[비즈한국] Lotte Wellfood280360 achieved its highest performance since the company's inception last year. This is the result of overseas operations driving revenue growth and overall business expansion. However, unlike the top-line growth, evaluations suggest that profitability improvements in the global segment have fallen short of expectations. Within the industry, the need for a fundamental improvement in Lotte Wellfood's overall global business operations is being raised.
Record Revenue Achieved, But Profitability Declines
On the 6th, Lotte Wellfood announced that its 2025 revenue reached 4.216 trillion KRW. This is a 4.2% increase from the previous year (4.0443 trillion KRW), marking the highest annual revenue since the company's founding. Lotte Wellfood explained that while domestic consumption has slowed, the growth of major overseas subsidiaries drove the increase in revenue.
Lotte Wellfood has been aggressively targeting overseas markets to counter the decline in the domestic population and shrinking consumer sentiment. In 2004, it acquired the Indian confectionery company Parrys to launch 'Lotte India,' becoming the first Korean food company to enter the Indian market. In 2008, it acquired the Belgian chocolate company Guylian, and subsequently expanded its business territory to regions including Russia and Kazakhstan to broaden its overseas market base.
Behind this overseas expansion strategy lies the determination of Lotte Group Chairman Shin Dong-bin to strengthen the global food business. Chairman Shin, focusing on the potential for K-food to expand in international markets, has consistently called for the strengthening of global operations. He has shown special interest by personally inspecting overseas businesses, such as attending the completion ceremony for the new Havmor factory in India and visiting the Guylian headquarters in Belgium.
With this group-level interest and ongoing investment, Lotte Wellfood's overseas expansion is picking up speed. Among these, the Indian market has emerged as a core pillar of its global growth strategy. One of its flagship products, Choco Pie, has gained immense popularity locally, raising brand awareness, and investments in production facilities and distribution networks are following suit. Lotte Wellfood consolidated its confectionery and ice cream subsidiaries last year to strengthen market responsiveness, and as a result, the Indian subsidiary achieved the highest revenue among all overseas units (326.2 billion KRW).
The Kazakhstan and Russian subsidiaries are also maintaining stable performance based on high local market share. The Kazakhstan subsidiary, where candy and chocolate products account for over 90% of revenue, posted 290.6 billion KRW in revenue last year. The Russian subsidiary (KF RUS) also continued its growth trend centered on pies and candies, recording 110.2 billion KRW in revenue last year.
However, despite hitting record revenue, profitability could not avoid a downturn. Lotte Wellfood's operating profit last year was 109.5 billion KRW, a 30.3% decrease from the previous year (157.1 billion KRW), and net profit also fell 12.9% from 82 billion KRW to 71.4 billion KRW. A Lotte Wellfood official explained, "Profitability worsened slightly due to the continued burden of rising raw material costs and one-time expenses from voluntary retirements implemented in the first half of last year."
Global Business, the Challenge of Improving Profitability
The global business segment, which drove overseas revenue growth, is also evaluated as falling short of expectations in terms of profitability. Lotte Wellfood's global business operating profit last year was 38.5 billion KRW, a 35.1% decrease from the previous year (59.3 billion KRW).
In particular, the profitability of the Indian subsidiary, considered a growth engine, remains at a very low level. While annual performance by subsidiary has not yet been fully disclosed, the net profit for the cumulative third quarter was only 2.4 billion KRW, keeping the net profit margin in the 1% range. The fact that the Russian subsidiary, which has only about one-fourth the revenue of the Indian unit, recorded a net profit margin of about 17% highlights the relatively low profitability of the Indian subsidiary. A Lotte Wellfood official explained, "There is an impact from investment expenditures and initial stabilization costs during the operation of the new factory."
The premium chocolate brand Guylian is also seeing a continued sluggish performance trend. Lotte Wellfood operates the Guylian business through the Dutch holding company 'Lotte Confectionery Holdings B.V.', which recorded a net loss of 3.2 billion KRW in the cumulative third quarter of last year, remaining in a deficit. Concerns have also been raised regarding production efficiency. The factory utilization rate for the Guylian-related subsidiary was 28.6% as of the third quarter, the lowest among overseas subsidiaries.
The China subsidiary is currently in the process of being sold. Lotte Wellfood's Chinese subsidiary, Lotte Qingdao, was once a "cash cow" recording over 20 billion KRW in annual revenue until the early 2020s, but it has suffered from persistent poor performance following the business contraction after the THAAD incident. Lotte Wellfood ceased operations at its Chinese factory starting from the second quarter of 2023. A Lotte Wellfood official stated, "We are currently pursuing the sale of the Chinese subsidiary," adding, "Although local production has stopped, we are continuing to address the Chinese market through exports."
The overseas profit of Lotte Wellfood is currently structured so that the Russian and Kazakhstan subsidiaries effectively carry the weight. The Russian subsidiary recorded a net profit of approximately 13.3 billion KRW as of the third quarter based on a high factory utilization rate, and the Kazakhstan subsidiary also earned about 8.6 billion KRW by the third quarter.
However, some in the industry evaluate the profit structure concentrated on Russia and Kazakhstan as somewhat unstable. This is because there is a high possibility that the business environment will change rapidly due to geopolitical variables such as the prolonged war, international sanctions, and changes in the financial and monetary environment. While they are currently sustaining performance, there are concerns that volatility could expand depending on external risks.
Lotte Wellfood plans to ensure both the stability and scalability of its global business by reorganizing its regional strategies. A Lotte Wellfood official stated, "To strengthen competitiveness in the Indian market, which is a core pillar of our overseas business, we plan to increase Choco Pie production lines from the current 3 to 4, and expand our sales network to traditional trade (TT) channels to increase market penetration." They added, "We also plan to strengthen global marketing for Pepero, our key export brand, with a focus on the US market."