Focus on Brands Less Affected by Trends
High Overseas Expansion Potential Key to Growth
A recommendation has emerged that investment strategies in the domestic food service market mergers and acquisitions (M&A) should focus on brands that are less affected by trend changes or have high potential for overseas expansion.
The report titled “New Opportunities in the Food Service Franchise Market Examined Through M&A Trends,” published by Samjong KPMG on the 24th, stated, “M&A activities are actively taking place mainly around chicken, hamburger, and pizza brands that are relatively less influenced by current food service trend changes,” citing the 2020 acquisition of the chicken franchise Norangtongdak by Q Capital and Koston Asia as a representative case.
It further explained, “As global interest in K-food rises, requests for global master franchises of domestic food service brands are increasing,” and “brands with high potential for overseas market expansion are being evaluated as key factors for corporate value growth.” This suggests that opportunities for domestic food service companies to enter overseas markets are expanding, leading to corporate growth. UCK Partners is currently pursuing overseas expansion by acquiring Seolbing, based on the successful global expansion case of Gongcha.
As polarization within the food service market intensifies, deals centered on “value-for-money brands” are also continuously being pursued. Representative cases include the acquisition of YeokjeonFnC, which owns Yeokjeon Halmeoni Maekju, known as a value-for-money beer franchise, and the acquisition of Mega Coffee. Another trend is the leap to becoming a comprehensive food service company through M&A. Examples include BHC Group’s acquisition of Changgo43, Halmae Sundaeguk, and Outback Steakhouse, as well as Maeil Holdings’ acquisition of Paul Bassett, Crystal Jade, and Mildo.
The report emphasized, “The food service industry is a market with long-term growth potential from demographic, socio-cultural, and economic perspectives,” and stated, “It is time for strategic M&A considering the mid- to long-term growth potential of the food service industry.” In particular, it proposed a method where strategic investors (SI) and financial investors (FI) form consortia to jointly invest, along with strategies for initial public offerings (IPO) and secondary sales to recover investment funds.
The report also analyzed, “As labor and ingredient cost burdens increase in the food service market, franchise companies capable of efficient operations are likely to secure a relatively advantageous position,” and “other operating costs, such as competition in delivery application promotions, are also rising, so franchises with capital strength or corporatization will have competitiveness in the market.”
Park Young-geol, Executive Director at Samjong KPMG, added, “Investors must carefully analyze the status of investment companies and make strategic investment decisions,” emphasizing, “It is important to secure stable cash flow centered on chicken brands less affected by trend changes or food service franchises with high potential for overseas expansion.”
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