A story Oriental Brewery boss Chang In-soo often tells about his days as a soju salesman is how he and two clients once worked through 29 bottles of the traditional Korean rice liquor at a single sitting. He feels bad, he says, they didn't manage 30.
His stamina in capturing 60 percent of the local beer market has been just as eye-catching, helping to explain why Anheuser-Busch InBev has agreed to buy back the brewer for nearly three times the price it achieved five years ago when it sold it to private equity investors.
"'The war is won on the ground,’ that is what Chang knows, he motivates the sales guys to go out, pound the pavement," says a source who knows him.
One anecdote colleagues tell of Chang's motivational style recalls him turning up with his wife at 5 a.m. in the depths of the Korean winter to give out bowls of hot soup to dockworkers and drivers toiling in the freezing loading bays.
Oriental Brewery (OB) has certainly performed well in the five years under KKR & Co and Korea specialist Affinity Equity Partners. Core profit (EBITDA) increased 25 percent last year to $500 million - 2.3 times more than when they bought it from InBev, which had retained a option to repurchase.
The $5.8 billion that AB InBev is paying to buy it back makes it the record inbound M&A deal into South Korea, ahead of Standard Chartered's $3.3 billion agreement to buy Korea First Bank in 2005, Thomson Reuters data shows.
But if the returns made were stellar - the deal announced last month was Asia's biggest ever private equity sale via M&A - the risk they took in buying the firm, in the depths of the financial crisis, were great.
The private equity partners set about reducing costs and boosting market share with new products and an aggressive sales drive. Celebrity endorsements from the likes of rapper Psy have been used to help target a younger audience for its Cass brand.
"OB was an old man's beer, a beer you would say, 'I don't drink that, my granddad drinks that.’ So they gave it a new image, they listened to what people wanted," says the source.
"They created Cass Lite to appeal to women, created OB Golden Lager with more flavour because people wanted more flavour in their beer. And the sales guys took it out to the distributors and the bars and clubs."
Industry veteran
The brewer's debt was refinanced with cheaper loans from Korean banks.
An early move by the new private equity owners was to poach Chang, a 30-year industry veteran with little English and no college education, from then-market leader HITE-Jinro Holdings, as sales chief in January 2010.
He overhauled the sales team and set about targeting the south of the country, HITE-Jinro's stronghold, raising OB's share of that market from barely double digits to around 40 percent, the source says.
Chang, who was promoted to CEO in June 2012, has told colleagues he drove more than 70,000 kilometres (45,000 miles) in his first year at the company, an OB spokesman says, having meals and drinks with wholesalers and regional employees.
On the road, he discovered that OB was damaging its beer's freshness by pushing out inventory to boost monthly sales that then sat in wholesalers’ warehouses for up to six months.
That soon changed, as the company overhauled its distribution model as part of a wider restructuring.
Working alongside Chang has been KKR's operations team known as Capstone - an internal consulting arm that boosted expenditure on equipment and improved the beer fermenting process, while overseeing cost reductions elsewhere including a $3.7 million saving on water and $17.7 million from cutting greenhouse gas emissions.
OB overtook HITE-Jingo as the country's top beer producer for the first time in 15 years in 2012. Its market share has grown to around 60 percent of the country's four trillion won ($3.8 billion) beer market, up from around 40 percent in 2009, according to trade group Korea Alcohol & Liquor Industry Association.
AB InBev, which last month said it would retain Chang as CEO, clearly believes there remains more room for growth, despite a fightback from HITE-Jinro and the entry of retail giant Lotte Group into the saturated beer market.
"Chang understands how to sell to Koreans," says Choi Soo-ok, the chairman of Korea General Liquor Wholesalers Association, which represents 1,200 wholesalers throughout South Korea. "During the last time InBev owned OB, it was all statistics and bottom line. But Chang forges human relationships to move bottles."
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