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Vietnam is the latest target for Lotte and CJ

Mar 27,2018
The third Lotte Mart in Vietnam, which was opened in 2012 in Bien Hoa, east of Ho Chi Minh City. The Korean retailer is expanding its business in the Southeast Asian country. [LOTTE]
Korean food and retail companies are shifting their focus from their struggling ventures in China to Vietnam, sensing opportunity in the Southeast Asian country’s young consumers, many of whom are interested in Korean pop culture.

Lotte said it aims to raise the number of Lotte Mart outlets in Vietnam to 87 by the end of 2020 from the current 13.

Lotte Mart’s sales in Vietnam rose to 266 billion won ($247 million) last year from 62 billion won in 2011. The discount chain first moved into Vietnam in 2008.

Meanwhile, the Chinese government has retaliated against Korean products, cultural exports and tourism after Seoul, against Beijing’s objections, deployed the U.S. Terminal High Altitude Area Defense (Thaad) antimissile system. Korean retail giant Lotte has been negotiating the sale of its hypermarket chain in China after it suffered major losses with no sign of recovery.

Lotte Group was the biggest victim of Beijing’s retaliation, as it signed a land-swap deal with the Korean government to provide a golf course as the host site of the U.S. missile defense system.

Most of its 99 Lotte Mart discount stores in China have suspended their operations for more than one year and Lotte Group suffered about 1.2 trillion won ($1.1 billion) in lost sales.

President Moon Jae-in and his Vietnamese counterpart, Tran Dai Quang, agreed last week to make efforts to boost bilateral trade to $100 billion by 2020.

Vietnam emerged as Korea’s third-biggest export market in 2017, trailing China and the United States.

Helped by a bilateral free trade agreement (FTA), which came into effect in 2015, Korean exports to the Southeast Asian country have been growing rapidly for the past several years.

Korean products accounted for just 8.5 percent of Vietnam’s import market in 2007, and their portion hit an all-time high of 22.1 percent in 2017.

Lotte Group has been operating department stores, hotels and cinemas in Vietnam since 1998.

It is also building Eco Smart City, to be completed by 2021, on about 100,000 square meters (24 acres) of land in Ho Chi Minh City with an investment of over 2 trillion won. The development will include a department store, shopping mall, hotel and office and residential buildings.

Lotte also plans to invest 330 billion won in the development of the Lotte Hanoi project on 73,000 square meters of land by 2020, featuring a department store, a shopping mall, a mart and cinemas.

Emart, Korea’s biggest discount store chain and an affiliate of Shinsegae Group, said it is considering building several more outlets in Ho Chi Minh City.

Emart, which completed the sale of scores of its outlets in China last year, has successfully run a store in Ho Chi Minh City since 2015 with an eye on expanding to nearby Myanmar and Cambodia in the near future.

Sales at Emart’s store in Ho Chi Minh City, which opened in December 2015, rose to 52 billion won in 2017 from 41.9 billion won in 2016.

Korean products are the biggest sellers at the Emart store to Hallyu, or the growing wave of Korean culture abroad, an Emart official said.

Korean food and entertainment conglomerate CJ Group has been actively expanding its business in Vietnam in recent years, hoping that Vietnam could serve as a springboard for an expanded presence in Southeast Asia.

CJ CheilJedang, Korea’s leading food manufacturer, bought several food processing firms in Vietnam, and hopes to make more than 700 billion won in sales by 2020.

The company invested 70 billion won in the construction of a food processing factory in Ho Chi Minh.

The factory will be completed in July. It will produce Korean dumplings and other frozen foods, and kimchi, the traditional Korean side dish made from fermented cabbage, radishes and hot peppers.

CJ Foodville, the restaurant arm of the food and entertainment conglomerate, currently operates 36 Tous Les Jours bakeries in Vietnam.

The company operates 380 outlets abroad, mostly in Vietnam, Indonesia and other Southeast Asian countries.

CJ Freshway, a food distribution and catering affiliate of CJ Group, posted sales of 49 billion won in Vietnam in 2017, up from 1.8 billion won in 2012, when the company began business there.

“We expect a growing number of Korean businesses will expand investment in Vietnam, the land of opportunity,” an industry source said. “Vietnam’s economy has been expanding by more than six percent every year, it is a young consumer market whose average age is 30 and Hallyu is gaining popularity.”


Yonhap


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