Daesang Corporation

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Daesang Corporation

96-48 Daesang Building
Shinsul-dong
Seoul,
South Korea
Telephone: (82 02) 2220 9500
Fax: (82 02) 3661 9983
Web site: http://www.daesang.co.kr

Public Company
Incorporated: 1956 as Dong-A Whasung Industrial Company
Employees: 2,345
Sales: KRW 1.35 trillion ($1.09 billion) (2006)
Stock Exchanges: Seoul
Ticker Symbol: 001680
NAIC: 311411 Frozen Fruit, Juice, and Vegetable Processing; 311412 Frozen Specialty Food Manufacturing; 311421 Fruit and Vegetable Canning; 311423 Dried and Dehydrated Food Manufacturing

Daesang Corporation is one of South Korea's leading producers of consumer foods and food additives, and cornstarch and other wet corn milling products. The group's food products, which generated 75 percent of Daesang's sales of KRW 1.35 trillion ($1.09 billion) in 2006, are sold chiefly under the group's flagship brand, Chungjungwon. This brand includes a broad product range, including hot pepper and soybean paste, soybean and other sauces, frozen foods, seasonings, seafood, coffee and tea, health foods, and others. Daesang's Food Division also includes its production and sale of monosodium glutamate (MSG, known as miwon in Korea), which alone accounts for 16 percent of this division's sales. Daesang is Korea's leading producer of MSG, with a market share of approximately 75 percent. In addition to MSG, Daesang's Fermentation business produces nucleotides, the artificial sweetener aspartame, l-phenylalanine, l-glutamine, and l-arginine. Daesang's Corn Wet Milling Division is a leading producer of cornstarch in Korea, and also produces high fructose corn syrup and oligosaccharide. This division also produces basic ingredients for the pharmaceutical industry, including cyclodextrin, l-glutamine, and acetoglutamide.

While the majority of Deasang's sales come from South Korea, the company has long established an international presence, with production plants in Indonesia and Vietnam, and trade subsidiaries in Europe, Japan, the United States, China, and other Asian markets. Founded in 1956, Daesang completed a vast eight-year restructuring and streamlining program in 2006. The company is listed on the Seoul Stock Exchange.

MSG MAKER IN 1956

Daesang was founded in 1956 as Dong-A Whasung Industrial Co. by Dae-Hong Lim in Dongdaeshin-dong, Seo-Ku, Pusan, in order to produce food additives for the Korean market. Under Dae, the company began to develop its own microorganism fermentation technologies in order to produce the flavor enhancer monosodium glutamate. By 1960, the company had succeeded in producing glutamine acid, and the company launched production of MSG on an industrial scale. Invented in Japan at the turn of the 20th century, MSG had rapidly grown into a highly important additive, not only in Korea, but throughout the Asian world. Dong-A began marketing its MSG under the Miwon brand and quickly became the dominant supplier of MSG to the country. The company's success was such that miwon became a generic term for MSG in South Korea. The company was to maintain its dominance of the Korean MSG market into the next century, with a market share remaining at 75 percent.

The success of the Miwon brand led the company to adopt it as its own name in 1962. Miwon Co. continued to develop its glutamine acid and fermentation technologies, developing a wider range amino acids and nucleic acids, including l-phenylalanine and l-glutamine, also used in food production. At the same time, the company began expanding its operations, notably entering the corn wet milling market with the production of cornstarch in 1964. That operation was expanded in 1973 with the construction of a new wet milling plant in Seoul. By then, the company had added a number of new items to its list of products, including citric acid. The company also branched out into the production of animal feed, launching production in the early 1970s. The company developed its feed and other agricultural interests through a sister company, Sewon Co., also controlled by the Dae family, and by the late 1970s had succeeded in becoming one of the leading feed producers both in Korea and in the Asian region. By the early 1990s, these operations accounted for more than 30 percent of the group's total revenues.

Miwon went public in 1969, listing on the Seoul Stock Exchange, in preparation for its growth into international markets in the 1970s. The company's first overseas venture came in 1973 when it formed an MSG production subsidiary in Indonesia. Miwon continued to expand its international operations through the end of the decade and into the next. The company moved into Japan in 1976, founding a trade subsidiary there. In 1981, Miwon entered Hong Kong, and during the next year the company created a sales and marketing subsidiary in the United States. Miwon also entered a joint venture partnership with major European foods brand Knorr, forming Knorr Korea Company in 1979. That operation launched production at a new plant built in Giheung in 1980.

Like many of Korea's largest companies, Miwon responded to South Korea's industrialization effort in the 1970s with its own diversification drive. This strategy led the group into a great many fields of operations, ranging from heavy industry to trade to hotel operation to information technology to petrochemicals development. By the late 1990s, Miwon was counted among South Korea's midsized chaebol, or conglomerates. The company had also built up an impressive real estate portfolio.

Nonetheless, foods and food additives remained at the core of the company's operations. In 1980, Miwon became one of only three producers of lysine in the world. The company expanded its additives business with the construction of a new nucleotides factory in Gunsan in 1982. By the end of the decade, Miwon had also entered the coffee sector, acquiring MJC Co. and launching its own Rosebud-branded coffee. Miwon supported its entry into the fast-growing Korean coffee market with the opening of its own chain of coffee shops. Meanwhile, the company continued to expand its MSG production, creating a second manufacturing subsidiary in Indonesia in 1989. This plant was later merged with the company's initial Indonesian subsidiary in 2002.

During the 1980s and into the 1990s, Miwon stepped up its efforts in expanding its fermentation technology, which resulted in the development of a mass production technique for oligosaccharide and related substances. Miwon also invested in manufacturing the artificial sweetener aspartame, launching production in 1992, and becoming the only Korean producer of the sweetener. Also in the early 1990s, the company extended its fermentation technologies to enter the production of basic ingredients for the pharmaceuticals industry.

COMPANY PERSPECTIVES

We create customer satisfaction and value. The customer-oriented management is based on the principle of thinking about things from the standpoint of customers, listening to what they want and supplying goods that fully satisfy their demands. The customers buy not only goods but their efficiency. We, therefore, must do everything we can to satisfy our customers materially and mentally.

RESTRUCTURED AND REFOCUSED FOR THE NEW CENTURY

Miwon continued its international expansion in the 1990s, as well. The company entered mainland China, forming an animal feed production joint venture with Beijing Feed Corp. The company also established its own sales office in Peking in 1991. In 1996, the company expanded its presence in the Chinese mainland with the opening of offices in Shanghai and Shenyang. In Vietnam, meanwhile, the company joined in the creation of an MSG manufacturing joint venture, established in 1993. By 1995, the company had extended its food business again, launching a seafood processing subsidiary in Indonesia. Farther abroad, the company added a trade presence in Europe, forming a subsidiary in the Netherlands in 1994.

Miwon launched a re-branding effort for its food products in the mid-1990s. In 1996, the company introduced the Chungjungwon name as its flagship brand. This then became the umbrella brand for much of the group's foods production. The re-branding effort came at the beginning of a long restructuring period for the company. This period began with the merger of Miwon with sister company Sewon. Following the merger, the company adopted a new name, Daesang Corporation.

Daesang's full-scale restructuring began in earnest in 1998. The company adopted a strategy of refocusing itself around its core food products and wet corn milling businesses. As part of that restructuring the company exited the lysine market, selling that operation to BASF in 1998. Daesang then sold its businesses in hotel operations, chickens, and chemicals operations. By 2000, the company had exited the animal feed market as well, spinning those operations off into a new company, Daesang Animal Feed. At the same time, the company moved to integrate a number of its other holdings, such as Daesang Beverage and Daesang Trading, which were merged into the company in 1999.

As part of its restructuring, Daesang shifted much of its production focus from Seoul to Kunsan (or Gunsan). The company built a new seasoning plant there in 1998. Next, in 2002, the company moved its Pusan manufacturing complex to Kunsan. The following year, the company launched construction of a corn milling plant there. The company also transferred its aspartame production unit to Nutrasweet that year as part of a long-term agreement. Meanwhile, the company exited the distribution sector, selling its Daesang Distribution subsidiary to MiniStop Japan in 2004 and ending its production of cosmetics the same year, selling that unit to Japan's Shiseido. By 2005, Daesang had sold its factory in Kayang, transferring its capacity to a new factory in Kunsan.

Daesang's restructuring was largely completed by 2006, following the group's absorption of Daesang Food. Daesang had in the meantime begun building up its biotechnology wing, spending some $177 million in the early 2000s to boost its research effort into new health foods and antibiotics based on its fermentation technologies. As part of the group's interest in the growing health food market, the company entered the promising chlorella market in Japan, buying controlling shares of three Japanese companies. Chlorella, a protein-rich single-cell algae, had become a highly popular food additive and ingredient in a wide range of health food products.

KEY DATES

1956:: Dae-Hong Lim founds Dong-A Whasung Industrial Co. in Pusan, South Korea.
1960:: The company launches production of monosodium glutamate under the Miwon brand.
1962:: Miwon Corp. becomes the name of the company.
1964:: Miwon enters the corn wet milling sector, producing cornstarch and corn syrup.
1969:: Miwon goes public on the Seoul Stock Exchange.
1970:: The company launches animal feed production under its sister company, Sewon Corporation.
1973:: Miwon forms its first international manufacturing subsidiary in Indonesia.
1979:: Miwon creates the Knorr Korea Company, which builds a factory in Giheung.
1982:: A trade subsidiary is formed in Hong Kong.
1989:: A second manufacturing subsidiary is founded in Indonesia; Miwon enters the coffee sector with the Rosebud brand.
1992:: Miwon becomes the only producer of aspartame in South Korea.
1996:: A new flagship foods brand, Chungjungwon, is launched.
1997:: Miwon and Sewon merge to form the Daesang Corporation.
1998:: Daesang launches a restructuring and streamlining effort, refocusing around a core of food products and corn wet milling.
2003:: Aspartame production operations are sold to Nutrasweet.
2005:: The restructuring is completed with the merging of Daesang Foods into the Daesang Corporation.

As it turned to the second half of the decade, the leaner Daesang continued to seek out new growth opportunities. In June 2006, for example, the company joined with joint-venture partner Kirin, the Japanese brewing giant, to invest $80 million in a new food seasonings plant in Lampung, Indonesia. In October of that year, Daesang agreed to pay KRW 105 billion ($100 million) to acquire the Chongga kimchi brand, as well as other food products, such as seaweed, tofu, and soy sauce, from major Korean rival Doosan. The addition of kimchi, a staple food in Korea, further established Daesang as one of South Korea's—and the Asian region's—consumer food giants.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Daesang (Hong Kong) Ltd.; Daesang America Inc.; Daesang Europe B.V. (Netherlands); Daesang Farmsco; Daesang Foods; Daesang Holdings; Daesang Information Technology; Daesang Japan Inc.; Miwon Shwe Tha Zin Co., Ltd. (Myanmar); Miwon Vietnam Co., Ltd.; Pt Miwon Indonesia Tbk; Sang Am & Associates, Inc. (United States); SangAm Communications.

PRINCIPAL COMPETITORS

Asahi Breweries Ltd.; Japan Tobacco Inc.; Kakira Sugar Works (1985) Ltd.; Kaneka Corp.; Meiji Seika Kaisha Ltd.; Morinaga Milk Industry Company Ltd.; Mukwano Industries (Uganda) Ltd.; QP Corporation.