"What Is Myeonsarang?"... The Struggles of Ottogi's Family-Affiliated Firm to Stand Alone

Despite Five Years of B2C Expansion, Sales Share Remains at 9%
Ottogi Sales Reach 29.8 Billion Won, Surpassing Consumer Revenue

Myeonsarang's efforts to transform its business structure and shed its image as an Ottogi original equipment manufacturer (OEM) partner have been slow to gain traction. Although it has been five years since the company entered the consumer market, the share of business-to-consumer (B2C) sales last year remained in the single digits. In fact, sales generated from transactions with Ottogi surpassed the size of its consumer-oriented business.

According to industry sources on July 13, Myeonsarang's B2C sales accounted for just 9% of its total revenue last year. The remaining 91% came from business-to-business (B2B) transactions with foodservice companies, franchises, and institutional catering clients.

Myeonsarang has launched three types of frozen noodle meal kits, which are being sold nationwide at Lotte Mart. Provided by Myeonsarang.

Attempting to Target the Consumer Market, But Falling Short of Expectations

Established in 1991 as Janghak Food, Myeonsarang grew by producing products such as Ottogi's "Old-Fashioned Noodles" as an OEM manufacturer. CEO Jeong Se-jang of Myeonsarang is the son-in-law of the late Ottogi founder and honorary chairman Ham Tae-ho, and the brother-in-law of Ottogi Chairman Ham Young-joon. Since 2021, the company has sought to expand into the consumer market with frozen noodles, meal kits, and home meal replacements (HMRs). Its strategy was to shift its business focus from being an OEM specialist to building its own branded products.

However, performance has not met expectations. Although total sales reached 205 billion won last year, surpassing the 200 billion won mark for the first time since the company's founding, the B2C segment remained at around 20 billion won. This is still less than half of the company's stated B2C sales target of 50 billion won.

In particular, transactions with Ottogi remain substantial. Last year, sales to Ottogi reached 29.8 billion won, accounting for 14.6% of total sales. This figure exceeds the total revenue from the B2C business, which the company has been nurturing for five years. Despite efforts to ramp up its consumer market presence, sales generated from Ottogi transactions are still a larger revenue source than the consumer business.

Mira Kim, Head of Communications at Myeonsarang, said, "We plan to maintain our current level of business with Ottogi, but going forward, our focus will be on growing our own brand."

Myeonsarang Grew Alongside Ottogi

Myeonsarang is considered a classic example of a family-run business that has grown together with Ottogi. In the past, its reliance on Ottogi was even higher. In 2005, out of total sales of 27.1 billion won, 17.9 billion won came from Ottogi transactions, accounting for 66%. Even as recently as 2010, the share of sales from Ottogi hovered around 50%. While the proportion has since decreased, the transaction volume has remained steady. Ottogi-related sales accounted for 20% (20.9 billion won) in 2018, 16.2% (18.1 billion won) in 2019, 23.6% (24.5 billion won) in 2020, 20.4% (24 billion won) in 2021, and 15.2% (21.3 billion won) in 2022.

The relationship with Ottogi even led to a legal dispute last year. The issue arose when, in April 2023, Myeonsarang graduated from small business status and became a mid-sized enterprise. As noodle manufacturing is designated as a livelihood-protected industry, large corporations are, in principle, only allowed to engage in OEM transactions with small businesses.

The Ministry of SMEs and Startups requested Ottogi to discontinue transactions with Myeonsarang after its reclassification as a mid-sized enterprise. Ottogi proposed to continue the business by reducing supply volumes to no more than 110% of the previous maximum shipments, but this request was declined. The matter eventually went to administrative litigation, where the court ruled in favor of Ottogi, stating that production within the existing supply volume could not be considered business expansion.

The High Barriers of the Convenience Food Market

Myeonsarang is increasing investment to expand its presence in the consumer market. Advertising and promotional expenses nearly doubled from 1.45 billion won in 2023 to 2.79 billion won last year. The company also spent more than 33 billion won on expanding its facilities. Additionally, it is pouring resources into production efficiency projects such as the construction of a smart eco-friendly factory, the adoption of AI machine vision systems, and the implementation of a manufacturing execution system (MES).

Nevertheless, the consumer business remains in the single digits as a percentage of total sales. The frozen noodle and convenience food markets are already dominated by major food companies such as CJ CheilJedang, Pulmuone, and Ottogi. According to industry experts, the competitive landscape for business clients and consumers is fundamentally different.

A food industry official commented, "While Myeonsarang is recognized for its competitiveness in the foodservice noodle market, transitioning from an OEM to a branded company is a completely different challenge. Ultimately, only when the company generates sales in the consumer market will its transformation be recognized as a success."

Meanwhile, Poonglim Food, led by CEO Jeong Yeon-hyeon, who is also the brother-in-law of Ottogi Chairman Ham Young-joon, generated 43.8 billion won in sales from Ottogi transactions last year out of a total of 149.6 billion won in revenue. This represents 29.3% of its total sales. For the past six years, Ottogi-related sales have accounted for roughly 25-30% of Poonglim Food's total revenue.

This content was produced with the assistance of AI translation services.