Divergent Q1 Results in the School Meal Industry... Samsung and Hyundai 'Smile' While CJ 'Cries'

Samsung Welstory and Hyundai Green Food Drive Sales and Operating Profit Growth
CJ Freshway Faces Profitability Decline Amid Prolonged Resident Doctor Strike

The first-quarter performance of the food ingredient and catering industry, which thrived last year due to the popularity of lunch inflation (lunch + inflation) in company cafeterias, has diverged. Samsung Welstory and Hyundai Green Food succeeded in boosting both sales and operating profit through consecutive new contract wins. On the other hand, CJ Freshway, the leading hospital group catering operator, was hampered in profitability by the prolonged strike of resident doctors.

Office workers are having meals at a company cafeteria in Seoul. [Image source=Yonhap News]

According to the distribution industry on the 10th, Samsung Welstory recorded an operating profit of 32 billion KRW on a consolidated basis in the first quarter of this year. This is a 10.3% increase compared to the same period last year. Sales during the same period were recorded at 716 billion KRW, up 7.8%. The continuous expansion of new external market contracts led to Samsung Welstory’s strong performance. Samsung Welstory succeeded in securing large contracts in the group catering sector with major companies such as SK Hynix, CJ CheilJedang, and Hanwha Aerospace. It also won apartment food and beverage services at Yongsan Central Park, among others.

Hyundai Green Food also succeeded in steady performance growth in the first quarter. Its operating profit on a separate basis was 29.8 billion KRW, a 12.5% increase compared to the same period last year. Sales during the same period increased by 4.2% to 543.6 billion KRW. Pre-tax profit also rose 18.3% to 31.6 billion KRW. This is interpreted as a result of an increase in the number of domestic group catering sites and favorable overseas group catering business.

However, on a consolidated basis, operating profit in the first quarter was 31.2 billion KRW, down 4.3% from the same period last year. A Hyundai Green Food official explained, "The decrease in consolidated operating profit was due to the exclusion of some subsidiary performance following the split into Hyundai G.F. Holdings and Hyundai Green Food in March last year."

On the 19th, concerns over a "medical crisis" due to collective opposition from doctors, including the mass resignation of residents from the five major hospitals in Korea in protest against the government's expansion of medical school quotas, were rising. The photo shows a university hospital in downtown Seoul. Some residents in departments such as Pediatrics and Adolescent Medicine at Severance Hospital decided to submit their resignation letters and stop working a day earlier. Photo by Hyunmin Kim kimhyun81@

On the other hand, CJ Freshway succeeded in external growth but saw profitability decline. Its consolidated operating profit for the first quarter was preliminarily estimated at 10.5 billion KRW, down 16.7% from the previous year. Sales increased by 4.9% to 731.5 billion KRW compared to a year ago. By segment, food ingredient distribution sales were 538.9 billion KRW, up 2.6% from the same period last year, and food service sales were 178.5 billion KRW, up 14.4% during the same period.

Although sales growth continued mainly in group catering, profitability was hampered by the prolonged resident doctors’ strike that began in February. CJ Freshway is the number one hospital group catering operator. Since catering companies sign contracts with hospitals based on the number of diners, sales increase as the number of cafeteria users rises. However, with fixed costs incurred and demand sharply declining, a deterioration in profitability became inevitable. A CJ Freshway official explained, "The increase in labor costs due to the recruitment of IT specialists for digital transformation also affected the decline in operating profit."

However, with growing expectations for improvements in logistics costs, there is a forecast that performance will recover in the second half of the year once the resident doctors’ strike and other issues are resolved.