SEOUL, KOREA - Major food companies are busy increasing their R&D budgets to prepare for future growth engines. For example, CJ CheilJedang spent 101.9 billion won last year on R&D. Given the company's 2010 R&D budget was 62.8 billion won, this is a 60-percent rise in two years. The company's share of R&D expenditure in total sales revenue has steadily increased to 1.43 percent this year from 1.11 percent in 2010 and 1.42 percent in 2011.
Daesang Corp., meanwhile, has increased its R&D budget to 21.3 billion won last year from 15.2 billion won in 2010 and 18.2 billion won in 2011. For Nongshim, its R&D spending has maintained the previous year's level even though the company recorded operating losses and net losses last year. Lotte Group's food subsidiaries including Lotte Confectionery and Lotte Chilsung Beverage have increased their R&D budgets 8 and 11 percent, respectively.
The reason for across-the-board increase in R&D spending by food processors has to do with the fact that they are equally under pressure to find future business opportunities. A Daesang Corp. executive said, "Under difficult circumstances where the domestic market is fully saturated and the consumer demand is historic low, food companies are under an emergency mode. As a way to get out of this predicament, most companies are doing everything they can to globalize their operations while differentiating their offerings."
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