Harim, Korea’s largest poultry processing firm, goes global

Updated : 2014-05-11 15:17

Harim goes global

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Poultry processing firm expands in US, China, Southeast Asia
By Lee Hyo-sik

Harim, Korea’s largest poultry processing firm, has been pursuing a two-track growth strategy .
It has been exporting “samgyetang,” or chicken soup with ginseng, and other processed poultry products to Japan and Southeast Asian nations, while operating a processing plant in the United States.
Harim also plans to build more plants or set up joint ventures with local partners in the United States, China and other populous countries.
To generate a new source of cash flow, the company has offered technical consulting to poultry processing firms in developing nations that could benefit from its knowhow on farm management, processing and product distribution.
In an interview with The Korea Times’ Business Focus, Harim CEO Lee Moon-yong said the company has completed a “vertically-integrated” system encompassing breeding, processing and distribution.
This system has enabled Harim to produce high-quality products more safely and at lower costs than competitors.
“We benchmarked U.S. poultry firms to build the comprehensive breeding-processing-distribution system,” said Lee who began working at Harim in 2001. “It took more than 20 years for us to complete the work. No other poultry processing firm in Korea has what we have.”
The company has spent tens of millions of dollars over the years to make its production facilities more environment-friendly and energy-efficient. In 2012, Harim introduced the European animal-friendly production system to its second plant in Jeongeup, North Jeolla Province, becoming the first Korean firm to do so.
The company also built an efficient nationwide distribution network that enables a faster delivery of its products, most of which are perishable.
“On the back of our advanced production and distribution system, we have been able to ship samgyetang and other products abroad over the years,” the CEO said. Samgyetang is considered one of the most sought-after energy-boosting dishes in Korea in the summer. “In addition, we have been approached by many poultry firms in China, Southeast Asia, the Middle East and Africa that want to learn about our knowhow. Harim’s overseas business will grow at an explosive pace in the coming years.”
Founded in 1986, Harim is the flagship unit of Harim Group, which also has eight other subsidiaries.
The company, headquartered in Iksan, North Jeolla Province, processes nearly 120 million chickens annually, supplied by 600 nearby poultry farms. It earned 789.5 billion won ($766.5 million) in revenue in 2013, up from 747.6 billion won in 2012. Harim employs 1,900 workers and operates two plants in Iksan and Jeongeup, and a plant called Allen Harim Foods in Seaford, Delaware, in the United States.
Pursuing a two-track growth strategy
Harim has been mobilizing more resources for its overseas expansion over the past few years in order to emerge as one of the top global food companies.
It ships locally-produced samgyetang and other processed poultry goods to Japan, Taiwan, Vietnam, Singapore, Hong Kong and Thailand, creating a strong consumer base there on the back of “hallyu,” or the Korean cultural wave.
In addition, the company operates a plant in the United States and plans to build more facilities abroad to lure more non-Korean consumers. Harim now seeks to acquire a pickle factory to turn it into its second chicken processing plant in the country.
“In 2011, we acquired U.S.-based Allen Family Foods, the world’s 18th- largest chicken producer and exporter, and renamed it Allen Harim Foods, in order to be able to produce and sell samgyetang and other products because we cannot sell Korea-made products in the U.S. because of non-tariff barriers,” Lee said.
Exports of samgyetang to the United States were very difficult because of the country’s tough quarantine inspection for sanitation and other requirements. However, early this year Harim and other Korean poultry processors got approval from the U.S. Department of Agriculture to ship samgyetang to the world’s largest economy from May 25.
The CEO said samgyetang could become a mainstream dish in the United States and Canada in the near future if Harim markets it effectively in cooperation with retailers and successfully publicizes its health benefits among the increasingly health-conscious American consumers.
“We will first target ethnic Koreans and other Asians in the U.S. who know the health benefits of the chicken soup with ginseng. We will then expand our customer base to Hispanics and other ethnic groups,” Lee said. “We will use both online and offline media as a marketing tool to let Americans know what samgyetang is. We will also explore the possibility of hallyu marketing to see whether it can help us attract American consumers.”
The CEO said Allen Harim Foods will distribute its products in eastern United States and Canada in cooperation with supermarket chain H-Mart, while Harim will distribute its products in western United States through retailers catering to Asian and Hispanic populations.
Harim plans to expand its Delaware plant in anticipation of the growing demand for samgyetang, he said, adding that the company will introduce other processed poultry products, such as canned chicken breast, ham and sausage, to the U.S. market.
“The U.S. government approval will also help us market samgyetang elsewhere. On top of the six Asian nations, we will make inroads into more countries in the region,” Lee said. “Within 10 years, our overseas sales will exceed domestic sales. Then, we will be much closer to achieving our goal of becoming one of the top global food companies.”
Venturing into emerging markets
Harim plans to make inroads into new markets, such as India, Africa and the Middle East, to further expand its overseas business.
“Besides expanding our presence in the U.S., we will soon launch a joint venture in China with a local partner to set up a chicken processing plant,” the CEO said. “Currently, we cannot export samgyetang to China as it is classified as a pharmaceutical product because of the ginseng. We consider this a non-tariff barrier. When both countries sign a free trade agreement, we expect to be able to offer samgyetang to Chinese consumers.”
In addition, Harim has been talking with poultry firms from the Middle East, Africa and Southeast Asia that seek to benefit from its production knowhow, according to Lee. The firms are from a wide range of countries including India, Indonesia, Brunei and the United Arab Emirates.
“They want to learn from us, not from industry leaders in the U.S. or Europe because our system is more compatible to theirs and easier for them to adopt,” he said. “They have asked us to set up a joint venture with them, but it is highly risky because we do not know much about their markets. We also do not have enough manpower to handle all the proposed joint ventures. So, we will focus on providing technical consulting for the time being.”
The CEO said the company plans to nurture dozens of employees capable of managing its expanding presence abroad. “We have set up an in-house MBA and other training programs for those who want to be involved the firm’s overseas operations. In addition, we will strengthen our logistics network at home and secure reliable vendors in foreign markets because delivering products timely and securely is as important as making products of high-quality.”
Introducing an animal welfare system
Harim has invested hundreds of billions of won to finance research and development activities, and upgrade its production facilities. The company has adopted the air chilling system to keep the meat fresh during the slaughter process, and the one-day delivery system in which butchered poultry is delivered to consumers the same day.
Harim has also paid keen attention to improving the welfare of chickens and ducks to be culled at its processing plants.
“We spent 110 billion won in 2012 to install the European animal-friendly production line at our Jeongeup plant. The line includes the auto-catching system, designed to minimize the stress of chickens and ducks during the transportation and slaughtering,” Lee said. “We also use the gas stunning system to make poultry unconscious with carbon dioxide gas before slaughter. This lessens the level of stress of the chickens and keeps the meat fresh longer.”
Besides samgyetang, Harim produces a wide range of poultry products under various brands, including sliced chicken parts, canned chicken breast, nuggets, and ham and sausage.
“People should consume more chicken, instead of pork or beef, to help solve the worsening global food shortage. Breeding pigs and cattle requires more resources and is much more harmful to the environment,” said the CEO, citing a report by investment firm Morgan Stanley released in May 2008. “Harim will make the utmost efforts to become a responsible and environment-friendly food company.”
According to the report, people are expected to consume more and more chicken rather than beef and pork in the future amid the rising grain prices. Raising chicken uses less grain than raising pigs or cattle, and is less harmful to the environment, the report said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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