Lee Jaehyun's Super Gap, Moon Jongseok Achieved It... CJ Freshway, 3 Trillion Sales... 1 Trillion Gap with 2nd Place

Chairman Lee Jae-hyun "Must Secure Super-Gap Capabilities, Constantly Demanding Each Affiliate"
CJ Freshway Achieves Record High Performance Since Inception... Fourth Largest Affiliate in the Group
Completion of Icheon CK Plant in First Half... 'Sustainable Growth Possible' with Unrivaled Competitiveness

[Asia Economy Reporter Lee Seon-ae] CJ Freshway's 'closer' CEO Moon Jong-seok responded to CJ Group Chairman Lee Jae-hyun's order to secure a super-gap (significantly widening the gap between first and second place) capability by achieving the industry's first '3 trillion won in sales' just four years after his inauguration.

According to related industries on the 6th, CJ Freshway's sales last year exceeded 3 trillion won ahead of next week's earnings announcement. Operating profit is also expected to record the highest performance since its establishment by exceeding 60 billion won. Cumulative sales for the third quarter of last year were 2.2742 trillion won, an increase of 7.8% compared to the previous year (2.1087 trillion won). Operating profit was 43.5 billion won, up 31.4% from 33.1 billion won the previous year. The 3 trillion won sales mark is the first in the industry, and the sales gap with the second-place company is estimated to reach the trillion won level.

With the breakthrough of 3 trillion won in sales, its status within the group is also expected to change. CJ Freshway is expected to settle as the 4th largest affiliate within the group, following CJ CheilJedang (sales of 13.3 trillion won as of 2018), CJ Logistics (9.219 trillion won), and CJ ENM (3.428 trillion won).

The main contributor to the performance increase is CEO Moon's innovation. Starting his career in the secretariat of Dongwon Group, he served as head of sales and marketing departments at Dongwon F&B Busan, CEO of Dongwon Home Food, and head of distribution business before joining CJ Freshway as head of distribution business in December 2015. In September of the following year, he was appointed CEO. At that time, CJ Freshway was only experiencing superficial growth without substance. In 2016, sales increased by 12.3% to 2.3279 trillion won compared to the previous year, but operating profit decreased by 33.2% to 21 billion won. It is said that CJ Group Chairman Lee Jae-hyun ordered CEO Moon to focus on both qualitative growth and super-gap.

The first thing he did after becoming CEO was to decentralize the sales organization nationwide. In addition, he reorganized the product and logistics (SCM) organizations to be field-centered. This was based on the judgment that securing a nationwide organizational network was essential to lead the 'industrialization of food material distribution' and become the industry's leading company. Emphasizing basics, he pointed out that freshness and safety are most important since they supply ingredients for food preparation. He also made large-scale investments in central kitchens (CK) and logistics to strengthen this. In October last year, he opened the largest logistics center in the Yeongnam region in Yangsan, Gyeongsangnam-do, and currently operates its own food safety center along with five major logistics centers located in Icheon, Suwon, Daegu, Yangsan, and Jangseong, delivering food materials with guaranteed safety nationwide in a timely manner.

The companies CEO Moon has acquired through mergers and acquisitions (M&A) so far have focused more on strengthening substance than merely increasing size. To vertically integrate group catering, he acquired Songlim Food, a seasoning specialist company, in November 2016, and in March last year, acquired J Farms and J&Food, companies specializing in agricultural product preprocessing. This was to streamline the system by omitting preprocessing steps such as washing and processing raw materials that must be done before producing finished products, establishing a system from food materials to home meal replacements and sauces. Based on this, CJ Freshway currently supplies food materials to about 30,000 customers nationwide, including food service franchises, general restaurants, food manufacturers, and group catering establishments.

The Icheon CK factory is also under construction, aiming for completion in the first half of this year. Once completed, the Icheon CK factory will mark the completion of foundational investments that can streamline core businesses such as logistics, preprocessing, and central kitchens, further enhancing its unique competitiveness. In particular, the CK factory is a centralized cooking facility that preprocesses or semi-cooks large quantities of ingredients and supplies them. Through mechanized systems, it can reduce labor compared to before and minimize food material waste. Regarding this, Nam Sung-hyun, a researcher at Hanwha Investment & Securities, said, "Once the CK facility is completed, it is analyzed that high competitiveness can be established, so the growth trend is expected to continue for several years."