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Shinsegae Group Reported to Be Interested in Taking over Oriental Brewery
Shinsegae Eyeing Korea's No. 1 Beer Brand Cass
Shinsegae Group Reported to Be Interested in Taking over Oriental Brewery
  • By Yoon Young-sil
  • November 2, 2018, 15:50
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Shinsegae Group is reportedly interested in acquiring Oriental Brewery, which is currently owned by AB InBev.

Shinsegae Group is reportedly moving to acquire Oriental Brewery (OB), an affiliate of AB InBev which produces several of Korea's most popular beverages including the OB, Cass and Cafri lager brands.

According to liquor industry sources, Shinsegae Group recently set up a task force to take over OB and is actively recruiting related people.

In particular, the company is reportedly attracting a large number of people from Lotte Liquor Co., which acquired Doosan Corp.’s beverage business unit.

Executives in the sales and marketing sector are the main targets as they are credited with the successful launch of Lotte's first premium beer "Cloud."

Currently, Shinsegae Group owns Shinsegae L&B, the No. 1 company in the domestic wine market, and Jeju Soju, a producer of “soju” which it acquired in 2016. As the group has nationwide distribution networks such as the E-Mart discount store chain, Shinsegae department stores, and the E-Mart 24 convenience store chain, it is easy to enter home channels.

However, the group’s presence at ordinary restaurants and bars, which constitute the core distribution channel of the liquor market, is weak compared with Hite Jinro and Lotte Liquor, which have strong sales forces.

If Shinsegae takes over OB’s Cass, the No. 1 beer brand in Korea, it will be easy to enter the entertainment channel and can promote sales of Jeju soju as well. This means that with just one piece of gas, Shinsegae will be able to rise to the top of the liquor industry without much effort, only if it can acquire the Cass brand.

AB InBev, the world's largest beer maker which owns OB, may also want to sell off the beer company. According to the National Tax Service and the Korea Customs Service, Korea’s beer imports increased at an average 30 percent per year between 2011 and 2015, and the volume of beer imports has already exceeded exports since 2014.

As the share of imported beers continues to rise in the domestic beer market, Lotte Liquor and Hite Jinro have strengthened their beer importing business and jumped into the sparkling liquor market.

Under these circumstances, it would be better for AB InBev to focus on the imported beer market rather than promoting domestic beer brands it owns.

In fact, OB had outsourced some portion of its Cass production, including the 2018 World Cup Russia package, to overseas plants. The company’s production of sparkling liquors under an ODM contract with Japanese clients has also decreased as the Janapese clients decided to use Kirin Co. as their ODM partner.

AB InBev has been financially squeezed to some degree due to its acquisition of SAB Miller in 2015. However, the main reason it wants to sell off OB is not because it has financial problems but because OB is not an attractive asset from a long-term perspective.

An OB official said, "The sales rumor has unnerved employees, making it difficult for them to focus on their work. We are considering taking legal action against rumors that are groundless." He added, however, that they do not know whether the rumor is true or not.

"We were recently asked to clarify our position regarding the rumor of Shinsegae acquiring OB. The rumor is groundless and there is no TF involved," a Shinsegae official said.

On the other hand, some industry watchers believe that AB InBev may decide to sell the Cass Brand only rather than the whole of OB. They estimate the sale price at around 5 trillion won.