Nongshim·SPC Samlip·Lotte 10% growth
Criticism of “price hike, consumer burden”
“Operating profit decreased due to increased cost burden”
Last year, the number of food companies that entered the so-called “three trillion won club” in sales increased due to strong overseas sales thanks to the popularity of “K Food” and subsequent product price hikes.
According to related industries on the 13th, Nongshim (sales of KRW 3.129 trillion, an increase of 17.5% compared to the previous year), SPC Samlip (sales of KRW 3.3145 trillion, an increase of 12.5%), and Lotte Confectionery (sales of KRW 4.745 trillion, an increase of 11.1%) were in double digits. It recorded growth and exceeded 3 trillion won in sales for the first time.
CJ CheilJedang, which was the first domestic food company to exceed 3 trillion won in sales in 2019, recorded 11.1042 trillion won in food business alone out of 18.7794 trillion won in total sales last year, recording the first annual food sales of 10 trillion won. It is highly likely that Ottogi, which has yet to announce its earnings, has surpassed 3 trillion won in sales, following existing ‘3 trillion won clubs’ such as Dongwon F&B, Daesang, and Hyundai Green Food.
Analysts say that the food industry achieved high sales by strengthening its overseas market penetration, including the United States. In fact, CJ CheilJedang posted sales of over 5 trillion won overseas alone as the ‘bibigo’ brand became popular. Nongshim also started operating its second plant in North America last year, and forecasts that overseas sales will exceed domestic levels within the next few years. Lotte Confectionery’s overseas business, including India and Kazakhstan, was also cruising.
Product price hikes last year also had a significant impact on sales growth. As the cost of raw materials such as flour and logistics soared under the influence of the war in Ukraine, the price of processed foods such as snacks, ramen, bread, and cakes rose several times. For example, Nongshim raised the price of snacks twice last year, and raised the price of ramen by 11.3% in September. Paris Baguette, run by the SPC Group, also raised bread and cake prices by an average of 6.6 percent in January last year. As the price hike continues until this year, some criticize that companies are passing the burden of price on consumers.
However, the food industry is complaining of difficulties, saying that operating profit did not grow as much as sales as the cost burden increased. In fact, last year’s sales exceeded 4 trillion won, but operating profit was 139.2 billion won, down 9.2% from the previous year. Lotte Confectionery also posted 135.3 billion won in operating profit, down 6.3 percent from the previous year, due to merger costs.
An industry insider said, “Last year’s operating profit rate in the food industry was low, around 3%, and the situation is improving performance by increasing the proportion of exports.”
Reporter Kim Hyun-yi