Orion Records 602 Billion KRW in Q1 Sales and 101.9 Billion KRW in Operating Profit

[Asia Economy Reporter Seungjin Lee] Orion Group announced on the 6th that its operating company Orion recorded consolidated sales of 602 billion KRW and operating profit of 101.9 billion KRW in the first quarter of 2021.

Compared to the same period last year, sales grew by 11.5% and operating profit increased by 5.1%. Despite the challenging global economic conditions due to COVID-19, overseas subsidiaries in countries including China, Vietnam, and Russia, as well as Korea, continued solid growth.

Orion analyzed that this was the result of continuous efficiency and profit-focused management amid rising global raw material prices, along with expanding new categories such as meal replacements domestically and internationally, laying the foundation for sustainable growth.

The Korean subsidiary achieved sales growth of 4.2% to 198.8 billion KRW and operating profit growth of 17.7% to 35.3 billion KRW. Orion explained that data-driven management in product production and channel inventory control, along with efficient cost management through global integrated purchasing, contributed to the high operating profit growth rate.

With the continued popularity of products like ‘Kkobuk Chip,’ the snack category grew by 7.6%, driving overall sales. The convenient meal replacement category, including granola, also supported growth with a 66% increase compared to the previous year. Exports also increased by 52% year-on-year, supported by the popularity of ‘Kkobuk Chip’ in the U.S. and other markets.

Orion plans to enhance the competitiveness of the snack category in the second quarter, ahead of the peak season, by leading with new products ‘Kwasak Chip’ and ‘Kkobuk Chip.’ It will also strengthen the Dr. You product lineup, reorganized as a functional food brand and the convenient meal brand Market O Nature, to continue sales growth. The group will actively promote its new growth engines in beverages and bio-business. With the summer peak season approaching, aggressive marketing activities for ‘Dr. You Jeju Lava Water’ will be conducted, and the bio-business will steadily build a foundation for entry into the Chinese market by discovering excellent domestic bio companies.

The Chinese subsidiary recorded sales growth of 14.8% to 301.9 billion KRW, while operating profit decreased slightly by 1.7% to 46.5 billion KRW. Sales growth was driven by active new product launches, including entry into the new meal replacement category following last year’s pioneering of the nutrition bar market. However, operating profit slightly declined due to increased raw material costs such as a 30% rise in oil prices, temporary promotional events to strengthen market competitiveness, and a base effect from government subsidies related to last year’s COVID-19 situation.

In the second quarter, the company plans to expand the meal replacement category and grow the market by expanding TT channel (traditional retail stores) clients not only in third- and fourth-tier small cities but also in first- and second-tier areas. Additionally, it will develop beverage-specialized small retailers to expand the placement of ‘Jeju Yongamcheon’ and strengthen online sales activities such as e-commerce and live commerce.

The Vietnamese subsidiary achieved sales growth of 17.9% to 82.9 billion KRW and a slight operating profit decrease of 1.3% to 15.7 billion KRW. Due to the depreciation of the Vietnamese dong (VND) against the Korean won, sales and operating profit grew by 25.2% and 4.8%, respectively, on a local currency basis. The prices of oils and sugar rose by 20-30%, increasing the raw material ratio by about 2.5 percentage points, impacting operating profit. Sales growth was supported by a significant increase in shipments of pies and gift sets for Tet, Vietnam’s largest holiday, and by expanding snack-exclusive displays for products like ‘O’Star’ and ‘Swing Chip,’ increasing consumer touchpoints. The expansion of the biscuit category lineup with new products such as ‘Tok’ and ‘Marika’ was also effective. Additionally, the mass-produced bread ‘Ssebon’ has established itself as a leading product in the local meal replacement market.

In the second quarter, the strategy is to drive sales growth through differentiated product launches such as new fresh potato chips and cost-effective small-pack products priced under 5,000 VND (about 250 KRW). The company also plans to complete the ongoing transition to direct supply in the logistics system and maximize efficiency to lay the foundation for high growth.

The Russian subsidiary recorded sales growth of 17% to 23.1 billion KRW and operating profit growth of 0.9% to 3.6 billion KRW despite a significant depreciation of the ruble (RUB). On a local currency basis, sales increased by 40.2% and operating profit by 21%. Despite difficult conditions such as raw material price increases of up to 70% for flour, sugar, and cocoa, which raised the raw material ratio by about 7 percentage points, the company maintained strong growth. This was driven by the popularity of berry-flavored Choco Pie, familiar to local consumers, and expansion of the biscuit product line.

In the second quarter, Orion plans to solidify the market leadership of Choco Pie, which has successfully expanded its lineup, and build a growth foundation by expanding the pie and biscuit categories.

An Orion official said, “Despite difficult management conditions such as the global economic downturn and rising raw material prices, we maintained growth domestically and internationally by launching highly competitive new products and pioneering new markets. We will continue to introduce market-leading new products and sustain healthy growth through efficiency- and profit-focused management.”