A Cash Cow for CJ Foodville
South Korea’s food and entertainment conglomerate CJ Group has finally decided to sell off its coffee chain operator, A Twosome Place.
CJ Foodville, the restaurant arm of the group that owns a 65 percent stake in the coffee chain, announced on April 30 that it will sell a 45 percent stake to Anchor Equity Partners, which is currently the second largest shareholder with a 40 percent stake, for 202.5 billion won. Anchor Equity Partners is a private equity fund based in Hong Kong.
A Twosome Place has been the cash cow for CJ Foodville. It logged 274.30 billion won (US$235.05 million) in sales and 29.20 billion won (US$25.02 million) in operating profit last year. When the sales of franchise stores are included, the chain’s total sales are expected to reach 900 billion won (US$771.21 million).
A Twosome Place is one of the top three coffee brands in South Korea along with Starbucks and Ediya. It has competiveness not only in coffee but also in cake and bakery based on CJ Group’s expertise in the flour milling and sugar manufacturing sector.
Market experts say that CJ Group has decided to sell the lucrative coffee chain because CJ Foodville’s loss has snowballed.
CJ Foodville spun off the business division of A Twosome Place in February last year. A rumor has since circulated that the spin-off of the profitable business division is a step toward putting it up for sale. CJ Group flatly denied the rumor at the time but it turned out to be true.
The problem is CJ Foodville. The firm recorded sales of 1.37 trillion won (US$1.18 billion) and an operating loss of 43.40 billion won (US$37.19 million) last year. Its sales showed a drop from 1.43 trillion won (US$1.22 billion) in 2017, while its operating loss had grown from 38.50 billion won (US$32.99 million). Although A Twosome Place recorded more than 30 billion won (US$25.71 million) in profit, it was not enough to offset the losses of other business divisions. CJ Foodville’s loss far surpassed 70 billion won (US$59.95 million) last year when A Twosome Place is excluded.
Other business divisions of CJ Foodville are struggling with poor sales. Market watchers believe that it will be difficult for CJ Group to sell off CJ Foodville after the sale its only lucrative business, A Twosome Place.
CJ Foodville is expected to scale back its operations as much as possible and pursue “frugal management.” An official from CJ Foodville said, “We will improve financial soundness and competitiveness in bakery and restaurant businesses with the funds from the sale of A Twosome Place.”