Korea's top craft brewer seeks junior Kosdaq listing

Jeju Beer Co., South Korea's No. 1 craft beer maker, is preparing to become the country's first craft brewery to go public, buoyed by the rapid market growth amid the stay-at-home trends and a rise in domestic travelers to the resort island of Jeju where it is based.

The brewer recently filed a preliminary application to list on the junior Kosdaq market as it is widely expected to swing to a net profit this year, according to investment banking sources on Nov. 24.

It plans to sell 8,362,000 shares, or 15% of its total shares set to be listed. Given that a review of a preliminary IPO application tends to take more than two months, Jeju Beer is expected to make a market debut in the first half of next year at its earliest. Daishin Securities is managing the IPO.

The IPO application was filed after it raised 14 billion won ($12.6 million) in pre-IPO share sales in September to venture capital firms, including Wooshin Venture Investment Corp. and Stone Bridge Ventures. They valued the brewer at 100 billion won as a whole.

Jeju Beer expects its enterprise value to top 100 billion won when it goes public.

Its financial investors, including SBS Neo Partners Co. and Won & Partners, recently have converted all their holdings of preferred shares and bonds into common shares of Jeju Beer, totaling 2.4 million shares. That represents 51% of the brewer's outstanding shares.

“The company needs to cut advertising and promotion costs amounting to 12.3 billion won and prove its capability of producing long-term profits,” said an investment banking source.

It logged a net loss of 11.8 billion won last year on sales of 8.5 billion won on a consolidated basis. But its first-half sales for this year exceeded the revenue posted for the entire year of 2019.

Although it falls short of meeting the Kosdaq market listing requirements of making three consecutive years of profits, Jeju Beer plans to seek special approval granted to growth companies, or those with growth business models, based on this year's bullish results, the sources said.  

GROWTH LED BY THOSE IN THEIR 20s, 30s

Domestic craft beer sales skyrocketed by almost 500% between January and October this year from a year earlier at the country's leading convenience store chain 7-Eleven, compared to a 6.2% growth in overall beer sales at the chain during the same period. By contrast, imported beer sales dwindled by 14% during the period.

Among those in their 20s and 30s, craft beer accounted for 52.4% and 37.5% of domestic beer sales at another major convenience store franchise CU between January and October this year, respectively.

A wide variety of tastes and low-volume production appealed to twenty- to thirty-somethings, especially after revised liquor tax laws in January this year led to a cut in craft beer prices.

The domestic craft beer market looks set to grow further with new entrants, including chicken franchise store Kyochon, as the government pledged to lower barriers to the industry from next year.

South Korea’s craft beer market is projected to expand to 300 billion won in 2021, by when the country’s entire beer market is estimated at 5 trillion won, according to the sources.

Founded in 2015, Jeju Beer adopted the recipe of Brooklyn Brewery, a top craft brewer in New York. It is leading the domestic craft beer market in terms of sales and market share, followed by The Booth Brewing Co. and Amazing Brewing Company.

A rise in domestic tourists to the southern island on the back of border restrictions imposed after COVID-19 struck helped lift its sales. Additionally, Our Ale, produced jointly with Hyundai Card Co., became the top-selling craft beer within one week of its launch this year at the CU franchise.

MBH Holdings Co, headed by Jeju Beer CEO Moon Hyuck-ki, is the largest shareholder with an 18% stake in the brewer. Its other financial investors include Forest Partners and SBI Investment.

Write to Ye-Jin Jun and Bora Kim at ace@hankyung.com
Yeonhee Kim edited this article.