Exclusive
Binggrae and Maeil Dairies products disappear… Is Homeplus facing another ‘severed ties’ crisis?

[비즈한국] Since Homeplus notified the termination of leases for 17 stores, the food industry appears to be turning its back on the retailer. Recently, Binggrae005180 decided to halt supplies to Homeplus, and Maeil Dairies263220 is also failing to supply products normally to Homeplus, unlike other major supermarket chains, citing issues such as stock shortages. Industry insiders anticipate that as the number of Homeplus stores shrinks, its market competitiveness will weaken significantly, and the exodus of major corporations will accelerate even further.

‘Sold Out’ notices on dairy shelves

On the 26th, a Homeplus store in Seoul was found with ‘sold out’ notices posted throughout its dairy section. This is because products from Binggrae and Maeil Dairies are not being delivered as usual. The section for Maeil Dairies’ milk products was completely empty, and yogurt products were also unavailable due to a lack of inventory. The Binggrae milk and yogurt section also had ‘sold out’ notices, with only a small amount of stock remaining. Employees even filled the empty shelves with products from other brands to make the display look less bare.

According to Bizhankook’s report, Binggrae recently declared a suspension of supplies to Homeplus. Maeil Dairies is also not supplying products normally to Homeplus due to shortages.

Binggrae stated, “We stopped supplying all Homeplus stores starting May 24. The suspension occurred due to disagreements during negotiations regarding transaction terms with Homeplus,” adding, “Nothing has been decided regarding when supply will resume.”

When Homeplus applied for corporate rehabilitation procedures last March, food companies considered suspending supplies. While Binggrae considered it at the time, it continued normal supply. However, as the situation has worsened, the company appears to have finally decided to halt deliveries.

Products from Maeil Dairies are also experiencing ongoing stockouts at Homeplus. While there is talk in the industry that Maeil Dairies stopped supplying Homeplus before Binggrae, the company clarified that it has not completely cut off supplies.

A Maeil Dairies official explained, “We have not stopped supplies. It is a situation where supply schedules have faced setbacks due to temporary shortages caused by internal circumstances.” However, unlike with Homeplus, Maeil Dairies products are being supplied normally to E-mart and Lotte Mart.

Homeplus also saw supplies from Seoul Dairy Cooperative halted on March 20. Seoul Dairy Cooperative stopped supplying products after disagreements arose regarding payment procedures with Homeplus. Products have been supplied normally again since the 2nd, 43 days after the suspension. Seoul Dairy Cooperative explained, “As debts to Homeplus other than rehabilitation claims are being settled normally, we decided to resume supply following negotiations.”

The industry is expressing concern that food companies are cutting off supply to Homeplus again, less than a month after the resumption of Seoul Dairy Cooperative supplies. An industry official said, “I am aware that there are companies considering stopping supplies to Homeplus. They probably judge that Homeplus’ situation is difficult to improve.”

Another industry official pointed out, “This situation shows that Homeplus’ liquidity has worsened even further,” adding, “Homeplus is in a position where it pays cash to major corporations, but as liquidity tightens, companies are one by one halting supplies.”

Possibility of up to 17 store closures: ‘Major corporations may pull products one after another’

On the 14th, Homeplus announced that it would terminate lease contracts for 17 stores where it failed to reach agreements on rent adjustments. The stores subject to termination include Gayang, Ilsan, Siheung, Jamsil, Gyesan, Incheon Sungui, Incheon Nonhyeon, Woncheon, Ansan Gojan, Hwaseong Dongtan, Cheonan Sinbang, Cheonan, Jochiwon, Dongchon, Jangrim, Ulsan Buk-gu, and Busan Gamman.

Homeplus operates 68 of its total 126 stores under lease agreements. Among them, 61 stores were subject to rent negotiations, excluding 7 that are operated by local governments or were already confirmed for closure before the start of rehabilitation procedures. Homeplus entered rent reduction negotiations with the landlords of these 61 stores, and has notified contract termination for the 17 stores whose landlords did not participate in the negotiations.

The Homeplus branch of the Korean Mart Industry Union (KCTU) strongly opposed MBK Partners’ move to terminate leases for the 17 stores, calling it a “prelude to the dissolution of the company.” The union has argued that a reduction in the number of stores weakens bargaining power in procurement and leads to a decrease in market share, which inevitably results in a decline in corporate value.

Lee Jong-woo, a professor of business administration at Ajou University, also noted, “Fundamentally, when the number of stores decreases, purchasing power drops, leading brands to raise supply prices, making it difficult to sell products cheaply. It will fall behind in market competition, and major corporations will increasingly pull their products from Homeplus.” He added, “Ultimately, it will inevitably lag in ‘price’ and ‘variety,’ the most basic aspects of retail. As the number of closed stores increases, it can be seen that Homeplus has given up on its path as a major large-scale retailer in the offline market.”

Regarding this, Homeplus explained that the closure of the 17 stores notified for contract termination is not finalized. A Homeplus official stated, “The 17 stores are those where landlords did not respond to re-negotiations or where negotiation periods were extended during the process of re-negotiating rents for 61 stores. We notified them of contract termination because we can issue such notices or exercise termination rights within 30 days of starting negotiations,” adding, “While we cannot say there is no possibility that up to 17 stores will close, we are continuing to make negotiation efforts to minimize this.”