Despite COVID-19, Q2 Remains 'Clear'... CJ, Ottogi, and Dongwon Avoid B2B Impact Thanks to Instant Rice Popularity

Increased Demand for Home-Cooked Meals Boosts Sales of Hetbahn, Ottogi Rice, and Ssencook in First Half
Commercial Sales Decline Due to Shrinking Catering Market but Growth Continues in Q2

[Asia Economy Reporter Choi Sunghye] Due to the increased demand for home-cooked meals, domestic food companies handling processed foods are expected to post surprising earnings in the second quarter following the first quarter. In particular, the top three instant rice companies?CJ CheilJedang, Ottogi, and Dongwon F&B?are expected to continue their growth despite sales setbacks caused by a reduction in business-to-business (B2B) transactions.

◇ Top 3 Instant Rice Companies Show Steep Growth = According to industry sources on the 3rd, CJ CheilJedang's instant rice brand "Hetbahn" recorded a 6% sales growth (internal sales converted to consumer price basis) from January to May compared to the previous year. Considering that Hetbahn achieved a total cumulative sales of 3 trillion KRW and surpassed 3 billion units sold by the end of last year, it is maintaining a high growth rate.

Ottogi, ranked second in the market, saw sales of "Ottogi Bap" and "Cup Bap" increase by more than 40% year-on-year from January to June. When looking at total rice product sales, the second quarter reached 51 billion KRW, up 5.6% from the previous year. Dongwon F&B also experienced about a 30% growth in instant rice "Ssen Cook" sales from January to May compared to the same period last year. A Dongwon F&B official stated, "Especially, sales of instant rice through online channels have significantly increased," analyzing this as an extension of untact (non-face-to-face) consumption.

◇ B2B Sales Decline = According to related industries, all three companies have seen a decline in B2B sales. This is due to the spread of COVID-19 cases mainly in the metropolitan area, leading to avoidance of going out and dining out. In particular, as the government has designated buffets as high-risk for COVID-19, B2B sluggishness is expected to continue for some time.

According to the food industry and securities firms, CJ CheilJedang's B2B business sales of raw materials such as flour, sugar, and cooking oil are estimated to have decreased by 5% in the second quarter. Dongwon F&B is also experiencing a continued decline in sales from Dongwon Home Food’s catering services. Especially for Ottogi, B2B accounts for a relatively large portion compared to other companies. Ottogi’s sales to food service businesses, such as sauces provided to restaurants, account for more than 40% of total sales. In the first quarter, sales of B2B products with a high proportion of seasoning sauces (-2.7%) also slightly decreased.

◇ Second Quarter Earnings Exceed Expectations = The industry expects all three companies to achieve strong second-quarter results despite the impact of declining B2B sales. This is thanks to steady growth in home meal replacements (HMR), including instant rice. According to Hi Investment & Securities, CJ CheilJedang’s total sales and operating profit, excluding CJ Logistics, are expected to grow 7.8% and 78.7% year-on-year to 3.4359 trillion KRW and 188.4 billion KRW, respectively. Food business sales in the second quarter are tentatively estimated to have grown 8.4% year-on-year to 2.1191 trillion KRW, with processed food sales expected to grow close to 9.8%.

Ottogi’s consolidated sales and operating profit for the second quarter are expected to increase 7% and 12.4% year-on-year to 606.5 billion KRW and 42.6 billion KRW, respectively. Lee Kyungshin, a researcher at Hi Investment & Securities, said, "We estimate that consumption of Ottogi’s HMR products, including instant rice, and frozen foods will increase. Also, despite a high base in the same period last year, we expect about a 10% growth rate centered on bagged ramen."

Dongwon F&B’s consolidated sales and operating profit for the second quarter are also expected to rise 6% and 8.6% year-on-year to 751.9 billion KRW and 15.7 billion KRW, respectively. The researcher added, "Although fixed costs and other expenses have increased due to declining sales in the catering division of Dongwon Home Food, profits are expected to remain at the same level as the previous year thanks to growth in foodservice ingredients and improved operating rates of seasoning sauces. The pace of normalization in the operating performance of the Home Food distribution division is expected to become visible depending on the speed of COVID-19 recovery."

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