DaeSang's China Plant No. 3 Begins Full Operation in August... Advancing Globally

Lianyungang Factory Fully Operational in Q3... Planned Production of Kimchi and Convenience Foods
Continued Investment in Vietnam and Indonesia... Establishment of Kimchi Production Plant in the US
Global Business Expansion Expected to Surpass 3 Trillion KRW in Sales This Year

[Asia Economy Reporter Lee Seon-ae] Daesang is focusing on expanding its global business by establishing production bases overseas. In the second half of this year, it will accelerate the expansion of the Chinese market. The strategy is to reach the milestone of 3 trillion KRW in sales this year based on the expansion of overseas business.

◆ Establishment of three production bases in China = According to related industries on the 7th, Daesang is in the final stages of constructing the Lianyungang food factory in China, which began construction in July last year. Originally, it was planned to start operations in July, but due to disruptions caused by the COVID-19 pandemic, the start date was postponed to August. Once it begins trial operations in August, full-scale operations are expected in the third quarter. The Lianyungang factory will produce products such as kimchi, sauces, and convenience foods.

To build the food factory, Daesang established 'Daesang Lianyungang Food Co., Ltd.' in Lianyungang City, Jiangsu Province, China, in April last year with a new investment of 1.136 billion KRW (100% stake). With this, Daesang's Chinese subsidiaries increased to three, including the existing Daesang Beijing Food Co., Ltd. and Tianjin Defeng Food Co., Ltd. Daesang Beijing Food Co., Ltd. produces and sells kimchi, noodles, rice cakes, and convenience foods, while Tianjin Defeng Food Co., Ltd. produces and sells red pepper seasoning.

The reason Daesang chose Lianyungang as the site for its third production plant is to leverage its geographical advantage as a logistics hub. Lianyungang is ranked among China's top 10 container ports along with Shanghai and Qingdao. It is also known as the starting point of the Trans-China Railway (TCR), which connects inland China with Kazakhstan, Russia, and Rotterdam in the Netherlands.

Daesang plans to continue its active food business in China through the Lianyungang factory. Daesang began its full-scale business in China in 2011. Since then, sales in China have grown annually by 20-40%. Sales increased from around 10 billion KRW in 2013 to 14 billion KRW in 2014, 19 billion KRW in 2015, 21.4 billion KRW in 2016, 23.1 billion KRW in 2017, and 27.9 billion KRW in 2018. Last year, sales reached 38.7 billion KRW. With the full operation of the Lianyungang factory, sales are expected to exceed 10 billion KRW, and Daesang's total sales in China this year are projected to surpass 40 billion KRW.

◆ Production plants in the U.S. and leading kimchi globalization = Daesang's overseas business is mainly conducted in Indonesia, Vietnam, Europe, China, and the U.S. Indonesia and Europe focus on bio and material businesses, while Vietnam, China, and the U.S. focus on food business expansion.

With active overseas business expansion, the share of overseas sales in major countries increased from 10% in 2016 to 16% last year. In particular, the operating profit share from Indonesia and Vietnam is growing. The operating profit share of these businesses surged from 6% in 2016 to 21% in 2019.

As Daesang seeks opportunities to improve profitability in the global market, overseas business expansion will continue comprehensively this year. The Indonesian subsidiary completed factory expansion in the second half of last year, and a production plant will be established in the U.S. by the end of the year. A Daesang official explained, "The U.S. plant aims to start construction within this year." The U.S. plant will produce products such as kimchi and gochujang. Among major domestic food companies, Daesang is the first to establish a kimchi factory in the U.S.

Daesang is leading the globalization of kimchi. Daesang's kimchi export value increased by more than 60%, from 26 million USD in 2015 to 42 million USD in 2019. The proportion of Jongga Kimchi in total domestic kimchi exports reaches 40%. Daesang plans to accelerate kimchi export activities this year with a growth target of over 10%.

Daesang also plans to continue investing steadily in Vietnam. Recently, it completed the construction of a complex production plant in Hai Duong Province, northern Vietnam, and has started trial operations. This complex factory, which began construction in April last year, produces various food products with a total investment of 17.5 billion KRW. Starting from the first half of this year, it will produce seasoned laver, seaweed for gimbap (sushi), and salted fish products.

Based on active overseas business, Daesang aims to surpass 3 trillion KRW in sales this year. Last year, consolidated sales amounted to 2.9639 trillion KRW, narrowly missing the 3 trillion KRW mark. Operating profit was recorded at 129.8 billion KRW.