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기업체출강대구외국어학원대구영어학원이앤펀 Lotte Group

Summary: Though long known for his staunch conservatism and aversion to overseas expansion Shin Kyuk ho appears to have been wooed by the allure of the Chinese market The octogenarian founder and chairman of the Lotte Group a retail confectionery hotel giant operating in both Korea and Japan is now in the midst of building his third business empire in China Rush to China Lotte Confectionery which began production of chocolate pies and biscuits from its $7 million plant near Beijing last September is planning to invest an additional $6 5 million to install gum production facilities Korea largest confectionery maker aiming for record annual sales of over 1 trillion won $757 million this year expects its Chinese operations to generate about $21 million in annual sales Lotte Chilsung Beverage buoyed by its successful launch of the cotch Blue whisky label here and in Beijing last year is planning to expand its liquor distribution network to other major Chinese cities Fast food chain Lotteria Co is to set up a local company in China with an eye to opening 20 outlets there by the end of the first half Lotte Shopping is looking to open discount chain stores in China eastern coastal cities Group officials said 2002 will mark the first year in Lotte stride towards its global ambition in a departure from its heavy dependence on the domestic market In truth local sales made up 97 1 percent of Lotte Confectionery revenue and 99 2 percent of Lotte Chilsung Beverage last year Korea eighth largest conglomerate with 31 affiliates says overseas projects are to account for about 30 billion won of its group wide annual investment of 1 5 trillion won this year otte future investments in China are expected to be carried out within the limit of manageable risks as founder Shin is known for being prudent and cautious to a fault in making all investment related decisions said Paik Woon mok an analyst at Daewoo Securities hin ultra conservative approach to investments and circumspect decision making coupled with the group swelling cash reserves and reluctance to diversify outside core businesses will likely keep Lotte immune to an operational or liquidity crisis for the foreseeable future the Daewoo analyst said Despite the absence of any imminent troubles however opaque disclosure and governance structures as well as disregard for shareholder interests and employee welfare are certain to pose serious hurdles to Lotte long term growth potential he warned referring to Shin longstanding practice of keeping key managerial information confidential Domestic operations On the domestic front Lotte is also poised for an aggressive expansion in its core fields such as retail beverage and hotel businesses given its group wide debt to equity ratio of 76 percent the lowest among major chaebol groups The 1 5 trillion won investment blueprint calls for the opening of four department stores in Daegu Changwon Anyang and Incheon and 15 discount stores under the Magnet brand Seven Eleven a convenience store franchise unit which opened its 1 000th franchisee store in southern Seoul last month is aiming for a net store increase of 450 in 2002 y the end of 2002 Lotte will own 18 department stores and 38 Magnet discount stores across the country with the retail business projected to generate annual revenue of over 9 trillion won said Choi Hyung vice president of the group public relations team he long term strategy calls for Lotte vast network of retail outlets plus Lotteria 700 fast food restaurants to tightly crisscross the entire nation Locating a Lotte shop or restaurant within walking distances of the nation urban neighborhoods will create enormous logistics benefits from the perspective of Internet shopping The executive stressed that the cobweb network strategy which was devised after the group failure to win a cable television home shopping channel in a government auction last year is also meant to counter the arrival of multinational retail giants in Korea In this regard some industry watchers speculate that Lotte may attempt to take over one of the weak home shopping channels though Choi denied such a possibility The intensive investments in core businesses aside Lotte will seek to enter the soju Korean liquor and credit card markets this year Lotte Chilsung which became the nation first beverage producer to post an annual turnover of over 1 trillion won last year is now test marketing the ansongi soju brand while group officials say credit card business will create tremendous benefits in conjunction with its retail networks and department store cards he credit card license is important but reinforcing retail sector competitiveness will be more important the executive said noting that Lotte Magnet aims to rise to the top of the local discount store industry by 2003 Discontented shareholders employees Displaying his attachment to cash flows founder Shin said in a recent magazine interview xcessive debts are a source of all diseases Korea entrepreneurs are generally bold but sometimes engage in reckless debt financed expansion Shin also said ntrepreneurs are fully responsible for corporate success and failure With that responsibility in mind I cannot be too conservative and cautious Under his unique management philosophy Lotte has grown into one of the nation healthiest conglomerates with its ratio of operating profit to interest payments standing at 6 53 the second highest figure among the top 30 chaebol after the Samsung Group As many as eight of the top 30 chaebol reported an interest coverage ratio of below 1 indicating that their operating profits failed to cover interest expenses Indeed only Lotte Giants Co a pro baseball team recorded losses last year among the group 31 subsidiaries with bank deposits exceeding loans at as many as 17 affiliates Lotte group wide turnover rose 20 percent year on year to 15 trillion won in 2001 with its ordinary profit amounting to over 900 billion won Share prices of Lotte four listed companies marked a 232 6 percent rise on average last year the highest growth among the top 10 groups with their capitalization swelling from 567 8 billion won to 1 7 trillion won Notably Lotte Chilsung share prices rose 427 21 percent last year to 550 000 won apiece emerging as one of the most expensive stocks in Korea The stock prices of Lotte Confectionery boasting a 40 percent domestic market share also surged by 224 percent to over 440 000 won Charmed by the strong fundamentals local lenders are competing to extend money to Lotte while the group has always been mentioned as the No 1 candidate in all corporate mergers and acquisition talks regardless of its real intentions But industry analysts say that the Lotte of today has been made possible at the sacrifice of employees and shareholders Lotte Department Store recently made headlines in local newspapers for its failure to pay year end bonus to its employees despite an annual ordinary profit of 370 billion won in 2001 By contrast Hyundai Department Store with 240 billion won in annual ordinary profit paid its employees the equivalent of 220 percent of monthly salary in special year end bonus Smaller rival Shinsegae Department Stores also granted 200 percent to 500 percent of monthly salary in a special bonus in late December while even Samsung Tesco with an annual profit of 8 billion won is planning to pay a 400 percent special bonus in March he Lotte Group is notorious for its stinginess in offering financial rewards to employees and shareholders Despite soaring profits and stock prices efforts to improve shareholder value and employee welfare have been nearly non existent said Hwang Chan a senior analyst of SK Securities ith Lotte Chilsung stock price topping the 550 000 won mark domestic and foreign institutional investors have consistently asked for a stock split and capital increases But the Lotte management has turned a deaf ear to the request said the SK analyst He asserted that even a 50 percent shareholder dividend by Lotte Chilsung based on the stock face value of 5 000 won is meaningless in light of the huge gap between the face value and market value of 550 000 won Daewoo Securities Paik agreed saying that Lotte companies are among the most unfaithful providers of management and financial information ven stock market analysts like me are kept in the dark about most corporate information Many Lotte companies including Lotte Chilsung are too flushed with cash to pay attention to the interests of shareholders the Daewoo analyst asserted Discontent over the disclosure problems and an exceptionally small number of shares in circulation have prompted local institutions and individuals to lose interest in Lotte Chilsung and Lotte Confectionery he said Generational change Starting last year Shin showed signs of gradually bowing out of management roles to send his offspring to the forefront of group management according to industry watchers In truth the 81 year old tycoon recently sold off 13 000 shares in Lotte Confectionery relinquishing his status as the company largest shareholder Shin has also cut his shareholding in Lotte Chilsung by 6 000 shares and is planning to take similar measures for other group affiliates In contrast Shin Dong bin the 48 year old second son of the chairman who currently holds a vice chairman title has bought an additional 6 020 shares in Lotte Confectionery and 2 400 shares in Lotte Chilsung The successive intra family stock transactions raised speculation that a father to son managerial succession may be imminent Similarly Shin Young ja the only daughter of the Lotte founder who now serves as vice president of Lotte Department Store bought 3 400 shares of Lotte Confectionery while Shin Dong ju the eldest son and vice president of Lotte Aluminum purchased 1 800 shares in Lotte Chilsung The watchers say Dong bin will eventually rise to become the chairman of Lotte operations in Korea while Dong ju will inherit control of Lotte business in Japan Dong bin who was born in Japan attended colleges in both Japan and the United States and had a business career with Nomura Securities branch in London joined Lotte in 1988 Analysts said Dong bin needs to prove his managerial capabilities citing a string of investment failures in the fields of mini discount stores home shopping and on line shopping malls Though long known for his staunch conservatism and aversion to overseas expansion Shin Kyuk ho appears to have been wooed by the allure of the Chinese market The octogenarian founder and chairman of the Lotte Group a retail confectionery hotel giant operating in both Korea and Japan is now in the midst of building his third business empire in China Rush to China Lotte Confectionery which began production of chocolate pies and biscuits from its $7 million plant near Beijing last September is planning to invest an additional $6 5 million to install gum production facilities Korea largest confectionery maker aiming for record annual sales of over 1 trillion won $757 million this year expects its Chinese operations to generate about $21 million in annual sales Lotte Chilsung Beverage buoyed by its successful launch of the cotch Blue whisky label here and in Beijing last year is planning to expand its liquor distribution network to other major Chinese cities Fast food chain Lotteria Co is to set up a local company in China with an eye to opening 20 outlets there by the end of the first half Lotte Shopping is looking to open discount chain stores in China eastern coastal cities Group officials said 2002 will mark the first year in Lotte stride towards its global ambition in a departure from its heavy dependence on the domestic market In truth local sales made up 97 1 percent of Lotte Confectionery revenue and 99 2 percent of Lotte Chilsung Beverage last year Korea eighth largest conglomerate with 31 affiliates says overseas projects are to account for about 30 billion won of its group wide annual investment of 1 5 trillion won this year otte future investments in China are expected to be carried out within the limit of manageable risks as founder Shin is known for being prudent and cautious to a fault in making all investment related decisions said Paik Woon mok an analyst at Daewoo Securities hin ultra conservative approach to investments and circumspect decision making coupled with the group swelling cash reserves and reluctance to diversify outside core businesses will likely keep Lotte immune to an operational or liquidity crisis for the foreseeable future the Daewoo analyst said Despite the absence of any imminent troubles however opaque disclosure and governance structures as well as disregard for shareholder interests and employee welfare are certain to pose serious hurdles to Lotte long term growth potential he warned referring to Shin longstanding practice of keeping key managerial information confidential Domestic operations On the domestic front Lotte is also poised for an aggressive expansion in its core fields such as retail beverage and hotel businesses given its group wide debt to equity ratio of 76 percent the lowest among major chaebol groups The 1 5 trillion won investment blueprint calls for the opening of four department stores in Daegu Changwon Anyang and Incheon and 15 discount stores under the Magnet brand Seven Eleven a convenience store franchise unit which opened its 1 000th franchisee store in southern Seoul last month is aiming for a net store increase of 450 in 2002 y the end of 2002 Lotte will own 18 department stores and 38 Magnet discount stores across the country with the retail business projected to generate annual revenue of over 9 trillion won said Choi Hyung vice president of the group public relations team he long term strategy calls for Lotte vast network of retail outlets plus Lotteria 700 fast food restaurants to tightly crisscross the entire nation Locating a Lotte shop or restaurant within walking distances of the nation urban neighborhoods will create enormous logistics benefits from the perspective of Internet shopping The executive stressed that the cobweb network strategy which was devised after the group failure to win a cable television home shopping channel in a government auction last year is also meant to counter the arrival of multinational retail giants in Korea In this regard some industry watchers speculate that Lotte may attempt to take over one of the weak home shopping channels though Choi denied such a possibility The intensive investments in core businesses aside Lotte will seek to enter the soju Korean liquor and credit card markets this year Lotte Chilsung which became the nation first beverage producer to post an annual turnover of over 1 trillion won last year is now test marketing the ansongi soju brand while group officials say credit card business will create tremendous benefits in conjunction with its retail networks and department store cards he credit card license is important but reinforcing retail sector competitiveness will be more important the executive said noting that Lotte Magnet aims to rise to the top of the local discount store industry by 2003 Discontented shareholders employees Displaying his attachment to cash flows founder Shin said in a recent magazine interview xcessive debts are a source of all diseases Korea entrepreneurs are generally bold but sometimes engage in reckless debt financed expansion Shin also said ntrepreneurs are fully responsible for corporate success and failure With that responsibility in mind I cannot be too conservative and cautious Under his unique management philosophy Lotte has grown into one of the nation healthiest conglomerates with its ratio of operating profit to interest payments standing at 6 53 the second highest figure among the top 30 chaebol after the Samsung Group As many as eight of the top 30 chaebol reported an interest coverage ratio of below 1 indicating that their operating profits failed to cover interest expenses Indeed only Lotte Giants Co a pro baseball team recorded losses last year among the group 31 subsidiaries with bank deposits exceeding loans at as many as 17 affiliates Lotte group wide turnover rose 20 percent year on year to 15 trillion won in 2001 with its ordinary profit amounting to over 900 billion won Share prices of Lotte four listed companies marked a 232 6 percent rise on average last year the highest growth among the top 10 groups with their capitalization swelling from 567 8 billion won to 1 7 trillion won Notably Lotte Chilsung share prices rose 427 21 percent last year to 550 000 won apiece emerging as one of the most expensive stocks in Korea The stock prices of Lotte Confectionery boasting a 40 percent domestic market share also surged by 224 percent to over 440 000 won Charmed by the strong fundamentals local lenders are competing to extend money to Lotte while the group has always been mentioned as the No 1 candidate in all corporate mergers and acquisition talks regardless of its real intentions But industry analysts say that the Lotte of today has been made possible at the sacrifice of employees and shareholders Lotte Department Store recently made headlines in local newspapers for its failure to pay year end bonus to its employees despite an annual ordinary profit of 370 billion won in 2001 By contrast Hyundai Department Store with 240 billion won in annual ordinary profit paid its employees the equivalent of 220 percent of monthly salary in special year end bonus Smaller rival Shinsegae Department Stores also granted 200 percent to 500 percent of monthly salary in a special bonus in late December while even Samsung Tesco with an annual profit of 8 billion won is planning to pay a 400 percent special bonus in March he Lotte Group is notorious for its stinginess in offering financial rewards to employees and shareholders Despite soaring profits and stock prices efforts to improve shareholder value and employee welfare have been nearly non existent said Hwang Chan a senior analyst of SK Securities ith Lotte Chilsung stock price topping the 550 000 won mark domestic and foreign institutional investors have consistently asked for a stock split and capital increases But the Lotte management has turned a deaf ear to the request said the SK analyst He asserted that even a 50 percent shareholder dividend by Lotte Chilsung based on the stock face value of 5 000 won is meaningless in light of the huge gap between the face value and market value of 550 000 won Daewoo Securities Paik agreed saying that Lotte companies are among the most unfaithful providers of management and financial information ven stock market analysts like me are kept in the dark about most corporate information Many Lotte companies including Lotte Chilsung are too flushed with cash to pay attention to the interests of shareholders the Daewoo analyst asserted Discontent over the disclosure problems and an exceptionally small number of shares in circulation have prompted local institutions and individuals to lose interest in Lotte Chilsung and Lotte Confectionery he said Generational change Starting last year Shin showed signs of gradually bowing out of management roles to send his offspring to the forefront of group management according to industry watchers In truth the 81 year old tycoon recently sold off 13 000 shares in Lotte Confectionery relinquishing his status as the company largest shareholder Shin has also cut his shareholding in Lotte Chilsung by 6 000 shares and is planning to take similar measures for other group affiliates In contrast Shin Dong bin the 48 year old second son of the chairman who currently holds a vice chairman title has bought an additional 6 020 shares in Lotte Confectionery and 2 400 shares in Lotte Chilsung The successive intra family stock transactions raised speculation that a father to son managerial succession may be imminent Similarly Shin Young ja the only daughter of the Lotte founder who now serves as vice president of Lotte Department Store bought 3 400 shares of Lotte Confectionery while Shin Dong ju the eldest son and vice president of Lotte Aluminum purchased 1 800 shares in Lotte Chilsung The watchers say Dong bin will eventually rise to become the chairman of Lotte operations in Korea while Dong ju will inherit control of Lotte business in Japan Dong bin who was born in Japan attended colleges in both Japan and the United States and had a business career with Nomura Securities branch in London joined Lotte in 1988 Analysts said Dong bin needs to prove his managerial capabilities citing a string of investment failures in the fields of mini discount stores home shopping and on line shopping malls

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