[THE INVESTOR] Discount retailer E-mart is entering the soju market with the acquisition of Jeju Soju, the company said Thursday.

The two companies signed a provisional contract, with final terms and conditions to be negotiated before the final agreement.

Reports estimate the deal to be worth around 30 billion won ($26 million), but Shinsegae Group, the parent company of E-mart, said that the deal price could not be confirmed until final negotiations were complete.

Jeju Soju is a regional soju-maker operating in the Jeju market with two lines, called Sandorong and Gopdeullak.

The company has been seeking a buyer since early this year, as its business could not gain traction against the region’s leading soju-maker Hallasan.

Once acquired by E-mart, the soju will be able to expand its consumer base across E-mart’s strong distribution network nationwide.

Industry watchers say it is unlikely that Jeju Soju will be able to make an immediate impact on the soju market, which is currently dominated by Lotte Chilsung Liquor‘s Cheoeumcheoreom and Hite Jinro’s Chamiseul brands.

“Jeju Soju is a very small company, with less than 1 percent market share within Jeju,” a spokesman from Shinsegae Group told The Korea Herald. “Our primary focus will be to make it stronger and increase production, and then we will look for ways to export the products to increase sales rather than target the domestic market.”

The spokesman said that Jejudo Island’s pristine, natural image gives Jeju Soju a good base for marketing overseas.

In the long run, the acquisition allows E-mart to enter the soju market without having to acquire a separate license, and also opens doors to utilizing Jejudo Island’s coveted underground water through Jeju Soju’s existing license.

By Won Ho-jung (hjwon@heraldcorp.com)