As Cafeterias Become a Refuge from Lunchflation... This Company’s Results Soar Fourfold

Lunchflation Drives Higher Institutional Foodservice Demand

Profitability Gap Widens Among Companies

Due to high inflation, the value-for-money domestic food service industry has continued its stable growth trend. However, profitability has varied by company: while Samsung Welstory and CJ Freshway remained at operating margins in the 1 percent range, Hyundai Green Food posted an operating profit margin in the 7 percent range.

According to the Financial Supervisory Service's electronic disclosure system on May 13, CJ Freshway recorded sales of KRW 833.9 billion and operating profit of KRW 11 billion in the first quarter of this year. Compared to the same period last year, sales increased by 4.4 percent and operating profit by 3.8 percent. The operating profit margin was 1.3 percent, the same as last year.

Samsung and CJ ... Food Service Business Results Improve Amid Lunchflation

The food service division performed relatively well. Food service sales reached KRW 427.4 billion, up 3.6 percent year-on-year, and the operating profit margin improved from 2.4 percent to 2.8 percent. Analysts attribute this to continued demand for group meals due to 'lunchflation' caused by high inflation, the return of hospital residents, and new catering contracts at Incheon Airport.

The food distribution division, however, saw weaker profitability. While sales in this segment increased by 3.8 percent, the operating profit margin for food distribution fell from 0.5 percent to -0.1 percent. The company explained that this was due to investments to expand its online business. CJ Freshway is expanding its online food material distribution via its platform 'Sikbom.' In the first quarter of this year, the gross merchandise value (GMV) of Sikbom was KRW 65.3 billion, up 20.2 percent from the same period last year. The cumulative number of registered users stands at approximately 230,000.

Industry insiders believe that while CJ Freshway experienced temporary fluctuations in growth during its channel diversification strategy, the effect of acquiring a stake in 'Marketboro' has started to show, and synergy is expected from the second quarter onward.

Welstory, the food services division of Samsung C&T, saw its profitability decline despite top-line growth. In the first quarter of this year, Samsung Welstory posted sales of KRW 825 billion and operating profit of KRW 14 billion. Sales increased by 6.9 percent year-on-year, but operating profit decreased by 26.3 percent. The operating profit margin was 1.7 percent, down from 2.5 percent in the same period last year.

In particular, operating profit dropped from KRW 35 billion in the previous quarter to KRW 14 billion. According to Samsung C&T, this was due to one-off costs such as retirement benefit provisions. Excluding these, the company claims the adjusted operating profit margin would be around 3.4 percent.

Samsung Welstory is known for its strength in large food service sites, especially at industrial and semiconductor plants. However, analysts note that the labor cost burden unique to food service businesses, rising raw material prices, and intensifying competition for new contracts are weighing on profitability.

Hyundai Green Food's Operating Profit Surges 44%... Profit Margin Reaches 7%

Hyundai Green Food Smart Food Center exterior view. Provided by Hyundai Green Food

By contrast, Hyundai Green Food, on a consolidated basis, recorded sales of KRW 621.5 billion and operating profit of KRW 46.4 billion in the first quarter of this year. Sales increased by 8.9 percent and operating profit by 44.1 percent year-on-year. The operating profit margin reached 7.5 percent. Although its sales are about KRW 200 billion less than Samsung Welstory and CJ Freshway, its operating profit is three to four times higher.

Each business division showed balanced growth. Group meal sales reached KRW 269 billion, up 8.1 percent year-on-year, with operating profit surging 84.2 percent to KRW 20.7 billion. Growth in meal supply to automotive and heavy industry affiliates, price increases, and expanded new contracts with clients like HD Hyundai Construction Equipment, Korean Air C&D, and KT&G were credited for driving performance.

The food material distribution segment also posted its best-ever quarterly results, with sales increasing by 13.3 percent to KRW 161.4 billion and operating profit rising 20 percent to KRW 14.4 billion. Analysis suggests that, in addition to increased volume from existing clients and more new contracts, improved logistics efficiency contributed to these results.

The dining-out business also maintained its growth trajectory. Due to increased visitors to the group's distribution network and greater demand for weddings, dining-out sales rose by 12.5 percent to KRW 62.3 billion, and operating profit surged by 183.7 percent to KRW 2.7 billion. In particular, the expansion of the wedding buffet business appears to have contributed to improved results. Industry insiders cite central kitchen (CK)-based production efficiency as a key factor behind Hyundai Green Food's high profitability. By expanding new contracts for food service and food materials and increasing the proportion of CK-supplied ingredients, while centrally producing major raw materials, the company improved cost efficiency. The growth rate of selling and administrative expenses was limited to 3.5 percent.

An industry official commented, "In the past, simply increasing meal volume was enough to drive growth, but now the core competitive edge lies in how efficiently companies integrate manufacturing, logistics, and food materials. It is difficult to achieve high profitability from the food service business alone."

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