Lotte chair calls for quality-growth pivot as petrochemicals and retail falter

SEOUL, January 16 (AJP)-Lotte Group Chairman Shin Dong-bin on Thursday called for a decisive shift toward “quality growth” centered on profitability and efficiency, as the South Korean conglomerate’s flagship petrochemicals and retail businesses both posted weak performance last year, underscoring mounting pressure on the group’s traditional growth engines. 

The message came at Lotte’s first Value Creation Meeting (VCM) since a sweeping leadership overhaul late last year, with the C-suite gathering taking place against the backdrop of deteriorating business conditions across key affiliates and coinciding with the sixth anniversary of the death of founder Shin Kyuk-ho. 

The meeting, held at Lotte World Tower in Seoul, brought together Shin and about 80 CEOs and senior executives from the holding company and major affiliates. It marked the group’s first top-level strategy session following what Lotte described as its largest-ever generational reset, as the conglomerate confronts rising uncertainty at home and abroad. 

The VCM is held twice a year to align affiliates around the group’s mid- to long-term strategy. This year’s first-half meeting unfolded in a notably somber atmosphere, reflecting concerns over slowing growth and structural imbalances within Lotte’s business portfolio. 

Shin warned that the group’s recent growth momentum has weakened and said this year’s business environment is unlikely to be favorable. Strengthening fundamental competitiveness, he said, must take precedence if Lotte is to overcome headwinds and return to sustainable growth. 

The sense of urgency was reinforced by the group’s recent financial performance. Lotte’s two core pillars — chemicals and retail — both struggled last year, eroding the “twin-engine” model that has long underpinned the conglomerate’s earnings. 

According to estimates by financial data provider FnGuide, Lotte Chemical is projected to have posted an operating loss of 719.4 billion won ($520 million) last year amid prolonged weakness in the global petrochemical cycle. Lotte Wellfood’s operating profit is estimated to have declined 11.64 percent from a year earlier to 138.8 billion won, reflecting rising costs and slowing demand. Lotte Shopping was seen as a relative bright spot, supported by solid department store performance, though overall retail conditions remained challenging. 

In November, Lotte moved to reset its leadership structure, replacing around 20 affiliate CEOs in its regular 2026 executive reshuffle. All existing vice chairmen stepped back from frontline management roles, and the group abolished its business headquarters system introduced in 2022, shifting greater accountability and decision-making authority to individual affiliates. 

Reflecting the tense environment, most executives declined to comment to reporters as they entered the venue, though a few offered brief remarks. 

Lee Won-taek, CEO of Lotte GRS, said only that the company would “strengthen food tech” when asked about its artificial intelligence strategy, declining to elaborate on management priorities for the year. Lotte GRS, which operates Lotteria, has been accelerating kitchen automation and digital transformation since 2024, introducing cooking robots such as Alpha Grill and Boglebot. 

Kim Jong-yeol, CEO of Lotte Cultureworks, said the company would “read trends and lead the world in advance.” Lotte Cultureworks is pursuing a merger with Megabox JoongAng and is shifting its focus from theater operations toward content investment and distribution. 

During the closed-door session, executives held in-depth discussions on rebalancing strategies by business line to restore competitiveness. For food, the agenda included raising the value of core brands. In retail, executives discussed tailoring store strategies to specific commercial districts to maximize customer satisfaction. In chemicals, the focus was on swift restructuring aligned with government policy and upgrading the portfolio around specialty, high value-added products. 

Participants also discussed strengthening groupwide risk management to prevent information-security breaches and safety incidents before they occur. 

Shin laid out management principles he said must underpin the turnaround: a shift to profitability-based management, faster and more proactive decision-making, and vigilance against complacency rooted in past success. 

He urged executives to adopt return on invested capital (ROIC) as a core benchmark, stressing efficient investment and sustainable profitability over sales-driven expansion. All investments, he said, should be guided by clear principles and continuously reviewed for feasibility, including projects already underway. 

Following governance changes, Shin also called for quicker decision-making at the affiliate level. He asked CEOs to balance mid- to long-term vision with immediate operational challenges while fostering a culture in which employees can innovate and grow autonomously. 

Shin warned against the arrogance of believing the group is immune to structural change. 

“Innovation means continuously improving products and services to meet customer needs,” he said. “Small, customer-centered innovations can come together to create big innovation. Leaders must think seriously about what it takes to understand customers and resolve their inconveniences.” 

In closing, Shin delivered a blunt message.

“If we do not change by breaking away from what is familiar, we cannot solve the problems we are facing now,” he said. “We must move quickly to innovate and strengthen our fundamental competitiveness by moving beyond past ways of succeeding.” 

Earlier in the day, Lotte held a memorial ceremony marking the sixth anniversary of the death of founder Shin Kyuk-ho. Attendees included Shin; his eldest son, Shin Yoo-yeol, vice president of Lotte Holdings and CEO of Lotte Biologics; and Lotte Holdings co-CEOs Ko Jung-wook and Noh Joon-hyung.