Namyang sees Q1 profits turn sour

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Namyang sees Q1 profits turn sour

First-quarter operating profit of Namyang Dairy Products, which has been buffeted by criticism for abusing small retailers and distributors, tumbled nearly 90 percent year-on-year.

According to the Dart (data analysis, retrieval and transfer) system, Namyang reported 305.6 billion won ($273.5 million) in revenue for the January-March period, down 6.72 percent year-on-year.

In the same period, Namyang’s operating profit was 2.65 billion won, down 88.5 percent compared to 23.1 billion won recorded a year earlier.

Namyang employees blamed the disappointing performance on steep marketing costs to promote new instant coffee brand Looka.

Meanwhile, Namyang’s archrival Maeil Dairies saw improved performance in the first quarter of 334.1 billion won in revenue, up 27.6 percent compared to a year earlier.

When it comes to operating profit, the company recorded 8.04 billion won, up 59 percent from 5.05 billion in the first quarter of last year.

Maeil Dairies said company performance improved greatly thanks to a cost-cutting restructuring plan.

“Namyang says the main culprit of disappointing Q1 performance is hefty marketing costs for instant coffee brand promotion,” said an industry insider. “But in the second quarter, the boycott of Namyang products that started in May is likely to hurt profitability.”

The nation’s largest producer of dairy products has been the target of a public outcry and boycotts after an audio file of a phone conversation between a young Namyang salesman and a distributor hit YouTube on May 3.

In the recording, the salesman hurls insults and threats at the older distributor, who refuses to buy more product than he thinks he can sell.

The public fury led Namyang CEO Kim Woong to apologize on May 9, but consumers have continued to boycot Namyang products.

By Kim Mi-ju []
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