Ever wonder what happens when a beauty empire hits a rough patch? K-beauty giant LG H&H is making headlines, selling its Coca-Cola bottling unit and other beverage assets. This massive corporate restructuring signals a response to a shifting market and the rise of nimble indie brands. Will this bold move revive the legacy powerhouse?
South Korean cosmetics behemoth LG H&H Co. is embarking on a significant corporate restructuring, putting its valuable Coca-Cola bottling subsidiary and other beverage assets up for sale in a strategic move to regain market leadership. This bold asset divestment signals a pivotal moment for the K-beauty giant as it navigates a rapidly evolving consumer landscape and seeks to revitalize its financial performance.
The company has experienced a challenging period, marked by two consecutive years of declining revenues and profits. Consolidated sales plummeted to 6.8 trillion won ($4.9 billion) in 2023 from 8 trillion won in 2021, while operating profit is projected to fall by nearly 28% this year, underscoring the urgent need for comprehensive operational streamlining.
LG H&H, once a dominant force in Korea’s consumer sector, has struggled to capitalize on the global K-beauty boom, largely ceding ground to agile indie brands and innovative beauty technology startups. This shift is evident in the recent surpassing of LG H&H’s market capitalization by newcomer APR Co., highlighting a significant change in the industry’s competitive dynamics.
Historically, LG H&H diversified its portfolio by acquiring Coca-Cola Korea Bottling Co. in 2007 and Haitai htb Co., a fruit and soft drink maker, in 2010. This strategy proved successful for a time, with sales growing eightfold under the long-serving Vice Chairman Cha Suk-yong, reaching 8 trillion won in 2021 and pushing its market value to over 25 trillion won.
However, the market landscape has profoundly shifted since then. The crucial Chinese market, long a cornerstone for LG H&H’s cosmetics business, has seen sales contract, while the North American beauty sector has been reshaped by the emergence of digital-native players. Concurrently, the beverage industry division, once a stable source of profit, is now also experiencing contraction.
Adding to these challenges, critics point to a leadership vacuum following Vice Chairman Cha Suk-yong’s departure in 2023. His centralized decision-making style meant no clear successor was prepared, leaving the company without decisive guidance when the market rapidly changed, further complicating its ability to adapt effectively.
The planned asset divestments, which include its plant in Namwon, North Jeolla Province, are perceived as the first step in broader cost-cutting measures, potentially involving job restructuring and consolidation of business units. Proceeds from these sales, expected to generate hundreds of billions of won, are slated for strategic reinvestment into acquiring promising beauty brands, expanding overseas distribution channels, and boosting digital capabilities.
Sources indicate that global private equity firms and various mid-sized food and beverage companies have already expressed interest as early suitors. Despite these potential sales, an LG H&H official confirmed that while the company is actively reviewing various options to strengthen competitiveness, no final decisions regarding the Coca-Cola bottling subsidiary and other assets have been made yet.
