CJ Corporation

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CJ Corporation

500 Namdaemunro 5-ka, Chung-ku
Seoul
South Korea
Telephone: +82 2 726 8114
Fax: +82 2 726 8089
Web site: http://www.cheiljedang.co.kr

Public Company
Incorporated: 1953 as Cheil Jedang
Employees: 3,506
Sales: KRW 2.27 trillion ($1.9 billion) (2002)
Stock Exchanges: KOSDAQ
NAIC: 311312 Cane Sugar Refining; 311119 Other Animal Food Manufacturing; 311211 Flour Milling; 311225 Fats and Oils Refining and Blending; 311421 Fruit and Vegetable Canning; 311423 Dried and Dehydrated Food Manufacturing; 312111 Soft Drink Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 325414 Biological Product (Except Diagnostic) Manufacturing; 512110 Motion Picture and Video Production; 512191 Teleproduction and Other Postproduction Services

South Korea's largest food manufacturer, CJ Corporation, is also one of the world's leading producers of such food additives as monosodium glutamate, biotin, and vitamins, as well as amino acids, colorings and flavorings, and other Korean food ingredients, such as Dashida and Mipoong. The company's food production operations embrace the full spectrum of foods, including refined sugar, seasonings, cooking oil, canned and preserved foods, ready-cooked meals, instant noodles, fish products, confectionery, coffee creamer, soft drinks and other beverages, and fresh and processed meats, among others. CJ Corporation, formerly the Cheil Jedang division of the Samsung conglomerate, is also one of South Korea's top pharmaceutical groups, focusing on bulk actives for antibiotics—the company controls some 20 percent of the world's supply of 7-amino cephalosporanic acid, or 7-ACA—as well as the antibiotics themselves. CJ Corporation has diversified at the dawn of the 21st century, with a particular interest in the media and communications markets. The company holds an 11 percent stake in the Steven Spielberg production vehicle Dreamworks SKG, and operates its own film production company, a record company, its own cable-based home shopping channel as well as m-net, the country's only cable music channel, and a national multiplex theater chain. The company is also present in the high-speed Internet market through its Dreamline and Dream Soft subsidiaries, and operates online shopping and logistics subsidiaries as well. CJ Corporation is led by the brother and sister team of Jay and Miky Lee, whose grandfather, Lee Byung Chull, founded Samsung in the 1950s. The company is listed on the Korea Stock Exchange and in 2002 posted sales of W 2.27 trillion ($1.9 billion).

Chaebol Origins in the 1950s

Son of a wealthy landowner, Lee Byung Chull took part of his inheritance and started a rice mill in the 1930s. That business failed, however, and instead, in 1938, Lee founded a trucking and real estate company, called Samsung, or "Three Stars." The Japanese invasion of Manchuria led to that company's bankruptcy as well. Yet this time Lee rebuilt his company, and by 1945 Samsung had begun its emergence as one of Korea's largest corporations. Samsung moved into international trading in the years following World War II. This placed the company in a strong position during the Korean civil war, and by the end of the war, Lee was one of Korea's richest men. Lee now decided to transform Samsung into the country's largest chaebol—a highly diversified conglomerate unique to Korea.

Although Samsung later re-oriented itself as an electronics and high-tech group, the company's growth during the 1950s and 1960s was led in large part by its food production. In 1953, Samsung set up a new subsidiary, Cheil Jedang (CJ, for "First Sugar"), and began construction of a sugar refinery in Pusan. That plant was opened in November 1953 and marked the start of Samsung's adventure as one of South Korea's leading manufacturing groups.

By the early 1960s, CJ had begun exporting its refined sugar. The company also had launched its own diversification, adding flour milling in 1958 and, in 1963, the production of the flavor enhancer monosodium glutamate. The company continued to focus on ingredients during the 1960s, beginning production of Mipoong, a seasoning, in 1964. CJ's rising production, and its growing list of products, led it to open a new manufacturing facility in Seoul in 1968. In 1970, the company added a second sugar refinery, in Inchon.

CJ, like the rest of the rapidly expanding Samsung empire, benefited from the government's protectionist trade policies, which placed high tariffs on imported goods. Lee's close relationship with the government—Lee, under threat of a corruption investigation, had agreed to use Samsung to implement the government's industrialization policies—also enabled CJ to garner leading positions in its product categories.

After establishing its position in basic foods during the 1960s, CJ began a drive to become a general food processor in the 1970s. The company entered the animal feed sector in 1973, opening a new facility in Pusan that year. The company then extended into the production of the seasoning Dashida in 1975, before adding nucleic acid seasonings in 1977. Other new food areas followed into the 1980s, including the start of cooking oils in 1979, meat processing in 1980, and flour-based products in 1985.

As part of its effort to impose itself on the food ingredients and seasonings sectors, as well as on the market for processed foods, CJ set up its own research and development laboratory in 1978. Yet that center quickly took on a new role for the company: an entry into the pharmaceuticals market. In 1984, CJ transferred its R&D department to new, larger quarters and applied to the Korean government for permission to begin pharmaceutical preparations.

CJ's earliest pharmaceutical products remained rooted in the food sector, such as its launch of aspartame and phenolanalin production in 1985. The company quickly targeted the broader pharmaceutical market, however, developing expertise particularly in the antibiotics and vaccines sectors. In 1986 the company began developed its own alpha interferon; that same year, the company began production of Heppacine-B, CJ's own hepatitis B vaccine.

Independence in the 1990s

CJ's expansion continued into the next decade with the construction of a new pharmaceuticals plant in Daeso in 1990. The company then launched production of 7-amino acid cephalosporanic (7-ACA), a key bulk active in antibiotic preparations. CJ soon became one of the world's largest suppliers of 7-ACA, controlling more than 20 percent of the world supply by the beginning of the next decade.

During the 1980s, Lee Byung Chull had placed elder son Lee Maeng Hee as head of CJ—instead choosing a younger son, Lee Kun Hee, to head the Samsung empire itself. By then, CJ had become somewhat of a backwater among Samsung's major technology and industrial holdings. Worse, already Korea's largest food manufacturing business, CJ's future growth appeared modest at best.

In 1993, Lee Maeng Hee turned over direction of CJ to his children, Miky Lee and her younger brother Jay Lee. The pair—Jay Lee took over the company's day-to-day operations as CEO, while Miky Lee emerged as the company's idea person—quickly moved to emancipate CJ from the Samsung empire, severing its ownership ties with the company their grandfather had founded. Over the next three years, the company unraveled its holdings in Samsung and affiliated companies, and officially launched itself as Chiel Jedang Group in 1996.

CJ's new management sought not just to revitalize the company, but, recognizing the limited growth potential, transform it into a diversified powerhouse in its own right. In 1994, the company extended its food operations into a new area, the restaurant sector, launching the Foodvill restaurant chain. CJ also entered the catering market that year.

Yet Miky Lee had a new direction for the company in mind. Reasoning that CJ had succeeded in nourishing South Korea's bellies, Lee sought to nourish the country's minds as well. In 1995, CJ became one of the early investors in a new film production company then in the process of formation—Dreamworks SKG. Formed by Hollywood heavyweights Steven Spielberg, Jeffrey Katzenberg, and David Geffen, Dreamworks originally had been approached by Samsung, which proposed to put up $900 million to back the new company. When Samsung decided against the investment, Miky Lee took a chance, and CJ offered $300 million for an 11 percent stake in Dreamworks, as well as a seat on the company's board of directors.

The Dreamworks investment now became the cornerstone for CJ's entry into the media and entertainment market. In 1996, the company joined the CJ Golden Village joint venture ship, which included Australia's Village Roadshow as a partner, and began plans to roll out a national network of modern multiplex theaters. The following year, CJ bought up money-losing Music Network, which owned m.net, South Korea's only cable TV music station. That year, as well, the group acquired Dreamline, which had begun building a fiber optic network and providing high-speed Internet access services. The company also established its own film production house, CJ Entertainment, that year.

Company Perspectives:

CJ Corp. is a company that dares to dream and to pursue its dreams. Also, the company would like to see your dreams come true, to help you realize your hope for a better life. All of the company's business lines are created to improve the way we live—foods divisions come up with better tasting processed foods and more wholesome ingredients catered to your modern life; pharmaceutical division strives for overall improvement in the health of the global community; animal feeds division is constantly in search for more nutritional formula for cattle; entertainment division seeks to please all our senses by offering entertaining movies and animations. These are just some of the ways CJ Corp. has structured its business lines to help you reach for a better life.

Food for the Body and Mind in the 20th Century

In 1998, CJ began developing a fourth branch of the group, logistics and online sales, setting up its own logistics group, CJ GLS. The following year, the company formed a food supply business as well, CJ Food System. On the entertainment side, CJ launched a new station, the Food Channel, and then entered the home shopping business with the acquisition of 39 Shopping, subsequently renamed as CJ 39 Shopping.

CJ also had continued investing in its foods and pharmaceuticals businesses, launching the Tous Les Jours bakery in 1997, and building a frozen bread dough factory that year as well. CJ also expanded its food operation internationally, opening production subsidiaries in Indonesia, the Philippines, Myanmar, and China in the late 1990s.

At the beginning of the 2000s, CJ launched a restructuring in order to focus itself on its four key business divisions: Food; Pharmaceuticals; Entertainment; and Logistics. As part of the restructuring process, which lasted more than three years, the company shut down or sold a number of its businesses, renaming some, such as Music Network, which became CJ Media in 2002, while spinning off others, such as CJ Food System and CJ Entertainment, both of which went public with listings on the KOSDAQ board of the Korea stock exchange. The newly reborn company showed no signs of stopping in its drive to become a major conglomerate in its own right. In 2003, the company opened a new feed mill in Chengdu, in China. CJ also launched a new delivery service, bridging its foods and logistics businesses, in 2003. Dubbed Hetbahn, the new service brought in partner DHL to promise delivery of Korean foods to the Korean expatriate community worldwide. Climbing out from under the shadow of Samsung, CJ had successfully negotiated its transition from its reliance on foods to become a diversified, yet strongly focused group. Yet, far from taking a break from growth, CJ continued to seek out new opportunities to grow, such as its agreement to buy majority control of struggling rival Shindongbang in January 2004.

Principal Subsidiaries

MorningWell; CJ Food System; CJ Foodville; Samyang Oil & Feed; CJ Media; CJ Entertainment; CJ CGV; CJ CableNet; CJ Home Shopping; CJ Telenix; CJ GLS; CJ Investment & Securities; CJ Investment Trust Management; CJ Development; CJ Systems; CJ Indonesia; PT. Cheil Jedang Superfeed (Indonesia); PT. Cheil Jedang Indonesia; PT. Super Unggas Jaya (Indonesia); CJ Philippines Inc.; Myanmar Cheil Co., Ltd.; CJ Nutracon Inc. (U.S.A.); CJ Qingdao Foods Co., Ltd. (China); CJ Ord River Sugar Pty Ltd. (Australia); CJ Vina Agri Co., Ltd. (Vietnam); CJ Cambodia Co., Ltd.

Principal Competitors

Nong Shim Company Ltd.; Daesang Corporation; Dong Suh Foods Corporation; Samyang Foods Company Ltd.; TS Corporation; Tong Yang Confectionery Corporation; Pulmuone Company Ltd.

Key Dates:

1953:: Samsung founds Cheil Jedang (First Sugar)(CJ), a sugar refiner, in its first move to enter the industrial sector.
1958:: CJ begins milling flour.
1963:: The company launches production of monosodium glutamate.
1968:: The company builds a new plant in Kimpo, Seoul.
1970:: Construction of a second sugar refinery at Inchon is completed.
1973:: CJ begins production of animal feed.
1979:: CJ begins production of food oils.
1985:: CJ begins production of aspartame and phenolanalin.
1990:: CJ builds a new pharmaceuticals plant in Daeso.
1993:: Jay and Miky Lee take over the company, now separate from Samsung.
1995:: CJ pays $300 million for an 11 percent stake in Dreamworks SKG.
1997:: The company acquires a cable TV music channel, and a high-speed Internet company.
1999:: CJ Food System, a food supplier, is launched.
2000:: The company acquires a home shopping channel; the Food Channel cable channel is launched.
2001:: CJ begins restructuring to focus on its core food, pharmaceuticals, entertainment, and logistics businesses.