Ladies and gentlemen, I am Woo Seong Jun, Head of IR Team at Finance Strategy. We'll now begin the Q1 2023 business results report for CJ CheilJedang. Today's session will be interpreted simultaneously into English for foreign investors. Let me first introduce the CJ team. We have Mr. Kang Kyoung Suk, the CFO, Mr. Jung Geun-yeong, Head of Food Korea Business Management, Mr. Cho Jae-beom, Head of Food Business Management, Mr. Kim Jung Hyung, Head of Bio Business Management, Mr. Kim Seung Pil from F&T, and Mr. Hwang Hyun-jo, Head of Feed and Care Business Management. Mr. Kang will first walk you through the business results, followed by progress on key strategy execution and outlook by respective presenters. We'll move on to a Q&A session.
Ladies and gentlemen, I am Kang Kyoung Suk, CFO of CJ CheilJedang.
Today's agenda includes Q1 highlights, earnings analysis by business unit, key indicator analysis, and progress on key strategy execution, followed by Q2 outlooks. Let's flip to page five. In Q1, sales grew 2% compared to the same quarter last year, OP declined by 59%. Food overseas grew 15% in sales and above 50% in OP, showing steady growth. Despite labor and input cost pressure, we have seen robust gross growth in sales of global strategic products or GSPs and pizza in the U.S., with improvement in cost structure and productivity. Consequently, Mandu and pizza in the U.S. saw a steady rise in market presence, contributing to profit expansion. In grocery channel, Mandu claimed 48% in market share, further solidifying market leadership, and market share of Red Baron Pizza stands at 19%, showing steady growth.
Combined specialty sales of bio and F&T grew 17% year-over-year, with OP contribution of more than 50%. Turn to the next page. Look at Q1 corporate results, excluding CJ Logistics. Decline in sales of bio and F&T has been offset with increase in sales of food and F&C, marking 2.1% growth versus Q1 of 2022, resulting in total sales of KRW 4.4081 trillion. Despite OP increase in food overseas, challenges across all business units resulted in decline of 58.8% versus Q1 of 2022, landing at KRW 150.4 billion. Net profit also declined due to reduction in OP and increase in non-operating loss.
When including CJ Logistics, sales grew 1.3% year-over-year to KRW 7.0712 trillion, and OP declined to 42% at KRW 252.8 billion. Next to page eight. Let's now look at the performance of each business unit. First up, food. Amid continued unfavorable business environment in Q1 of 2023, we focused on executing strategies for core products, channels, and countries to address margin pressures. Sales grew 6% year-over-year, but in Korea, despite efforts for product portfolio transformation with stronger competitiveness, sales volume declined due to base burden and weak demand. As a result, Korea sales declined by 2% from the same quarter last year to KRW 1.4056 trillion. For overseas sales, we expanded regional coverage of GSPs using Bibigo brand as platform for globalization.
By accelerating entry into mainstream channels in the US, Japan and Europe, we achieved 15% growth year-over-year to KRW 1.354 trillion. OP declined with rising cost pressure in Korea, but was partially offset by high profitability overseas, including the US. As a result, OP came in at KRW 134 billion, down 21% year-over-year. If you look at the bar graph on the next page, OP margin in Q1 of 2023 was 5.1%, excluding Schwan's PPA, and 4.9% when including the PPA. Next is more details on food sales in Korea. Product-wise, we focused on expanding occasions aligned with market trends and consumer values to create new demand and enhance competitiveness of each category to build a differentiated portfolio.
Channel-wise, efforts to offset the slowdown at online as we enter an endemic phase have been made, such as focusing on strategic platforms and high-margin products at convenience stores, diversifying menus at food service and B2B channels, and identifying opportunities in each channel. Q1 sales in Korea came in at KRW 1.4056 trillion. Let's look at more details on overseas sales. In the U.S., thanks to further scale-up in GSPs and stronger market share of Mandu and pizza, sales in the U.S. jumped by 18% from the same quarter last year to KRW 1.0772 trillion. In Asia Pacific and Europe, with Bibigo brand as the platform, we expanded sales of key food in key channels of each country.
Sales in APAC and EU grew 6% from the same quarter last year to KRW 276.8 billion. Bio and F&T. First, bio. Sales declined by 7% from the same quarter last year to KRW 817.4 billion. On top of the base burden from the amino acid boom last year, normalization of global supply chain led to export normalization by Chinese competitors, and delay in recovery of global livestock industry led to weak prices and volume of major products. OP declined substantially year-over-year by 89% to KRW 12.8 billion. Despite robust growth of tryptophan and special amino acid, margin declined due to sluggish market for major products in amino acid and Selecta and increasing competition pushing down prices.
For F&C, sales declined by 16% year-over-year to KRW 174.5 billion due to a surge in the number of confirmed COVID-19 cases immediately after reopening of China, there has been short-term delay in recovery of nucleotide demand, and global inflation adversely impacted the upstream industry of taste enrichment and amino acid. OP declined by 9% from the same quarter last year to KRW 50.3 billion, largely due to weak short-term demand of key products, including nucleotide. If you flip to the next page, share of specialty products and sales has grown steadily to 17% as of the first quarter of 2023. Next on to Feed & Care. Sales grew 5% year-over-year compared to the same quarter last year to KRW 656.6 billion.
Drop in livestock price in Southeast Asia resulted in decline of livestock sales, but was offset by increasing feed sales, driving overall top line growth. As for OP, amid rising input cost pressure, livestock prices fell below break even, resulting in deficit of KRW 46.7 billion. For feed, with higher price compared to 2022, sales increased with spreads maintained at last year's level, leading to a slight increase in OP. For livestock in Vietnam, while input cost pressure, including feed price, has risen, inflation and economic slowdown causing weaker demand gave rise to a downward trend in pork prices, resulting in a deficit. In Indonesia, weaker farming demand led to a dramatic decline in DOC price, undermining profitability. Let's now turn to the performance of CJ Logistics on page 16.
Despite a slight decline in sales due to a deteriorating forwarding market, profitability improved by raising prices across all business units. Sales in Q1 declined 2% year-over-year to KRW 2.8078 trillion, OP increased 31% year-over-year to KRW 99 billion. Jumping to page 19, you can see SG&A and non-operating income expenses, excluding CJ Logistics. For SG&A, labor costs increased by KRW 62.5 billion, transportation cost was down by KRW 43.2 billion. With efficient resource allocation, however, SG&A to sales ratio rose only by a mere 0.5 percentage points to 22.9%, even in a high inflation environment. For non-operating income expenses, global interest rate hike resulted in increase of KRW 28.2 billion in net interest costs.
As a result, non-operating income expenses declined by KRW 69.9 billion compared to the same quarter last year at minus KRW 117.9 billion. When including CJ Logistics on the next page, SG&A non-operating income expenses are largely affected by performance of CJ CGV, so I'll skip the details. Next up is update on key strategies and outlooks. First up is Korea Food business sales outlook. Right. This is outlook on Korea Food business. The unfavorable internal and external conditions persist. We see high food inflation rate, and the recovering effect demand from the endemic persisted, and the shrinking consumer sentiment from uncertain economy added to year-over-year base effect and slumping sales from the channels. If you see from some channels such as online and products, we saw a considerable decrease in the sales volume.
However, these factors are expected to improve as dining out become expensive. Amidst economic recession, the comparative price of processed food will have more merit against dining out. Processed food inflation will peak out, and the base effect will ease from the same period last year. In Q2, we expect to see some recovery. Added to this, we will drive elaborate product and channel strategies to improve our competitiveness. First, number one, on the restaurant meal replacement and wellness category, we will derive new demand. Based on our brand power and our taste quality competitiveness, we will also expand our existing demand. Also, based on the two-track strategy for value and premium segment, we will enter the value segment and launch premium restaurant meal replacement to strengthen and add on to our portfolio.
In addition, we plan to expand the business breadth and share with a wide range of product lineups. Last update is on product channel mix strategy. Our goal is to scale up business by setting customized and detailed strategies for hero products in different channels, focusing on channel and occasion. We will focus on developing categories, aiming to boost penetration in different channels.
Next up is key performance of U.S. Food. With the Schwan's and CJ Food integration this year, we expect to see synergy in procurement, logistics, sales, and marketing. Despite recent inflation and economic downturn, we are seeing continued growth of shares for key products, thanks to product innovation and strategic sales increase based on key capability. K-Food entry and expansion in grocery channel and stronger market growth of dumpling and pizza led U.S. Food sales to grow 20% year-over-year in 2022, and 18% quarter-over-quarter as of Q1. OP margin increased versus prior year, coming close to double digits in Q1. GSP led the way with grocery expansion and channel product new growth. As you can see from the graph on the left, GSP sales grew by 29% in 2022 versus prior.
In Q1 2023, the growth rate was 30% versus same period prior year, continuing the momentum. The number of Asian destination in Kroger stores has been growing ever since March 2020, reaching 2,000 stores as of the year end of 2022, meaning that it is in almost all large-scale stores. Within 2023, we aim to create Asian destination zones in other major retailers in the U.S. Mandu and pizza is also recording growth in shares. Market share for Mandu in grocery channel was 47.8% in Q1, higher than 41.1% in 2022. Red Baron, the pizza brand made by Schwan's, saw its share increase to 19.1% in grocery channel, only 1 percentage point behind the number one brand in the market.
We will continue our successful strategy execution and create additional synergy from the integration of CJ Schwan's and CJ Foods USA to continue the strong momentum in the U.S. market. Next is new portfolio expansion in FNT business. FNT strives to lay the foundation to scale up Taste and Beyond business by expanding new solution lineups for our natural seasoning, flavors, and nutrition business, providing personalized nutritional solutions. First, we plan to launch two new solutions under TasteNrich brand. First up is TasteNrich Hybi nd. It is a solution made with TasteNrich to substitute phosphate for processed meat. It is a high-performing solution that provides higher yield in line with stronger food additive regulations in Europe and clean label trend for processed meat segment. Second is TasteNrich V- Meat, fermented meat flavor ingredient solution that does not have any animal ingredients.
Alternative protein meat extract process ingredient markets are recording sustained growth with increasing need for clean label. V Meat will create new demand generation in alternative meat markets in advanced countries based on its high applicability. We plan on introducing two new solutions in the nutrition business. First is ActiveNrich Boost . It is an antioxidant solution based on natural glutathione. This is an ingredient that require continued intake as antioxidant level deteriorate with age. If taken together with vitamin C, another representative antioxidant, the effect is increased. This will help open the market for ActiveNrich Boost , we plan to expand the portfolio afterwards. WellNrich Essential is a natural mineral solution with zinc and iron that helps with metabolism. Consumers' interest in this market has grown after COVID-19 as more people care about their immune system.
CJ CJ plans on driving the business with evidence-based tech marketing, focusing on higher bioavailability, high content, and low side effects to highlight our differentiation point. Next is on our ESG and sustainability. CJ CJ is developing sustainable food and bioproducts and expanding them globally. First, in food, we are accelerating our global business by expanding our vegan portfolio. V-Label is a highly recognized and globally trusted certificate developed by the Italian Vegetarian Association, currently used in more than 30 countries. To become certified, one must pass strict qualification standards, such as not using animal-derived ingredients and preventing cross-contamination of animal-based ingredients during manufacturing. CJ CJ has gained V-Label for its plant-based brand, The PlantTable, and for our vegan seasoning. Haechandl was the first Korean traditional paste brand to gain V-Label for certification for 18 gochujang or red pepper paste SKUs.
We plan to diversify our vegan portfolio to target growing demands for vegan products and widen the consumer base of K-Food. Bio business unit took part in VIV Asia, the largest livestock fair in Asia. Under the theme of We Connect, that means sustainable bio cycle, we ran a booth showcasing our ESG vision. It was an opportunity to introduce our diversified product lineup to the global market, such as L-met Eco, an amino acid manufacturer with differentiated microbial fermentation technology, an energy-efficient method for lower carbon emission growing at a feed enzyme brand, and NeoPro, a functional plant-based fun-functional protein brand. Bio business unit will continue to develop green bio solutions such as fermented amino acids for feed and plant-based protein sources to contribute to creating a sustainable environment. Next is 2023 Q2 outlook.
Domestic food sales volume is expected to pick up in Q2 as processed food becomes comparatively cheaper compared to eating out, year-over-year base effect burden decrease and with trend-based sales strategy. Considering current level of pre-secure materials, price cost spread is expected to improve. Overseas food business will show continued sales growth with increasing B2C share in Mandu and pizza, growing B2B channel, thanks to expanding Asian menus and accounts, and channel synergy from U.S. food business integration. Japan business is expected to grow as Micho sales recover and with the launch of RTD, as well as growth in Bibigo Mandu sales. China will see some impact from setbacks of key online platforms, but we will recover by expanding sales from the FS channel.
For bio business, we forecast lysine to rebound as China reopens and pork demand recover. Quarter-on-quarter performance is expected to improve as we strategically expand sales of tryptophan and specialty amino acids and as SPC and soybean oil market improve. FNT will see continued deterioration of TNR and nutrition demands, quarter-over-quarter performance will improve as nucleotide performance rebound following the reopening of China. Feed and care is expected to record improved quarter-over-quarter performance as COGS improve with lower mortality rate and as Vietnam pork price and Indonesia poultry price rebound with tighter supply. Considering all this, CJ corporate performance will see slight burden of year-over-year base effect burden from higher prior year performance of bio.
Overall, quarter-over-quarter performance will improve with decreasing food raw material costs, overseas growth driven by GSP and regionally key products, upturn of feed amino acids such as lysine and nucleotides from reopening of China, recovery of Vietnam pork price helping FNT market recovery. Q2 CJ sales will be similar to prior year and OP margin around 5%. That is all. We have our Q&A session. One announcement before we go on: simultaneous interpretation will be provided for Korean questions, but questions in English will be consecutively translated. Please speak slowly for the interpreters. Let us begin the Q&A.
For those with a question, please press star one. If you want to cancel, press star two. The first question is from Kim Jong-wook from Meritz. The floor is yours, Mr. Kim.
Thank you very much for the opportunity. I have three questions. The first question for Food Korea business. The sales has declined by about 4.5%. There has been decline because of the pricing effect, but I think that's mean that there is decline in volume as well. It would help if you could give us the price volume mix. As for food, you know, you mentioned, you know, the increases has happened in DASIDA and paste. It seems like, you know, there has been increase with food ingredients. For frozen products or HMR, we would like to know how they have fared in the first quarter. The second question has to do with overseas business.
You're doing a great job, you know, it's quite disappointing that there is, you know, not equally good performance elsewhere. It seems like there is increase because of the expanded channels. Like to know, you know, how much contribution there has been from existing channels and how much contribution there has been from new channels. You know, we would like to know how sustainable the current growth is, and we would really appreciate your guideline on that. The final question has to do with the overseas buyers. For Bio, the purchasers of feed additives, you mentioned that there would be rebound in Bio when there is recovery in demand of pork. I would like to know whether you're really feeling that recovery, because it seems like the pork market is still very weak.
You know, we would like to know whether, you know, bio has really bottomed out or we are still at a very low floor, and that's likely to continue into the second quarter. We would like to know what kind of indicators you have seen to come to that analysis. Thank you.
Regarding Food Korea Business. For Food Korea Business, in the first quarter, there has been decline of about 2%, and the effective price, it was about eight percentage points. Among that, if we look at processed food, there has been decline of about 5% in sales, and price effect was about seven percentage points. As for food ingredients, sales increased by 3%, and the price impact was about 19%.
As for our, other than our gift sets, for non-gift sets, Korea business, there has been growth of about 0.4%, and price impact was about 9.2 percentage points. As for the performance of key products, as for HMR, among the HMR products, we have and for compared to the past year, it is, the volume growth is similar to that of last year. As for soup and stew HMRs or retorts products, there has been intensifying competition, so there has been decline of about 6%. In contrast, for frozen products, Mandu, the overall market has declined, resulting in volume decline of about 6%. For pizza or side dishes or snack, there has been some growth. Among frozen pizza, we have seen 18% growth year-over-year.
As for snack and side dishes, whether it be chicken or Chinese, frozen Chinese cuisine, it grew 18%, and chicken grew 25%. We have seen high growth for these two products. I mean, as for the sales of HMR, it excludes from the material. Just for your information. Regarding our U.S. Food business, you know, new distribution at grocery, we can't really, you know, break down between existing channels and new channels. If we look at the penetration rate at grocery, which is represented by ACV, in March, grocery ACV was about 69% last year, and this year, it was about 80% as of February year-to-date. There has been substantial growth in ACV.
Including the growth in ACV, if you think about the B2C sales in the U.S., it grew 25% in KRW, not just in Mandu, but also in other GSPs as well. In B2B or food service and school catering or K12 catering, there has been expanded sales of pizza and GSP, so there has been increase in sales of about 34%. Just to add on to the previous reply, for food, there has been substantial remarkable growth overseas in food, especially in the U.S. There has been prominent growth in the U.S.
If we compare between existing channels and new channels, instead of, you know, providing you breakdown on that, you know, from January 1st, we've had the integration of existing CJ Foods entity and CJ Schwan's. There has been much synergy created from that integration. For B2C, the sales growth rate was about 18%, and for B2B, that was about 27%. In particular, what we could have seen more is that, I mean, in Asian category, we have been really focused on Asian categories as well as GSPs, including Mandu, and there has been remarkable growth of GSPs there.
In the second half of the year as well as the second quarter of this year, we would be focusing on rolling out Asian destination so that we would be able to see further growth in sales within the Asian category. If you look outside the US, from the second half of the year, we will be going into Thailand, Philippines, United Kingdom, and Australia, and we would be seeing sales incremental in these new territories as well. The overseas food business is likely to show steady growth moving forward. As for sales growth, there has been some discrepancies in numbers. What I've mentioned was in Korean won, and what J.B. just mentioned was in US dollars, so there has been some differences in the numbers just mentioned.
For bio global in the first quarter, we have bottomed out, and we are seeing gradual signs of recovery in the second quarter, especially in China. Led by major players, the feed formulation is becoming upgraded and the Chinese government is trying to reduce the use of soybean meal. We feel that there's going to be strong demand for specialties. Especially for highly competitive areas in China, we would be focusing on high price sales and for, we would focusing on U.S. with our technical sales solution to make sure that we can expand our market coverage. We'll take the next question.
The next question is from Paul Huang from Citi Securities. Yes, hi, Huang,
Paul Huang from Citi Securities. I also have three questions.
For first questions, if we think about profitability of processed food in Korea, it seems like there has been some deterioration. Is it just because of, you know, I mean, there is weak demand, so there would be more competition for promotion? These were some of the concerns I have harbored, whether if it's promotional marketing. We would like to know how the promotional competition had been in the first quarter and how it's going to unfold in the second half of the year, and what your action plans are accordingly. That's my first question. As for the second question regarding input costs, if we look at your other companies, you know, when they think about foreign exchange rate and spot prices, they feel that, you know, the peaking out timing is going to happen later.
Of course, you know, it's going to happen slower than many have anticipated. As for the second quarter outlook, you mentioned that there would be improvement in the price and cost spread. We would like to know whether, you know, you have more positive outlook compared to other players and what kind of trajectory you are forecasting regarding the spread. As for the final question, overseas, you know, we are having good top-line growth, but of course, for profitability, the improvement is actually happening much faster than anticipated. We'd like to know what were the drivers making that possible and whether that's going to be sustained in the second half of the year as well.
As for the first question.
Right now, when we think about, you know, processed food industry in Korea, there is, you know, unfavorable business environment. Of course, all manufacturers confront the same set of challenges. Each manufacturer are trying to find the resources for reinvestment into the future, but there are a lot of challenges there. Whether if it's competition in the market or whatever it may be, you know, the intensity is actually a very. We don't feel that, you know, it's very strong. In terms of advertising or marketing for advertising or promotional costs, compared to the past year, based on select and focus, in the spirit of select and focus, we have been minimizing these areas.
Into the second quarter, if the current trend will continue, considering the cost pressures as well as the burden for expanding volume, the competition across manufacturers, we do not believe are likely to intensify, and they're going to further focus on enhancing product competitiveness to make sure that they can appeal to consumers with the products, and that could lead to actual purchase by these consumers. Just to add on to Food Korea business, regarding input cost. As mentioned in the first quarter, you know, if we think about the overall direction, we feel that the situation is likely to unfold in a similar way. If we look at key grain prices, you know, because of the geopolitical issues, it's going to peak out in the second quarter, and it's going to stabilize in the second half.
Of course, it is historically very high. If there is no major change, of course, we would be able to see some expansion in cultivation land in the Northern Hemisphere. Of course, if climate change normalizes, crop yield is likely to normalize. That's the kind of direction that we anticipate as we move into the year. I think depending on which crop we're talking about, it would be a little bit different. There could be some uncertainties compared to what we have anticipated early on. As for soybean, compared to wheat and corn, there could be some higher strength. Because of La Niña, there could be some, you know, deterioration in the new crop yield in Latin, in South America, and there could be some changes in biodiesel policies in the U.S.
There could be some fluctuations in soybean prices, and it's going to be higher than other crops. If we think about their impact to CJ CGV, if there is increase in price of soybean, then it's going to have, you know, a positive impact on our soybean oil sales. We would have to take a comprehensive view on that. As for raw sugar, there are some volatilities there. For Indonesia and Thailand, compared to the Northern Hemisphere, the yield had not been very strong. That's the current situation. These are some of the volatilities with raw sugar, and there's some speculative funds coming into this area. The sugar prices has been pretty high as of recent. Our internal view is that, you know, there's going to be over purchase of sugar, but...
There's also uncertainties because of the climate issues. We will see a lot of fluctuations for raw sugar down the road. As for the commodities already secured from the second quarter of this year, there's going to be higher prices as well. If we think about the commodity trend, the spread is projected to improve. Of course, we would have to factor this in together with the total volume sold. In the second half of the year, compared to... I mean, if we think about the price trends, we have the projections, we would be maintaining the projections that commodity prices would go down. You know, how much that would fall would depend on these uncertain and volatile issues that we have mentioned.
As for the U.S. business, U.S. food business, the question was on what the key drivers were of the growth in the first quarter. Just to add on to what I've mentioned in the previous question. If you look at U.S. food business, there is some seasonality in the first quarter. The key events would be that there is the Super Bowl, which is one of the major sports events. Of course, there has been recovery in K-12 as we enter the endemic phase. For our existing pizza product, after the price increase last year, we have seen that there has been some sales growth driven by Super Bowl events.
Of course, when we think about, you know, restaurant prices or delivery, demand for delivery pizza, a lot of them have been converted into demand for frozen pizza, and especially Red Baron Pizza. In the first quarter, we've taken the right pricing actions, and we have something called DSD, a direct sales delivery. Based on these platforms, we had been able to narrow the gap in market share against the industry number one to less than, to about one percentage point. On top of that, there has been growth by the global strategic products or GSPs. Based on the frozen sales infrastructure of Schwan's, we have been able to focus on Mandu or chicken or processed rice in the grocery channels. We have been able to expand distribution of these products, and that helped us really drive that growth.
In the second quarter, we feel that, you know, there are concerns over inflation as well as consumer sentiments, there are a lot of uncertainties abound for the U.S. market. Again, as I mentioned earlier, we will continuously expand to Asian destination. Especially at B2B, we would be looking into further expansion in catering and CVS channel. There is a lot of acceptance to GSP. We would be working on to make sure that that momentum continues into the 2nd quarter. Of course, we'll focus on raising operational excellence and making sure that we have the right OPEX structure so that we would be able to pursue profitable growth into the 2nd quarter.
On to the next question is Park Sangjun from Kiwoom Securities.
All right. Thank you for the opportunity. I have three questions. Number one, during the previous call, you mentioned the profit structure improvement, rationalization in the SKUs in K-Korea food business, cost reduction measures. What's the progress so far in Q1, and what will be the effects of that in the following quarters? I want to know on the progress of the cost reduction strategy execution. My second question is for the Korea food business pricing strategy. Because of the deteriorating profit level and the increasing raw material costs, the government is still saying the asking the corporations to not make any additional pricing actions. What will be your response to the government's policy, and what would be a strategy to improve the value segment, the product lines?
What kind of ideas and strategies do you have in your future product launches? Any examples of value type products would be good. My last question is on F&T. You mentioned nucleotide. You're seeing that you expect the demand to rebound in Q2. Compared to Q1, how much rebound in demand do you foresee? What will be the direction for the pricing actions or how much the rebound will be in your nucleotide sales?
To answer your question on number one, in improving our process structure, we are currently executing different faceted efforts. In Q1, we looked at across-the-board measures and levers. Compared to one, the SG&A ratio fell by 0.2% year-over-year. The purchasing, in order to alleviate the purchasing price burden, we are have secured or diversified our supply network, our SCM network, and we have diversified our ingredients and specifications based on R&D efforts. With, by maintaining the quality at the same level, we adjusted the formulation of the ingredients, and we are also constantly working in those ends. In terms of operation, in order to rationalize the SKUs, we are looking into ways to rationalize inefficient SKUs. In first half, we aim to reduce by 10%.
We're preparing to rationalize the SKUs and executing bit by bit. In Q2 and Q3, these efforts will continue throughout the year, and in particular, on procurement and unit price. The COGS inflation will persist throughout the year. The PPI will persist. We hope to simplify our business structure limit and make it leaner.
To set a detailed strategy to improve on that end. All right. On your second question, the ingredient input price and considering the inflation, we will work on rationalizing our costs and reduce our purchasing unit cost. If there are times where we cannot offset internally, we will have to further review potential pricing actions. However, the slope of the inflation and increasing slope of the input cost, if we look at that, of course we see some categories might need additional pricing. Compared to last year, we believe this year the frequency and the width of, or the depth of the pricing action will not be as much as last year.
Regarding the value for money trend and our response to that, at CJ CheilJedang, because of inflation, we see that the basket size, the basket amount of consumers are shrinking. We see that consumers are selecting less and less products when they make a purchase. We are looking for ways to cut down on the absolute price, so we're reducing the weight of the product and cutting down on the absolute price of the product. We're coming up with some smaller pack products, and we're changing some of the flavors for some of the products so that we can lower our price point for some products to give more options to the consumers. We are also looking into packaging cost reduction efforts so that we give more options to the consumers and give more cheaper options to the consumers.
On the re-rebounding demand for nucleotide, for FNT in Q1, it was right after the reopening of China, the number of COVID positive cases surged. After February, it's normalizing and we're seeing a rebound in demand, the slope is a constant, it's continuing. In May, during the long holiday, we saw that the tourist income compared to pre-COVID, it was similar to as 83%, it's similar to pre-COVID era. Looking at those news, we believe this trend will continue. In China, the APAC region, where there's a lot of Chinese tourists, we believe we'll see continued rebound in the demands.
If there are no other questions, we will now close the conference call for of CJ CheilJedang. Thank you.