"Turning Crisis into Opportunity"... Food and Distribution Industry Actually Smiled Amid 'COVID-19' Adversity (Comprehensive)

CJ CheilJedang HMR Sales Soar Due to Increased Demand for Home-Cooked Meals
Orion and Nongshim Smile as Ramen and Snack Demand Surges as Alternative Foods
HiteJinro Turns Profitable with Strong Home Sales of Jinro and Terra
GS Retail and Others in Distribution Industry Also Report Earnings Surprise

[Asia Economy Reporters Choi Saeng-hye, Cha Min-young] Amid the global economic crisis triggered by the spread of the novel coronavirus infection (COVID-19), some food and distribution companies have reportedly enjoyed a windfall in the first quarter. In the food industry, sales of home meal replacements (HMR), ramen, and snacks surged in the first quarter following the 'social distancing' trend, while some convenience stores and large supermarkets posted better-than-expected results due to a stronger tendency to refrain from dining out.

CJ CheilJedang, which maintains a domestic HMR market share in the 50% range, is considered a representative beneficiary of the COVID-19 windfall. According to securities and distribution industry sources on the 4th, CJ CheilJedang's consolidated sales for the first quarter are expected to reach KRW 5.6371 trillion, up 12.3% from the same period last year. The processed food segment's sales increased by 33.9% year-on-year, driven by a surge in domestic food demand due to COVID-19.

Park Hee-jin, a researcher at Shinhan Financial Investment, explained, "As of the end of the third quarter last year, CJ CheilJedang's HMR market share was 53.3%, up 3.9 percentage points from the same period last year," adding, "This is thanks to the expansion of product lines under brands like Bibigo and Gourmet, as well as increased market share within existing product categories." He further noted that HMR demand is expected to continue growing, making the annual performance outlook positive.

Orion is also expected to post strong results as demand for snacks surged due to the COVID-19 situation and demand in previously sluggish overseas markets improved. Orion's consolidated sales and operating profit for the first quarter are projected to be KRW 543.7 billion and KRW 96.9 billion, respectively, up 9.3% and 25.4% year-on-year.

In particular, the COVID-19 issue created opportunities for Orion in the Chinese market. Although sales in the Chinese segment fell 36.0% year-on-year in January, Orion's pie, biscuit, and snack products stood out as substitutes for food in China, leading to sales increases of 53.2% and 67.3% in February and March, respectively, compared to the previous year. Kim Jung-wook, a researcher at Meritz Securities, stated, "In countries outside China such as South Korea, Vietnam, and Russia, strong performance is expected due to new product effects rather than external environmental changes."

Nongshim is another food company that benefited from the surge in ramen demand that began in earnest after February. The success of the Academy Award-winning film "Parasite" also boosted sales of "Jjapaguri" (a combination of Jjapaghetti and Neoguri). Nongshim's consolidated sales and operating profit for the first quarter are expected to be KRW 686.6 billion and KRW 50.1 billion, respectively, up 16.7% and 58.4% year-on-year.

By business segment, ramen sales reached KRW 353.2 billion, up 16.7% year-on-year, while snack and beverage sales are expected to increase by 10.2% and 17.5% to KRW 87.2 billion and KRW 40.5 billion, respectively. Overseas sales are estimated to rise 24.2% year-on-year to KRW 165.4 billion. In the U.S. market, which benefited significantly from "Parasite," sales are projected to reach KRW 92.9 billion in the first quarter, up 30.9% year-on-year.

In the alcoholic beverage industry, most companies are expected to see their first-quarter results plummet due to reduced demand for entertainment caused by social distancing, minimized gatherings, and remote work. However, HiteJinro is thriving alone, thanks to the continued popularity of Terra and Jinro Is Back. Its first-quarter sales and operating profit are expected to be KRW 497.9 billion and KRW 35.1 billion, respectively, marking a 17.7% increase and a return to profitability compared to the same period last year. As of the end of the first quarter, HiteJinro's market share for beer and soju was tentatively estimated at 36.0% and 67.2%, up 5.2 and 4.0 percentage points year-on-year, respectively. Sales volumes of Terra and Jinro Is Back, which led the sales increase, are expected to exceed 7 million and 3 million boxes, respectively. First-quarter sales in the beer and soju segments are projected to rise 28.7% and 11.9% year-on-year to KRW 179 billion and KRW 281.8 billion, respectively.

In the distribution sector, GS Retail recorded an earnings surprise in the first quarter. Its consolidated operating profit for the first quarter was KRW 88.8 billion, a staggering 314.7% increase year-on-year. During the same period, sales reached KRW 2.1419 trillion, and net profit was KRW 49.4 billion. GS25, the core convenience store business, has established itself as a platform tailored for single-person households, while the supermarket business GS The Fresh turned profitable, contributing to the strong performance. Additionally, one-time gains such as advisory fees from the sale of the Gwanggyo Mall commercial facility were reflected. GS Retail's decision to announce results about five days earlier than last year is also interpreted as a move to avoid the 'golden holiday week' and maximize the positive impact of the strong performance.

The turnaround in performance amid the distribution industry's downturn due to COVID-19 received high praise from the securities community. In fact, seven major securities firms raised their target prices for GS Retail following the first-quarter earnings announcement. The disclosed quarterly operating profit was nearly four times higher than the initial consensus estimate of KRW 23.9 billion. This has also raised expectations that BGF Retail, operating in the same convenience store sector, likely posted solid results.

Additionally, Emart, which is scheduled to announce its results in mid-month, is estimated to have performed relatively well in the first quarter. The securities firms' consensus for Emart's first-quarter consolidated operating profit is KRW 64.3 billion, with sales of KRW 4.9094 trillion. The demand for food increased as the atmosphere of refraining from dining out strengthened amid social distancing. Moreover, SSG.com, an online shopping specialist affiliate, contributed to sales growth. GeoSoft, which owns Oasis Market specializing in fresh food delivery, is also estimated to have increased its first-quarter operating profit by about 71% year-on-year.

This content was produced with the assistance of AI translation services.