Lotte Units Underperforming the Market
Lotte Group, the fifth-largest conglomerate in South Korea, is in a crisis. It is yet to find a breakthrough although chairman Shin Dong-bin is focusing on innovation. Meanwhile, the larger four, that is, Samsung, Hyundai Motor, SK and LG are turning opportunities into reality despite COVID-19.
The crisis of Lotte is attributable to disputes over management rights, the chairman’s absence caused by litigation, the THAAD issue related to China and the ongoing boycott of Japanese products in South Korea as well as the pandemic. However, Lotte’s conservative and closed corporate culture and the resultant lack of innovation have been mentioned by many as a more fundamental cause.
Lotte Group’s market capitalization increased 8 percent from the end of 2019 to Jan. 15 this year, when the aggregate market values of the four jumped 35 percent to 85 percent and KOSPI gained 40 percent. Besides, the market cap of non-chemical Lotte subsidiaries fell 7.8 percent. The distribution business unit of Lotte Group, which is its core, lost energy last year with Coupang and Naver leading the paradigm shift in the market.
The combined sales of Lotte subsidiaries decreased 8.1 percent last year while those of Samsung and LG rose 1 percent and 3 percent and those of Hyundai Motor and SK fell 2.3 percent and 12.2 percent, respectively. Many investors in the stock market prefer the four to Lotte for its weaker future growth potentials.
The four groups are increasing their investments in new industries, such as electric vehicle, robot, AI and biotech, and some of the investments are already leading to tangible achievements. In addition, they are accelerating global collaborations and M&As. In the meantime, Lotte Group’s annual sales fell from 84 trillion won to 74.5 trillion won in 2019 and last year’s figure is estimated at less than 70 trillion won.