The 'Big 3' Food Ingredients That Smiled Together with Daily Recovery... Continuing Upward Trend in the Second Half

Performance Improvement with Demand Recovery after Social Distancing Lifted
CJ Freshway Recovers Quarterly Sales to 700 Billion KRW Level for the First Time in 3 Years
Strong Performance Expected in Second Half with New Business Competitiveness Enhancement

[Asia Economy Reporter Koo Eun-mo] CJ Freshway, Hyundai Green Food, and Shinsegae Food, three major food ingredient companies, posted strong second-quarter results as both dining out and catering demand returned to normal tracks following the lifting of social distancing measures. These three food ingredient companies are expected to continue their performance improvement in the second half of the year by strengthening the competitiveness of their existing and new businesses.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 16th, CJ Freshway's consolidated operating profit for the second quarter of this year was 34.6 billion KRW, an increase of 81.7% compared to the same period last year. Sales also grew by 25.2% to 720.9 billion KRW, marking the first time in about three years since the fourth quarter of 2019 that quarterly sales exceeded 700 billion KRW.

The food ingredient distribution business led the performance as the overall atmosphere improved with the recovery of the dining-out market and the expansion of catering transactions following the lifting of social distancing. In particular, the proactive response to external environmental changes by diversifying private brands (PB) such as the kids-specialized brand ‘Ainuri’ and the care food brand ‘Healthy Nuri’, and planning differentiated products to build a profitability-centered business portfolio, was evaluated as having a positive impact.

Hyundai Green Food's sales increased by 7.4% to 923.4 billion KRW, while operating profit decreased by 5.7% to 24.4 billion KRW. However, excluding the performance of its affiliate Hyundai Livart, which turned to a loss, the separate basis operating profit rose by 34.8% to 22 billion KRW, and sales also increased by 11.8% to 444.1 billion KRW. In the largest segment, group catering, the increase in meal prices from major clients and the recovery of meal counts due to the easing of remote work led to improved performance. The food ingredient distribution segment also continued to secure new orders, including starting deliveries to military units.

Shinsegae Food also posted consolidated sales of 353.7 billion KRW, up 6.6% year-on-year, and operating profit of 8.5 billion KRW, up 1.9%. However, Shinsegae Food's operating profit growth was limited compared to sales growth due to sharp increases in raw material and labor costs.

Despite concerns over demand contraction due to the resurgence of COVID-19 and inflation, the performance improvement trend of food ingredient companies is expected to continue in the second half. As daily life recovery progresses and reopening accelerates, overall dining-out demand is expected to return to pre-COVID-19 levels, and demand for leisure and concession businesses (food and beverage consignment operations) such as golf courses, water parks, and rest areas is also expected to increase. Additionally, catering meal counts are rapidly recovering from the impact of COVID-19 since the second quarter, which is likely to further support performance improvement.

The strengthening of competitiveness in existing and new businesses in line with the market recovery trend is another factor that makes the outlook for the second half positive. CJ Freshway is focusing on strengthening its core competitiveness through the launch of exclusive B2B products and menu-type products, and the development of customer-tailored solutions. In the group catering segment, it is enhancing operations in specialized markets such as hospitals and concessions by securing high-quality clients. It also plans to improve online service capabilities through IT infrastructure advancement and the database creation of catering menus.

Hyundai Green Food launched a new vegetarian ready meal product ‘Veggie Life’ under its own care food brand ‘Greeting’ last month. The company plans to more than double the number of Veggie Life items and the import volume of overseas vegan specialty companies currently sourced domestically, such as Dayya and Earth’s Own, within this year. Shinsegae Food also introduced new products under its alternative meat brand ‘Better Meat’ last month and announced plans to expand the use of Better Meat across its catering and dining-out businesses, aiming to nurture it as a leading brand in the alternative meat market.