CJ divests Chinese subsidiary in bid to ramp up K-food push

(CJ CheilJedang)

South Korean food giant CJ CheilJedang said Monday it sold its entire stake in Jixiangju Food, one of its biggest Chinese subsidiaries that sold Chinese food in China, in a bid to focus on its global strategy to primarily sell Korean food products, centering on its Bibigo brand.

According to CJ CheilJedang, the company sold its 60 percent stake in Jixiangju Food for 300 billion won ($235 million) to multiple Chinese institutional investors and the second-largest stakeholder of Jixiangju Food, who contractually remains anonymous. CJ CheilJedang previously acquired a 49 percent stake in Jixiangju Food in 2011 and another 11 percent stake in 2016, for a total sum of 38.5 billion won.

"With this divestment, CJ CheilJedang is continuing its initiative to bolster its global strategic product business, which recorded 33 percent on-year growth and sales of about 165 billion won in China, last year," said an official from CJ CheilJedang.

In January, CJ CheilJedang announced its vision to mainly ramp up sales of its seven Korean food products to foray into the global market. The seven food products it named as global strategic products include dumplings, processed rice, chicken, traditional Korean sauces, kimchi, seaweed and rolls.

According to CJ CheilJedang, by divesting from Jixiangju Food, the company's Chinese operations will now mainly be led by CJ Qingdao Foods, which sells Korean food products including the company's Bibigo brand products in the Chinese market.

Up until now, CJ CheilJedang's Chinese operations mainly relied on performance of its two Chinese subsidiaries Jixiangju Food and CJ Qingdao Foods -- which respectively sold Chinese side dishes such as zha cai and Chinese pastes, and Korean food products including Bibigo frozen foods. The two subsidiaries posted 209 billion won and 247 billion won in annual sales, respectively, last year. Jixiangju Food's sales took up 45 percent of CJ CheilJedang's sales raised in China in 2022, while CJ Qingdao Foods' sales took up some 54 percent.

"We thought it was the prime time to sell Jixiangju Food, as a buyer offering good terms came along just as the company was aiming to enlarge its K-food business," the official said.

"However, this does not mean that CJ CheilJedang is aiming to downsize its Chinese operations. Although the Chinese operations will be affected by the divestment to some degree, the effect is estimated to be temporary, and the firm aims to steadily enlarge its Chinese business for the future."

The proceeds reaped from the divestment is aimed to be used to fortify financial strength of the company such as returning debts and expanding the firm's global K-food business, the official said.

During the first quarter of this year, CJ CheilJedang posted 2.7 trillion won in sales for its food business, with its overseas sales, which showed on-year growth of 15 percent, nearly accounting for half its sales, with 1.3 trillion won.