South Korean dairy firm chairman resigns over false COVID-19 claims

SEOUL, May 6 (UPI) -- The chairman of one of South Korea's largest dairy manufacturers is resigning after the company falsely claimed its yogurt drink could help prevent COVID-19 infection.

Namyang Dairy Products Chairman Hong Won-sik, who owns 51.68 percent of the Seoul-based manufacturer, bowed his head and gave a tearful apology to the media on Tuesday.

Last month, the company's research institute claimed that its Bulgaris yogurt drink reduces the possibility of the COVID-19 infection by almost 80 percent.

The drink instantly sold out, and Namyang's share price skyrocketed on the Korean stock exchange.

The Ministry of Food and Drug Safety sued the company for false advertising, saying the research it commissioned and promoted at a symposium did not involve animal testing or clinical trials.

"At a time when people are suffering greatly from the virus pandemic, we caused great disappointment and anger to all the people, our employees, our distributors and dairy farmers. We sincerely apologize for that," Hong said.

"I will take full responsibility for that. I will step down from the chairmanship of Namyang. In addition, I will not transfer the managerial right to my siblings," he added.

CEO Lee Kwang-bum has also offered to resign.

Following Hong's announcement, Namyang's share price shot up 9.52 percent Tuesday and rose 6.9 percent Thursday. The Seoul bourse did not open Wednesday as it was a holiday.

Namyang struggled last year, netting $48 million in loss compared to $26 million net profit in 2019. Its sales also declined up to 8 percent year on year.

"Namyang has faced several bad news in terms of public relations over the past several years, and the yogurt drink issue has made matters worse," said Park Ju-gun, chief of business tracker Leader's Index.

"Namyang will have to put forth great efforts to gain a positive reputation in the future," he said.

In 2013, a video showing a Namyang salesperson using abusive language to force distributors to purchase more products sparked a boycott of Namyang.

The company has also been accused of attempting to disparage rivals through public relations maneuvers or rumors.

Hong's niece, Hwang Ha-na, has been convicted multiple times of using illegal drugs.

Namyang was established in 1964 by Hong Doo-young, who is the father of Hong Won-sik. Hang Ha-na is the granddaughter of the founder.