proposal for investment standards , scm solutions, and a strong sales network overview 4 with...
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Proposal for Investment
2014
CJ Group Overview
CJ Group has 4 major businesses with over 160 subsidiaries
1
CJ group integrated the Food & Food Service value chain so that CJFW can leverage on
group companies’ infrastructure
Restaurant & franchise co.
No1. restaurant operator
1,700 restaurants
(bakery, coffee, fine dining, etc.)
Food distribution & food
service co.
No. 1 food distributor in Korea
sourcing and distributing
institutional food service
M
Producer Sourcing
Distributing
Wholesaler/
Retailer
Franchise
Restaurant
Catering
Fertilizer/Feed
Seeds Hotel
Maker
Manufacturer
Korea’s No. 1 food manufacturer
Major products:
sugar, flour, chilled products,
meat processed products
Competitive
finished products
Supply raw food Captive client
Under consideration
Food & Food Service Value Chain
Cost-effective
products
Food & Food Service Division Overview
2
A number of global companies are providing their products in Korean B2B market through
No.1 company, CJ Freshway’s sales channels
Restaurant
Franchise
Manufacturer
Hotel
Catering
Manufacturer
Producer
Global Packer
CJ Freshway channel in Korea
Business of CJ Freshway
1.6
Sales in FY 2013
0.4
0.4
0.3
Major players in B2B market
(tril. KRW)
Company ‘A’(No 2)
Company ‘B’
Company ‘C’
Overview
3
30,000 SKU (one-stop delivery)
bargaining power
(economies of scale)
exclusive products
various PB products
worldwide sourcing network
(sourced directly from producers)
diversified sales channel
to wholesalers(distributors),
hotels, restaurants, caterers,
manufacturers global
Vietnam, China, USA, etc more than 30,000 clients
expertise in B2B market
food safety center
HACCP
largest logistics center
in Korea
13 logistics center
nationwide
Commodity competitiveness Strong sales network
Food safety SCM
Strength and Infrastructure
CJ Freshway leads in the Korean B2B market with a wide product range, high food-safety
standards , SCM solutions, and a strong sales network
Overview
4
With recession and governmental
policies, SMEs are losing
competitiveness
expanded JVs with SMEs
began to supply raw materials
to factories
- based on captive clients
expanded wholesale business
sustainable growth
- won orders from large firms
- hospital route expanded
Inha Univ, funeral halls
Recent Performance Overview
CJ Freshway showed sustainable sales growth and significant margin improvement over
the last 5 years
675
1,020
1,603
1,873 1,877
2008 2009 2010 2011 2012 2013
Revenue(KRW bil)
CAGR 22.7%
780
9
26
8
1.1% 1.3%
0.9%
1.5% 1.4%
0.5%
2008 2009 2010 2011 2012 2013
OP(KRW bil)
26
6 1
482 582
796
1,361
1,585 1,609
2008 2009 2010 2011 2012 2013
Food distribution
(KRW bil)
118 116 130 150
175 196
2008 2009 2010 2011 2012 2013
Catering (KRW bil)
CAGR 27.3%
CAGR 10.7%
Vietnam
Hochiminh
in the World
China
Shanghai
Qingdao
Shenyang
CJ Freshway
sites CJ group sites
USA
Los
Angeles
Global CJ Freshway Overview
Riding on its expertise and experience in the industry, CJ Freshway is expanding globally
6
Size of Korean B2B market(KRW tril, %)
• Korean B2B food distribution market is expected to
grow as the number of women in workplace and single
family increases
2010 2013 2016
31.3
36.8
43.3 CAGR
5.6%
69 67
31 32 33
2010 2013 2016
68
Food Material Breakdown in Korean B2B
(KRW tril, %)
• Raw material takes a substantial portion of
food distributed in Korean B2B market
High standard of food safety and
high level of sourcing expertise are needed
Processed
Raw
Material
18.8 22.4 26.7
Market Size Business Environment(Distribution)
Market will reach KRW 37tril in 2013 with 6% annual growth in the future
Food Safety is essential as raw material takes a major portion of food distributed
institutional
Small - mid
1 3 5
100 99 97 95
1995 2000 2005 2008
9
91
2011
SMEs without relevant infrastructure account for 90% M/S
Recent market trends and government policies have
weakened SMEs’ competitiveness
- Stricter regulations on food-safety and illegal transactions
- Restaurant industry is becoming industrialised with an
increasing number of large scale restaurants, including franchises
M/S of institutional distributors are increasing
(%)
Market Dynamics Business Environment(Distribution)
SMEs still dominate the market, but big distributors are growing rapidly
0
Market Share Trend by Players
(%)
8
Market Size and Competition Business Environment(Catering)
The Korea catering market will be driven by hospitals and military sectors
Catering Market M/S(2010)
20%
20%
11% 9% 5%
4%
4%
6%
21% Our Home
Everland
Hyundai
Greenfood Shinsegae
Foods
Hanwha
Resort
CJ Freshway
ECMD
Dongwon/Araco
Others
• Top 9 companies with captive market occupy 80% M/S
• Korean catering enterprises are entering Asian markets
Catering Market Size(KRW tril)
Hospital
Company
CAGR
83%
4.3%
3.3
4.2
5.0
CAGR
6.8%
2.7
Military
10.6%
▲8.5%
School
• gradual expansion of private cafeteria businesses in the
military, expect high growth in military route
Ministry of National Defense pushing “joint-operation project"
• expect CAGR of 10.6% in the hospital route due to aging and
medical law amendments
Revenue Target(KRW tril)
• Target KRW8 tril sales by 2017 (34% CAGR)
1.9
8.0
2012 2013 … 2017
CAGR
34%
1.9
OP Target(KRW bil, %)
• Target KRW 240bil OP by 2017, 3% OPM
27
240
2012 2013 … 2017
CAGR
55%
8.5
0.5%
3.0%
Earnings Target Mid-Long Term Plan
CJ Freshway will meet its performance target supported by a strong sales
network and global M&As
1.4%
10
Sustainable growth through
differentiation
utilise group infrastructure
Accelerating Asian businesses
domestic expertise, M&A, JV
- duplicating domestic model (food
distribution and catering) in global market
- China, Vietnam, USA, etc
Domestic food distribution
Build up entry barriers
- expand sales channels through M&A, JV
- diversify sales channels from high to low-
end, from HoReCa to Food manufacturers
- strengthening commodity competitiveness
Domestic catering
Global business
① Speeding up M&As and JVs to enhance domestic sales network ② Developing
differentiated technologies and branding in Catering ③ Expanding into global market
Strategy Mid-Long Term Plan
11
1.6 1.6
5.3
CAGR 27%
2012 … 2017
Long-term Sales Target
(KRW tril)
Strategy
- expand sales channel through M&A, JV
- diversify sales channels
from high to low-end, from HoReCa to Food manufacturer
Preoccupy the food distribution market
- increase the portion of primary commodity
- increase sales of PB products(it’s well, CJ Freshway)
- increase the number of exclusive commodities and sales
- direct sourcing from manufactures and producers
Build up entry barriers with commodity
Food Distribution
CJ Freshway will preoccupy the food distribution industry with further M&As and JVs
and thus build up entry barriers
2013
Mid-Long Term Plan
12
[JV Model]
CJ Freshway is expanding JV Models with SMEs to acquire numerous distribution
channels and bargaining power with economy of scale
Mid-Long Term Plan
Before JV(FreshOne)
CJ Freshway Manufacturers/
Wholesalers
Small – Medium Restaurants
Small
Distributors
After JV(FreshOne)
JV(FreshOne)
CJ Freshway
Small – Medium Restaurants
Manufacturers/
Wholesalers
A
A B
B C
C D
D
E
E
F
F …
bargaining
power
13
-
- CAGR 23%
175
490
2012 2017
Develop differentiated technologies
Build strong branding
Utilise CJCJ’s R&D technology
Develop special diet meals
diabetic, low-sodium cancer meals, etc
Differentiated meal service
- higher quality and synergies with other
group businesses: bakery, coffee shop, and
drug store
14
…
200
2013
Catering
CJ Freshway will achieve sustainable growth with differentiated technologies and branding
Long Term Revenue Goal
(KRW bil)
Strategy
1)
Mid-Long Term Plan
Sourcing
Distributing
Local Trading
Hotel,
Restaurant
Franchise,
Catering
Producer
Manufacturer
Global
Network
Channel in Korea
Enter the
global market
USA China Vietnam Other countries
…
…
Expand
neighboring
countries
Global Business
CJ Freshway is duplicating it’s successful business model in the global market
10
2,200
2012 2013 … 2017
50
Long-term sales target (KRW bil)
Mid-Long Term Plan
15