Rising Costs from High Exchange Rates and Middle East Conflict... Food Industry Endures with Overseas Growth

Major Food Companies Defend Profitability in H1
Domestic Slump Offset by Robust Overseas Performance
Performance Gaps Widen According to Overseas Sales Share
Cost Pressures to Intensify in Second Half
Wave of Product Price Hikes Continues

Despite adverse factors such as the high exchange rate and the rise in raw material prices triggered by the Middle East war between the United States and Iran, Korea’s leading food manufacturers managed to defend their profitability in the first half of this year. Although they struggled in the domestic market, their performance in overseas markets such as the United States, Europe, China, and Southeast Asia helped to offset those challenges. Companies with a high proportion of overseas sales and an export-oriented business model stood out even further, whereas those unable to fully offset cost pressures experienced a clear divergence in performance.

A large supermarket ramen display in Seoul. Photo by Dongju Yoon

According to industry sources on August 15, Samyang Foods emerged as the most notable manufacturer in terms of second-quarter results. During this period, its consolidated operating profit reached 176.2 billion won, an increase of 46.7% from the previous year. Sales rose by 39.3% to 770.3 billion won. Notably, overseas sales in the second quarter hit 645.8 billion won, up 46.7% from the same time last year, surpassing the 600 billion won quarterly mark for the first time and marking an all-time high. Overseas sales accounted for 83.84% of Samyang Foods’ total sales in the second quarter. As a result, the company also maintained a quarterly operating margin above 20% for the sixth consecutive quarter, recording 22.9% in the second quarter.

For the first half of the year, Samyang Foods’ cumulative sales totaled 1.4847 trillion won, with an operating profit of 353.3 billion won, up 37.2% and 39.0%, respectively, from the same period last year. The company explained that the sophistication of overseas distribution networks and the improved efficiency of its domestic production facilities, such as the Miryang plant, sustained global demand. Its flagship Buldak brand surpassed a cumulative sales volume of 10 billion units as of the end of May, further demonstrating growing global demand.

Nongshim also reported significant growth, with second-quarter sales rising 10.2% year-on-year to 956.1 billion won, and operating profit jumping 47.6% to 59.3 billion won. On a separate basis, sales were 738.4 billion won and operating profit was 32.1 billion won, representing 6.4% and 4.2% increases, respectively. Nongshim attributed the improvement in overall results to growth in overseas sales and profitability driven by exports and its overseas subsidiaries. For the first half of the year, overseas sales accounted for 40.2% of the company’s total.

Orion also achieved double-digit growth in both sales and operating profit in the first half, thanks to balanced growth at its overseas subsidiaries in China, Vietnam, and Russia. On a consolidated basis, operating profit rose 17.9% year-on-year to 298 billion won, and sales increased 15.5% to 1.8239 trillion won. Despite a difficult business environment marked by higher energy, logistics, and raw material costs due to the prolonged US-Iran conflict in the Middle East, its overseas subsidiaries—excluding the Korean unit—achieved double-digit growth in both sales and operating profit by expanding localized products and focusing on key growth channels, according to the company.

In addition, Lotte Wellfood reported cumulative sales of 2.1831 trillion won and operating profit of 100.5 billion won in the first half, up 7% and 98%, respectively, compared to the same period last year. The cumulative operating margin during this period was 4.6%. In particular, second-quarter overseas subsidiary sales rose 28% year-on-year to 311.2 billion won and operating profit increased 133% to 29.6 billion won, driving a turnaround in performance. Key growth was seen in major markets such as India and Kazakhstan. “Despite increased uncertainty from unsettled international conditions and persistent pressure from the cost of major raw materials, we continue to recover our performance,” the company stated, adding, “In particular, global business growth and operational efficiency have contributed to the turnaround.”

However, not all companies were able to translate overseas growth into a rebound in overall performance. In particular, CJ CheilJedang saw sales of dumplings and Hetbahn in the Americas rise 31% and 49%, respectively, and double-digit growth in both Europe and the Asia-Pacific regions. Nevertheless, its total operating profit in the second quarter fell 18.4% year-on-year to 161.9 billion won. Sales in its main food division climbed 5.8% year-on-year to 2.8441 trillion won, but operating profit in that segment dropped 21.3% to 70.9 billion won, which weighed down the company’s overall performance. The company explained, “While the sluggish domestic market continues, rising costs due to high oil prices and increased raw material prices have eroded profitability.”

An industry official commented, “Despite rises in the price of packaging materials and other raw materials, major manufacturers were able to maintain profitability in the first half by relying on existing inventory. But starting in the second half, not only the increase in raw material prices but also rising exchange rates, logistics costs, and labor expenses will inevitably have a negative impact on results.” As a result, price increases are spreading throughout the processed food and beverage industry, now affecting products such as cup noodles, snacks, and even bakery goods.

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