[Why&Next] CJ CheilJedang's Big Picture in Withdrawing from 'Bio' Sector

Accounts for 23% of total company sales
Sales and profit stability are declining
Group's focus on strengthening food sector also plays a role

The veil has been lifted. As CJ CheilJedang has been withdrawing one after another from the bio business, attention is focused on the background, with a large-scale investment plan announced to conquer overseas food territories. CJ CheilJedang is pushing to sell its bio business division, a growth pillar of the company, following the disposal of its stake in the Brazilian subsidiary CJ Selecta last year.

According to CJ CheilJedang on the 24th, the company will invest 800 billion KRW to build new factories in Hungary and South Dakota, USA. Through this, they plan to expand their business in Europe, a new growth strategic region, and strengthen their market position in the core country, the United States.

Size of 80 Soccer Fields... The Largest Bibigo Factory in North America

The factory being built in Dunabars?ny near Budapest, Hungary, covers an area equivalent to 16 soccer fields. The factory, constructed with an investment of 100 billion KRW, will start producing Bibigo dumplings from the second half of 2026 and sell them in the European market. There are also plans to expand the Bibigo chicken production line. This is the first time CheilJedang is building its own production plant in Europe.

In the United States, the frozen food subsidiary Schwan's has started constructing a new Asian food factory in Sioux Falls, South Dakota, aiming for completion in 2027. This factory will be built on a site covering the area of 80 soccer fields (575,000㎡). The initial investment amount is about 700 billion KRW. Once completed, the factory will be the largest Asian food manufacturing facility in North America, equipped with steamed dumpling and egg roll production lines, wastewater treatment facilities, and a logistics center, serving as a central production hub in the U.S. Midwest.

CJ CheilJedang is investing a total of 800 billion KRW to build these factories. According to CJ CheilJedang's Q3 report this year, the company has liquid assets convertible to cash within one year on a consolidated basis amounting to 8.3207 trillion KRW. The immediately available cash assets (including short-term financial products) exceed 1.7 trillion KRW. However, cash assets as of Q3 this year decreased to 1.7 trillion KRW compared to about 2 trillion KRW in the same period last year. During this period, interest expenses increased from 728.7 billion KRW to 775.4 billion KRW, increasing financial burdens. While long-term borrowings and bonds decreased, short-term borrowings increased by nearly 500 billion KRW.

CJ CheilJedang, the foundation of the CJ Group, has served as the group's cash cow. However, due to continuous domestic demand sluggishness caused by population decline and economic downturn, growth was maintained through overseas food markets and the bio business. But last year, due to the economic slowdown in China, feed consumption decreased, causing the bio business division's sales to contract and overall performance to decline. Therefore, CJ CheilJedang improved its financial structure by reducing its debt from 18 trillion KRW in Q3 last year by about 1 trillion KRW within a year.

Valued at Trillions... Bio Business Sale in Progress

CJ CheilJedang has selected Morgan Stanley as the lead advisor for the sale of its bio business division and is in contact with private equity funds (PEFs), with the main bidding expected as early as next month. The bio business division is valued at several trillion KRW, with some estimates ranging from 5 to 6 trillion KRW.

The company's bio business began in 1964 with the launch of the seasoning 'Mipung.' At that time, the Miwon Group, the predecessor of the Daesang Group, introduced 'Miwon,' a seasoning that enhanced the umami flavor of food and gained tremendous popularity, prompting CJ CheilJedang to release Mipung using MSG (monosodium glutamate). CJ CheilJedang then expanded its food seasoning material business by producing nucleotides in 1977 and entered the feed amino acid sector by starting lysine production in Indonesia in 1991.

The bio business division mainly focuses on the green bio business, producing food seasoning materials and feed amino acids using microorganisms as raw materials. Notably, among the eight major feed amino acids, five items including lysine rank first globally. The food seasoning material nucleotide also holds over 60% market share worldwide, ranking first.

Margin Volatility and Chinese Low-Price Competition Are Decisive

However, the bio business's volatility has hampered its corporate value. The green bio business experiences significant performance fluctuations every 3 to 5 years depending on raw material market conditions such as grain prices and meat consumption demand.

For example, CJ CheilJedang's bio business division saw sales and operating profit decline by 14% and 60%, respectively, last year due to sluggish lysine sales, a core product of the green bio business. This was caused by a sharp decrease in pork consumption in China, the largest market for lysine. The oversupply of low-priced lysine produced domestically in China also contributed to hitting the lowest prices. Many expect this low-price competition from Chinese companies to continue.

This year, CJ CheilJedang's bio business division increased the production proportion of other feed amino acids besides lysine and diversified product forms into powder, liquid, and granules, achieving a turnaround in performance. Operating profit up to Q3 this year reached 279.2 billion KRW, already surpassing last year's operating profit of 251.3 billion KRW. Having succeeded in this year's turnaround, the company appears to consider this the right time for sale.

Strengthening Food Business... Another Large M&A on the Horizon?

Industry insiders expect that if CJ CheilJedang sells its bio business division under appropriate conditions and reduces net borrowings by at least 2 trillion KRW, its financial stability will improve significantly.

It is also anticipated that CJ CheilJedang will use the funds secured from the bio business sale to pursue mergers and acquisitions (M&A) to strengthen its food business competitiveness. Previously, CJ CheilJedang sold CJ Healthcare, its health and functional food business division, for 1.3 trillion KRW in 2018 and then acquired Schwan's Company, the second-largest frozen food company in the U.S., for 2.1 trillion KRW. As a result, CJ CheilJedang's U.S. food sales surged from 364.9 billion KRW at that time to 4.3807 trillion KRW last year.

The sale process of CJ Feed & Care, currently under review within the group, is also expected to accelerate. CJ Feed & Care is CJ CheilJedang's feed and livestock subsidiary. Its sale was attempted in 2019 but failed once, and rumors of a sale have resurfaced this year. Like the bio business division, it faces significant margin volatility, and with the group's ongoing focus on strengthening the food business, avoiding the sale seems unlikely.

An industry insider said, "The sale of the bio business can only be interpreted as a strategy to focus on the food business," adding, "The sale of CJ Feed & Care is also expected to materialize soon."

CJ CheilJedang Center exterior, Dongho-ro, Jung-gu, Seoul