Hite Brewery to
Take over Soju Maker Jinro
- Begins due diligence pending antitrust watchdog's decision on the acquisition

Hite Brewery's selection as the preferred bidder of the country's best-selling distilled liquor, "soju" has prompted its rival beer maker OB and provincial soju makers to jitter over Hite's possible dominance over both the domestic beer and soju markets.
The nation's leading beer maker, Hite Brewery signed a memorandum of understanding (MOU) with Jinro on the negotiations on one of the nation's highest merger and acquisition deals in Korean history.
The Hite-led consortium was selected as the preferred bidder on April 1 out of eight bidders competing for the race to acquire the debt-ridden yet lucrative distilled liquor maker. The consortium won the bidding with the highest bid of 3.2 trillion won, outbidding CJ Corp., Doosan Corp., the holding company of Oriental Brewery, and Taihan Electric Wire Co. The Korean Teachers Credit Unit, the Military Aid Association, Korean Federation of Community Credit Cooperatives and a private equity fund of Korea Development Bank participate in the Hite-led consortium.
Hite Brewery on April 15 launched due diligence on the soju distiller, Jinro Co. in accordance with the MOU reached between the two companies.
Reversing its earlier stand, the soju maker's trade union issued a statement on the same day, saying that it does not oppose the Hite-led consortium's bid to acquire the distilled liquor maker. The trade union's about-face was taken to mean to Hite Brewery's M&A bid cleared a hurdle which could otherwise complicate the acquisition process. Jinro's labor union initially on April 11 raised objection to the Hite takeover.
Another huddle Hite Brewery will have to cope with in the acquisition bid is whether the Fair Trade Commission will approve its acquisition of Jinro.
In particular, some provincial soju makers are apparently showing signs of putting up opposition against Hite Brewery's acquisition of Jinro, saying that the provincial soju makers, which account for 80 to 90 percent of their markets, may be threatened by Jinro's brand "Chamisul" if the brand is marketed through Hite Brewery's beer marketing network in provincial areas. Hite Brewery wields more clout through its marketing network in provincial areas than in the Seoul area. If Hite Brewery acquires Jinro, industry analysts say, Hite Brewery and Jinro would reciprocate each other by allowing Hite Brewery to utilize Jinro's marketing network in the Seoul area and permitting Jinro to capitalize on Hite Brewery's strong marketing networks in provincial districts. Hite Brewery commands a 58 percent share of Korea's beer market, outperforming overall considerably over its archrival Oriental Brewery (OB), but OB is leading particularly only in the Seoul area with a 52 percent share. On the other hand, Jinro, which has a 56 percent share of the local soju market, is making a strong showing in the Seoul with a 92.7 percent share, but not in the provincial markets.
Hite Brewery takes the lead in provincial districts, except the Chungcheong area (46 percent share). The market share of the beer maker is 71 percent in the Jeolla area; 57 percent in the Gangwon area; and 81 percent in the Gyeongsang and Jeju districts. Take for instance the Gangwon area where Doosan's soju brand "Sansoju" enjoys a 54.1 percent, not Jinro's "Chamisul". The soju market of the Gyeonsang area is dominated by three different local soju makers: local soju maker Kumbokju's brand "Chamsoju" commands a 94.2 percent share in North Gyeongsang Province; Muhak's brand "White" has an 80 percent share in South Gyeongsang Province; and Daesun's brand "Siwon" with an 86 percent portion.
Hite Brewery Chairman Park Moon-deuk dismissed local soju makers' worry over its acquisition of Jinro, saying that the Hite-led consortium is aimed at making a foray into the global market in the case of opening the alcoholic markets, including soju, to foreign competition, not limiting its activity to the local market. Hite Brewery, which has been around on the alcoholic market for some 70 years, has a good understanding of the difficulties facing local alcohol beverage makers, and if Hite Brewery manages to acquire Jinro, the beer maker will have a win-win strategy by collaborating with provincial alcoholic beverage makers, Chairman Park said.
Concerning the issue of creating a monopoly, the chairman said, his company would submit to the Fair Trade Commission an application for prior deliberation on its acquisition bid, and it would be up to the antitrust watchdog's decision.
Hite Brewery President Yoon Jong-woong indicated in a statement that its acquisition of Jinro is not against with the Fair Trade Act. He noted that soju and beer have been considered to have their respective markets as they show differences in determining prices and a possibility of substituting each other. Any decision on the monopoly of the soju market should be taken into account such factors as the market share, entry conditions and the existence of neighboring markets, President Yoo added.
Hite Brewery officials said the local alcoholic beverage market is expected to undergo tremendous changes in the wake of signing Free Trade Agreements in the years to come, so Hite Brewery's acquisition of Jinro does not see a violation of the Fair Trade Act. They cited a recent case in the global whisky market in which France's Pernod Ricard, the maker of the renowned whisky brand Chivas Regal, is seeking to acquire UK's Allied Doecq, the maker of Valentine. The local beer, soju and whisky markets are likely to be roiled by a series of M&A attempts. Hite Brewery also has made its presence in the local whisky and bottled water markets. nw