Hy's logistics center in Nonsan, South Chungcheong Province / Courtesy of hy

Hy CEO Byun Gyeong-goo / Courtesy of hy

Hy, one of the country's biggest fermented beverage makers, continues to struggle with falling revenues and profits amid lackluster portfolio diversification, according to industry observers, Monday.

The company, formerly Korea Yakult, registered 1.1 trillion won ($810 million) in sales in 2022 but saw the figure inch down to 1.08 trillion won last year. Its operating profit fell to 68.4 billion won last year, down from 80 billion won in 2022 and 100 billion won in 2021.

One of the reasons behind hy's slowing performance, according to market experts, is the country's soaring market prices, which are discouraging consumers here. Hy, which started in 1971, had maintained its reputation in the domestic market by attracting consumers who often signed up for a subscription service to have the products delivered to their homes.

However, following the ongoing inflation, people started reprioritizing their shopping lists. To them, regular home delivery was no longer essential.

Disappointing performance was not only evident in the company's fermented beverage sector. Other subsidiaries the company had created to expand its business portfolio from food businesses to delivery and logistics also failed to make sufficient money.

In April 2023, Hy acquired Vroong, a delivery service startup, to boost its food delivery and IT capabilities. In September of the same year, hy started operating its new logistics depot in Nonsan, South Chungcheong Province. The facility received a 55 billion won investment, which hy's then-CEO Kim Byeong-jin said would help make it the company's "critical link to its future blueprint."

But both entities have yet to yield meaningful sales for hy.

Hy has also expanded its businesses to robotics for medical purposes by investing tens of billions of won to acquire local firm Curexo in 2011 and the United States-based Think Surgical in 2016. But their performances haven't helped hy turn a profit yet.

Hy said that despite falling operating profits, the company isn't doubtful about its future. It admitted it faces risks as it tries to refrain from raising consumer prices while its operating costs keep rising and it committed a large-scale investment into its portfolio diversification. But it said the return on investment will come.

"We've put a lot of money into our logistics arm, having developed a third-generation electric carts for our company-use which cost 14 million won each," a company official said. "We plan to stabilize our operation this year, improving and broadening our existing infrastructures. It's not going to be easy with the country's domestic market apparently shrinking. But it's our goal to diversify our channels."

The official said the robotic medical business would yield a profit in the longer term and the company is trying to introduce its own technologies. The company also attributed its investment into the Nonsan logistics depot to its underperformance and predicted that it would assist it in becoming more lucrative in the future.