Disruptions in dairy, rice supply to Homeplus raise concerns among farmers

A section of the milk shelves at a Homeplus store in Seoul sits empty, March 20, due to delivery delays from Seoul Milk. Yonhap

Farmers are increasingly concerned about potential losses amid delays in dairy and rice deliveries to Homeplus, which is currently undergoing corporate rehabilitation, agriculture industry officials said Monday.

The country’s No. 2 supermarket chain abruptly filed for corporate rehabilitation with the Seoul Bankruptcy Court on March 4 amid liquidity concerns following a credit rating downgrade.

Fearing nonpayment, Seoul Milk, Korea’s largest dairy company, suspended deliveries to the retailer on March 20.

Homeplus notified Seoul Milk of its plan to begin installment-based payment of unpaid deliveries incurred prior to entering a rehabilitation procedure starting in June. It also pledged to pay on time for products delivered after the court-led process began.

Despite this, the dairy producer remains firm, calling for a one-time settlement of the overdue payments and requiring upfront cash payments for any future deliveries.

The ongoing delivery halt by Seoul Milk is raising concerns about financial strain among its secondary partners — including raw milk suppliers, material vendors and franchise owners — who are experiencing a drop in sales.

As well as Seoul Milk, NongHyup Agribusiness Group — a key rice supplier to Homeplus — has also significantly scaled back shipments amid fears of unpaid bills, raising concerns about potential losses for rice farmers.

Hahm Yong-il, senior deputy governor of the Financial Supervisory Service (FSS), vows to investigate the Homeplus case thoroughly during a media briefing at the FSS building in Seoul, April 1. Yonhap

The agricultural and livestock industries are calling on the government to intervene and take prompt action to prevent further damage.

In a recent statement, a coalition of 22 agricultural and livestock organizations said, “Dairy cooperatives and producers are currently owed between 4 billion won ($2.7 million) and 10 billion won by Homeplus. We strongly urge the government to assess the scope of the losses and introduce concrete countermeasures.”

In response, the retail store chain called on the coalition to help persuade Seoul Milk and NongHyup Agribusiness Group, saying their cooperation is essential to minimize the impact on farmers and small secondary suppliers.

“Cooperation and support from large corporations, suppliers and related organizations are urgently needed,” a Homeplus official said.

Meanwhile, facing liquidity challenges, the retailer has requested a 30 percent to 50 percent reduction in rent from funds and real estate investment trusts (REITs) that own its store properties, according to sources in the financial investment industry.

These funds and REITs had acquired Homeplus stores using loans from financial institutions and have been relying on rent payments from the retailer to service the interest on those debts.

Homeplus earlier stated that it had postponed rent payments that became due after it entered court-led rehabilitation.

The rent reduction request has placed property owners in a difficult position, as prolonged disputes over lease terms could lead to store closures and potential public backlash.

Hahm Yong-il, senior deputy governor of the Financial Supervisory Service, the country’s financial watchdog, pointed out that Homeplus has consistently used vague language about “minimizing damage” without offering specific explanations despite failing to pay rent for some of its stores.

“We are committed to uncovering any signs of misconduct or fraud and will take strong disciplinary action if any illegalities are confirmed,” he said during a media briefing on April 1.