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| Lotte Group Chairman Shin Dong-bin dismisses reporters' questions as he walks into Lotte World Tower in Jamsil, Seoul, for a meeting with the presidents of Lotte units, Tuesday. Yonhap |
By Nam Hyun-woo
A fast-growing consumer boycott on Japanese products is dealing a heavy blow to Lotte Group, as key targets of the consumer-based movements are affiliated with the conglomerate's retail units, industry officials said Friday.
With consumers arguing about whether Lotte is Korean or Japanese, officials said Korea's fifth-largest conglomerate will continue to fall victim to controversies stemming from Korea-Japan relations, unless Chairman Shin Dong-bin's protracted efforts to sever links with Lotte Japan pick up momentum.
According to the Korea Exchange, shares of the group's holding firm, Lotte Corp., ended at 38,750 won on Friday, showing a 12.23 percent decline from 44,150 won on July 1, when Tokyo announced export restrictions on Korea-bound resource materials for manufacturing semiconductors and chips.
The export curbs, which appear to be a retaliatory move against last year's Supreme Court rulings here ordering Japanese firms to compensate victims of wartime forced labor, triggered a massive boycott on Japanese brands among Korean consumers.
Lotte Shopping, which has a 49 percent stake in Uniqlo's domestic operator FRL Korea, plunged by 12.99 percent to 144,000 won on Friday from 165,500 won on July 1. Lotte Chilsung Beverage, which has a 50 percent stake in Lotte Asahi which imports Japan's Asahi beer, also saw a 9.7 percent decline during the same period.
Uniqlo and Asahi are among the top brands on the boycott list. Reportedly, Uniqlo's sales in the past two weeks have declined by 30 percent from the same period a year earlier, and Asahi allowed other beer brands to become No. 1 in sales at GS25 and CU convenience stores from July 3 to 7.
Along with the two brands, Lotte is running various joint ventures with Japanese firms including Lotte Mitsui Chemicals, Lotte Canon, travel agency Lotte JTB and Fujifilm Korea.
According to market tracker FnGuide, the combined market cap of 11 listed Lotte companies has declined by 1.78 trillion won or 7.2 percent from 24.63 trillion won in July 1 to 22.85 trillion on July 12.
Adding heavier woes for the group is a growing number of consumers urging their peers to boycott Lotte itself, claiming Lotte is a Japanese firm.
Lotte started the group's businesses in 1948 by establishing a chewing gum maker Lotte in Tokyo. The company entered Korea in 1967 with Lotte Confectionery.
Until Lotte Corp. was established in 2017 as Lotte's Korean holding firm, the majority of Lotte units in Korea were under control of Hotel Lotte, of which over a 99 percent stake is held by Japan's Lotte Holdings and other Japan-based Lotte affiliates.
After Lotte Corp. was established, most of Lotte's units came under its control, but Hotel Lotte still has an 11.1 percent stake in Lotte Corp. and directly controls a number of large Korean units including Lotte Property & Development with a 31.13 percent stake and Lotte E&C with a 43.07 percent stake. Nineteen out of 95 Lotte units in Korea are under the influence of Lotte's Japan side.
To sever its links with Lotte Japan, Chairman Shin has been trying to lower the Japanese stake in Hotel Lotte by offering its shares to the public, but the effort has not shown progress since 2016.
"Lotte is exposed to risks stemming from Korea-Japan relations, because many of its units, especially retail units, are heavily related with Japanese firms," a conglomerate official said asking not to be named. "After Shin became the chief of the group, Lotte has been trying to separate its Korean and Japanese businesses, but its entangled ownership structure is hampering its efforts."
After the boycott spread, Lotte has been reiterating that it is paying "the least amount of dividends" to Japanese stakeholders and it is using nearly 100 percent of its profits in Korea for domestic investments.
Chairman Shin has been holding a series of meetings between unit presidents throughout this week, but did not respond to reporters' questions on Lotte's stance toward the Korea-Japan trade friction.
