Hotel Shilla announces plan to pull out from the high-end market after Lee ciriticized


Founders of Korea’s major enterprises devoted their lives to building a manufacturing powerhouse of the world’s best ships, cars and electronics, but their grandchildren are more interested in selling pastries and importing luxury items.

A slew of chaebol offspring have jumped into bakeries or coffee shops, possibly driving out small, individually owned stores.

The number of bakeries run by self-employed individuals plunged from about 18,000 in 2003 to around 4,000 late last year, according to the Korea Federation of Small and Medium Business.

Franchise Paris Baguette, in the meantime, opened some 300 stores just last year, breaking the 3,000 mark. Tous les Jours, under CJ Group, has about 1,400 stores nationwide.

The bakery business also attracted several female scions of major chaebol such as Samsung, Hyundai Motor, Lotte and Shinsegae.

Lee Boo-jin, eldest daughter of Samsung Electronics chairman Lee Kun-hee and chief executive of Hotel Shilla, ran a high-end bakery and cafe business branded Artisee.

Hotel Shilla announced on Thursday, however, that it will pull out from Artisee, a day after President Lee Myung-bak joined the public criticism against chaebol running after quick money.

Hotel Shilla said it had been reviewing the withdrawal since late last year for shared growth with smaller companies and that it will seek to minimize harm to Artisee employees.

Chung Yoo-kyung, daughter of Shinsegae Group chairwoman Lee Myung-hee and vice president of Shinsegae, is the major shareholder of Chosun Hotel Bakery, which runs the premium confectionery labels Dalloyau and Vecchia & Nuovo. 

Chang Seon-yoon, granddaughter of Lotte Group Chairman Shin Kyuk-ho and president of Bliss, has Fauchon.

The chaebol children say their premium confectionery businesses mostly based on imported labels do not compete with or hurt self-employed local bakeries since they have only about 50 stores altogether.

But with support from the subsidiaries of their parents’ business empires, their shops, placed in hotels, department stores and other large buildings with good locations, easily see sales surge.

On Wednesday, President Lee ordered his staff to look into the bakeries run by chaebol progeny.

“Second-generation or third-generation chaebol may be doing it as a hobby, but it is a matter of survival for ordinary people running bakeries,” Lee was quoted as saying by his aides in a weekly meeting with senior secretaries.

“Do they really need to do something small business owners are doing?”

Lee urged large conglomerates to refrain from expanding their business to areas that are bread-and-butter jobs for small business owners, according to his spokesman Park Jeong-ha.

The nation’s antitrust watchdog was undergoing an investigation in November into allegations that bakeries and cafe chains run by chaebol children were paying lower fees for floor space in their families’ hotels.

Several conglomerates have even begun selling snacks such as instant noodles and blood sausage.

Our Home, which runs cafeterias for LG Group companies, restaurants such as Xingkai and dining franchises such as Saboten, sells sundae, or Korean blood sausage usually sold in small food stalls. Koo Ja-hak, third son of LG Group founder Koo In-hwoi, is the chairman of Our Home and his children control the company’s entire stake.

Daemyung Group’s subsidiary Beggaerback sells various dishes using tteokbokki, or rice cake in hot sauce, a popular street food.

Importing luxury fashion brands has become more or less a oligopoly of second and third-generation chaebol.

Cheil Industries Inc., of which Samsung Electronics chairman Lee Kun-hee’s second daughter Lee Seo-hyun is the chief executive, imports Issey Miyake and Tory Burch.

Shinsegae International, launched under the lead of Shinsegae vice president Chung Yoo-kyung, imports dozens of designer brands such as Coach, Armani and Dolce and Gabbana.

Lotte Shopping president Shin Young-ja’s son Chang Jae-young runs B&F Trade which imports and distributes Paul Smith, Camper and Radley.

Shin’s son-in-law is set to begin sales of German baby care wipes through Lotte’s retail network. Yang Sung-wook, husband of Chang Seon-yoon, also plans to sell foreign sanitary product brands.

The car import business has long been dominated by chaebol sons.

DFMS, owned by the great-grandsons of Doosan Group’s founder, imports Honda, Jaguar and Land Rover.

Hyosung imports Mercedes-Benz and Toyota. Three sons of Hyosung Group chairman Cho Suk-rae control a 10.44-percent stake in The Class Hyosung, a dealership for Mercedez-Benz.

Charmzone Group chairman’s two sons run dealerships for Audi and Bentley.

By Kim So-hyun (sophie@heraldcorp.com)