Samyang Foods achieved an operating profit margin of 20% last year. According to the results announced on the 5th, consolidated sales amounted to 1.73 trillion won, with operating profit recorded at 344.2 billion won, marking increases of 45% and 133%, respectively, compared to the previous year.
In particular, the operating profit margin was recorded at 19.9%. It surged from 12% in 2023. An operating profit margin of 20% is rarely seen in the food industry. Samyang Foods was the only company to achieve this last year among major food companies.
The domestic food industry has been growing based on internal consumption for a long time. Competition in the small market is fierce, making it difficult to maintain high profit margins. For this reason, the food industry often regards a 10% operating profit margin as a challenging target.
The average operating profit margin of major domestic food corporations, known as the "3 trillion club," ranges from 3% to 7%. Competitor Nongshim in the ramen industry has an average operating profit margin of 5% to 6%.
① Targeting advanced countries' export markets with high unit prices via social networks
Samyang Foods focused on aggressively targeting advanced markets such as the Americas and Europe last year. In the first half of last year, the sales composition showed that the Americas (29%) and Europe (19%) accounted for nearly half of the total. These markets have a high consumption level and strong purchasing power. However, entry into these markets is challenging. Notably, consumer preferences for Samyang Foods' flagship product, "Buldak Bokkeum Myun," are clearly divided.
Since the beginning of exports in 2016, Samyang Foods has focused on localization. It increased brand awareness via social network service (SNS) marketing utilizing popular influencers. At the same time, it prioritized partnerships with major distribution networks like Walmart, Costco, and Target.
In particular, the "Buldak Bokkeum Myun recall incident" orchestrated by the Danish Veterinary and Food Administration (DVFA) last year resulted in global publicity. Although Danish food authorities requested a recall citing excessive spiciness, the news spread worldwide, increasing brand awareness instead.
The proportion of exports in Samyang Foods' sales increased from 68% in 2023 to 77% in 2024, marking a 9 percentage point increase. It is now approaching global giant food companies like Nestlé (95%) and Kraft Heinz (85%).
In overseas markets, Buldak Bokkeum Myun is sold at a significantly higher price than in Korea. The price for one bag of Buldak Bokkeum Myun at Walmart in the United States is $1.50 (about 2,300 won), while in France, it is 1.70 euros (about 2,800 won). The domestic selling price level (ASP) based on Coupang is less than half of these figures, at about 1,000 to 1,100 won. Even considering logistics expenses and marketing costs, there is more profit overseas.
A Samyang Foods official noted, "Overseas demand surged to the point where it has become difficult to align quantity," adding that holding localized events specific to each country and strengthening the brand through campaigns proved effective.
② Maximizing the effect of weak won through production and export strategy
At the end of last year, the exchange rate of the won against the U.S. dollar neared 1,490 won, as the value of the won decreased. Many food corporations source raw materials from overseas. Corporations producing goods domestically for local consumers face increased cost burdens when the exchange rate rises.
Samyang Foods also imports a significant portion of its ramen ingredients or purchases processed products from other companies. While it manufactures domestically, it exports around 80% of its products, highlighting a key distinction.
Samyang Foods' Buldak Bokkeum Myun is produced at its factory in Miryang, Gyeongsangnam-do. Employee wages and various expenses are paid in won, while the export revenue is received in dollars. By producing goods in won and receiving payment in appreciated dollars, the company can anticipate profit.
A source in the food industry mentioned, "Raw materials are usually purchased every quarter or semi-annually, so as long as exchange rates do not continue to rise, we only have to bear temporary expenses," adding that from then on, revenues generated overseas are consistently affected by the exchange rate each time payments are made.
③ Reducing logistics and production burdens by establishing a new Miryang factory
In 2022, Samyang Foods opened a plant in Miryang as an export advance base. With the rising global popularity of Buldak Bokkeum Myun, it became challenging to manage export quantities solely through the existing factories in Iksan and Wonju.
Samyang Foods selected Miryang to facilitate ramen exports through Busan Port. Miryang is geographically close to Busan, making it easier to reduce inland transportation costs. According to Samyang Foods, inland transportation costs for exports decreased by 63% after opening the Miryang factory.
Samyang Foods maintains an automation rate of over 90% in the Miryang factory's production. This decision aims to reduce labor costs while enhancing efficiency to secure cost competitiveness. The company has invested a total of 164.3 billion won in the construction of the second Miryang factory, which is set to open in June. According to Samyang Foods, the second factory will establish an advanced smart factory system, improving productivity by more than 30% compared to the first factory.
Experts forecast that with ongoing demand for K-ramen centered around the "spicy challenge," the operational startup of the second Miryang factory will significantly enhance production capacity for Samyang Foods, leading to sustained growth in the foreseeable future.
Since achieving an annual sales record of 1 trillion won for the first time in 2022, Samyang Foods is expected to surpass 2 trillion won this year. The forecast indicates reaching 2 trillion won within two years, a much faster achievement compared to Nongshim, which required 12 years, and OTOKI, which took 10 years.
Han Yoo-jeong, a researcher from Hanwha Investment & Securities, stated, "Next year's consolidated sales for Samyang Foods are expected to reach 2.0172 trillion won, with operating profit anticipated at 424.6 billion won," adding that the expansion of the second Miryang factory will accelerate market penetration in major regions, including Central and South America and Europe.