Kimchi Biz Profitable Again

Daesang FNF acquires Chongajip Kimchi from Doosan and turns it around

Daesang FNF has been drawing a lot of attention in the food industry since it took over the Chonggajip Kimchi from Doosan Group in 2006. The company turned around the kimchi maker from last year to make profits again, an astounding feat in these day and age when the economy is down in the dumps.
Behind the remarkable resurgence of the number one Korean traditional fermented cabbage food maker is President Lee Mun-hi's professional management skills accumulate over two decades of his service with the business group. He joined soon the group after his graduation from Seoul National University Graduate School in 1988 with a business management master's degree.
Daesang acquired the deficit-ridden traditional food maker in October, 2006, which makes tofu, and bean sprouts and kimchi for 1.050 billion won. One of its affiliates Daesang FNF, which took over the food maker, was to expand the business lines of the company to the extent that it would become one of the largest frozen food makers in the country.
There were quite a few voices within the group opposed to the take over saying the traditional food maker looks good only from outside. Those who did not favor the take over had a very good reason. For one thing, the food maker was mired in deficit to the tune of 11 billion won annually based on its 2005 performance records, although it commanded the largest share of the traditional food market with 65 percent. Daesang's fresh food line incurred 2.6 billion won in deficit in 2006 on sales of 57 billion won.
Many wondered whether Daesang can make a go of mixing the two different food makers and succeed. Daesang produces and markets fresh food items under the brand name of Chongjong-won, which are distinctively different from traditional food items like kimchi and tofu. The two food makers had been operating in the red and have two vastly different operational structures, so much so that synergy from the two systems was considered impossible.
President Lee took over the company in October last year, exactly a year from the acquisition. At the time of his installation as CEO, he pledged to achieve 300 billion won in the company's sales in 2010, with a promise to catch up with Pulmuwon, the top fresh food maker in the country and complete the merger of the two food makers so amicable among the employees of the two companies
The company projects to ring up 170 billion won in sales this year, which is considered not bad at all with the merger only year old.
Lately, the company is working on the project to change the corporate image of Chonggajip brand name at the cost of 1 billion won to make its traditional food products more palatable to young customers.
President Lee also is set to make the product lines more diversified. Kimchi is the top selling product among the products being produced and marketed, but its weight will be down to 50 percent of the company's total sales. The company also produces tofu, processed meats, and noodles, in addition to kimchi.
The company is having trouble with kimchi, because the prices of key material including cabbages vary widely from time to time and so is the preferences of its customers. Imported kimchi from China also is also a formidable competitor. Its sales fluctuates widely from season to season, which shows that the company cannot rely on kimchi for its major profit source for a long time for the company's sustainable stability.
The CEO has been pushing the sale of fresh noodles under a new marketing plan to make the product to rival kimchi as a major income source.
It make take a lot of time to catch up with kimchi and to make noodles a major source of income. Kimchi dominates the income make up for the company, to continue to share more than half of the income. nw

President Lee Mun-hi of Daesang FNF Co.

Various Kimchi products under Chonggajip brand made by Daesang FNF Co.