Lotte chairman orders sweeping overhaul as conglomerate confronts deepening crisis

Lotte Group chairman Shin Dong-bin speaks out for company reforms at a 2-day company session at the Lotte Human Resources Development Center in Osan July 17 2025 Courtesy of Lotte Group — Lotte Group Chairman Shin Dong-bin speaks during a two-day company session at the Lotte Human Resources Development Center in Osan, Gyeonggi Province, July 17, 2025. Courtesy of Lotte Group

SEOUL, July 18 (AJP) - Shin Dong-bin, the chairman of South Korea’s Lotte Group, has ordered a sweeping business overhaul, calling for structural reform and long-term innovation as the retail-to-chemicals conglomerate faces what analysts describe as the most serious crisis in its history.

The directive came during a rare two-day forum that concluded Thursday at the Lotte Human Resources Development Center in Osan, south of Seoul.

The meeting brought together some 80 senior executives, including Shin’s eldest son, Executive Vice President Shin Yoo-yeol, in what insiders say was the most comprehensive top-level review since the group’s founding.

At the center of Lotte’s woes is its petrochemicals arm. Lotte Chemical’s operating profit plunged nearly 64 percent year-on-year — from 2.59 trillion won ($1.9 billion) in 2023 to 916.8 billion won in 2024 — amid a sharp downturn in demand, rising raw material costs, and intensifying competition from Chinese producers.

The group has begun liquidating non-core assets to ease financial pressure. It has reportedly pledged its iconic Lotte World Tower as collateral and sold its operations in Pakistan. It is also considering a merger of its naphtha cracking center with HD Hyundai Chemical to achieve cost synergies.

“CEOs must anticipate how the business environment will evolve over the next decade and act with speed and precision,” Shin told executives, emphasizing a shift toward what he termed "PEST perspective management" — a framework focused on political, economic, social and technological change.

The restructuring plan calls for Lotte Chemical to significantly reduce its reliance on low-margin basic materials, which currently account for more than 60 percent of revenue. The company will instead prioritize the expansion of high-value-added products, which now make up roughly 30 percent of sales.

Lotte’s retail division is also set for a strategic overhaul. As legacy department stores and supermarkets lose ground to online platforms and a surge in competition from Chinese players, the company will pursue a “selection and concentration” strategy — focusing on core assets while exiting or consolidating weaker units.

“The fatal mistake in corporate management is ignoring known problems — or worse, failing to recognize problems at all,” Shin said. “We must be prepared for the world five to ten years from now.”

Kim Dong-young davekim0807@ajupress.com