Post on 27-Jun-2020
Investor Relations
1. Company overview
1-1. CJ Group
1-2. CJ Freshway
2. Food Material Distribution
2-1. Business environment
2-2. FMD core competency
2-3. Advanced business model
3. Catering Service
3-1. Business environment
3-2. FS core competency
4. Global Business
4-1. Global outposts
4-2. Global business structure
4-3. Current tasks
4-4. Mid/long-term strategy
Contents Page
2~3
4~7
8
9~11
12
13
14
15
16~17
18
19
20
21
22
Index
2
Four core business divisions of CJ group
1-1. CJ Group
CJ group is one of the largest conglomerate in Korea(annual revenue of W24tn in 2016), specialized in Consumer and Culture business. CJ Freshway is a key player in the food & food service division along with CJCJ(097950 KS), CJ Foodville(U/L).
Revenue W7.5trn W4.3trn W7.7trn W3.9trn
(Total revenue of CJ group W24trn)
CJ Cheiljedang food stuff, processed food CJ Foodville franchise restaurant CJ Freshway Food materials distribution, Catering
CJ Cheiljedang lysine, nucleotides, feed&livestock CJ Healthcare pharmaceutical
CJ O shopping homeshopping CJ Korea express logistics, parcel service CJ Olive young Health & beauty
CJ E&M broadcast, movie, music, musical, etc CJ CGV movie theater CJ Hellovision cable TV
Company overview
3
Synergy amongst affiliates
Restaurant & franchise co.
No.1 franchise company with 2,159 restaurants
(fine dining, bakery, coffee, etc.)
Food material distribution & catering service
No.1 food material distributor Sourcing and distribution Catering service
No.1 Food ingredient & Processed food maker
No.1 processed food maker in Korea Main products: - Food material: sugar, wheat flour, etc. - Processed food: frozen food(dumplings ,pizza etc.), meat processed food(SPAM, bacon), HMR(Microwavable rice, soup/stew) etc.
Supply of competitive processed food
Raw materials Captive client
Cost-effective raw materials
CJ has integrated value chain of food & food service industry. From raw material to restaurant brands, CJ maximizes synergy effect with affiliates by cost-effectiveness and product competitiveness.
M
Producer Sourcing
Distributing
Wholesaler/ Retailer
Franchise
Restaurant
Catering
Fertilizer/feed
Seeds Hotel
Maker
Manufacturer
Under consideration
Food & Food Service value chain model
Company overview 1-1. CJ Group
4
Foreign investors 1.4%
Domestic Institutions
24.1%
397
318
501
987
463
12.55 14.87 16.29
24.74 24.10
2.63 0.57 1.81 1.91 1.44
2012 2013 2014 2015 2016
Market cap
Share of institutional investors
Share of foreign investors
1-2. CJ Freshway
[FY 2016]
Company overview
CJ Corp + affiliated person
58.7%
CJ Corp(001040 KS) + special interest group holds 58.7% of CJ Freshway. Shareholder mix diversified in the recent years, as domestic institutions & NPS added their stake in the company. Most recently foreign funds have increased their holdings.
Shareholding structure Market cap
5
History
1988. 1 Founded Samil agriculture & marine
1996. 5 Incorporated into CJ Corp (ex-CJCJ)
1999. 1 Launched food material distribution business
2000. 9 Launched catering business
2000.11 Launched PB brand for food material<it`s well>
2001. 7 Listed KOSDAQ market
2005. 7 Opened service academy and culinary education center
2005. 1 Acquired ISO 22000 certificate
2007. 1 Acquired a certificate of HCCP of Hospital for the first time in Korea
CJ Freshway, founded in 1988, is leading domestic food material distribution market and catering business with largest infrastructure and more than 20 years of experience
2008. 3 Company renamed to “CJ Freshway”
2009. 8 Designated as a food safety inspection agency by KFDA
2010. 7 Opened the largest low-temperature logistics center of Korea
2012. 4 Launched PB brand for primary food, ‘FRESHWAY’
2012. 5 Founded a distribution company in China(CJFW Qingdao corp)
2013. 7 Founded a distribution company in Vietnam(freshway Vietnam)
2016. 11 Established JV company with Younhui in China
- CJ Freshway Yonghui(Shanghai) Trade
2016. 12 Songlim food(sauce & seasoning manufacturer) Acquisition
Company overview 1-2. CJ Freshway
6
Sales breakdown
Distribution 83.2%
Food Service 13.6%
Overseas& others 3.2%
0.80
1.35
1.57 1.61 1.53
1.75
1.94
2010 2011 2012 2013 2014 2015 2016
Food material distribution(Wtn)
0.13 0.15
0.17 0.20
0.22
0.27
0.32
2010 2011 2012 2013 2014 2015 2016
Food service(Wtn)
CAGR 16%
CAGR 15.9%
Comprised of two main businesses, Food material distribution(FMD) and Food service(FS), make-up majority of its sales and has shown strong growth.
Sales Mix [FY 2016]
Business model
Franchise
Restaurant
Manufacturer
Catering
Hotel
Manufacturer
Producer
Global Packer
① Food Material distribution ② Food Service
Office
Factories
Hospital
University
Leisure/etc.
Company overview 1-2. CJ Freshway
7
102.0
160.3 187.3 187.7 179.5
207.2 232.8
2010 2011 2012 2013 2014 2015 2016
Revenue(W bn)
CAGR% 14.7%
0.9
2.5 2.7
0.8
2.7 3.2
2.1
0.9% 1.6% 1.4%
0.5%
1.5% 1.5% 0.9%
2010 2011 2012 2013 2014 2015 2016
Operating Profit(W bn) OP
OP margin
1.94
0.81 0.61 0.52 0.49
[FY 2016]
Company overview 1-2. CJ Freshway
Despite recent sluggish market condition, CJFW maintains its market dominance on the back of strong top-line growth. Effort to find working "Korean FMD model”, CJ FW spent years endeavoring fast changing market conditions, often challenging through worst down-cycles.
Revenue has grown at CAGR of 14.7% with establishment of JVs(FreshOne) and enhanced sourcing ability within CJ group
Fluctuation in OPm caused by external events in the market
Company ‘A’
‘B’ ‘C’ ‘D’
Revenue comparison with competitors CJ Freshway Earnings
(Unit: W tn)
CJ Freshway is an unrivaled domestic food material distributor with the largest economy of scale.
8
Food material Distribution
9
2-1. Business environment
Korean food distribution market size & channel mix
46.4 48.3 49.9 51.2 52.8 54.4 55.9 57.6
2013 2014 2015 2016 2017(F) 2018(F) 2019(F) 2020(F)
19.5
Small Medium
CAGR 3.1%
ML Chain Catering 2)
7.5
8.2
13.5
8.8
Market size of restaurant food material W 29.2tn (51%)
Wholesale & factory
Domestic FMD(food material distribution) market to grow at the rate of 3.1% annually till 2020, reaching W58tn in size. Strong growth from domestic restaurant industry to push its proportion up to 51% Vs. wholesale 34%, and FS(Food Service) 15%
(W tn)
Source : Bank of Korea, Statistics Korea Wholesales & retail service Index, Internal interview etc.
1) Scale of restaurants : Mid-large(Yearly revenue more than W0.3bn), Mid-small(less than W0.3bn)
2) Market includes manufacturing sites, office, hospital, military, university and etc
10
2-1. Business environment
7.4% 8.5% 8.2% 9.1% 10.2% 11.6%
2011 2012 2013 2014 2015 2016
M/S trend of large corporations Breakdown of restaurant industry
CAGR
2.5%
33% 36% 38% 40% 46%
31% 31% 30% 30% 28%
35% 34% 32% 30% 26%
2013 2014 2015 2016 … 2020
Franchise
Middle &
large
Small
7.4%
1.0%
total
Enterprise
SME
▲2.1%
Domestic FMD market is still at its early phase of industrialization. However, recently, market is accelerating its industrialization/corporatization process as government policy and industry demand trend changes require stricter system.
Korea’s food material distribution market is fragmented as M/S of large corporate is only 11.6%
The gov’t policy is leading the industrialization and corporatization of the market as it demands stricter :
transaction transparency and quality control
Rising needs of corporate food distributor as restaurant industry grows : Franchise to grow @ CAGR of 7.4%, and small declines @ CAGR -2.1%
11
2-1. Business environment
Residual income squeeze driven by weakening economy led eat-outers to be more prudent on their expenditures. To meet change in trend, restaurants soon turned to tighter budgeting which sparked fierce price competition between SMEs.
GDP growth rate(%) Service industry GDP growth rate(%)
-5.5
1990 2025 1998 2009 2016
V shaped
Perk-up
L shaped
recession
1) 2012~2060 long-term financial prospects(National Assembly ), 2016~2020 : 3.4%, 2021~2025(F) : 3.0%
2016~2025
forecast1)
10.4
⇒ Entering into L shaped recession, unable to break above, sluggish growth rate to last in coming years
-2.7
Slow growth
(4%)
1990 2025 1998 2009 2016
10.2
12
Freshway(6) : Icheon(2), Suwon, Yangsan, Jangsung, Daegu FreshOne(12) : Kwangju, Namseoul, Daejen, YongIn, Namyangju, Daegu, Busan, Incheon, Cheongju, Gunsan, Mokpo, Jeonju
2-2. FMD Core competency
SCM – largest logistics Infrastructure
Diversification of Distribution Channel
Restaurant Catering Whole sales
Factory Others
Total revenue
Sourcing Status : Domestic W2.1tn(90%), Overseas W0.23tn(10%) 30,000SKU of B2B food products PB, global exclusive food products
Sourcing Competitiveness 1 2
3
Market differentiation by core competency; 1) Global sourcing network, 2) SCM ability, 3) distribution channels, and 4) quality control infrastructure
W2.33tn
4 Specialties in Food Safety : Designated food safety inspection centers and food safety experts (total 60 specialists) Risk Management Activity : systematic audit, on-site training programs Customer Satisfaction Activity :VoC analysis→ understanding customer needs → propose business insight → customer satisfaction ▪ Designated as the Best Food Safety Company for 4 consecutive years
Top tier class of food safety infrastructure
[FY 2016]
Restaurant(including FreshOne), catering, wholesale/factory
: Freshway : FreshOne
13
2-3. Advanced business model
[AS-WAS] [AS-IS]
B2B Channel(Ho∙Re∙Ca∙∙∙)
Small Distributors
FreshOne
CJ Freshway
A
A B B C C D D E
E
F
F …
Food safety, SCM Infra
Producer Global Packer
Manufacturers/ Wholesalers
Producer Global Packer
Manufacturers/ Wholesalers
CJ Freshway
Agent(C)
Agent(b)
B2B Channel(Ho∙Re∙Ca∙∙∙)
Inefficient distribution structures resort to additional cost to end-users
Cost reduction achieved through integration of distribution structure with advanced infrastructure
One-stop service to cut out unnecessary distribution stages by expanding direct transactions (CJFW⇌B2B client), strengthening bargaining power through integration/consolidation of distribution channel → Result : simplified distribution structure & gain cost competitiveness.
Agent(a)
Procurement integration
⇒ Bargaining power
14
Catering Service
15
3-1. Business environment
9.1 9.3 9.5 10.0 10.7
4.0 4.2 4.3 4.8
5.3
14~20 CAGR
5.0%
16.0
14.8 13.4 13.1 12.7
CAGR 3.3%
2.7%
2020(F) 2018(F) 2016 2015 2014
(30%)
(70%)
(33%)
Source : Bank of Korea, Statistics Kore, Internal Interview etc.
1) Assuming that middle/high school and military cafeteria maintained In-house catering service
Wellstory
26.0%
Ourhome
21.2% Hyundai
green food
15.2%
ECMD
10.3%
Shinsege
food
6.9%
Hanhwa
5.9%
others
7.2%
[FY 2016]
… …
(67%)
CJ Freshway 7.3%
Food Service(FS) market to grow at the rate of 3.3% annually till 2020 to W16.0tn. Outsourcing market leading the growth.
Domestic catering market size & channel mix M/S
Outsourcing (%)
In-house (%)
Domestic catering outsourcing market, already consolidated, is fiercely competed by conglomerates.
CJ FW continues to gain M/S by winning top tier contracts available and wielding its core competency in hospital and leisure channel
Domestic catering outsourcing market to grow at CAGR of 3.3% until 2020.
Recently, In-house operations are turning toward outsourcing as a solution to improve efficiency and quality
16
CJ Freshway’s expansion lies with its customizable service, and indisputable top position in specialty areas.
2011 2012 2013 2014 2015 2016
COGS(%) GPM(%)
Growth Profit Margin/rate of COGS Differentiated capability and service
Promote sustainable growth of profit margin through improving
COGS ratio and optimized operation
1 Hospital channel – menu expertise for the patients
Customized menu to accommodate different types of
patients
Meal services for foreign patients
2 Leisure channel – Customized service and menu
Unrivaled M/S No.1 company with specific menu
for Leisure site
Optimized staff management system for leisure
channels
2 Synergy within CJ group
Restaurant/retail brands of sister companies.
(Café, restaurants, drugstores, etc)
CJ group events
(Foodville: FC brand menu day)
(E&M: celebrity autograph event)
1
2
3
3-2. FS core competency
17
Remarkable new order momentum and competitive contract renewal rate resulted positive growth.
2011 2012 2013 2014 2015 2016
Amount M/S(%)
50
100
2012 2013 2014 2015 2016
Amount of new order exceed W50bn(expected annual revenue) since 2014
Amount of new order in 2016 recorded historical high winning over a quarter of new contracts available for the year
3-2. FS core competency
90.8%
Contract renewal rate maintained above 90% for consecutive 5 years, on the back of strong customer satisfaction level
Amount of new order Contract renewal rate(%)
(W100mil)
1)
18
Global Business
19
USA, L.A
Shanghai
Qingdao
Ho Chi Minh
Korea
CJ Freshway Qingdao Co.(2012)
/Food distribution
Shanghai Blue Wish(2012)/Catering
CJ Freshway Yonghui(Shanghai) Trade(2016)/Food distribution
CJ Freshway Vietnam(2013)
/Food distribution
Fides foods system/Catering
▶ China
▶ Vietnam
57 65
91
2014 2015 2016
CJ Freshway America(2013)
/food distribution
▶ USA
Overseas Revenue(Unit: Wbn)
Recent expansion to China, Vietnam and the US market to add growth momentum mid/long-term. Collaboration between domestic and overseas market to provide regional expertise and synergy between outposts.
4-1. Global outposts
Overseas entities of CJ Freshway
20
Expansion strategy : Localization & utilization of global outposts
Further expansion of local sales channels
and development of global packer network
Global
sourcing
Overseas
Local
distribution
Freshway
Global food material trade business
based on sourcing networks
Localization of food material distribution in emerging market
Utilizing global sourcing capability to its full extent,
Gained competitive edge over local competitors
Expansion of sourcing volume
As distribution channels diversify
Two-Track Mechanism
4-2. Global business structure
21
China Vietnam USA
“Local distribution business based on YH captive channel”
“Triangle-trade network based on global sourcing power”
“No. 1 Trade Company between Asia-US”
Goal
Establishment 2012 2013 2013
Core competency
Global sourcing power (purchasing cost reduction, supply stabilization)
Training sales force to expand local food distribution
mollusk, mango, dragon fruit,
cashew nut
Imported fruit, beef
Canned tomato, Orange, grape
Basa, Mahi-mahi, Korean product
Canned Chinese food, cellophane noodle, frozen produce
whipping cream, imported fruit
Sourcing
distribution
Core strategy
JV1 Business stabilization and strengthened product line-up
Local product/distribution channel expansion
M&A Target research
Captive client coverage expansion
FC Channel(Golden gate) supply stabilization and expansion
Local distribution channel development
Korean fruit supply expansion
Captive client supply expansion(July 2016~)
Supply Asian fishery products in local market
Supply primary products to affiliates in China
Strengthen Sourcing power in America
Expansion fueled by strengthening global sourcing & local distribution Developing new local sales channel and global packer network
4-3. Current tasks
Investor Relations
E-mail: hl.ryu@cj.net suri.lim@cj.net Website: www.cjfreshway.com