The encyclopedia · Finance & Accounting · Financial decision · 1945–2001
Haitai Group was Korea's first food company — then overexpansion destroyed it
Korea's first food company grew to 15 affiliates, defaulted in 1997, and was dismantled.
Haitai Group · Haitai Confectionery · 1997-11
What happened
Haitai Confectionery was founded on October 3, 1945, as Korea's first food company. Under founder Park Gun-bae, the company grew into a conglomerate spanning confectionery, dairy, beverages, electronics, construction, trading, advertising, and professional baseball. By 1996, the group had 15 affiliates and was one of Korea's largest chaebols.
The expansion was funded by aggressive borrowing. Park Gun-bae acquired Inkel, an electronics company, and pushed into construction and other unrelated businesses without the financial discipline to support them. When the Asian Financial Crisis hit in 1997, the group's debt structure collapsed. On November 1, 1997, Haitai Confectionery, Haitai Electronics, and Daehan Packaging defaulted on their obligations.
Creditor banks approved a 150 billion won cooperative loan, but it proved insufficient. The group was forced to sell or liquidate most of its affiliates. Park Gun-bae was arrested and imprisoned for window-dressing accounting and creating slush funds through disguised affiliates. By August 2001, the group was formally dissolved.
Why it happened
- Diversification into unrelated industries — electronics, construction, trading — created a debt structure that required sustained growth across all sectors to service.
- The acquisitions of Inkel and other companies were funded by borrowing, leaving no buffer when the 1997 crisis cut off credit markets.
- Chairman Park Gun-bae's window-dressing accounting hid the group's true financial condition from creditors and regulators until it was too late.
- The group had 15 affiliates but no core-business discipline — the confectionery cash flow was used to prop up unrelated ventures.
The lesson
Diversification into unrelated businesses does not reduce risk when the expansion is funded by debt and the core business cannot support the structure.
Aftermath
Haitai Confectionery survived as the sole remaining entity and was sold to Crown in 2004. Haitai Dairy was sold to Dongwon. The Haitai Tigers baseball team was sold to Kia Motors. Chairman Park Gun-bae was imprisoned for accounting fraud. The group that began as Korea's first food company in 1945 was completely dissolved by 2001.
Sources
- Korean Wikipedia — Haitai Group
- FoodNavigator — Korean confectionery deal wrapped up (Haitai Confectionery sold to Crown after 1997 Asian crisis dismantled the 15-affiliate chaebol)
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