[Why&Next] The Inside Story Behind Ourhome’s Acquisition of Shinsegae’s Group Catering Business

Shinsegae Food Negotiates Sale of Catering Division to Ourhome
Ourhome Pursues First M&A After Joining Hanwha
Challenges Expected for Ourhome in Renewing LG Group Catering Contracts
Group Catering Market Booms Amid High Inflation

Shinsegae Food has begun the process of selling its group catering business. Ourhome, a group catering company now under Hanwha Group, is being mentioned as a potential acquirer. As competition in the group catering market intensifies, some analysts say that the interests of Ourhome?seeking to expand its catering business after joining Hanwha Group?and Shinsegae Food, which has recently increased its focus on bakery products such as No Brand Burger, have aligned. If this merger and acquisition (M&A) is completed, Ourhome could secure a market share capable of challenging Samsung Welstory, the current leader in group catering, drawing attention to the possibility of a market reshuffle.

According to industry sources on August 7, Ourhome is reported to have begun due diligence for the acquisition of Shinsegae Food’s group catering division. The division is estimated to be valued at around 100 billion KRW. Shinsegae Food recently announced in a disclosure, "We are reviewing various strategic options, including strengthening our business structure and cooperation, to enhance business competitiveness," and added, "Nothing has been decided yet." Ourhome also stated, "We are considering various measures to enhance brand competitiveness, but nothing has been finalized."

Shinsegae Food Icheon Factory. Shinsegae Food

Ourhome, Now Under Hanwha, Signals a Bidding War for LG Group’s Group Catering Contracts

This M&A marks Hanwha Group’s first move since acquiring Ourhome. Hanwha Hotels & Resorts, led by Kim Dongseon, the third son of Hanwha Group’s chairman, acquired a 58.62% stake in Ourhome for 869.5 billion KRW in May, returning to the catering market after five years. Since Shinsegae Food is reportedly in exclusive talks with Ourhome, there is speculation in the industry that Ourhome may have been the first to propose the sale to Shinsegae Food.

Ourhome is the second-largest player in the domestic group catering market. According to the Fair Trade Commission’s 2019 market share data, Samsung Welstory held 28.5%, Ourhome 17.9%, Hyundai Green Food 14.7%, CJ Freshway 10.9%, and Shinsegae Food 7.0%, with the top five companies accounting for 80% of the entire market. The industry believes that the market share rankings have not changed significantly since then. Although suppliers are selected through competitive bidding, most contracts remain with existing providers.

However, with Ourhome now under Hanwha Group, changes are expected in the group catering contract market. Ourhome was established when the food service division of LG Distribution (now GS Retail) became independent, and its founder, the late Koo Jahak, was the third son of LG Group founder Koo Inhoe. Koo Jahak entered the catering business in 1987 by operating the employee cafeteria at LG Twin Towers. For this reason, Ourhome has grown by providing group catering services to LG Group affiliates.

Within the catering industry, it is believed that since Ourhome was acquired by Hanwha Group after a management dispute among the second-generation siblings following the death of Chairman Koo, the likelihood of Ourhome renewing its group catering contracts within LG Group is low. An industry insider said, "LG Group remains conservative, adhering to primogeniture succession," and added, "Fierce competition among catering companies is expected for LG affiliate contracts previously held by Ourhome."

Shinsegae Food Seocho Raemian Leaders One Community Food and Beverage Facility. Shinsegae Food

Shinsegae Food Has Low Revenue Share from Catering... Focusing on New Businesses

Shinsegae Food appears to have judged that now is the right time to sell, given the current boom in the group catering market due to high inflation.

This is not the first time rumors have circulated about Shinsegae Food selling its group catering division. Shinsegae Food began as a spin-off from Shinsegae Group’s catering division in 1995, but has attempted to sell the division two or three times in the past. Although the group catering market has recently attracted attention due to high inflation and market expansion, until recently, it was considered a business maintained for employee welfare rather than profitability. In fact, Shinsegae Food has grown its business mainly through direct contracts for group catering with affiliates and related companies.

Shinsegae Food’s group catering business also has the lowest revenue share among the top five companies. As of the first quarter of this year, Shinsegae Food’s group catering division accounted for just over 10% of total sales. This is significantly lower than Samsung Welstory (60%), Ourhome (50%), Hyundai Green Food (45%), and CJ Freshway (24%).

The saturation of the domestic group catering market is also cited as a reason for considering the sale. As of 2022, the market size is estimated at about 21.2 trillion KRW (11.5 trillion KRW in the private sector and 9.7 trillion KRW in the public sector), with the big five companies accounting for 80% of the market. These companies compete fiercely for contracts with public institutions, corporations, hospitals, and schools, leading to worsening price competition, while labor costs and raw material price pressures continue to rise.

An industry source explained, "The group catering market can only grow if the number of people eating increases, but the number of diners continues to decrease," and added, "Due to changes in working and labor environments, it is not a business with strong growth potential."

Franchise vs. Catering... Shinsegae Food and Ourhome Take Different Paths

After selling its group catering business to Ourhome, Shinsegae Food is expected to focus on strengthening the competitiveness of No Brand Burger and expanding its food material distribution business. Through No Brand Burger (NBB) 2.0, Shinsegae Food plans to reduce the initial franchise cost by 40% and aggressively expand its franchise business, aiming to make No Brand Burger one of the top three burger brands in Korea by 2030. The company is also strengthening its strategy to increase bakery food material supply sales based on par-baked products.

Ourhome is expected to expand its business by taking over large apartment community catering operations previously managed by Shinsegae Food. Currently, Shinsegae Food provides catering services at locations such as Trimage in Seongsu-dong, Seongdong-gu, Banpo Raemian One Bailey in Banpo-dong, Seocho-gu, and Gaepo DH Xi in Gaepo-dong, Gangnam-gu. In the first quarter of this year, the company also signed new catering contracts with SK Key Foundry and Gongju National University Bloom House.

There is also speculation that Ourhome may expand into military catering, care food, and overseas markets. Since the military catering market was opened to the private sector in 2023, large companies have entered the field. If private catering is expanded to all military units, the market size is expected to grow to about 2 trillion KRW. As global interest in K-Food increases, overseas expansion is also expected to accelerate. Ourhome already operates local subsidiaries in five countries: China, the United States, Mexico, Poland, and Vietnam. In 2022, its overseas sales share exceeded 10% of total sales for the first time.

Another industry source said, "The group catering market is a mature industry with a long history and operates as a business-to-business (B2B) model, so it is inevitably being reorganized around companies with strong capital. However, there are still areas with growth potential, such as military catering and overseas catering," and added, "It remains to be seen whether the industry can establish itself as a full-fledged growth sector, but it is certainly one of the industries attracting increased attention in the M&A market."

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