Harim Industry Spent 1.1 Billion Won on R&D Last Year
Expanded Product Lineup After Launching The Misik Artisan Ramen
Lack of Product Innovation and High Prices Led to Poor Sales
Discount Sales Resulted in 27.3 Billion Won in Losses
Harim Industry, a food subsidiary of Harim Holdings, which appointed actor Lee Jung-jae?who became a global star through the Netflix drama 'Squid Game'?as its model and spends hundreds of billions of won annually on advertising, reportedly spent only about 1 billion won on product development last year. Although the company declared its leap to a comprehensive food enterprise with the premium home meal replacement (HMR) brand 'The Misik,' research and development (R&D) took a backseat, focusing mainly on raising brand awareness, which analysts say led to poor sales of the products.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, Harim Industry spent 1.1 billion won on product development expenses (current R&D expenses) last year. When Harim Industry launched 'The Misik' in October 2021, product development costs were 3 billion won. However, R&D expenses sharply dropped to 700 million won the following year and have remained around 1 billion won since 2023.
Harim 1 Billion Won vs Nongshim 29.5 Billion Won... 30-Fold Gap in R&D Investment
Facing a slowdown in the domestic market growth, the Korean food industry regards R&D as a core competitive advantage. Especially in recent years, as K-food has gained popularity in the global market, comprehensive food companies have been expanding their R&D investments. This is due to the urgent need to develop products that can create new consumption trends, like Samyang Foods' Buldak Bokkeum Myun, which has become a key driver of K-food exports.
In fact, CJ CheilJedang, the top food company, invested 218 billion won in R&D last year. During the same period, competitors such as Daesang, Nongshim, and Pulmuone also spent hundreds of billions of won on product development, with 47.6 billion won, 29.5 billion won, and 30 billion won respectively. This is more than 30 times Harim Industry’s R&D investment.
Such a gap in R&D investment is analyzed to have weakened the competitiveness of Harim Industry’s products, leading to poor sales. Since October 2021, starting with the first product, The Misik Artisan Ramen, Harim Industry has significantly expanded its product lineup to include noodle products like Jjajangmyeon, soup dishes, cooking noodles, cooked rice, dumplings, and instant rice. Recently, it also launched the street food brand Melting Piece and the children’s food brand Foodie Buddy.
The Misik Instant Rice Sales Decline
However, the results have fallen short of expectations. Sales of The Misik Artisan Ramen reached 33.7 billion won last year, a 35.3% increase from 24.9 billion won the previous year, but market share remains minimal. Nongshim’s ramen sales reached 2.814 trillion won last year.
Instant rice sales actually declined. The Misik instant rice sales dropped 4% to 17.5 billion won last year compared to the previous year. Meanwhile, CJ CheilJedang’s 'Hetbahn' surpassed 1 trillion won in sales last year. Industry experts attribute the poor sales to high-priced "me-too" products lacking product innovation and technological differentiation.
In fact, as sales continued to slump, Harim Industry engaged in large-scale discount sales last year, reflecting 27.3 billion won in sales adjustments (discounts). Although product sales exceeded 100 billion won last year, actual sales amounted to only 80 billion won, 27.3 billion won less than the initially set prices due to discounts. Harim Industry’s sales adjustments surged annually from 3.5 billion won in 2022 to 12.5 billion won in 2023.
Lavish Advertising Expenses... Inflated R&D Costs
On the other hand, Harim Industry’s advertising and promotional expenses reached 26.7 billion won last year, accounting for 33% of total sales. Advertising and promotional expenses increased more than threefold over five years, from 6.8 billion won in 2020 to 26.7 billion won last year.
This level of advertising and promotional spending is exceptionally high in the food industry. CJ CheilJedang’s advertising expenses account for only 0.7% of its total sales of 29.359 trillion won, while Ottogi (1.4%), Nongshim (3.1%), and Samyang Foods (3.6%) all fall below 5%. A distribution industry official said, "It is difficult to gain long-term consumer trust through advertising alone," adding, "If you want to position yourself as a premium brand, genuine investment in the product must come first."
Meanwhile, the R&D expenses of Harim Industry reported in Harim Holdings’ business report were inflated compared to the amounts disclosed in Harim Industry’s audit reports: 3.4 billion won in 2020, 4.7 billion won in 2021, 2.5 billion won in 2022, 2.9 billion won in 2023, and 2.7 billion won last year. Even these figures fluctuated annually in accounting categories. For example, the 2023 business report classified R&D expenses as manufacturing costs, but from last year, they were recorded as selling and administrative expenses. Harim Industry’s R&D organization has 28 employees.
A Harim Group official explained, "The current R&D expenses in Harim Industry’s audit report cover costs for clinically necessary materials in R&D, whereas the R&D expenses reported to Harim Holdings include labor costs and machinery depreciation."
Regarding this, a Financial Supervisory Service official stated, "We will review whether there has been any violation of disclosure regulations."
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