ORION 2017 1
Message from the Chairman
Evolving from a confectionery company into a global total
Our overseas subsidiaries continued to terms of market share in South Korea’s do well, despite such ongoing challenges film industry with such box-office hits food player Dear Valued Customers and as global economic slowdowns and a as “A Violent Prosecutor,” “Tunnel,” and Shareholders: strong South Korean won. Sales in China “Luck-Key”. It is expected to continue Orion is planning to evolve from a confectionery exceeded RMB 7.7 billion, up 4.3% from its excellent performance in 2017 by company into a global total food player in 2017. In 2016, Orion recorded its largest- the previous year and despite a sluggish showing even more popular and critically- ever operating profit and net income: market for confectioneries throughout acclaimed works. Since our establishment in 1956, we have led the KRW 326.2 billion and KRW 240.8 the country. Our sales in Vietnam passed world confectionery industry by offering customers billion, respectively. This happened the KRW 200 billion level, up 24% and In 2017, Orion will retain its commitment high-quality products that are always tasty and representing a new record for us. We also to the operation of an effective and despite the challenge of worldwide popular. Now we are laying the foundations for economic slowdowns, and was mainly did very well in Russia, continuing our efficient management system guided by becoming a global total food company, while attributable to strong performances by record of growth by overcoming difficult strict and serious business principles and also retaining our commitment to honesty and our overseas subsidiaries and box office business conditions due to the continuing standards under a policy of enhancing successes by our Showbox operations. depreciation of the ruble. our key competencies with a particular transparency and the manufacture and sale of high- Our consolidated sales also increased, focus on the essentials. We will also quality products. registering KRW 2,386.3 billion in total. This year, we are planning to develop continue developing new products, and the high-end confectionery market in secure new growth drivers by diversifying Contents In the domestic confectionery business, China, adding such premium products our business interests from only Choco Pie achieved record-high annual as Real Cheese Chips in addition to Real confectioneries into foods. sales backed by the popularity of two Brownies, which we launched in 2016. exciting new products, Choco Pie We will also raise our market share by In addition, we will stress the importance 02 Management Philosophy Banana and Choco Pie Matcha Latte. expanding our sales network into inland of a fair and ethical organizational culture 04 Corporate History Our other major brands, such as Swing areas, and will lay the groundwork for by insisting on open and honest behavior 08 Business Overview Chips, Marine Boy, Choco Biscuit, and new business operations by undertaking on the part of all our employees. We will THE Xylitol grew by more than 20% exhaustive market analyses. also keep on building mutually beneficial over the year, while new products, relationships with our corporate partners. 12 South Korea including Market O Real Brownie Matcha, Our subsidiary in Vietnam will reinforce Last, but far from least, we will keep on 20 China Muddukdduk Potato Chips, and O’gamja its industry leadership by increasing its supplying our many satisfied customers 24 Vietnam Chicken also performed well. In addition, market share, and we will also continue with delicious, high-quality products at 28 Russia we started to build a premium-quality growing our subsidiaries in the ASEAN very reasonable prices. 32 Global Sales Network processed food production factory countries, the Middle East, and India. In Thank you. that will use domestically grown farm addition, our subsidiary in Russia will products in Miryang, Gyeongsangnam- strengthen its revenue base by enhancing 34 Showbox do Province. Operated in collaboration the profitability of Choco Pie and Tam Chul Kon 35 Orion Basketball Team with the National Agricultural Cooperative expanding its client base. Chairman, Orion Group Federation, this will hep to establish foundations for new emerging businesses. Showbox enjoyed another record-high 36 Financial Highlights operating profit in 2016, ranking first in 37 Share Information ORION 2017 2 Management Philosophy 3
Management Philosophy 1 Sticking to the Basics ORION Enhancing Customer Value Orion’s number one rule is that the quality of its products Orion enhances customer value must never come second to any other considerations. by selling high-quality goods at We help make our customers’ lives happier by providing WAY reasonable prices. With our efficient management based on principles them with healthy and nutritious food choices. Orion’s core beliefs include the establishment and standards, we are continuously growing in production and the level of an open, honest, and ethical corporate of trust from customers. culture. Our future growth and our ambition to evolve into a truly global company are both predicated upon the ongoing trust and loyalty of our customers. 2 Establishing an Open, Honest, and Ethical Corporate Culture
Orion is committed to an organizational culture that is open, honest, and ethical. This includes establishing mutually beneficial relationships with our partner firms, and sharing our good fortunes with the people living in the communities in which we operate. ONLY 3 ORION Laying the Foundations for Future Growth Originality is the key to all the ideas, Orion enhances its product competiti- actions, and successes of the Orion veness by leveraging R&D collaboration family of fine food products. in South Korea, China, Vietnam, and Russia. In addition, we secure new FAIR growth engines by evolving from a confectionery company into a global total food player and establishing a series of marketing strategies custom- QUALITY tailored to reflect the demands of both our domestic and overseas markets. Everything we sell is backed by our We also raise our profitability through commitment that the quality of our products improved cost efficiencies. will always have priority over any other considerations. ORION 2017 4 Corporate History 5
Corporate History
Orion will celebrate its sixty-first anniversary in 2017 by evolving from a confectionery company into a global total food player.
1950s 1960s
A National Confectionery Business Takes Root Technology Development
1956 • July: Acquired Pungkook Confectionery 1960 • Launched Mommy Biscuit • September: Company name changed to Tongyang 1962 • Started selling Fruits Drops, Chewnut Candy, Confectionery Corporation Happy Biscuits, and Orion Crackers 1957 • June: Built South Korea’s first state-of-the-art candy 1965 • Started developing premium-level products manufacturing facility 1967 • Started selling Choco Candy • December: Started selling Orion King Drops 1968 • August: Switched to automatic candy packaging 1958 • September: Began using automatic molding machine • September: Started selling chocolate bars, for the making of soft biscuits including No. 1 Chocolate and Nimege Chocolate
1956 2017 1956
The Original ORION, a World-class Company Orion: Differentiated from the Beginning
Orion was founded in 1956 when the company’s founder and chairman, Mr. Lee Yang-gu, acquired Pungkook Confectionery. Since then, the company has led the country’s confectionery market with such popular products as caramels and candies. It also pioneered many of South Korea’s manufacturing facilities for confectioneries, and developed a wide range of new, exciting, and innovative products. Only ORION, ORION Way
Orion leads the market by creating and developing unique brand value through innovative ideas and methods. Orion is vigorously advancing toward becoming a world-class company through the competitiveness of “Only ORION,” which conveys its sincerity to customers and creates new, unique values. ORION 2017 6 Corporate History 7
1970s 1980s 1990s 2000 and After
Opening the age of Choco Pie Second Stage of Growth Transitioning and Advancing Growing into a Global Player
1974 • April: Launched Choco Pie 1983 • Began production of Diget 1993 • January: Mr. Tam Chul Kon appointed Vice Chairman 2001 • Established Orion Group 1975 • June: Conducted 1.66 million share IPO 1985 • Established industry’s first marketing department • February: Established office in Beijing 2002 • Built manufacturing facility in Shanghai 1976 • Began exporting chewing gum 1987 • July: Established Orion-Frito Lay Co., Ltd., a joint venture • September: Began exporting Choco Pies to Russia 2003 • Company name changed to Orion Corporation • August: Started producing Cuttlefish Peanut Balls with PepsiCo of the United States 1994 • April: Received plaque from Minister of Education for 2004 • Parted ways with PepsiCo. and changed name to Orion 1977 • May: Introduced South Korea’s first-ever automatic 1988 • Launched Pocachip help in replacing old desks and chairs in elementary Snack International biscuit packaging process 1989 • Launched “Jeong” Choco Pie advertisement series schools on remote islands and rural areas in South 2006 • Built manufacturing facilities in Beijing, My Phuoc, • Launched Flavano, South Korea’s first breath refreshment gum Korea. The program was carried out to mark the Vietnam, and Tver, Russia 1989 • December: Mr. Tam Chul Kon appointed President and CEO twentieth anniversary of the introduction of Choco pie. • Launched Innovation Project Step 1 1995 • Established ORION Food, a local subsidiary in China - Reducing Level of Trans Fats • November: Won $10 Million Export Tower Award 2007 • Launched Innovation Project Step 2 1996 • Value of exports reached KRW 30 billion - Reducing Level of Saturated Fats • Established basketball team • Launched Innovation Project Step 3 - “Green” Packaging • Launched Dr. You • Launched Market O 2008 • Built manufacturing facility in Novosibirsk, Russia 2009 • Built manufacturing facility in Yen Phong, Vietnam • Awarded HACCP certification for all manufacturing 1974 1988 1993 facilities, a first for South Korea’s confectionery industry 2010 • Built manufacturing facility in Guangzhou, China 2012 • Built manufacturing facility in Shenyang, China Orion Pocachip 2013 • Annual sales in China exceeded KRW 1 trillion 2014 • Carried out Good Packaging Project, a first in the In 1988, Orion created Pocachip, a domestic confectionery industry potato snack made with more than 2015 • Cumulative sales in Vietnam exceeded KRW 1 trillion 95% real content. It has retained its • Began operation of a raw materials production base number one sales position in the potato (Beitun Plant) in China chip market since 2000, becoming 2016 • Operating profit exceeded KRW 300 billion • Annual sales in Vietnam exceeded KRW 200 billion a byword for all South Korean snack • Launched Choco Pie Banana and Matcha Latte foods in the process. In December • Established a joint venture with the National Agricultural 1989, founder Chairman Lee Yang-gu Cooperation Federation for the production of premium- Orion Choco Pie passed away and Orion appointed Vice Advancing into China quality processed foods President Tam Chul Kon as CEO. Orion’s famous Choco pie product, Orion’s first step into China was made by estab- first sold in 1974, was the real lishing an office in Beijing in 1993. Two years later, 2013~ foundation for the company’s the company established ORION Food, its Chinese ongoing success. Orion is today by subsidiary. This resulted in Orion winning a $10 Expanding global sales growing more than 100% every year Million Export Tower award in 1995, with the value Orion has become a global force: in 2005 its overseas from the first year of its launch. The of its exports in 1996 exceeding KRW 30 billion. The sales surpassed USD 100 million for the first time since company sells more than two billion company established a production facility in Beijing its advance into overseas markets, and in 2009 overseas packages of it every year. in 1997, and extended its reach to include the cities sales outperformed domestic sales. In 2013 its annual of Shanghai, Tianjin, and Dalian. sales in China exceeded KRW 1 trillion. In 2016, the company’s operating profit exceeded KRW 300 billion, a new record in its history. This momentous achievement was primarily due to strong performances by our over- seas subsidiaries and a series of box office successes by our Showbox division. ORION 2017 8 Business Overview 9
Business Overview Status of Manufacturing Facilities 2016 Highlights Orion advanced into China in the 1990s, at a time when most South Korean companies were focused on the domestic market. Since then it has become a global player, entering South Korea China 1. Vietnam and Russia as well. Orion has grown into a global ORION Corporation Hebei Langfang Enjoyed largest-ever operating brand with high product power that attracts customers ORION Food Co., Ltd. profit and net income around the world, operating ten manufacturing facilities in Establishment: May 1997 Iksan Plant II, III Orion’s consolidated operating income for China, Russia, and Vietnam. Orion will continue to grow by Establishment: 1980 (Iksan Plant II) Products: Pies, Gum, Biscuits 2016 was KRW 326.2 billion, up 9% over providing high quality products and pursuing differentiated 1982 (Iksan Plant III) the year and setting a new record. Net Products: Pies, Biscuits, Shanghai Qingpu income surged by 36% to a company-high strategies. KRW 240.8 billion, while sales amounted Chocolates, Snacks ORION Food (Shanghai) Co., Ltd. to KRW 2,386.3 billion. Establishment: Sept. 2002 Ansan Plant Products: Pies, Snacks, Biscuits Sales by Country Establishment: 1986 Products: Packing Materials Hebei Langfang 2. Unit: KRW billion ORION Snack Co., Ltd. Recorded largest-ever Cheongju Plant Establishment: May 2006 China Choco Pie sales Establishment: 1994 Products: Snacks, Biscuits Products: Pies, Gum, Biscuits, Global sales of Choco Pie in 2016 exceeded 1,346.0 KRW 480 billion, the largest ever. This Candies, Snacks Guangdong Guangzhou 1,332.9 record was made even more significant ORION Food (Guangzhou) Co., Ltd. since it happened in the forty-second Establishment: Jan. 2010 year of the product’s release and during Products: Pies, Snacks, Biscuits the sixtieth anniversary of the company’s Vietnam establishment. Choco Pie entered the overseas market by establishing a Liaoning Shenyang production plant in China in 1997. We ORION Food (Shenyang) Co., Ltd. South - My Phuoc continued to accelerate its global market My Phuoc Factory Establishment: Jan. 2012 expansion by building plants in Vietnam Vietnam Establishment: Dec. 2006 Products: Snacks, Biscuits and Russia in 2006. Choco Pie is now one 707.4 Korea Products: Pies, Snacks, Gum of South Korea’s leading global brands, 204.5 selling in more over sixty countries around Xinjiang Beitun 679.4 the world. 164.9 North - Yen Phong ORION (Beitun) Agro Processing Co., Ltd. Yen Phong Factory Establishment: Nov. 2014 Establishment: Sept. 2009 Products: Potato Flakes Products: Pies, Snacks, Biscuits 3.
Russia Advanced into food business in alliance with NACF Russia Employees Persons 61.2 Orion signed a joint venture agreement 58.1 Tver Factory with the National Agricultural Cooperative South Korea Federation1,989 to strengthen its production ORION Food Russia China 7,434 of premium-quality processed foods. This Establishment: Mar. 2006 Vietnam 3,619 includes the construction of a production Products: Pies, Biscuits, Chocolate Russia 399 plant in Miryang, Gyeongsangnam-do Province, with completion expected in Japan, Indonesia 11 Novosibirsk Factory the second half of 2017. The plant will Showbox 53 utilize domestically-grown farm products ORION Food Novo targeting both domestic and overseas Establishment: Apr. 2008 Total 13,505 consumers. Products: Pies, Biscuits, Chocolate
2015 2016 2015 2016 2015 2016 2015 2016 ORION 2017 10 Confectionery Business 11
Orion has grown into a global company, building production bases in China, Vietnam, and Russia, and Confectionery exporting a wide variety of products to the additional foreign markets including the Americas, Europe, Southeast Asia, Australia, and the Middle East. Taking 2017 as the first year of our change from a strictly Business confectionery-based company to a global total food player, we will continue to launch a wide variety of new products that will appeal to consumers around the world.
Orion contributes to the happiness of people around the world by delivering delicious snacks under the belief that the quality of its products is always top priority. ORION 2017 12 Confectionery Business: Korea 13
Confectionery Business: South Korea
Orion has been a leading South Korean confectionery brand since 1956, introducing customers to a myriad of products that are ORION Corporation always popular and of the highest quality. They include Choco Ansan Plant Pie, which has consistently ranked first in the Confectionery category in a number of the nation’s brand valuation surveys. Cheongju Plant
With our sixty-first anniversary happening in 2017, we are taking Iksan Plant II on a challenging new step by transforming ourselves from a Iksan Plant III confectionery company into a global total food player. Orion has been South Korea’s leading confectionery maker for the last sixty-one years, delivering good taste and healthy foods to consumers around the world.
2016 Sales in South Korea Power Brands Premium Brands: ORION in Korea Dr. You and Market O The phrase “power brands” refers to ORION Corporation KRW 13, Baekbeom-ro 90da-gil, Yongsan-gu, billion Orion products that have been world- Orion is also the leader of the 679.4 Seoul, South Korea wide consumer favorites for years. confectionery industry’s premium T. 82-2-710-6000 F. 82-2-718-4825 Every one of them is made with pride market. and dedication, as well as a commit- Iksan Plant II 11, Seodong-ro 23-gil, Iksan-si, ment to delivering the very best in Dr. You is a prime example of Orion’s Jeollabuk-do, South Korea terms of quality, consumer satisfac- commitment to making healthy T. 82-63-830-6114 F. 82-63-833-4654 tion, and food safety. snacks that everyone can enjoy anywhere and at any time, while Iksan Plant III They include Choco Pie, a truly global Market O reflects the company’s 317, Dongseo-ro, Iksan-si, Jeollabuk-do, South Korea brand; Pocachip, which has become goal of producing hearty and T. 82-63-830-6114 F. 82-63-858-2218 a byword for high-quality potato healthy foods in all its restaurant and chips; O’gamja, which has become confectionery products. Cheongju Plant very popular with Chinese consumers 249, Wolmyeong-ro, Heungdeok-gu, because of its unique shape and flavor; Market O will continue to introduce Cheongju-si, Chungcheongbuk-do, South Korea Marine Boy, which has experienced premium-quality products that T. 82-43-279-6000 F. 82-43-276-6548 rapid growth everywhere it has combine homemade goodness been launched; Gosomi, a savory with the pure, fresh taste of nature. Ansan Plant snack with a delectable flavor; and 22 Sandan-ro 20beon-gil, Danwon-gu, Yegam, a distinctively different baked Ansan-si, Gyeonggi-do, South Korea T. 82-31-489-2642 F. 82-31-492-5006 potato chip enjoying particular support from young women. These power brand products have always been recognized for their excellent quality in South Korea and around the world.
Going forward, Orion will continue enhancing its brand power by developing even more delicious Choco Pie products. ORION 2017 14 Confectionery Business: Korea 15
Domestic Products Products
Pocachip in Korea Rising to a Mega Brand, a First among Potato Chips Pocachip has satisfied the tastes of consumers since its launch in 1988, and has dominated the potato snack market for the past fifteen years. In 2012 it rose to a mega brand, with annual sales surpassing KRW 100 billion, a first in the potato chip industry. This resulted Choco Pie from a rise in adult consumers, an increase in quantity A Global Snack Food Favorite with no accompanying price change, and its excellent quality demonstrating Orion’s accumulated expertise in Choco Pie is South Korea’s leading global snack food, boasting sales potato snacks. of over 2.3 billion a year in more than sixty countries around the world. Now marking its sixtieth anniversary since its establishment in 2016, In September 2015, Orion increased the quantity of Orion recently introduced two new and delicious Choco Pie products, its Pocachip products from 60g to 66g and 124g Choco Pie Banana and Choco Pie Matcha Latte. to 137g. It also lowered the amount of empty space inside the packaging to less than 25%, lower than the Choco Pie Matcha Latte was also launched in China, where it gained Ministry of Environment’s standard of 35%. This was huge popularity. This outstanding performance by such new products done to address consumer complaints that the actual helped Orion record its largest-ever sales in 2016, with global sales of contents seemed to be small when compared to the KRW 480 billion. bulky volume of the package. Orion is now leading the snack market as the number one potato chip brand. It recently launched Pocachip Cheddar, which combines the savory flavor of Cheddar cheese with the refreshing taste of sour cream.
Kkobuk Chip O’gamja South Korea’s First Four-Layered Snack Food The Potato Snack with an Amazing Taste and an Awesome Shape Kkobuk Chip is South Korea’s very first four-layered snack food. It boasts the rich texture that consumers O’gamja, a stick-shaped potato snack with a hole in expect from eating two or three single-layered snacks the middle, has enjoyed popularity as “an extraordinary at once, along with a rich flavor from the many snack in both taste and shape” since its launch in 1999. seasonings that are soaked into each layer. It comes in It posted sales of KRW 300.0 billion in 2016 alone, two flavors: corn soup, and sweet cinnamon. winning recognition for its product power not only at home but also overseas, including China and Vietnam. ORION 2017 16 Confectionery Business: Korea 17
Swing Chip Yegam Jelly Boy Chambungeobbang Crispier Potato Chips in Thick Slices A Baked Potato Chip A Deliciously Chewy Fun A Modern Version of Gluti- Taste nous Bungeobbang A wave-shaped snack that was launched in November Yegam are baked potato chips 1993, Swing Chip has a rich spicy flavor and is made that emphasize the natural flavor Jelly Boy is a combination of Marine Chambungeobbang is a soft cake with high-quality potatoes. Orion brought unique of potatoes by lowering their salt Boy and jelly. It was launched in 2015 made in the shape of a cute carp. flavors to the potato snack market by introducing content and supplementing their to continue the momentum enjoyed Filled with glutinous rice and red Swing Chip Chicken. It follows 2016’s Swing Chip Hot texture. When the brand first hit by Marine Boy, which has rapidly bean chocolate, it offers consumers Natural Ridges, with its tasty stir-fried chili paste and store shelves in 2001, monthly sales become a very popular snack for both a differently new flavor from ground beef flavor. averaged an amazing KRW 3.5 taste and fun. Featuring a host of traditional Bungeobbang. The billion. refreshing fruit flavors such as apple, distinctive taste of South Korea’s orange, strawberry, pineapple, and one and only carp-shaped pie is pear and coming in six marine animal sure to appeal to a wide range of shapes, it can be enjoyed by everyone consumers. thanks to its soft and chewy taste.
Wow Gum The More You Chew It, The More You’ll Like It
The name “Wow Gum” reflects the happiness that comes when a piece of bubble gum bursts in your mouth. It has become South Korea’s leading brand of bubble gum thanks to its excellent flavor and texture. It especially appeals to consumers thanks to its extended length and longer-lasting taste, as well as adding a fifth Cola flavor to the existing flavors of Grape, Plum, Soda, and Berry Soda. Marine Boy Marine Boy, A Fun and Tasty Snack Jelly Day THE Xylotol Launched in 1984, Marine Boy has A Deliciously Fruity Pulp Taste Three Distinctively Different Fruit Flavors become popular with consumers of all ages. It comes in Stir-fried Seasoning A single package of Jelly Day delivers 100 mg of vitamin C, THE Xylotol comes in apple, lemon, and peach flavors. and Chicken flavors. King Marine Boy the daily amount recommended by doctors and nutritionists. Boasting a flavorful but not-too-sweet taste and a very was introduced in 2007. Featuring the chewy texture of fresh fruit, Jelly Day is attractive low price, it has quickly become a favorite with especially popular with women in their teens and twenties. consumers concerned about their dental health and the state of their finances. ORION 2017 18 Confectionery Business: Korea 19
MAKING SNACKS BOASTING ALL-
MORE NUTRITIOUS NATURAL INGREDIENTS
Dr. You Market O
1 2 1 2 Dr. You Diget Dr. You Bars Market O Real Brownie Market O Real Chocolate Made with 14% whole wheat, Dr. You Diget provides a Because they are healthier and tastier than other types Orion’s signature product in the Market O line, Market Market O Real Chocolate uses 100% cacao butter to higher level of potassium, minerals, and vitamin E than other of chocolate bars, Dr. You Bars have long been the leader O Real Brownie is made from 100% real chocolate and deliver a truly chocolaty taste that melts in your mouth. snacks made from different types of flour. It comes in two of South Korea’s nutrition bar market. Filled with such antibiotic-free eggs. Highly appealing to consumers due Market O Real Chocolate Original contains up to 45% varieties: Diget Original and Diget Choco. super-healthy ingredients as nuts, fruits, and cereals, they to its quality and good taste, it comes in two varieties: cacao, while Market O Real Chocolate Milk combines a provide consumers with a long-lasting burst of energy. Original and Matcha. Market O Real Brownie Matcha rich milk flavor with that of creamy chocolate. Although the 99 Light Bar contains oats, three kinds boasts a uniquely bittersweet taste, since it contains the of berries, and honey, it weighs in at only ninety-nine flavors of both rich and fragrant Matcha and smooth and calories. delicious chocolate.
3 Dr. You Kids Made with domestically-grown ingredients that meet the nutritional needs of growing children, Dr. You Kids is recognized as a safe and reliable nutritional snack for 3 4 children. Instead of flour, which can sometimes cause Market O Butter Palet Market O Real Cheese Chips allergic reactions, it’s made from 100% rice grown near the Market O Butter Palet is an authentic French biscuit Market O Real Cheese Chips are oven-baked, premium-level city of Icheon. It comes in Cheese Cookie, Pumpkin Cookie, made with high-quality butter and eco-friendly Guerande potato chips topped with real Cheddar and Camembert Milk Cookie, and other kid-friendly flavors. salt. It is especially popular with women in their twenties. cheeses. Their rich, cheesy taste has made them a winner with snackers everywhere. ORION 2017 20 Confectionery Business: China 21
Confectionery Business: China
Orion made its first step into China by opening an office in Beijing in 1993. Starting in the city of Langfang in 1997, the
company also built manufacturing facilities in Shanghai, Orion (Bei Tun) ORION Food Agro Processing (Shenyang) Guangzhou, and Shenyang. Sales in China passed KRW 1 trillion Co., Ltd. Co., Ltd. in 2013, and its market position there continues to rise. ORION Food Co., Ltd. ORION Snack Co., Ltd.
ORION Food (Shanghai) Co., Ltd. Orion maintains its success in the Chinese market with two strategies: market concentration, and regional and city ORION Food (Guangzhou) Co., Ltd. localizations, with a special focus on quality.
2016 Sales in China Increasing Sales through Brand Developing new products to meet ORION in China Diversification the changing needs of Chinese consumers ORION Food Co., Ltd. KRW Number 11 Quanxing Road, Langfang trillion As of 2016, Orion had seven mega- 1.3460 Economic & Technical Development Zone, brands (Choco Pie, Q Di, O’gamja, Orion added to its presence in China Langfang, Hebei 065001, China Yegam, Swing Chip, Marine Boy, and in 2015 by capturing the lion’s share T. 86-316-607-7888 F. 86-316-608-8964 Mu Tang Chun 3+) in China that had of the traditional trade (TT) market. recorded annual sales of more than In 2016, TT sales jumped by 23% from ORION Snack Co., Ltd. Number 8 Baihe Road, Langfang KRW 100 billion each. The sales growth the previous year to reach KRW 543.4 Economic & Technical Development Zone, in 2016 of O’gamja and Choco Pie billion, accounting for 42% of the Langfang, Hebei 065001, China was particularly notable. Making up company’s total. Since traditional trade T. 86-316-5919-700 F. 86-316-5919-701 the largest portion of sales by Orion’s in China accounts for about half of all Chinese subsidiary, O’gamja achieved sales, there is still significant growth ORION Food (Shanghai) Co., Ltd. Number 5151 Waiqingsong Road, sales of KRW 260.0 billion in 2016. potential remaining for the company Qingpu Industrial Zone, Qingpu, Choco Pie bolstered its position as a and its products. Shanghai 201700, China favorite with Chinese consumers by T. 86-21-6921-1888 F. 86-21-6921-1889 launching Choco Pie Matcha in 2016. Orion begun to advance into China’s Sales exceeded KRW 200.0 billion, up northeastern provinces, and recently, it ORION Food (Guangzhou) Co., Ltd. Xiandai Avenue, Huadu District, by nearly 20% YoY. Orion divides its is targeting the distribution networks Guangzhou 510800, China Chinese products into three categories: across the country. Orion also plans to T. 86-20-8675-7777 F. 86-20-8675-7775 growth strategy brands, competition raise the share of its products in the strategy brands, and “potential” brands. markets of Shanghai, Guangdong, and ORION Food (Shenyang) Co., Ltd. Number 15 Xiahuahu Road, Shenbei New Chongqing. District, Shenyang 110000, China T. 86-24-3162-1000 F. 86-24-3162-1001 In 2017, it will continue its success by developing and introducing additional Orion (Beitun) Agro Processing Co., Ltd. products that suit the tastes of Chinese No.1 Guangming Rd, Beitun Industrial Logistics Park, Altay, Xinjiang, China consumers. This includes Honey Milk in 2015 and the Mango taste series and Choco Pie Matcha in 2016. Ya Tu Dou Mango Taste ORION 2017 22 Confectionery Business: China 23
Overseas Products Products
Shu Yuan Mo Gu Li The Ultimate in Baked Stirring Your Imagination in China Potato Chips The name Mo Gu Li, which combines Shu Yuan is a new-concept potato the Chinese words for mushrooms chip. Because it is baked rather than and chocolate, is a delicious, fun-filled fried, it’s not as greasy or fattening combination of mushroom-shaped as regular potato chips. It has quickly biscuits topped with chocolate. Ya Tu Dou Hao Duo Yu become a hit with young Chinese Chinese consumers have been mad about it since its launch in 2004. 100% Pure Potatoes A Fun-filled Snack consumers.
Ya Tu Dou is China’s first molded Hao Duo Yu potato crackers are a potato snack to be made from 100% favorite with Chinese people because potatoes. First launched in 2006, they’re shaped like fish and have it has become a favorite with the a crispy texture. The name, which country’s consumers for its distinctive means “a lot of fish” in Chinese, when shape, its crunchy texture, and its coupled with the advertising slogan, fun name and great taste. It comes “Having a Hao Duo Yu helps you keep Hao You Qu in four flavors: mango, tomato, steak, your chin up,” has made the product Delicious Wave-Shaped Chips chicken, and original. a hit with both children and their mothers. It comes Hao You Qu, launched in 2014, means “good friend in three zesty chip” in Chinese. Cut into ridges and then marinated, the flavors: seaweed, product boasts a crispy texture with a tantalizing mixture BBQ, and tomato. of natural flavors and spices. It comes in four savory flavors: kimchi, steak, roast chicken, mango, and original.
Hao Li You Pai Q Di Mu Tang Chun 3+, A Chinese People’s Favorite A Multilayered Chocolate China’s Three-Times-A-Day Cake Refreshment Break Hao Li You Pai is one of Orion’s best sellers in The name Q Di comes from the China. The name, which means “a good friend” in English word “cute.” It’s a premium- Mu Tang Chun 3+ is made with sugar- Chinese, appeals to consumers there because of level, multilayered cake that’s free xylitol. A daily refreshment gum its connection with the Confucian ideal of caring especially popular with women that delivers a strong energy boost for other people. because of its soft texture, its while you chew on it. It comes in a chocolaty fragrance, and its sweet, wide variety of fresh fruit flavors. mocha and hazelnut cream taste. ORION 2017 24 Confectionery Business: Vietnam 25
Confectionery Business: Vietnam
Yen Phong Factory
Orion opened its first Vietnamese manufacturing facility in Ho Chi Minh City in 2006. A second plant was soon built in Hanoi to cover Vietnam’s northern reaches, which are a major market for pies and biscuits. Since then, Orion has become an integral part of the daily lives of the Vietnamese people by expanding its products to include snacks and biscuits, with Choco Pie as the lead product.
My Phuoc Factory
2016 Sales in Vietnam Maintaining healthy growth by Leading the Market through ORION in Vietnam launching new products Product Diversification ORION Food Vina Co., Ltd. KRW 204.5 billion Choco Pie is a national favorite in Orion will strengthen its leadership in • My Phuoc Factory Vietnam. The people there liked it even Vietnam’s confectionery market in Ho Chi Minh Road, NA 3, My Phuoc Industrial Park 2, Ben Cat District, more when Orion decided to make 2017 through aggressive marketing Binh Duong Province, Vietnam its Choco Pie products 10% bigger efforts for its existing products and by T. 84-650-553-700 F. 84-650-553-720 without changing their price, while also continuously launching new products • Yen Phong Factory increasing the softness of their texture that can become future growth engines. Yen Phong Industrial Park, Yen Phong and the richness of their chocolate. Choco Pie will increase its presence in District, Hanoi, Vietnam These changes helped Choco Pie gain the Mekong region where it has been T. 84-0241-369-9000 F. 84-0241-369-9111 a 60% share of the country’s chocolate- relatively weak through enhanced coated pie market and increase sales by branding activities. In addition, we will nearly 30%. In the sponge cake market, expand its customer base by launching Custas has built an unrivalled image for a green tea-flavored Choco Pie product. healthiness by introducing a new milk- Custas will aim for double-digit growth flavored product. Meanwhile, in the by strengthening its advertising and biscuit area, Orion introduced Milkiss promoting its new milk-flavored product. cookies and Goute continued to gain popularity among younger women. In the biscuit market, Orion will accelerate Sales within Orion’s snack product new product development and under- group grew by 30% over the year, take an aggressive marketing campaign upgrading its product mix in response for its new Milkiss product. In the snack to the changing needs of the market market, we will build up the attractive- and consumers. We also focused on ness of our existing power brands and improving the value of each of our launch new products to tap into new brands. This growth was particularly led markets. We will also strengthen our sales by Toonies and O’Star, each of which activities targeting key consumers, with a Orion’s unmatchable menu of pies and solidified its position as favorite snacks particular focus on young people. In snack helped the company maintain for children. We also laid new founda- addition, we will continue making inroads its number one market position in the tions for growth by launching new into the increasingly popular low-cost Vietnamese confectionery market. Choco Pie products called “Corn Chips” and “Tayo!” snack market. ORION 2017 26 Confectionery Business: Vietnam 27
Overseas Products Products
Toonies Swing Enjoy Great Taste and a Dynamic Potato Chips in Vietnam Free Toy Swing is a dynamic potato chip Toonies, which were launched especially made for Vietnamese in Vietnam in 2007, enjoy the teenagers. They love its rich, country’s highest sales in the crispy flavor, its thick slices, and single snack market. Packaged its wide variety of tastes. Orion Choco Pie Milkiss, with the country’s first-ever free A Long-time Vietnamese Made with 100% Milk in-pack toy, they have quickly Favorite become a hit with Vietnamese Vietnamese people love their children children. In Vietnam, Orion Choco Pie is as and are greatly interested in the health loved as birthday cakes and wedding of their families. Milkiss was launched rings, holding a 60% share in the in August 2016 to reflect these traits chocolate-coated pie market. It has and to take advantage of the growth O’Star Corn Chip potential of the soft cookie market. delivered new value to consumers Vietnam’s Leading Enjoy in Comfort as the category leader by improving Made with delicious, 100% raw milk and filled with healthy goodness, it is a Potato Chips its cost-effectiveness through a Launched in 2015, Orion’s Corn 10% increase in quantity in 2016. nutritious snack for the entire family. “Be a Star!” “Try the country’s Chip appeals to Vietnamese It is developing a reputation as a best potato chips and be a consumers as a snack that can successful and innovative brand. star in your life.” These slogans be enjoyed by all generations have helped O’Star become thanks to the savory and the best-selling brand of potato enjoyable taste of corn and chips in Vietnam, especially seasonings. among teenagers and young people. Their kimchi flavoring Goute Custas is enhancing Orion’s position in Vietnam’s snack market For Good Taste and Style The Nutritious Snack That Tastes by providing snackers with a Like Homemade traditional Korean flavor that rival Goute was very well received when it was first introduced companies can’t duplicate. in Vietnam in 2007. The delectably crunchy biscuits, which In Vietnam, Custas is called “nutritious bread.” Accounting feature a superb combination of sweetness and the nutty for a 20% share of the Vietnamese market, these cream- taste of sesame, are enjoying especially rapid sales growth filled custard cakes have such a homemade taste that Marine Boy Tayo! thanks to word-of-mouth talks among young women. it’s common for parents to put some in their children’s Production that began in Vietnam itself late in 2011 has also lunchboxes. In 2016, it enhanced its image as a reliably Tasty and Exciting A new-concept, 100% boosted sales. It is also enhancing its value as a special nutritious snack by introducing milk-flavored products in potato snack Marine Boy snacks are popular Lunar New Year gift, when it is sold in uniquely-shaped addition to the well-known yellow egg bun. bags packed in tin cases. Orion will introduce new chia and with both Vietnamese parents “Tayo!” is a Vietnamese version black sesame seed-flavored Goute products in 2017. and children, because they’re as of O’gamja. The country’s much fun to look at as they are consumers really go for its crispy to eat. Shaped like fish, crabs, yet smooth texture, plus the fact squid and other marine creatures, that it’s made of 100% potatoes. they’re especially appealing to people who like the taste of shrimp and seaweed. ORION 2017 28 Confectionery Business: Russia 29
Confectionery Business: Russia
Orion entered the Russian market in 1993 and now operates production bases in two cities: Tver, and Novosibirsk. Its products are steadily gaining popularity in the country through an unbeatable combination of good taste and high nutritional value. The company’s R&D efforts and commitment to local production result in products that reflect a deep understanding of the Russian people’s food preferences. Orion continues its sustained growth in the Russian market through its phased localization strategies, including high- quality products and creative branding.
Tver Factory Novosibirsk Factory ORION International Euro Co., Ltd.
2016 Sales in Russia The Power of Choco Pie during an Orion Choco pie, Russia’s Favorite ORION in Russia Economic Slump In 2016 Choco Pie will increase its ORION International Euro Co., Ltd. KRW 117574 Ul.Profsoyuznaya Boulevard, Fifth billion Orion began exploring the Russian popularity with consumers through its 61.2 Floor, 129A TK Prince Plaza, Moscow, market in 1993. Choco Pie is its core “Share your mind” campaign, making Russia brand, enjoying strong and continuous it into a top 5 brand not only in the T. 7-495-987-1485 F. 7-495-987-1480 growth as a premium market product. biscuit and pie categories in Russia Orion’s expansion in Russia market is but also in the overall confectionery Tver 15 Nab. Lazuri 170028, Tver, Russia based on local and outbound sales and market. To meet the continuously T. 7-482-249-4828 F. 7-482-249-4831 production, including exports to other increasing demand, it will also expand CIS countries and eastern and western its supply volume to more than 700 Novosibirsk Europe. Choco Pie’s reputation for million products annually by extending 630088 St. Severny Poezd 35 (Kiro vsky Rayon), Novosibirsk, Russia high quality and superior flavor led to its production lines in Novo during the T. 7-383-344-7055 F. 7-383-344-0291 double-digit growth in 2016, despite second half of 2017. the negative effects of a prolonged economic slump.
Orion Choco Boy An Exciting New Brand For Kids
Orion soon came to realize that the production of a different brand that could provide a fun and exciting experience for Russian children would be a big opportunity in the market. The company’s promotion of Choco Boy began in the late 1990s, with full-fledged production starting in 2000. Choco Boy, which has enjoyed steady growth in Russia and other CIS countries, expects sales to grow even more in 2017 due to improvements to its taste and quality and aggressive
Choco Boy sales strategies. ORION 2017 30 Confectionery Business: Russia 31
Overseas Products Products in Russia
Orion Choco Pie Choco Boy A Russian Favorite for over Twenty Years Inspiring People’s Imaginations
Orion Choco Pie has been a favorite with Russian Although Choco Boy’s crispy-tasting, mushroomshaped consumers since its launch there in 1993. People like to biscuits are topped with chocolate, they’re just as eat it with their tea, and they particularly enjoy its healthy as they are tasty. They’re loved by both children delicious marshmallow flavor. As a result, Choco Pie has and their parents, who like them because they contain fast become an integral part of the local population’s DHA, an Omega 3 type of fatty acid that contributes to daily lives. the healthy development of children’s brains. Orion sells two types of Choco Boy in Russia: the original, familiar Orion initiated a phased quality improvement program mushroom-shaped Choco Boy, and Choco Boy Safari, a for all its products in 2009. In the case of its Choco snack with cute characters on each piece. Pie brand, this meant that no preservatives, synthetic coloring, or MSG are used any more, with the product being enhanced so that long-term storage is now possible without the need for preservatives.
In 2010, Orion became the first company in Russia to carry out a voluntary inspection of its products regarding the presence of GMOs, declaring that no artificial additives were added to them. A year later, Orion adjusted the nutritional balance of its products to make them more suitable for breakfast. The company also obtained a zero trans fat certification in 2012 and a Food Safety System Certification in 2014 from the Global Food Safety Initiative. ORION 2017 32 Global Sales Network 33
Orion exports its products to sixty-one countries, including the Middle East, the Americas, and Japan. The company enhances Global Sales its brand competitiveness by focusing on quality, innovation, and product diversification, including “star” products like Marine Boy, O’gamja, and Goute Biscuits. It is also a leader in the Network production of premium products, like Dr. You and Market O.
Russia
Canada Lithuania United Kingdom Belarus Germany Ukraine Kazakhstan Moldova Mongolia Abkhaziya Uzbekistan Italy Bulgaria Azerbaijan Kyrgyzstan Armenia Tajikistan U.S.A Armenia Japan Turkmenistan Cyprus China Iran South Korean Headquarters Palestine Jordan Kuwait Israel Bahrain Nepal Qatar Bangladesh Taiwan Saudi Arabia UAE India Myanmar Oman Hongkong Dominican Republic Thailand Guatemala Vietnam Guam Philippines Costa Rica Panama Ethiopia Sri Lanka
Somalia Malaysia Brunei Kenya Singapore Indonesia
Brazil
Mauritius
Australia
South Korean Headquarters Argentina Overseas production subsidiaries Countries to which South Korea exports Countries to which South China exports Countries to which Vietnam exports New Zealand Countries to which Russia exports ORION 2017 34 Showbox / Orion Basketball Team 35
Showbox Orion Basketball Team
Showbox distributed seven South Major Movies for 2017 Founded in March 1996, the Goyang in the Pro-Ama Championship by. Korean films in 2016. They included Orions is a professional men’s 1. A Taxi Driver Showbox Inc. “A Violent Prosecutor,” “Tunnel,” Goyang Orion Orions basketball team. In its second year, In 2015-16, they won the championship Man-seob, played by Song Kang-ho is a taxi Basketball Team and “Luck-Key”, all of which ranked driver in Seoul in May 1980. He is raising his the team won the championship again, recruiting new players to in South Korean movies’ “top ten” young daughter alone, and his old taxi is all at the Korean Baseball League establish a top-tier forward line and Major Businesses that he owns. One day, he hears of a foreigner and setting a new record for a and a semifinals victory at the 77th showcasing a fiercely attacking style of Film Distribution who is willing to pay big money to be driven Major Businesses National Sports Competition. In 1997, play. They won second place in regular Korean Film Productions and Investments domestic film distribution company. to Gwangju and back. Not knowing that the Goyang Orion Orions professional The company also led attendance foreigner is a German journalist who wants to it advanced into the quarter final league play in 2016-17. Imports of Overseas Movies cover the revolutionary ferment in Gwangju, basketball team records for South Korean films for the playoffs. Overseas Theater Business Man-seob agrees to take him. Orions Vision and Goals Online Business fifth consecutive year. It advanced Address 2. The Mayor During the 2001-02 season, the Orions Content Business, etc. into the global market in 2015 and Goyang Gym, 1601, Jungang-ro, Ilsanseo- Vision A team that put the 3Fs (Fans, Fun, This is a story about an election. Byeon (Choi achieved an integrated championship hosted a contest to secure content in gu, Goyang, Gyeonggi-do, South Korea and Fighting) first Min-sik), the mayor of Seoul, announces by winning its first regular league and cooperation with webtoon agencies Address his plan to run again, but with his ultimate finishing first in the playoffs. Success Goals · To be a prestigious team that meets 310 Dosan-daero, Gangnam-gu, like Naver Books in 2016. goal being the presidency of South Korea. A Tel. 82-31-913-0898 the expectations of its fans campaign team is formed, headed by a crafty continued with its second straight Seoul, South Korea · To play basketball well and thrill its campaign manager named Shim (Kwak Do- regular league win and second-place fans with its endeavors Showbox released films in many won). Meanwhile, Park (Shim Eun-kyung), finish in the playoffs in the following 82-2-3218-5500 a young advertising specialist, is recruited Tel. different genres made by many new season. The Orions also recorded the to give the campaign a boost. One crisis directors in 2016. This year, it will 2016-2017 Achievements after another unfolds, while the thinly-veiled KBL’s first advance to the playoffs for introduce “RV: Resurrected Victims”, enmity with an opposing candidate named six consecutive years. • Achieved a record-high second place Yang (La Mi-ran) intensifies. directed by Kwak Kyung-taek and finish in the regular league since its move “Memoir of a Murderer” by Won Shin- to Goyang 3. The Swindlers The Orions has celebrated many yun. Some of its other offerings will This film is about a confidence game played professional basketball milestones. • Size of audience increased by approximately include “A Taxi Driver”, starring Song by some amateur con men to catch a They include advancing to the playoffs 9% over the previous season Kang-ho, “The Mayor”, with Choi Min- legendary con artist who has vanished. Hwang for four years in a row, having the (Hyun Bin) is a con man who is working hand- sik, and “The Prison”, featuring Han in-hand with an ambitious prosecutor named league’s longest winning streak, Seok-kyu. Park (Yu Ji-tae), who isn’t above engaging in winning one hundred games since dirty tricks. Joined by other con men (played moving to Goyang, a second-place by Bae Sung-woo, An Se-ha, and Nana), they finish in the KBL D League, and winning eventually end up cheating on each other. ORION 2017 36 Financial Highlights / Share Information 37
Financial Highlights Share Information
Unit: KRW billion
Number of Shares Issued (As of December 31, 2016) 2014 2015 2016 Unit: Shares Profit And Loss Status Net Sales 2,199.8 2,382.4 2,386.3 Registered Common Stock 6,008,435 Gross Margin 1,037.4 1,114.7 1,150.7 Treasury Stock 724,905 Operating Income 248.9 299.3 326.2 Floating Stock 5,283,530 Non-operating Income 52.2 23.4 36.0 Non-operating Expenses 25.8 30.6 37.6 Financial Income 8.8 18.7 20.6
Financial Costs 55.2 59.0 39.6 Stock Performance (Common Stock) Unit: KRW Net Income before Income Tax Expenses 228.9 251.8 307.4 2014 2015 2016 Net Income 174.3 177.1 249.0 Average Daily Trading Value 14,649 15,402 18,746 Financial Status Share Price High 1,017,000 1,374,000 1,200,000 Total Assets 2,932.9 2,998.8 2,908.9 Share Price Low 763,000 857,000 641,000 Current Assets 997.1 939.7 758.9 Share Price (Year End) 1,015,000 1,166,000 655,000 Non-current Assets 1,903.9 2,037.2 2,150.0 Market Capitalization (Year End, trillion) 6.1 7.0 3.9 Total Liabilities 1,530.0 1,472.7 1,204.0 Dividends per Share 6,000 6,000 6,000 Capital Stock 29.9 29.9 30.0 Dividends Paid (million) 31,594 31,508 31,701 Capital Surplus 172.3 1,66.5 168.4 Retained Earnings 1,200.3 1,329.8 1,536.5 Total Shareholders’ Equity 1,402.5 1,526.2 1,704.9 Key Financial Ratios (%) — Total Market Capitalization (Unit: KRW billion) — Stock Price (Unit: KRW) Liquidity Ratio 116.3 127.8 87.0 Stock Price Trend Debt Ratio 109.1 96.5 70.6 ROA 5.9 5.9 8.4 1,400,000 ROE 12.4 11.6 15.4 10,000
1,200,000
8,000 Net Sales by Country Unit: KRW billion 1,000,000
6,000 204.5 800,000 1,332.9 1,346.0 164.9 82.7 751.7 707.4 1,161.4 150.1 4,000 679.4 58.1 61.2 600,000
2,000
400,000
1,000
200,000
2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 0 Korea China Vietnam Russia 2004.12 2005.12 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12 2015.12 2016.12 ORION Corporation 13, Baekbeom-ro 90da-gil, Yongsan-gu, Seoul, South Korea T. 82-2-710-6000 F. 82-2-718-4825