[UP&DOWN] Livestock E-commerce Jeongyukgak, Business Diversification in 'Foggy' Situation

Operating Loss Tripled in One Year, Loan Repayment Burden
Striving to Secure Financial Soundness and Enhance Efficiency
Focusing on Profitability Improvement Over Business Expansion

[Asia Economy Reporter Kwangho Lee] A red light has turned on for the business diversification of Jeongyookgak, a specialized e-commerce platform for livestock product distribution. Until now, it has pursued a ‘super fresh meat’ sales strategy, distributing fresh livestock and seafood products such as pork within 4 days of slaughter and eggs on the day of laying. In addition, it acquired Chorokmaeul, an eco-friendly distribution company under the Daesang Group, and steadily expanded its size by continuously trying new ventures such as opening the food specialty shop ‘Choshop,’ but going forward, it must focus solely on profitability.

According to the investment banking (IB) industry on the 30th, Jeongyookgak recently completed a Series D investment round worth 47 billion KRW. Existing shareholders such as KDB Industrial Bank, Atinum Investment, Premier Partners, Capstone Partners, and Stonebridge Ventures participated in this round. NH Investment & Securities joined as a new investor. Despite the contraction in investment sentiment, the successful fundraising has provided relief. Jeongyookg CEO Jaeyeon Kim said, "With this investment as a turning point, we will focus on selection and concentration to establish a sustainable growth foundation and strive to implement Jeongyookg and Chorokmaeul services that customers can trust and seek out more."

Although the investment was successful, Jeongyookg’s Series D differs somewhat from the typical meaning of Series D. Generally, the Series D stage is summarized as business expansion. Companies that have reached a certain level of success receive this investment, mainly using the funds for new product development and entry into new markets. Venture capitalists (VCs) also tend to order external expansion. Jeongyookg, however, focused on internal stability while raising Series D funds. With the entire food industry expected to face greater difficulties next year, the plan is to pursue a rapid break-even point (BEP) turnaround through selection and concentration rather than expanding business areas through investment. This decision contrasts with its previous growth-oriented approach. It is essentially a declaration of emergency management.

Jeongyookg plans to focus on its existing online commerce services. Newly planned businesses such as rebranding the food specialty shop and launching Internet of Things (IoT) home appliances will be temporarily suspended. The beta service of the direct agricultural and marine products trading service ‘Jikshop’ will also be terminated. The company will focus on securing financial soundness through intensive reforms such as factory operation efficiency and improving profitability by introducing seven-day-a-week operations and enhancing cost efficiency.

Its subsidiary Chorokmaeul completed its office consolidation move to Nonhyeon-dong earlier this month and has launched intensive innovation efforts to achieve quarterly profitability turnaround early next year. It has begun full-scale work to create synergy by leveraging Jeongyookg’s information technology (IT), data capabilities, and manufacturing and logistics infrastructure. The application (app) service will also be completely revamped. Early morning delivery is targeted for early next year.

The reason for focusing on BEP turnaround despite securing external funds is due to an imminent challenge. The company currently carries the risk of loan repayment burdens. Earlier this year, Jeongyookg invested 90 billion KRW to acquire Chorokmaeul. Initially, it planned to raise a generous 150 billion KRW through financial investors (FIs) for both the acquisition and operating funds, but the plan did not proceed as expected. When funds did not accumulate, part of the acquisition funds for Chorokmaeul were covered by a three-month short-term loan from Shinhan Capital. During this process, some shares of Chorokmaeul were also pledged as collateral. This caused difficulties in fundraising. VCs anticipate that even if they invest, the funds might be used to repay loans.

Fortunately, Shinhan Capital extended the maturity of the 37 billion KRW short-term loan provided to Jeongyookg at the end of last month. The extension period is six months, with repayment due by April next year. This extinguished the urgent fire and secured 37 billion KRW in funds from existing shareholders. According to the VC industry, Jeongyookg’s Series D valuation is at the 100 billion KRW level, contrasting with the previously mentioned 400 billion KRW range. Major FIs include Capstone Partners, Lighthouse Combine Invest, Albatross Investment, Premier Partners, Stonebridge Ventures, Mirae Asset Venture Investment, and Atinum Investment. A platform-specialized investment analyst said, "Jeongyookg was so popular that VCs wanted to invest but had no room to enter, but the market’s evaluation changed after the Chorokmaeul acquisition," adding, "Most FIs participating in Series D are follow-on investors, which indicates the high risk involved."

Jeongyookg is a startup founded in 2016 by CEO Jaeyeon Kim, a KAIST graduate. It made its presence known in the e-commerce market with ‘super fresh meat’ as its weapon. However, it still has not escaped the deficit swamp. Operating losses increased more than threefold from 8 billion KRW in 2020 to 24.9 billion KRW last year within a year.

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