Food Industry's Top 3 Expanded, but Only CJ CheilJedang Smiled Alone

[Asia Economy Reporter Eunmo Koo] Despite challenging domestic and international business environments, including the US interest rate hikes and rising raw material prices due to Russia's invasion of Ukraine, major food companies succeeded in expanding their scale in the third quarter. However, while CJ CheilJedang successfully defended its performance by significantly increasing overseas sales, Daesang and Dongwon F&B left some regrets in terms of profitability.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 19th, CJ CheilJedang (excluding CJ Logistics) posted an operating profit of 386.7 billion KRW in the third quarter of this year, a 20.0% increase compared to the same period last year. Sales also rose 21.7% to 5.1399 trillion KRW. This is the first time quarterly sales excluding its subsidiary CJ Logistics exceeded 5 trillion KRW.

K-Food, led by 'Bibigo,' performed well in overseas markets, driving growth in earnings. The company continued to expand its business centered on Bibigo brand's Global Strategic Products (GSP) such as dumplings, chicken, processed rice, rolls, K-sauce, kimchi, and seaweed in major business countries including the US. Profitability improved significantly due to increased sales of high-margin core product groups and cost structure improvements.

Notably, growth and performance improvement in North America, including Schwan's, a US frozen food company in which CJ CheilJedang acquired a 70% stake in February 2019, stood out. Since acquiring Schwan's, market dominance in products like dumplings and pizza has become more apparent, and synergy effects between K-Food content and Schwan's distribution network have strengthened. Schwan's operating profit more than doubled due to productivity improvements, promotion efficiency, and fixed cost reductions from sales growth.

In the domestic market, proactive price increases also proved effective in defending performance. Earlier, CJ CheilJedang raised prices for Bibigo dumplings and Hetbahn rice in the first half of this year, followed by price hikes for kimchi and sauces in September. Additionally, the company expanded distribution shares in growth channels such as online, B2B, and convenience stores, and responded comprehensively to rising costs and raw material prices through cost-cutting efforts.

CJ CheilJedang's overseas sales in the third quarter reached 1.3822 trillion KRW, up 22.8% from last year. Although domestic sales (1.6736 trillion KRW) still exceeded overseas sales in scale, the growth rate was 15.1%, lagging overseas markets by more than 7 percentage points, indicating a shift of the core market axis from domestic to overseas.

While CJ CheilJedang succeeded in defending profitability by significantly increasing overseas sales, Daesang and Dongwon F&B managed to expand their scale thanks to price hikes but fell short in profitability due to burdens from rising raw material prices and exchange rates.

Daesang's consolidated sales in the third quarter reached 1.0616 trillion KRW, a 15.9% increase from the same period last year, but operating profit decreased by 4.0% to 34.4 billion KRW. Sales of food products such as kimchi, seaweed, and tteokbokki grew evenly due to the popularity of K-Food, increasing sales of instant meals and fresh food products. However, operating profit declined due to rising domestic and international raw material prices. Prices of imported starch, molasses, and raw sugar rose by up to around 50% during this period, which had a significant impact.

Dongwon F&B also saw its consolidated sales in the third quarter increase by 15.5% year-on-year to 1.1146 trillion KRW, but operating profit fell 8.0% to 45.1 billion KRW, reflecting a decline in profitability. Dongwon F&B led sales growth as its subsidiary Dongwon Home Food showed balanced growth across all business sectors by recovering the dining-out market and securing large-scale B2B catering clients. However, the strong dollar and rising exchange rates caused sharp increases in unit costs of key raw materials such as pork, cheese, and powdered milk, and rising oil prices increased logistics costs, resulting in decreased profits.

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