November 21, 2024

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Baemin app on a phone screen (Woowa Brothers)

South Korea’s leading food delivery app Baedal Minjok, or Baemin, posted a 65 percent growth in operating profit last year, achieving a significant surplus for the second consecutive year. As a result, its German parent company, Delivery Hero, received some 412.7 billion won ($306 billion) in dividends for the first time since acquiring Baemin.

Baemin's app operator Woowa Brothers announced Friday that its consolidated sales reached 3.41 trillion won last year, marking a 15.9 percent increase from the previous year.

Its operating profit came in at 617.4 billion won, up 65 percent from a year earlier to surpass that of Coupang, the top e-commerce company here.

In 2020, Delivery Hero acquired Woowa Brothers with an investment of 4.75 trillion won. However, despite generating sales of 2.88 trillion won during the same period, Woowa Brothers experienced operating losses amounting to 75.7 billion won.

From March 2022, Baemin initiated a restructuring of its payment policies for Baemin One, a single-order-per-delivery system, introducing a fixed brokerage fee rate of 6.8 percent and increasing delivery charges by 1,000 won. This strategic adjustment yielded an operating profit exceeding 400 billion won.

The enhanced performance of Baemin, currently dominating more than 60 percent of the local food delivery market, has resulted in a resurgence of investment returns for Delivery Hero.

The company attributes the expansion of its operating profit to diverse previous investments, including the recruitment of new restaurants to the platform, development of delivery infrastructure, advertising, and optimization of business structures to reduce costs.

Upon criticism being raised regarding the potential impact of distributing substantial dividends to a foreign entity, Delivery Hero underscored the significance of dividends within the "comprehensive investment cycle of a startup," encompassing fund acquisition, corporate growth, investor exit and reinvestment.

As of the end of last year, the number of restaurants partnering with Baemin nationwide had reached 320,000, marking an increase of some 20,000 establishments from the previous year.

Industry analysts view that initiatives to improve cost efficiency, such as discontinuing the live-commerce business and exiting the global market in Vietnam, have contributed to the success.

Additionally, Baemin's grocery delivery business unit, B-mart, significantly reduced its deficit last year. The overall quick commerce sector, including B-mart, recorded sales of 688 billion won, marking a 34 percent year-on-year increase.

Woowa Brothers currently operates around 70 B-mart urban distribution centers spanning Seoul, Gyeonggi, Busan, Daegu, Ulsan, Daejeon and Cheonan, offering over 10,000 types of products.

By Kim Hae-yeon (hykim@heraldcorp.com)
The Korea Herald