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[SUPER RICH] Lotte, Shinsegae turn to alcohol sector

Shinsegae heir Chung eyes beer while Lotte chairman Shin goes for wine

It seems the heads of Lotte and Shinsegae, the country’s two leading retailers, are both smitten with the same item ― alcohol.

These two market competitors are advancing into the local alcohol business, which is growing rapidly thanks to the diversification of customer demand and easing government regulations. 


Lotte serious about wine

Lotte Liquor ― part of Lotte Chilsung Beverage, an affiliate of Lotte Group ― is in search of a facility measuring at least 1 square kilometer to open a premium winery.

The most likely location is Yeongcheon, North Gyeongsang Province, where there are several vineyards totaling 22.6 square kilometers in size.

“We are testing the grapes. Because most grapes in Korea are for eating and not for wine, finding the perfect fit will be a bit difficult,” a Lotte official was quoted as saying to a local newspaper.

Lotte has appointed Australian winemaker Peter Lehmann as a consultant to its wine plans. Experts from Bordeaux and Italy are also expected to advise Lotte on its future in the new business.

The wine quest was an assignment handed down from Lotte Group chairman Shin Dong-bin, who has reportedly been hit by the poor performance of Lotte’s own wines.

Lotte currently produces 150,000 bottles of its Majuang wine brand, but the beverage rates lower than imported wine. Lotte imports 70 percent of its grapes for red wine from Chile but the performance has been less than impressive ― Majuang’s reputation is the wine people use for sacrament at Catholic Mass. 
Shin Dong-bin
Shin Dong-bin

Shin’s recent trip to China and a dinner at Cheong Wa Dae have also been opportunities for him to reexplore the wine market, industry observers say.

“Shin visited China as a member of the business delegation during President Park Geun-hye’s state visit to China last year and was surprised by the quality of the wine by Chinese winemaker Zhangyu. He thought it was time that Korea had such a facility,” a market observer said.

Shin also found inspiration when he was at a Cheong Wa Dae dinner in July to greet Chinese President Xi Jinping, where the wines served were imported from Spain and France.

“Shin thought it was embarrassing to serve imported wine at a state dinner, and he urged his executives to come up with a solution,” a company insider said.

Lotte said that once developed, its indigenous wine could replace 170 billion won ($162 million) worth of annual foreign wine imports and boost overall wine consumption.

There are some doubts, but give the success Lotte has seen in the liquor market, the prospects appeared to be bright. Lotte released its own stout beer Kloud in April, which surprised the market by selling 27 million bottles in less than three months. 


Shinsegae eyes gastropub

Shinsegae Group vice chairman and heir Chung Yong-jin is currently in the midst of constructing a gastropub near Shinsegae Department Store’s Gangnam branch in southern Seoul.

Scheduled to open in November, the 1,322-square-meter beer house was commissioned to present foods and beer that Koreans have never before experienced, according to those close to the matter.

Some of the top staff from the Westin Chosun Hotel, a subsidiary of the business group, have been dispatched to produce craft beer at the new venue.

“All brewery machines will be facilitated inside the pub and visitors will be able to see the production process as they enjoy their beer,” a Shinsegae Food insider said. Alongside the house beer, a variety of global premium beers will be presented along with tapas, she added.

Chung, who has been credited for painting a young, fashionable and trend-setting image of the retail group by communicating with the public via social media such as Twitter, has reportedly put a lot of effort into the project.
Chung Yong-jin
Chung Yong-jin

Recently, he has been witnessed touring microbreweries in the trendy districts of Itaewon and Gyeongnidan in Seoul to benchmark the craft beer industry.

The vice chairman was previously responsible for opening Shinsegae’s high-end grocery chain SSG and for housing global fashion brands and restaurant chains at the retailer.

“Chung played a major role in bringing Starbucks coffee shops to South Korea in 1999, opening a new era of espresso-based beverage and leisure culture here.

“This time he understood the growing need for more personalized and well-crafted beer, but very few mass brands have been dominating the supermarket and beerhouse shelves. The new gastropub will introduce high-end ales to the public,” a company insider said.

And the opening of the pub will be a stepping stone for more to come. Market insiders speculate that Shinsegae will distribute the craft beers nationwide through its discount chain store E-Mart.

The government’s deregulation is expected to help. The National Assembly recently revised a regulation on the liquor tax, allowing microbreweries to sell their products outside tap houses.

Market pundits say Shinsegae will start with the gastropub, then branch out to supply the beer at its bistro outlets, such as seafood restaurant Bono Bono and burger restaurant Johnny Rockets, and finally to E-mart.

By Bae Ji-sook (baejisook@heraldcorp.com)
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