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Shaping the postwar bakery aisle

Summary: The faces inside KOREA S CONGLOMERATES 81 Analysts have called the company too opaque and inflexible but the recent promotion of younger executives may alleviate that concern One of the most long lasting and stable industries despite any cyclical economic downturn is flour The demand for this powder made from grain is always there as it is the main ingredient of food for many cultures worldwide including Korea Lee Han won the founder of Daehan Flour Mills one of Korea s top three milling companies along with CJ CheilJedang and DongA One was aware of that potential In 1953 the businessman established Daehan with a starting capital of 10 million won $8 500 aiming to help improve the lot of the Korean people who were starving in the aftermath of the Korean War Following its foundation Daehan Flour Mills gradually worked its way up the ladder of local business becoming the nation s largest mill and by the late 1950s the largest in Asia as the country started to undergo massive development Not long after the company was listed on the stock market in the 1970s Daehan Flour Mills started to expand establishing and acquiring subsidiaries The flour company began making premixes and was the first to export to Japan in 1986 The following year the firm opened state of the art facilities and improved its production capability Currently Daehan Flour Mills manufactures more than 80 types of wheat flour products and frying powder including bread and cake flours and 60 types of premixed products including tempura donut muffin and pancake batter mixes It also manufactures pasta noodles including spaghetti and macaroni as well as Korean traditional wheat noodles Visit any corner store and head for the bakery or pasta section and Daehan products are everywhere usually in yellow packages under its Gompyo brand illustrated with a green bear logo With consistent demand for wheat flour products amid a drop in overall rice consumption last year Daehan Flour Mills posted record sales of 369 3 billion won in an increase from 348 7 billion won the previous year The company also reported 45 5 billion won in operating profit Nevertheless according to industry sources the firm is struggling with the fluctuating exchange rate as most of its grain is imported from overseas In fact global wheat prices have surged recently making it difficult for all three major milling companies to make money On the Chicago Mercantile Exchange wheat price escalated sharply 37 percent last month to $5 87 per 60 pounds The price surge was reportedly due to unpredictable weather and floods taking place in Russia Kazakhstan Eastern Europe and Canada which are major producers of wheat Local milling companies however have been under pressure to hold steady or even lower flour prices as economic conditions for many families in Korea lag behind despite an apparent recovery touted by the central bank and other government ministries Raising flour prices would mean that prices for daily necessities such as snacks and other packaged goods that use flour as a main ingredient would go up as well Industry experts say that the flour manufacturing business is stable but limited as there is no chance of a surge in demand Until the 1960s the firm was one of Korea s top 10 conglomerates but with other businesses and industries growing more profitable the company started to fall behind Today it hopes through mergers and acquisitions to regain its presence among Korea s conglomerates Daehan s latest initiatives call for more subsidiaries and a broader business portfolio to gain competitiveness in Korea s retail and general food industries Daehan Flour Mills three subsidiaries are Daehan Silo Daehan Livestock Feed an assorted feed manufacturing company and Korea Milk Product an animal feed manufacturing firm All three are not yet listed on the stock exchange Daehan Silo which loads and reserves grain was established in 1971 and built the nation s first modern grain loading facility near Incheon port in Gyeonggi Daehan Flour Mills has been investing in technology at this subsidiary in particular since Daehan Silo reserves all the imported grain the rest of the company must use before it is released Daehan Livestock and Feed which produces animal feeds for poultry and pigs exports mainly to Southeast Asian countries including Malaysia and Taiwan Its factory has a capacity to produce 540 000 tons of animal feed per year Korea Milk Products also produces milk replacements for calves and pigs According to industry sources the company recently underwent negotiations with a local firm that makes gochujang or traditional chili paste and doenjang soybean paste Though the deal reportedly worth about 20 billion won was not finalized due to differences on conditions and price industry experts noted that the attempt to create synergy and diversify its sales base was meaningful Its competitors CJ CheilJedang and Daesang are expanding their businesses from various food powders to health foods said an industry analyst It is also inevitable for Daehan Flour Mills to enter new arenas for business survival Industry analysts reported that unlike its rivals CJ CheilJedang or DongA One which are known to be more consumer friendly and transparent Daehan Flour Mills is considered relatively opaque and too inflexible for a modern business environment They blame this on Daehan s lack of a public relations department as a result of its corporate oriented approach to management and sales The closed corporate environment was heavily shaped by Lee Jong gak chairman of Daehan and son of its founder He is known to dislike public or external activities tending to close off the company s management from public view Its executives in charge of management are also relatively older than those of its competitors In addition to Chairman Lee who is 78 years old Lee Jung hee one of the three chief executives is 64 years old and Kim Duk myung who heads the subsidiary Korea Milk Product is 69 Some analysts are hopeful however at the milling company s recent promotion of a younger generation of executives as it looks for new growth engines Last year the company held a board of directors meeting and inaugurated Lee Geon young 44 the chairman s eldest son as Daehan Flour Mills chief executive and vice chairman Previously he held the position of the firm s vice president After graduating from Yonsei University the vice chairman studied business administration at Columbia University By Lee Eun joo angie joongang co kr Copyrights ⓒ JoongangIlbo Joins com All rights reserved The faces inside KOREA S CONGLOMERATES 81 Analysts have called the company too opaque and inflexible but the recent promotion of younger executives may alleviate that concern One of the most long lasting and stable industries despite any cyclical economic downturn is flour The demand for this powder made from grain is always there as it is the main ingredient of food for many cultures worldwide including Korea Lee Han won the founder of Daehan Flour Mills one of Korea s top three milling companies along with CJ CheilJedang and DongA One was aware of that potential In 1953 the businessman established Daehan with a starting capital of 10 million won $8 500 aiming to help improve the lot of the Korean people who were starving in the aftermath of the Korean War Following its foundation Daehan Flour Mills gradually worked its way up the ladder of local business becoming the nation s largest mill and by the late 1950s the largest in Asia as the country started to undergo massive development Not long after the company was listed on the stock market in the 1970s Daehan Flour Mills started to expand establishing and acquiring subsidiaries The flour company began making premixes and was the first to export to Japan in 1986 The following year the firm opened state of the art facilities and improved its production capability Currently Daehan Flour Mills manufactures more than 80 types of wheat flour products and frying powder including bread and cake flours and 60 types of premixed products including tempura donut muffin and pancake batter mixes It also manufactures pasta noodles including spaghetti and macaroni as well as Korean traditional wheat noodles Visit any corner store and head for the bakery or pasta section and Daehan products are everywhere usually in yellow packages under its Gompyo brand illustrated with a green bear logo With consistent demand for wheat flour products amid a drop in overall rice consumption last year Daehan Flour Mills posted record sales of 369 3 billion won in an increase from 348 7 billion won the previous year The company also reported 45 5 billion won in operating profit Nevertheless according to industry sources the firm is struggling with the fluctuating exchange rate as most of its grain is imported from overseas In fact global wheat prices have surged recently making it difficult for all three major milling companies to make money On the Chicago Mercantile Exchange wheat price escalated sharply 37 percent last month to $5 87 per 60 pounds The price surge was reportedly due to unpredictable weather and floods taking place in Russia Kazakhstan Eastern Europe and Canada which are major producers of wheat Local milling companies however have been under pressure to hold steady or even lower flour prices as economic conditions for many families in Korea lag behind despite an apparent recovery touted by the central bank and other government ministries Raising flour prices would mean that prices for daily necessities such as snacks and other packaged goods that use flour as a main ingredient would go up as well Industry experts say that the flour manufacturing business is stable but limited as there is no chance of a surge in demand Until the 1960s the firm was one of Korea s top 10 conglomerates but with other businesses and industries growing more profitable the company started to fall behind Today it hopes through mergers and acquisitions to regain its presence among Korea s conglomerates Daehan s latest initiatives call for more subsidiaries and a broader business portfolio to gain competitiveness in Korea s retail and general food industries Daehan Flour Mills three subsidiaries are Daehan Silo Daehan Livestock Feed an assorted feed manufacturing company and Korea Milk Product an animal feed manufacturing firm All three are not yet listed on the stock exchange Daehan Silo which loads and reserves grain was established in 1971 and built the nation s first modern grain loading facility near Incheon port in Gyeonggi Daehan Flour Mills has been investing in technology at this subsidiary in particular since Daehan Silo reserves all the imported grain the rest of the company must use before it is released Daehan Livestock and Feed which produces animal feeds for poultry and pigs exports mainly to Southeast Asian countries including Malaysia and Taiwan Its factory has a capacity to produce 540 000 tons of animal feed per year Korea Milk Products also produces milk replacements for calves and pigs According to industry sources the company recently underwent negotiations with a local firm that makes gochujang or traditional chili paste and doenjang soybean paste Though the deal reportedly worth about 20 billion won was not finalized due to differences on conditions and price industry experts noted that the attempt to create synergy and diversify its sales base was meaningful Its competitors CJ CheilJedang and Daesang are expanding their businesses from various food powders to health foods said an industry analyst It is also inevitable for Daehan Flour Mills to enter new arenas for business survival Industry analysts reported that unlike its rivals CJ CheilJedang or DongA One which are known to be more consumer friendly and transparent Daehan Flour Mills is considered relatively opaque and too inflexible for a modern business environment They blame this on Daehan s lack of a public relations department as a result of its corporate oriented approach to management and sales The closed corporate environment was heavily shaped by Lee Jong gak chairman of Daehan and son of its founder He is known to dislike public or external activities tending to close off the company s management from public view Its executives in charge of management are also relatively older than those of its competitors In addition to Chairman Lee who is 78 years old Lee Jung hee one of the three chief executives is 64 years old and Kim Duk myung who heads the subsidiary Korea Milk Product is 69 Some analysts are hopeful however at the milling company s recent promotion of a younger generation of executives as it looks for new growth engines Last year the company held a board of directors meeting and inaugurated Lee Geon young 44 the chairman s eldest son as Daehan Flour Mills chief executive and vice chairman Previously he held the position of the firm s vice president After graduating from Yonsei University the vice chairman studied business administration at Columbia University By Lee Eun joo angie joongang co kr Copyrights ⓒ JoongangIlbo Joins com All rights reserved

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