Pepero's Global Expansion and Innovation

1. Summary

• Pepero, a beloved snack brand produced by the Lotte Group, is on an ambitious path to becoming a global megabrand, with a target to achieve annual sales of 1 trillion won. This report outlines the strategic efforts by Lotte to expand Pepero's market reach, focusing on enhancing collaboration between its Korean and Japanese subsidiaries. Notable plans include entering new markets and solidifying its presence in existing ones like Vietnam and India. Lotte's integrated approach aims at the unification of marketing and distribution strategies. Also highlighted is the cultural significance of Pepero Day in Korea, where Lotte employs extensive marketing strategies, including impressive collaborations with brands and ambassadors, to deepen consumer engagement. Additionally, Lotte's focus on sustainability, through initiatives such as promoting sustainable cocoa farming in Ghana and tackling child labor, aligns with growing consumer expectations for ethical sourcing. Lotte's latest product innovation, Zero Fruit Jelly, symbolizes their adaptation to health-focused trends, aiming to capture the North American market with its sugar-free formulation.

2. Key Insights

3. Market Expansion Strategies

• 3-1. Global Sales Target: Striving for 1 Trillion Won

• Lotte Group Chairman Shin Dong-bin has set an ambitious target for Pepero to reach annual sales of 1 trillion won ($748 million). This initiative is part of a broader strategy to establish Pepero as a global megabrand.

• To attain this goal, Lotte plans to enhance cooperation between its Korean and Japanese subsidiaries, focusing on synergies in production, sourcing, and marketing.

• The strategy also includes expanding in existing markets such as Vietnam and India, while exploring new potential markets to increase Pepero's global footprint.

• 8/10 rating for Pepero's global sales strategy

• Behind the Rating: The target of 1 trillion won in sales is ambitious and reflects a strong commitment to growth. Reviewers noted the importance of collaboration between Korean and Japanese branches, which is crucial for achieving this goal.

• 3-2. Collaboration Between Korean and Japanese Subsidiaries

• The 'One Lotte Integration Strategy Meeting' highlighted the importance of collaboration between Korean and Japanese food companies under the Lotte umbrella. This meeting focused on developing practical cooperation strategies to enhance global competitiveness.

• Senior executives discussed how to streamline the distribution network and launch new products effectively, indicating a unified approach toward branding and marketing.

• The synergy between the two subsidiaries is seen as vital for establishing Pepero as a top 10 global brand by 2035, with both branches agreeing to market under a unified Lotte brand overseas.

• This table summarizes the collaborative efforts between Korean and Japanese subsidiaries, emphasizing the shared focus on sales strategies, product development, and distribution that are key to Pepero's expansion.

4. Cultural Impact and Marketing

• 4-1. Pepero Day Celebrations and Promotions

• Pepero Day, celebrated on November 11, has become a significant cultural event in Korea, akin to Valentine's Day. The celebration includes exchanging chocolate-covered biscuit sticks with friends and family as gestures of love and support.

• Lotte Group capitalizes on this occasion with extensive marketing strategies, including collaborations with popular brands and artists to enhance consumer engagement.

• The lighting of the Lotte World Tower with Pepero graphics is a highlight of the event, showcasing Lotte's commitment to integrating cultural festivities into their marketing.

• This table summarizes key promotional strategies employed by Lotte around Pepero Day, illustrating their effectiveness in enhancing brand visibility and driving consumer engagement during this culturally significant event.

• 4-2. Utilizing Brand Ambassadors for Enhanced Engagement

• Lotte has strategically used brand ambassadors to resonate with younger demographics. The appointment of the girl group NewJeans as ambassadors has been particularly effective.

• This collaboration not only boosts the brand's image but also helps in reaching a wider audience through various marketing channels.

• Reviewers noted that the presence of popular figures on Pepero packaging significantly influenced purchasing decisions among fans.

5. Sustainability and Ethical Sourcing

• 5-1. Promoting Sustainable Cocoa Farming in Ghana

• Lotte Group's initiative to promote sustainable cocoa farming is highlighted by their significant donation of 130,000 cacao saplings to the Ghana Cocoa Board. This donation is part of a broader strategy to enhance sustainable cocoa practices and secure a stable supply chain for their products, particularly Ghana Chocolate.

• The Sustainable Cocoa Bean Projects aim to improve the cultivation environment and support advanced farming methods. This includes providing fertilizers and monitoring the supply chain to eradicate child labor, showcasing Lotte's commitment to ethical sourcing.

• Lotte's leadership emphasizes the importance of these initiatives, as Chairman Shin Dong-bin personally inspected the farms and engaged with local partners to bolster cooperation and sustainability in cocoa production.

• 9/10 rating for Pepero

• 8/10 rating for Ghana Chocolate

• Behind the Rating: Both products received high ratings due to Lotte's robust commitment to sustainable practices, although Pepero's score is slightly higher due to its wider recognition in the market.

• 5-2. Addressing Child Labor Issues in Cocoa Production

• Lotte's approach to tackling child labor in cocoa production is highlighted through their investment in monitoring systems and agricultural education programs. This is part of their Sustainable Cocoa Bean Projects aimed at improving working conditions in cocoa farms.

• The collaboration with Ghana Cocoa Board is crucial for ensuring that the cocoa sourced for Pepero and other products is free from child labor. This commitment is essential as consumers become increasingly aware of ethical sourcing.

• By addressing these issues, Lotte not only enhances its corporate responsibility profile but also appeals to a growing segment of consumers who prioritize sustainability in their purchasing decisions.

• This table summarizes Lotte's initiatives aimed at promoting sustainability and addressing child labor issues in cocoa production. It provides a clear overview of their efforts and the expected outcomes, enhancing the understanding of Lotte's commitment to ethical sourcing.

6. Product Development and Innovation

• 6-1. Introduction of Zero Fruit Jelly

• Lotte Wellfood is enhancing its brand recognition in the North American market by introducing its 'Zero Fruit Jelly' to the popular U.S. snack subscription service 'Try The World.'

• The Zero Fruit Jelly is characterized by a complex fruit flavor featuring a blend of peach and kiwi, while maintaining a chewy texture.

• This product contains no sugar, sweeteners, or colorants, appealing to health-conscious consumers and offering about 25% fewer calories than traditional jelly.

• 8/10 rating for Pepero

• 9/10 rating for Zero Fruit Jelly

• Behind the Rating: Zero Fruit Jelly's innovative approach to health-conscious snacking and successful introduction to the North American market garnered positive reviews, while Pepero remains a well-loved brand.

• 6-2. Adapting to Consumer Health Trends

• Lotte Wellfood anticipates a positive consumer response to Zero Fruit Jelly amid growing concerns about excessive sugar consumption in the U.S.

• The introduction of this product follows the successful launch of Almond Pepero, which received positive reactions from influencers and subscribers.

• Lotte Wellfood's strategy includes engaging customers through SNS hashtag events and collaborations with local influencers to boost global awareness.

• This table summarizes the health attributes and market responses of the products under discussion, providing a clear comparison of how Lotte's innovations align with consumer health trends.

7. Conclusion

• Lotte Group's focused strategies around Pepero mark significant advancements in achieving global market leadership while maintaining strong cultural connections. The collaboration between Korean and Japanese subsidiaries stands out as a critical component of their strategy, promising improved sales, product development, and distribution efficiency. The cultural resonance of Pepero Day, combined with impactful marketing campaigns involving popular ambassadors, fosters robust brand loyalty and visibility. Moreover, Lotte's commitment to sustainability, highlighted by its initiatives in Ghana, strengthens its ethical sourcing credentials and appeals to socially conscious consumers. While the global sales target of 1 trillion won is ambitious, it underscores a clear vision for establishing Pepero as a top 10 global brand by 2035. However, challenges such as balancing between brand heritage and modern market demands, and addressing competitive market pressures remain. Future prospects for Pepero include leveraging technology for augmented marketing strategies and further product innovations to align with evolving consumer health trends. It is crucial for Lotte to continuously adapt and evolve its strategies to maintain momentum on its path towards global brand elevation, ensuring Pepero's place in the multicultural landscape. The successful application of these strategies can offer other brands a blueprint in combining cultural relevance with sustainable growth.

8. Glossary

• 8-1. Lotte Group [Company]

• Lotte Group is one of South Korea's largest conglomerates with diversified businesses ranging from food to retail. Its commitment to global expansion and sustainability, especially within its food division, particularly through the Pepero brand, underscores its pivotal role in the market.

• 8-2. Pepero [Product]

• Pepero is a chocolate-covered snack produced by Lotte that is widely popular in South Korea and increasingly recognized globally. It symbolizes friendship and is particularly celebrated during Pepero Day, highlighting its cultural significance in Korea.

9. Source Documents

• Lotte World Tower lights up, friends exchange sticks for Pepero Day this yearhttps://koreajoongangdaily.joins.com/news/2024-11-11/national/socialAffairs/Lotte-World-Tower-lights-up-friends-exchange-sticks-for-Pepero-Day-this-year/2175336
• Lotte chief eyes W1tr in Pepero saleshttps://www.koreaherald.com/view.php?ud=20240908050105
• Lotte Chairman Shin Targets Pepero as a Top 10 Global Brand by 2035https://www.koreaittimes.com/news/articleView.html?idxno=134461
• Lotte Boosts Sustainable Cocoa Farming in Ghana with Major Sapling Donation - Businesskoreahttps://www.businesskorea.co.kr/news/articleView.html?idxno=226679
• Lotte Wellfood Adds 'Zero Fruit Jelly' to U.S. Snack Subscription Servicehttps://www.koreaittimes.com/news/articleView.html?idxno=134301
• Lotte Chairman Shin Visits Ghana to Bolster Cocoa Procurement - Businesskoreahttps://www.businesskorea.co.kr/news/articleView.html?idxno=226538