Open While Competitors Close: The Humiliation of Hanaro Mart

[Anchor]

Hanaro Mart is owned by the National Agricultural Cooperative Federation (NACF), and its affiliate, NongHyup Agribusiness Group, operates it through two subsidiaries: NongHyup Hanaro Distribution and NongHyup Distribution. These large-scale Hanaro Mart locations in urban areas have reportedly been suffering from tens of billions of won in losses since 2022.

For more details, here is Videomug reporter Yeo Hyeon-gyo.

[Reporter]

1. Four Years of Deficits, Surviving on Bank Loans

NongHyup Distribution reported an operating loss of 30.5 billion won last year, a 40 percent increase in just one year.

NongHyup Hanaro Distribution also recorded an operating loss of 39 billion won last year.

NongHyup Distribution has borrowed nearly 100 billion won from NongHyup Bank, paying 3 billion won in interest expenses last year alone.

Effectively, the company is surviving on bank loans, and its financial health is flashing red. NongHyup Distribution fell into partial capital impairment last year, and its debt-to-equity ratio jumped from 110 percent in 2024 to 164 percent in 2025.

The issue of store deficits is not limited to one or two locations; it is a common problem across stores nationwide.

According to data provided to People Power Party lawmaker Kim Seon-kyo by the National Agricultural Cooperative Federation during last year's parliamentary audit, the proportion of loss-making stores under the two subsidiaries has been increasing every year.

The number rose from 13 out of 60 stores (21.7 percent) in 2020 to 35 out of 62 stores as of August 2025.

This is more than a two-fold increase in just four years.

Why has it come to this?

2. Costs Are Down, So Why the Deficit?

This is where it gets strange.

To attribute the deficit to poor sales would be inaccurate, as the burden of cost of goods sold has actually decreased.

Let us look at NongHyup Distribution, one of the two subsidiaries.

The ratio of the cost of goods sold, which is the cost incurred when purchasing products, fell from 86 percent to 82 percent.

In November 2021, NongHyup Agribusiness Group merged four distribution subsidiaries into one under the name NongHyup Distribution, citing "enhanced management efficiency." This allowed for bulk purchasing and created a structure where goods could be bought at lower prices.

Despite this, the deficit persists due to "selling, general, and administrative (SG&A) expenses."

SG&A expenses include costs for sales and management, such as labor, rent, and marketing.

These expenses surged from around 170 billion won just before the merger to nearly 280 billion won last year.

In particular, payroll costs alone jumped from 69.9 billion won to 102.3 billion won.

3. Agribusiness Group Holds Purchasing Power, Distribution Just Sells?

A bigger problem is that the authority to purchase agricultural products was taken over by NongHyup Agribusiness Group.

[Lee Man-hee / People Power Party Lawmaker: (NongHyup) Agribusiness Group is receiving nearly 27 billion won as a middleman. What is this? Even after receiving this, (NongHyup) Agribusiness Group remains in a deficit, and Hanaro Distribution and NongHyup Distribution, which were operating well, are now generating massive losses after being merged. Does this not mean that the merger failed to create the intended synergy and instead worsened the management situation?]

[Park Seo-hong / CEO of NongHyup Agribusiness Group: Yes, the results show that...]

4. Poor Performance Despite Being a "Regulatory Blind Spot"

In fact, Hanaro Mart is in an advantageous position.

Unlike other large supermarket chains, it is not subject to regulations such as mandatory closures twice a month or bans on late-night operations.

This exception was granted because agricultural and marine product sales account for over 55 percent of their revenue.

It is essentially a "regulatory blind spot" where they can operate even on days when competitors are closed.

Yet, they have failed to capitalize on this indirect benefit.

The situation is vastly different from other large retailers that are navigating the waves of the retail industry by quickly reading consumer trends, utilizing direct trade, cutting SG&A expenses, and implementing excellent marketing, even while under regulation.

[Seo Yong-gu / Professor of Business Administration at Sookmyung Women's University: They need to address burdens like real estate rent, and in reality, they should be closing down underperforming stores, but the pace of restructuring is slow. I believe it is urgent to develop private brands that are sold exclusively at Hanaro Mart.]

The fallout from this sluggish performance is affecting farmers.

NongHyup Distribution pays an agricultural support fund every year in exchange for using the "NongHyup" name.

This money is used for support projects for farmers, such as revitalizing local distribution.

However, as performance worsened, this contribution dropped from 5.1 billion won in 2022 to 4.3 billion won last year.

Essentially, because they cannot resolve their deficit, they are cutting funding for farmers first.

Hanaro Mart has successfully reduced costs but is held back by SG&A expenses, and despite avoiding regulations, it has fallen behind current trends.

Experts suggest that fundamental structural improvements are necessary, such as reorganizing chronically loss-making stores and strengthening purchasing authority.

Reported by Yeo Hyeon-gyo | Video by Kim In-seon | Produced by Lee Mi-seon | Graphics by Jo Seung-hyun and Jeong Yu-min | Produced by Knowledge Contents IP Team
※ Please note: This article was translated by AI and may contain errors.