Korean food is making its way into overseas markets riding the wave of the Korean Wave, but there is a company that can only watch its progress. That is Dongsuh, which manufactures and sells the representative instant coffee brand "Maxim."
Dongsuh Food is a joint venture created through equal investment from the publicly traded Dongsuh and Mondelēz Singapore, a U.S. confectionery company. Due to these structural reasons, Dongsuh Food has not been able to venture into overseas exports. This is because their joint venture agreement prohibits Dongsuh Food from competing with Mondelēz's coffee products. However, recent developments suggest that Maxim may soon have the opportunity to expand into international markets.
According to the distribution industry on the 25th, the number of Dongsuh shareholders closely monitoring whether Maxim can start exporting is increasing. Maxim's exports are a significant issue for Dongsuh shareholders. If Maxim, which currently holds the number one market share in the domestic coffee mix market, enters the overseas market, it is believed that the corporate value of Dongsuh Food will increase, subsequently driving up Dongsuh's stock price. The unlisted Dongsuh Food accounts for about 70% of the revenue of the listed Dongsuh.
The growing expectations for Maxim's exports are tied to Mondelēz. Mondelēz, a U.S. confectionery company, sold its remaining equity in coffee company JDE Peet's to German JAB Holding Company last November. As a result, Mondelēz has no coffee business other than the 50% equity it invested in Dongsuh Food.
Dongsuh shareholders recognize this situation as a favorable turn of events. They interpret that even if Maxim is exported, there will no longer be any conflict of interest with Mondelēz.
Active shareholders are directly questioning Mondelēz about its position. In response, Mondelēz gives mechanical answers. When asked about their stance on exporting Dongsuh Food's coffee mix "Maxim," they simply replied, "Mondelēz plans to focus on snacks and confectionery." Dongsuh shareholders interpret this response as an indication that there will be no objections to expanding Dongsuh Food's coffee business.
The slowing growth of Dongsuh Group also explains why shareholders are eagerly waiting for news of Maxim's exports. Dongsuh Food manufactures and sells coffee, and various subsidiaries of Dongsuh handle product packaging and coffee raw material import businesses. It can be seen that all businesses related to the manufacturing and sale of instant coffee are distributed among affiliates.
However, the growth of the coffee mix market is not as robust as before. Since the boom of coffee specialty stores after the 2000s, the demand for powdered coffee in offices has declined. The growing capsule coffee market presents a significant challenge to powdered coffee. According to market research firm Euromonitor, the domestic coffee mix market size is estimated at 955.9 billion won as of 2023, having fallen below the 1 trillion won mark. This represents a 9.9% decrease from 1.061 trillion won in 2022.
Dongsuh Food has also begun to target the capsule coffee market, but it is facing a tough challenge in competing against Nespresso, which has been number one in the capsule coffee market for 18 years since its entry into Korea in 2007.
Dongsuh Food is currently drawing a line regarding Maxim's exports. A Dongsuh Food official stated, "The sale of Mondelēz's coffee business has nothing to do with Dongsuh Food. I do not understand why export rumors keep circulating," adding, "There has been no change in Dongsuh Food's equity structure, nor is there any export plan being prepared."
An analyst at a securities firm analyzing Dongsuh and Dongsuh Food said, "The export rumors for Maxim will likely dissipate quickly if Dongsuh Food achieves remarkable growth in the capsule coffee market, which they are currently focusing on. Until then, it seems that Maxim's exports will remain the most visible favorable development, hence the frequent discussions around it."