[Click eStock] Korean Soup Dishes and Packaged Kimchi vs. US Pizza and Dumplings Driving CJ CheilJedang

Increased New Demand Due to COVID-19... Positive Reviews for Pizza and Mandu Overseas

[Asia Economy Reporter Minwoo Lee] CJ CheilJedang is rapidly growing both domestically and internationally despite the economic downturn caused by the novel coronavirus infection (COVID-19). This is because the company focused on selected key product lines and attracted new consumers in the convenience food sector due to COVID-19.

On the 15th, Kiwoom Securities maintained a 'Buy' investment rating on CJ CheilJedang and raised the target stock price by 7.3% to 440,000 KRW. The previous trading day's closing price was 328,500 KRW. Kiwoom Securities analyst Sangjun Park stated, "The processed food division has entered a full-fledged growth phase in sales and profitability as sales volume and average selling price (ASP) increased following efficiency improvements from SKU restructuring," adding, "The bio and bioresource divisions are also showing favorable profitability, so the company is expected to demonstrate relatively high profit growth rates within the industry."

In fact, the profitability of the domestic processed food business has significantly improved since COVID-19. It is analyzed that reduced capital expenditures (Capex), streamlined promotional expenses, ASP improvements centered on top market share products, and strong demand for soup dishes and kimchi have driven performance improvements. The expected sales and operating profit for the processed food sector in the second quarter of this year are 1.7269 trillion KRW and 65 billion KRW, respectively, representing increases of 12.4% and 3.8% compared to the same period last year.

Analyst Park explained, "Through investments over the past few years, we have expanded the market size and secured superior market dominance not only in dumplings and ambient ready-to-eat rice (Hetbahn) categories but also in soup dishes, packaged kimchi, and ambient mixed rice (Hetbahn Cupban)," adding, "Based on recently increased demand and market position, we are leading ASP growth by category (through discount rate reductions and premium product launches)."

In particular, the soup dishes and packaged kimchi segments have shown high growth domestically. Park said, "Both product groups grew to sales of around 120 billion KRW each last year and continued high growth with over 30% growth in the first quarter of this year," forecasting, "Coupled with market demand, economies of scale will be maximized this year."

Overseas processed foods are also on the rise. Key factors include ▲ increased B2C channel demand post-COVID-19 ▲ high growth in dumpling products ▲ Capex reduction and promotional expense efficiency ▲ improved performance trends of overseas processed food subsidiaries such as Schwan’s. Park explained, "In the U.S., Schwan’s, which has the highest sales proportion in pizza, saw pizza sales increase by over 90% in April, offsetting sluggish B2B channel sales such as schools," adding, "Since pizza is a core category, we can expect both economies of scale from sales growth and product portfolio improvement effects."

Additionally, U.S. subsidiaries other than Schwan’s are also experiencing high growth centered on dumplings. 'Bibigo Dumplings' have already achieved good results at Costco in the U.S., with sales growing about 20% in the first quarter of this year. It is expected that sales channels will expand through Schwan’s distribution network in the future. Furthermore, the Chinese subsidiary continues high growth centered on zha cai (pickled mustard stems) and dumplings, and the bio division is expected to improve operating profit in the second quarter due to increased demand for specialty amino acids including tryptophan.

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