Jeon Chang-won, CEO of Binggrae, "Domestic Stagnation Must Be Overcome Through Overseas Business"

Overseas Performance Growth Efforts Since Inauguration
Vietnam Subsidiary Sales Expected to Accelerate This Year
Focus on Product Export and Development... Long-Term Investment Also Needed

[Asia Economy Reporter Lee Seon-ae] Binggrae is tightening the reins on expanding its overseas business this year. With "new challenges" as its management theme at the beginning of the year, Binggrae is showing a strong determination to overcome stagnation in the domestic market through overseas business expansion.

According to industry sources on the 21st, overseas business expansion, which CEO Jeon Chang-won of Binggrae has been fully committed to since his inauguration, is showing remarkable results. Although overall sales, which have been stagnant for several years, are still fluctuating in place, the performance of major overseas subsidiaries is rising, compensating for the stagnant domestic market performance. CEO Jeon plans to take a bold step in the global market this year by positioning overseas business expansion as a "new challenge" in 2020.

Binggrae's performance has been stagnant since 2013. After surpassing 800 billion KRW in sales for the first time in 2013, sales have slightly increased but have not exceeded the 800 billion KRW range for the past six years. Operating profit, which was 50.6 billion KRW in 2013, decreased to the 30 billion KRW range in 2017 and has since remained flat.

CEO Jeon plans to steadily implement localization strategies by strengthening sales and marketing by country this year, focus on key strategic products to raise brand awareness, and then promote the expansion of additional product lines. His management message emphasizes the need for long-term investment to achieve steady sales growth. He is also putting his life on the line for new product development. CEO Jeon urged, "Based on better and different strategies, pursue a health-oriented lifestyle business and lead the market by proactively developing pioneering products."

CEO Jeon started expanding overseas business immediately after his inauguration in January last year. Overseas performance is on an upward curve. Cumulative overseas sales for the third quarter of 2019 reached 50.1 billion KRW, a 26.5% increase compared to the same period last year. It has already surpassed the 49.3 billion KRW performance of 2018. Overall overseas performance is expected to exceed a growth rate of 25%, reaching 63 billion KRW.

Binggrae currently exports products to about 20 countries. Among them, the growth of major export countries such as China, the United States, and Vietnam is driving overall performance. The China subsidiary achieved cumulative sales of 20.2 billion KRW in the third quarter, showing a 10.4% growth compared to 18.3 billion KRW the previous year. This is the highest performance since its establishment in 2015. The growth of the U.S. subsidiary is even steeper. Due to the expansion of local OEM production and an increase in retail partners, cumulative sales for the third quarter reached 17.6 billion KRW, a 48.8% increase compared to 11.8 billion KRW the previous year.

Vietnam, which submitted a report to establish a subsidiary in September last year, has no subsidiary sales yet, but exports are expected to increase from 6 billion KRW in 2018 to 7.5 billion KRW last year, anticipating a 25% growth rate. CEO Jeon's plan is to use Vietnam as a base to expand into Southeast Asia. A Binggrae official explained, "Although exports to Vietnam started in 2004, a new subsidiary was established to strengthen local sales and marketing."

The products mainly sold by Binggrae overseas are frozen desserts (such as Melona, Bungeo-ssamanco) and milk products (such as Banana Flavored Milk). In the U.S. and Brazil, frozen desserts are the focus, while in China, milk products are the main business. Banana Flavored Milk is popular in China, Melona in the U.S., and Bungeo-ssamanco in Vietnam.

However, the Brazil subsidiary is a sore spot for CEO Jeon. In Brazil, business conditions are unfavorable due to currency depreciation and economic downturn. Cumulative sales for the third quarter slightly decreased from 500 million KRW last year to 400 million KRW, and operating losses more than doubled from 80 million KRW to 180 million KRW. CEO Jeon is determined to find a breakthrough to improve profitability while monitoring market conditions this year to resolve the chronic deficit of the Brazil subsidiary. His plan emphasizes the need for long-term investment for growth.

A Binggrae official stated, "Based on cumulative third-quarter results, overseas sales in 2019 are expected to exceed the previous year by more than 25%. Strengthening sales and marketing through local subsidiaries is seen as the main factor for growth, and this year, we will continue to expand overseas sales focusing on key countries."