[CJ Heritage] is a monthly column highlighting the evolution of CJ’s heritage and the best, the first, and the most unique corporate moments alongside modern Korean history
During the Joseon Dynasty(1392-1910) in Korea, flour was a precious high-quality ingredient called jingaru that only aristocrats and those that lived in the palace could eat on special days. Flour is an ingredient that has a long tradition of being used in Korean cuisine, and it is a part of modern and historical Korean cuisine.
So, when did flour become the main ingredient in Korea?
Here’s another story of the challenge CJ, which is responsible for the flour, faced to enter the mill business.
CheilJedang Enters the Milling Business
On August 7, 1958, CheilJedang topped the National Taxpayer Record released by the Treasury Department. Paying the most taxes meant that the company had the highest sales, and CheilJedang was able to set a meaningful sales record. While this was good for the company, CheilJedang’s finances in the late 1950s were suffering. Sugar sales were low, supply exceeded demand and sugar consumption was gradually decreasing.
In response, after careful consideration, CheilJedang entered the milling industry, a new business field similar to the sugar business.
Flour was an item that could be traded, similar to sugar, and there were requests from sugar handling distributors for businesses to enter the milling industry. If the two industries are integrated, there are many advantages in terms of working time efficiency and manpower management.
The Mill Factory Built Using Our Own Hands and Technology
After entering the milling industry, CheilJedang also quickly built a factory to handle wheat, a raw material to make flour.
“We have built a sugar factory. At that time, we used Japanese facilities due to our lack of experience, but now we have the know-how. We want to give hope to the people by building the mill factory with our own hands and technology.”
In February 1958, a huge steel structure was built. Thirty-six mills, three silos with a storage capacity of 1,700 tons, centrifugal force reels, husk separators, and more were installed in the facility. This facility was the largest at the time. Finally, on March 5, 1958, CheilJedang’s mill factory was completed.
CheilJedang’s First Flour Products and Opening Market Share
In May 1958, the first product was shipped. CheilJedang added different labels depending on the product grade to differentiate itself from its competitors. The hard flour was released under the name ‘Samsung’, the medium flour ‘Moon World’ and the soft flour ‘Beautiful Woman’. At that time, CheilJedang’s flour accounted for 8.3% of the market. This was its first accomplishment after eight months of production and also the largest domestic market share among new companies.
However, this prosperous moment was short, as they were forced to shut down the factory due to a shortage of wheat and sugar. The problems the sugar industry faced were beginning to affect the milling industry as well. The dark age of the three-powder crisis that drove the mill and the sugar industry down was slowly approaching.
Global Inflation, Sugar Crisis and Flour Shortage
The international raw sugar price, which was $63 per ton in 1962, soared to $277 per ton the following year. Due to the increased price of sugar, some distributors started to hoard sugar.
To make matters worse, the import of wheat flour was delayed as the cold weather caused Incheon Port to freeze. Many milling companies stopped operating as they couldn’t get raw materials, and the prices of flour and sugar soared.
As the price of rice increased, this caused flour prices to surge which, in turn, caused rice prices to increase even more. The main reasons for this were disorganization in the distribution process and soaring prices of international raw materials.
In response, CheilJedang decided that direct sales that exclude intermediate distribution were necessary. While eliminating intermediate profits, the company also decided to eliminate grounds for unfair gains that could occur during wholesale and retail processes.
In February 1963, CheilJedang set up about 10 stores in Busan and 15 stores in Seoul. The sales time was set from 8 a.m. to 7 p.m. and each person was limited to only 600g (1.32lbs) to prevent potential hoarding. With neither the government nor the industry in control, CheilJedang tried to establish a distribution order by taking quick measures. Thanks to its efforts, the prices of sugar and flour gradually subsided.
The Emergence of Nuclear Families and the Introduction of ‘Beksul’ Premix
Starting in 1976, the international wheat market price dropped and the Korean government’s support policy helped the milling industry stabilize. As the economy stabilized, CheilJedang prepared to enter a new market with an aim to pursue sustainable growth.
The company entered the ‘pre-mix’ market, products that help people prepare meals easily while still being delicious. While pre-mixes are common now, at the time it was a newly introduced product. However, with the increase of dual-income and nuclear families at the time, CheilJedang noticed how people began prioritizing simplicity when preparing meals. In addition, Western foods were introduced to Korea and CheilJedang began focusing on the release of various new products to suit consumers’ preferences. To meet these demands, the company began developing and producing pre-mixes in the late 1960s.
In line with market trends at the time, CheilJedang developed doughnut premix and hot cake premix. To create the right mixture, the company developed countless baking powders, and in February 1977, succeeded in making prototypes of these two pre-mixes. This was the first time these box mix products were made in Korea, and CheilJedang’s creation spurred development in this new market.
CheilJedang then released Beksul frying powder and Beksulpyo mung bean powder. CheilJedang produced 4,350 tons of pre-mix in 1980, recording an average annual increase of 120%, and CheilJedang led the domestic pre-mix market and laid a stable foundation for the milling business in the 1980s.
Korea’s First Food Company to Achieve 1 Trillion KRW in Sales
On July 1, 1985, CheilJedang merged with Dongrip Industrial, marking a turning point in the milling business. Dongrip Industrial had been jointly managed by three sugar companies, including Samyang Corporation and Daehan Jedang Corporation, since 1978. It had a factory in Yeongdeungpo, making it attractive to many businesses. The Yeongdeungpo plant had a daily milling production capacity of 600 tons and a box mix production capacity of 40 tons. Since then, it has been reborn as a staple of CheilJedang’s mills in addition to the existing Busan plant. Thanks to this merger, CheilJedang was able to become the top company in the domestic milling industry.