Major South Korean food companies reported strong performances in the first quarter of this year, driven by growth in their overseas operations. The expansion of global sales amid the K-food craze has allowed these companies to successfully defend against domestic and international uncertainties. However, as the second quarter approaches, concerns are rising due to the prolonged conflict in the Middle East, which is expected to impact raw material and packaging costs, alongside high exchange rates.
According to data from the Financial Supervisory Service on May 14, CJ CheilJedang recorded consolidated sales of 7.111 trillion won and an operating profit of 238.1 billion won for the first quarter. Despite a decline of 17.2% in overall operating profit due to poor performance in its bio business, sales from global strategic products, including dumplings, surged to 3.0384 trillion won, with operating profit increasing by 11.2% to 143 billion won compared to the same period last year.
Lotte Wellfood saw its operating profit soar by 118.4% to 35.8 billion won, driven by growth in its overseas operations in India and Kazakhstan. Lotte Chilsung Beverage also reported a 91% increase in operating profit to 47.8 billion won, bolstered by strong exports of its Milkis and LetsBe brands. Notably, profitability from overseas subsidiaries in the Philippines, Pakistan, and Myanmar has improved, raising the global segment's share of total sales to 46%.
Samyang Foods set a new quarterly record, fueled by the popularity of its Buldak brand. With European sales skyrocketing by 215%, all overseas subsidiaries recorded double-digit growth, leading to first-quarter sales of 714.4 billion won and an operating profit of 177.1 billion won, marking increases of 35% and 32%, respectively. Orion continued its growth trajectory, with first-quarter sales reaching 934.9 billion won, up 16%, and operating profit rising by 27.7% to 169.1 billion won, thanks to strong sales in Russia and China. Nongshim is also expected to report first-quarter sales of 925.7 billion won and operating profit of 60.3 billion won, reflecting improvements of 3.7% and 7.5%, respectively, based on market estimates.
These results stem from a combination of aggressive overseas market strategies and rigorous cost-efficiency measures. Major companies have focused on enhancing profitability by streamlining low-margin businesses and increasing their international presence. While concerns about rising costs due to supply chain disruptions from the Middle East have emerged, companies have managed to mitigate the impact on their performance by utilizing existing inventory.
However, the effectiveness of this 'holding strategy' may diminish as the second quarter progresses. The ongoing conflict in the Middle East and persistent high exchange rates have driven naphtha prices, a key raw material for packaging, up by more than 70% since the beginning of the year, with packaging costs themselves increasing by 20-30%. Additionally, the won-dollar exchange rate is threatening to breach the 1,500 won mark, exacerbating the burden of imported raw materials and logistics costs.
Compounding these challenges, the government's strict price stability measures are limiting companies' flexibility. Chief Presidential Secretary Kang Hoon-sik instructed relevant ministries during a senior secretary meeting on May 11 to prevent excessive price increases under the pretext of rising oil prices, stating, "The war on inflation is just beginning."
An industry insider noted, "So far, we have been managing through inventory and cost-cutting measures, but if supply instability from the Middle East continues, we may need to adjust our production strategies for key products. The overall atmosphere in the industry is one of concern over defending profitability."
* This article has been translated by AI.
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