These days, the hot topic in the school meal market is the movements of "the broader LG family." Until last year, the focus was on ways to enter the newly opened military meal market, but suddenly the topic has changed. OURHOME, which was classified as part of the broader LG family after being spun off from LG Distribution (now GS Retail), is expected to cause changes in the meal market as it is integrated into Hanwha Group.
According to related industry sources on the 3rd, there is a possibility that meal orders worth 300 billion won, which OURHOME was responsible for, will come onto the market. There are about 60 business sites within the broader LG Group's meal business that face re-contracting by the end of this year. In the past, the broader LG family, including LG, GS, and LS, has generally resolved employee cafeteria meals through OURHOME.
This re-contracting is somewhat different from usual. This is because it is likely to serve as a kind of testing ground to prove the capabilities of OURHOME. If OURHOME succeeds once again in bidding, it could dispel evaluations that suggest they were able to secure contracts easily due to being part of the broader LG Group. This means that there will be perceptions that employee satisfaction is high because OURHOME managed the meals or that the meal costs are reasonable. Conversely, if it fails to win bids at most business sites, evaluations could change dramatically.
The meal business is considered one of the industries where the relationships between group companies are significant. While the entire meal orders from group companies have not been monopolized by one service provider to avoid controversies such as preferential treatment, it has reportedly been an implicitly closed market. This can be seen in the example of Foodist, which was owned by Hanwha Group and later integrated into Sajo Group through a private equity fund.
An investment bank (IB) industry source noted, "It was suggested that the selling price presented when Foodist was sold should be about half of that to be viable, but nonetheless, it was possible to set the selling price so high because of the expectations surrounding securing orders from Hanwha Group."
Attention is also being drawn to which meal service provider will secure contracts if bids come out from business sites within the broader LG Group. Currently, five companies dominate most of the meal industry market. Excluding OURHOME, they are Samsung Wellstory from Samsung Group, CJ Freshway from CJ Group, Shinsegae Food from Shinsegae Group, and Hyundai Green Food from Hyundai Department Store Group. There are also several small and medium-sized meal providers, exemplified by Bon Food Services from the main group, Foodist from Sajo Group, and Pulmuone's Pulmuone Food and Culture.
Meal providers are paying attention to LF Food's moves because it is seen as capable of delivering meals within the broader LG Group. An industry source said, "Although the profit margins are not high, meal service is a typical business where sales can be significantly increased in a short period," adding, "If there is a need for companies within the broader LG Group to expand their size, they may look for candidates 'from within the family.'"
In fact, LF has recently been emphasizing its food business. LF established the position of chairman for LF Food this year, with Oh Kyu-sik as the chairman. Oh, who has been described as a 'legend of salarymen' in the fashion industry, has used his remarkable financial sense as a weapon since becoming the representative of LF in 2012, contributing to a blueprint for diversifying into food, distribution, cosmetics, and real estate. He was promoted to vice chairman in 2018 and has one of the highest salaries after Koo Bon-geol, the chairman of LF.
Results are also showing. The proportion of food business revenue within the LF Group is increasing. Last year, 16% of total revenue came from the food business. This proportion has steadily grown for three consecutive years. There are also evaluations that they have sufficient capabilities to enter the meal business, as they are already engaged in home meal replacement (HMR) and restaurant businesses. Recently, they expanded by acquiring the sauce company MG Food Solutions. Additionally, Gourmet F&B, another food sector company within the LF Group, is involved in the import and distribution of high-quality food ingredients, which could lead to synergies.
An industry source noted, "Although LF Food's official position is that it is not considering entering the meal business, it is in the process of broadening its scope as a lifecycle company." They added, "Since it can quickly raise the proportion of food against total sales, LF Food is expected to be a candidate to replace OURHOME."
In response, OURHOME representatives stated, "In the group meal business, new bids cannot be avoided depending on the contract period, and in this process, the operating entity may change, and it may succeed in re-bidding."