Namyang Dairy, dealers hammer out agreement

Namyang Dairy Products, which has been buffeted by criticism for abusing small retailers and distributors, finally agreed with the council of distributors nationwide on measures for mutual cooperation and support.

Since early May, Namyang has been the object of nationwide scorn after an audio file of a Namyang salesman berating a distributor and trying to strong-arm him into purchasing more product was released on YouTube.

Namyang has also been accused of manipulating an online ordering system to make stores take two to three times the amount of products they actually need.

At negotiations at Seoul Station attended by 40 representatives including Kim Woong, CEO of Namyang Dairy Products, and Ahn Hee-dae, president of the council, both parties agreed to eradicate unfair trade practices like forcing excessive sales on small distributors.

According to Namyang Dairy Products, it also agreed to raise 50 billion won ($43 million) to support mutual growth, 12 billion won for emergency assistance for dealers, establish a shared growth committee and ombudsman, set up an effective system for returns and improve the payment system. The changes will take effect next month.

The council of distributors has held four negotiation sessions with Namyang Dairy Products since the end of May.

The council put the final proposal to a vote of the 1,128 member dealers and 87 percent, or 984, approved.

“It seems our members have accepted the proposal because the normalization of the sales is imperative, although the company’s proposal was not fully satisfying,” said a representative of the council.

Both parties worked out details of the agreement over the weekend.

A key to resolving differences was increasing the fund for emergency assistance to 12 billion won from the originally proposed 10 billion won, according to Namyang.

Namyang Dairy has decided to continue the investment for growth and improving the business environment of distributors by operating a task force team to improve business structure and carry out the proposals.

“The company learned a great lesson in the wake of this incident and could contemplate a fundamental transformation,” said Kim Woong, CEO of Namyang.

“Now we are in a pursuit of becoming the exemplary company in the industry by creating a distribution structure based on the viability of distributors and retailers.”

“In the wake of the negotiations today, we will set out to improve and normalize management of the distributors. We will make further efforts to make today’s results the new precedent for big businesses and small distributors to grow together,” said Ahn Hee-dae, the president of the council.

BY KIM JUNG-YOON [kjy@joongang.co.kr]