A user of Lotte Healthcare's Cazzle app shows the digital health care service's smartphone platform in this undated photo from March. Courtesy of Lotte Healthcare
Lotte Group is shutting down its health care business, terminating what was once considered one of the group's four future growth engines, one of the country's largest conglomerates said, Wednesday.
The group held a shareholders' meeting on Tuesday and reached an agreement to wrap up Lotte Healthcare, according to DART, an electronic disclosure system under the Financial Supervisory Service. The disclosure said the meeting will subsequently appoint a representative to proceed with the wrap-up and complete the procedure in accordance with the country's fair trade law.
Lotte Healthcare's homepage is currently showing a notice that all of its services will cease as of next Tuesday, the last day of the year. The notice provided a contact number for inquiries on group health checkups for company employees, one of the services Lotte Healthcare provided.
Lotte Healthcare's closure comes after a rather short period of business operation. It was established in April 2022 with 70 billion won ($48 million) invested by Lotte Corp., the group's holding company. It also launched Theragen Health, a joint venture with genome research company Theragen Bio, to develop genetic technologies. It also began working on digital health care platform Cazzle, setting up a beta service in 2023 and officially launching it in September that year.
However, Lotte Healthcare kept losing money. It logged a deficit of 11.2 billion won in 2022 and 22.9 billion in 2023. Sales last year stood at only 800 million won. The holding company additionally invested 50 billion won to sustain the money-losing subsidiary, but failed to turn the tides.
Lotte Group recently began streamlining its operations, cutting money-losing businesses in an effort to improve its financial standing, which led to the shutdown of Lotte Healthcare. Key subsidiaries, such as Lotte Shopping and Lotte Chemical, have been struggling with sluggish sales and unprofitable operations. Lotte Shopping also closed selected duty-free stores with the poorest overseas sales performance. This prompted rumors that the group was facing a liquidity crisis.
The decision to close down the health care service follows the promotion of Shin Yoo-yeol, the eldest son of Lotte chairman Shin Dong-bin, as the group's new vice president late last month. The younger Shin was the former chief of the group's Future Growth Office.
The younger Shin's promotion was announced during the group's large-scale leadership reshuffle by the board of directors, replacing 18 CEOs and reducing members of the directorial board by 13 percent. The reorganization was in line with the group's emergency management announcement due to disappointing performances by its key subsidiaries such as Lotte Shopping and Lotte Chemical.
Instead, the group announced plans to invest in urban residences for seniors. Having been in the hotel business for the past 50 years, Lotte aims to leverage its lodging service expertise in this new venture. The new brand, VL (Vitality and Liberty), is set to launch in Busan in January and in Seoul in October next year.