Ladies and gentlemen, thank you for joining us today. We'll now begin the conference call for Q2 twenty twenty one results report by CJCJ. For today's conference call, we'll first have the presentation by CJCJ, followed by a Q and A for all the participants here today. So we'll first begin with the presentation by CJCJ. Ladies and gentlemen, am Woo Hoon Song, Head of IR, Team and Finance Strategy Office at CJCJ.
We'll now begin the Q2 twenty twenty one business results report for CJCJ. Let me remind you that Korean through English simultaneous interpretation will be provided for foreign investors. Let me first introduce today's participants from CJCJ. We have Mr. Kang Kyung seok, Head of Finance Strategy Office Mr.
Ahn Seung Joon, Head of Finance Planning Department Mr. Kim Jong un, Head of Korea Business Management at Food Business Unit Mr. Cho Jae Beom, Head of Global Business Management at Food Business Unit Mr. Kim Seung Pil, Head of Business Planning Team at Bio Business Unit and Mr. Hwang Yoon un, Head of Business Planning Team at Feed and Care.
So Mr. Kang, the Head of Finance Strategy Office, will first walk you through the business results, followed by issuing outlook reports by respective presenters. We'll then move on to Q and A. Ladies and gentlemen, I am Kang Kyung Soo, Head of Finance Strategy Office at CJCJ. Let's first look at Page five.
In the second quarter of twenty twenty one, we achieved growth of percent in sales and 26% in operating profits year on year. First for food, despite increasing commodity and logistics costs, we have been able to maintain previous year's OP level with continuous improvement in profit structure. In Global Business, we have expanded sales of K Food and our plans to build and reinforce VPGO brand abroad are well on track. In Bio based on market leadership, we have proactively increased prices and strategically expanded sales resulting in significant increase in operating profits. In FMC, rising grain prices decline in hog ASP have been mitigated by biosecurity performance and productivity enhancements.
Next page please. And here you can see the highlights of Q2 twenty twenty one results. First, excluding CJ Logistics, for sales, with expansion of key products at growth channels both in and out of Korea for food and increase in sales for BaiYo and FMC based on market leadership, we have been able to achieve sales of KRW3.7558 trillion, up 9% from the same period last year. For operating profits with continuous improvement in profit structure at food, strategic price increase in bio and improvement in lifestyle productivity and FSC, we have achieved operating profits of RMB379.9 billion, up 26% from the same period last year. In terms of net profits, we reached billion representing an increase of 75% year on year with improvement in operating expenses along with rise in operating profits.
And including CJ Logistics sales grew 6.6% year to year to KRW6.3092 trillion and operating profit rose 22% to KRW469.6 billion. Now let's look at Page eight. Let's look at performance for each business. First up, Food. The first sales grew 1% year on year.
For sales in Korea, despite base effect from last year in B2C business, we have expanded sales in growth channels, namely B2B, convenience stores and e commerce. And with launch of new premium products, we have been leading the premium eating at home space. As we sustain such quality growth, we achieved growth of 5% to KRW1.2023 trillion in sales at home. For global, there has been some decline in sales when converting Korean won due to stronger won versus 2020, but with strategic response to B2B in light of pandemic driven changes in The U. S.
And China and expanded sales of K Food in key regions and channels, we have been able to mitigate the negative impact of FX achieving sales of KRW1.01 trillion. As for operating profits with continuous improvements in profit structure and efficient execution of resources, we have been able to achieve operating profit of billion recording 3% increase in year on year. And in Korea, some of the burden from increasing grain and commodity prices have been offset by improvements in profit structure by value chain and increase in ASP of certain items. In Global, the burden had been partially mitigated with efficient use of promotional resources and expansion of K Food sales in The U. S.
And Japan in China and Japan. If you look at the slide on the next page, Q2 OP margin is around 6.2% when excluding Schwann's PPA and 5.9% when including Schwann's PPA. And if we look at Page 10, I would like to take you into the specifics of sales in Food in Korea and Global. First, in Korea business in terms of products, we have seen continued growth for core products such as Hefan, HMR and Manju. We have also been leading the market with launch of new premium products such as Gourmet Pizzas, Sweet and Sour Pork, Hefan Sofan and Washington Eat Noodles.
In terms of channel, we focused on growth channels for processed food, namely e commerce, B2B and convenience stores. So in Q2, sales for Korea food business is KRW1.2023 trillion. And Page 11 for Global Food business. First for The U. S, despite high base effect, we have been able to maintain previous year's level.
In B2C, despite previous year's base effect, we have expanded sales of K Food with differentiated taste and quality that mitigated decline in sales. So compared to Q2 twenty nineteen pre COVID, we actually grew more than 20% in sales. In B2B, we have seen expansion of key products such as pizza and egg rolls in K-twelve and C store channels leading to sharp recovery in sales. And for Asia Pacific and Europe, we have continued with high growth, thanks to strong B2B with recovery in aiding out and expansion of K Food sales. As a result, China grew 5% and Japan grew 51%.
So for Q2, global sales reached KRW1.01 trillion. And next on to Page 12 on BIO business performance. Enabled by market leadership, Bio has proactively raised ASP and pursue strategic expansion in sales at the same time that helped Bio mitigate the burden from rising commodity and logistics costs resulting in significant increase in operating profits. For sales, we actively took advantage of our existing market dominance and recovery in China's hog population for strategic expansion in sales. As a result, we achieved sales growth of 24% year on year.
In terms of operating profits with preemptive price increase maximize product sales, we achieved record high quarterly operating profit of KRW193.9 billion, up 75% from the previous year. By product for feed additives, we have taken leadership in strategic pricing of key products taking into account rising commodity prices. By leveraging diversified manufacturing basis worldwide, we have minimized the impact of increase in commodity and logistics costs and led the trend of using less CP to continuously identify new markets and customers. For Food Additives, we have leveraged our market position to proactively lead nucleotide market and by promoting high margin specialty products and accelerating efforts to develop new markets with Taste and Rich, we have achieved growth in sales. If you look at Page 13, Q2 operating profit margin reached 21.1%, which is a dramatic increase from last year.
And you can also see the increase in share of specialty products in total sales mix. And next on to Feed and Care on Page 14. In general, rising commodity prices and downturn in Vietnam hog prices have been mitigated by expanded sales of Aquafeed enabled by R and D and improved productivity through biosecurity. In terms of sales, FMC experienced 19% growth year on year with increase in feed ASP, expanded sales of high value added Aqua feed, improved productivity through livestock security and expanded downstream volume. In terms of operating profits, it was down by 13% year on year to billion.
To make up for the related pricing increase that came only after the rising grain prices and to offset the impact of decline in hog ASP in Vietnam, FNC responded with improved feed portfolio and higher livestock productivity and cost competitiveness. By product for feed, rising grain prices and related pricing increase weighed down on profitability, but FNC pursues stable volume expansion in hog and poultry with proffin driven structure improvement and FMC also expanded sales of high value added aqua feed based on quality, cost competitiveness and technical services. For livestock, the downturn in hog ASP in Vietnam had been partially mitigated by improved productivity and expanded sales. By expanding downstream value chain infrastructure, FNC strengthened risk hedging against lower livestock prices. In Odentia, we have secured cost competitiveness with continuous improvement in profit driven business structure.
With declining supply of poultry in the market, prices resulting in increased operating profits. If you look at the next page, you can see that OP margin for FMC declined by 3.2 percentage points year on year to 9%. And let's look at CJ Logistics performance on Page 16. CJ Logistics pursued increase in prices in response to rising costs for supporting personal delivery drivers and parcel classification work. There has been base effect in domestic logistics including port handling volumes.
The sales in Q2 stood at KRW2.7472 trillion, up 4% from the previous year and OP at KRW96.6 billion.
Slide 19 shows SG and A and non operating income and expenses including CJ and logistics. CJ and SG and A expenses similar to last year was 22.3% out of the sales non operating expenses, down by KRW 48,300,000,000.0 or negative KRW 40,500,000,000.0. For inflation in sea freight cost and oil price drop of transportation cost by KRW38.4 billion, promotion and advertising cost jumped by KRW22.1 billion, but SG and A remained at a similar level to last year's. For non operating expenses, the interest income improved by a great margin of KRW 14,500,000,000.0 and the total non operating expenses were up by KRW 48,300,000,000.0. With CJ Logistics included, SG and A and non operating income are mostly determined by CJ's JLANG businesses, so we'll skip Slide 20.
Next, we'll go over our progress and key strategy and outlook. First, we will begin with an update on The U. S. Business, and then that will be presented by Mr. Chaibom Cho.
Good afternoon. My name is Chaibom Cho, Head of Global Food Business Department. Last year's panic buying due to COVID-nineteen and this year's B2C Pizza market contraction were manageable enough for our business to drive a moderate level of sales so far. Pizza business market share grew and the rebound of the B2B business are currently setting the stage for us to drive further growth. The second half sales in dollars was down by 2%, but this was due to stockpiling by consumers last year in the home service segment.
Consumer brand, food service and other business units combined together for The U. S. Business grew 3% in sales. Schwannz Foods home service is a frozen food delivery business, which was not excluded from the Schwannz Foods acquisition deal. Schwannz Foods currently manufactures and supplies frozen food to the home service unit.
Compared to pre COVID, Schwannz food sales grew at the fastest pace among other frozen food manufacturers in The U. S. If you look at the graph on the right on the left, in the B2C frozen food segment, the annual sales as of June 2021 grew 32% compared to the annual sales of June 2019. This is thanks to the growth of the frozen pizza market itself, but highly attributable to the strong growth of our market share. After the acquisition of Schuang's Food in 2019, the B2C Pizza market saw continued growth of Schuang's market share.
This has been possible with DSD and sales networks. And also Red Baron's portfolio upgrade and our focus on high profit SKUs. With all this effort, the market share gap to number one pizza player narrowed from 22.9% in 2018 to 15.9% in June 2021. Meanwhile, with consumers resuming outdoors activities, the B2B channel sales is on track to recovery. Schwannzenegger's food service sales in the second quarter grew 79% with broader vaccination and schools reopening throughout the month following September or the high season for K-twelve channel, dumpling shipments and accounts will jump in number to continue a fast paced growth.
Now moving to Kfood business growth in The U. S. The dumpling market share in the grocery market grocery channel continues to expand. PB Go's dumplings market share in the grocery channel grew from about 14% in Q2 last year to about 25% in Q2 this year by 11. With Xuan's Foods existing brand Pagoda's dumplings market share combined together, our dumpling market share in the grocery channel is 38% and now we're number one in dumpling grocery channel.
Next dumplings for The U. S. Market in the pipeline are chicken, the fried rice and K sauce. Our chicken crispiness and garlic and Gochujang based Korean flavor present a differentiated experiences resulting in distribution to 2,400 grocery retailers in the first half. The chicken sales grew 51% in 2020 and this pace will continue.
Our fried rice offerings also features kimchi and Korean sauces that offer Korean effecting taste. It has been distributed to 3,000 retailers, which will expand further in the second half. And for K sauce, the very first product adopted Katsu, a Kochujang based hot sauce was launched in The U. S. And the second half, it will make its way into larger retailers and we also plan to open a new D2C website and run consumer trial events to expand consumer experience.
Our mid to long term brand building is also underway for our brand Bibigos, our social media, banner ads and influencer endorsement. And we raised unaided awareness from 22% to 26%. In the second half, the consumer trial events and promotions during sports events will continue. We have worked with retailers to create in store Asian destination zones, which continued to grow in number. Kroger's in March 2020 had one store with the Asian destination zoned, and the number went up to two ninety three as of June.
We are set to drive up the number to 600 by the end of the year. And other than Kroger, so we are expecting to expand we are going to expand the Asian destination in other retailers. Next page on update, the busy Micho business in Japan. Japan's vinegar drink market's initial target consumer segment was a middle aged group, but Micho was aimed at females in their 20s and 30s. Fermented fruit flavored K beauty drinks have been a successful concept of differentiation in Japan.
Ten Years from the launch in Japan, Micho has now become a powerful brand worth KRW 100,000,000,000. In the first half, it has posted sales of KRW 73,600,000,000.0 with continued product differentiation, channel expansion and broader awareness, Micho is expected to grow more than 50% on a yearly basis. For diverse offerings, the diluted version will have more flavors with ready to drink and jelly type lineups to have new product offerings. When it comes to channel strategy for Micho, Micho's primary focus was Costco, but now we're making our way into convenience store and drugstores with Micho's B2C reaching 60% in the second half. For a stronger brand awareness of Mitchell, we did TV commercials and also we were on Instagram and other social media platforms to communicate how to enjoy Mitchell to consumers with different lifestyles.
Menu development with tea and coffee chains are underway as we discuss potential matchups with bakery, cosmetics and apparel brands to further amplify the brand awareness. Now we'll move to an update on BIO's progress and creating new growth momentum. Mr. Kim Jung pi, Good afternoon. Let me present highlights of our Bio business.
Bio business unit has long accumulated the world class competency in microbial strain and fermentation, And now we're emerging from green bio to white and red bio. Our green bio business, so with the competency in microbial engineering and control as well as fermentation, production and purification is expanding into white bio that involves plant organism based material development and production. In white bio, marine degradable bioplastic or PHA is our current area of focus to build infrastructure in partnership with HDC Hyundai EP. So from a material manufacturer, we will emerge as a material compounding player to extend the value chain to leverage not only PHA, but a diverse set of the bioplastic materials to develop applications to solidify our position in the white bio space. The Bio business unit's competency in microbials screening and efficacy assessment are currently serving as assets for us to venture into the red bio space.
Microbiome medicine, which can replace existing generics and biologics is in the spotlight of the industry as a new promising technology with a high potential for a fast paced growth. Last July, we acquired a microbiome company, Chanlep, which specializes in strain profiling and genome analysis. With Chanlep's competency and our expertise in microbial biotechnology combined together will create a synergy to accelerate microbiome derived drug development and gain differentiated competitive advantage and customized health functional food. Next is an ESG update. CJJJedang operates under the motto of from nature to table, table to nature to create a virtuous cycle of nature to nature.
To join efforts to stop deforestation and go eco friendly from ingredient sourcing, CJ Selecta plan to source zero soybeans from the Amazon Rainforest and to partner with local businesses council to fund local farmers and source 100% of their soybeans as part of the seed project. Development of 100% of biodegradable material or PHA to create an eco friendly cycle is a critical business for our ESG practice. PHA is the only marine biodegradable plastic material that has been granted all four Comfortability certifications by TUV Australia. The manufacturing base for PHA will be completed by the end of this year. New applications will be developed while creating demand to replace existing petroleum based plastics.
We're also working to ensure human rights of stakeholders. To identify human rights at stake in advance and contribute to addressing relevant issues, detailed work plans are currently in execution and also to commemorate the International Year for the elimination of child labor this year, CJOJDAN signed a UN ILO Conventions for Ending Child Labor. To further embed the value of ESG into our management, we have newly launched the Sustainable Committee. And within the board in climate change, sustainable sourcing, sustainable supply chain will be among things to be addressed by the committee and other key ESG matters will be discussed and reviewed our first strategies and finally pass the committee. And we'll now move to our outlook for the third quarter.
Inflation of commodity price and logistics costs and declining livestock prices in key countries are expected to stay to other unfavorable business environment. We'll continue to focus on profit structure improvement while leveraging the recovery of the B2B food market and K food growth in the global market. Our sales strategy will reflect the market trends and strong market position to cope with industry headwinds. Food business in Korea will continue to be faced with commodity price inflation, and COVID triggered panic buying on the B2C segment, but will be made up by driving strong sales of core products as well as B2B sales with newly launched B2B brand with gift sets during Chuseok. For The U.
S. Food business, the impact of the pizza pricing strategy, launch of key new products, broader channel coverage of K Food, expansion of new dumpling category lineups and recovery of the B2B market including K12 segment with strategic sales expansion across key channels expected to yield growth in sales. For Japan, Micho sales during the high season and K Foods growth including dumpling will continue to drive a fast growth in sales. BioSpin additive business will face headwinds due to a slowing hog cycle in China and commodity price and logistics price hike. However, with continued feed transportation price inflation, we'll take advantage in the logistics cost enabled by our global presence.
While leading trends in crude protein use reduction of the industry will increase the share of feed additives and feed products to mitigate the grain price spikes. For food additives, the nucleotide business while driven by profit centric operations with plant based and clean label food demand on the rise, taste enrich is expected to yield a high growth while other specialty products. Next is on outlook on Feed and Care. Another wave of COVID-nineteen in Southeast Asia will lead to contraction in overall demand as well as lower livestock prices. For this business, we will increase prices in line with the grain price hike and diversify the high margin portfolio.
With that, we expect our overall sales to post a mid to high single digit growth, while the operating profit margin will be at the similar level with the same period last year. And that is it, the end of our prepared remarks, and we're ready to take questions. Questions in Korean will be simultaneously interpreted, but questions asked in English will be consecutively interpreted.
So we have the first question from QM Securities, Mr. Park Seung Jun. Hello, I'm Park Seung Jun from QM Securities. So I have three questions.
So my first question has to do with the Q3 outlook. In terms of sales growth rate or operating profits compared to the second quarter, it seems to be slightly down from Q2. So
it could
be because of changes in bio market situation or margin spread in FMC. So regarding that, could you please elaborate on your Q3 outlook? And as for the second question, it has to do with U. S. Food business.
For Schwann's business, it seems like the market share has risen. So I mean, so whether it be Red Baron portfolio upgrade or focus you mentioned you're focused on high margin products. So can you also elaborate on why how that was possible? And my third question also has to do with U. S.
Business. For Mandu, we are seeing increased distribution rate in The U. S. So in the past, I feel that there has been a lot of diversion from our existing focus from costs. So I'd like to know about the specifics of how the channels have been diversified from the existing focus on Costco.
So regarding our Schwann's Pizza market share, so if you think about Pizza in The U. S, so we have the organic and better for you premium lineup and we have the mass premium and we have general mass lines. So last year we've had the COVID-nineteen. So what happened was that the prices have gone up. So as for our mass products, we have seen much stronger profitability with that.
I mean, Xuan has the competency with direct sales delivery or DSD, which is about getting our products direct to the stores. So with that competency of DSD for Schwannz, we actually have that connection with 700 stores. So that helped us raise market share. And based on that competency from '20 I mean, as we move from 2020 amid COVID-nineteen, we have been able to narrow the market share gap against our competitor Nestle. So and as for diversified channels for dumplings or Mandu in The U.
S, for the ethnic channel, we have penetrated our Mandu and that and we have leveraged the channel of Costco. But our aim actually is to I mean, as for the mandu that were sold by Schwann's and CJ Foods, we want to leverage Schwann's existing sales platform. So one of that was expanding dumplings or Mandu in the grocery channel. So for grocery, we have the Walmart or Kroger So these are the areas that we really want to penetrate in the grocery channels.
In terms of distribution rates, compared to a major Asian competitor, our distribution rate has been significantly higher. It's actually 58% distribution rates. So we believe that this trend is likely to grow. We began with 35%, but over the past year, we have been able to raise that to 57%. So for the remaining year, we want to raise that to 60%.
So that's our plan for increasing our distribution rate in the grocery channel. As for Q3 outlook, if I may elaborate, just like you mentioned, compared to the second quarter, operating profit outlook is lower. But if we think about the second quarter, whether it be Bio or in FMC, it has been quite high in the second quarter in terms of operating profit. I think you should take note of that. So in Bio, it was 21.1% in F and C, it was 9% in terms of operating profits.
So for Bio, mean, in terms of spot prices, the feed additives prices of feed additives had been on a decline from the peak. So that would be reflected later in the contract prices. So compared to second quarter, we will see decline in the third quarter, but it would still be higher than the same quarter last year. And as for FMC, if we think about Vietnam hog ASP or upholstery prices, it's going to be lower than the second quarter. So we factor that in as well.
So we feel that it's going to go down on a quarter to quarter basis. As for food, the third quarter is actually one of the high seasons. We have the Chuseok gift sets sales. So it's going to increase on a quarter to quarter basis. And we'll take the next question.
Just to add on, just to have some revision from our existing material. We have something called all commodity volume or ACV based on RII. So that is actually equivalent to the distribution rate at grocery channel. So 57% I mentioned earlier is based on the RRI data. It's actually based on thirteen weeks on an annual basis.
So on a quarterly basis about 50% and in the material it says 54%, but that's actually based on four weeks. So just to clarify on the timeframe of how the numbers have been calculated. All right. So we'll take the next question. And we have the next question from Ms.
Kim Hyun from Morgan Stanley. Thank you for the presentation. I have three questions. First on Bio, I mean operating profit above 20% for Bio, this is actually quite unprecedented. So of course there has been increase in price and there has been a lot of improvements in product mix.
Are there I mean can you highlight on how such a rapid increase in operating profit has been possible? And what kind of things that you're looking forward to in terms of operating profit at BIO? And my second question is regarding food business overseas. I want you to you have elaborated on the details of sales, but in terms of operating margin, I mean if you think about Schwann's operating margin seems like that's dipped somewhat. So maybe that's because you're investing in diverse things.
So that is why you have lower operating margins. So if we take Schwann's aside, if it I want to know about how the margin for other global business is moving. And my third question my final question is, with increasing commodity prices, you have we have been increasing prices as well. So if you think about process I mean, if you think about commodity prices burden and as well as the benefits that we get from increase in price, I want to know how these could be aligned with each other and what kind of your expectations are for the third quarter? Regarding the operating profit of Bio business for Bio in the second quarter, we have achieved operating profit margin above 20%.
The biggest reason may be a temporary overshooting and there has been high grain prices and there has been some weighing down by increasing commodity prices. So we have strategically raised our ASP and expanded our sales. In that process, there has been some weighing down by logistics costs and there was also the issue with Evergreen. So there has been some hiccup with logistics. As a result, the supply from China had not been directed to overseas market, but because we have worldwide sales network, we had been able to have additional price increase and additional expansion in volume.
So that was one of the temporary reasons why we have seen high spike in the second quarter. And among logistics issues, such logistics crunch has been addressed. So the price has peaked and it's now climbing down. So at current pace, so it may not be we will not be able to achieve as high a operating margin, but we would be able to offset such increasing commodity prices with our technical sales network as well as our competency, so that we would be able to maintain high level of operating profit margin. And as for Global Food margin, well for each we will not I would like to ask for understanding the fact that we would not be breaking down the margin for each region.
But if you look at Schwann's in terms of standalone, it seems like the operating margin has come down somewhat. But the biggest reason is that there has been increasing logistics costs amid pandemic situation and we have also seen increase in advertising costs compared to the same quarter last year. So it has to do with the fact that we are actually making a little long term investment to strengthen our brand equity that we have launched of new products under Red Baron. So we're investing in advertising. So that could be one of the reasons for taking that decline.
So as you have seen in the handouts, so we can see that increased BB Go awareness and increase in market share of Red Baron. These investments are now coming into fruition and we will be making these kinds of brand building activities for in the mid to long term. So other than Shuang, as for the other regions, there are discrepancies among regions. But in general, we have seen increase in operating profits in global worldwide. It is pretty much similar as the same quarter last year.
And as for increase in price for processed food in Korea in February for hetban, Gochujang, Tofu and Bean Sprouts, we have seen we have raised prices for these products. After increasing prices, it takes about two months for that price increase to actually take effect in the markets. So after the price increase in February, some of that had been reflected in our second quarter performance. And as for the increase in commodity prices, we have made some internal efforts to mitigate that impact by cost saving. And for areas where it would be difficult to lower cost, we would be directing that to increase in price.
And as of July for processed meat including spam, there has been some increase in prices and that's going to be further reflected in the third quarter. And in the third quarter is the highest season for food business as CJJJDang. So especially we would be focusing on expanding sales of gift sets for Chuseok and we would also be expanding mega products. And in terms of channels, we want to focus on e commerce, convenience stores and B2B so that we can offset the impact of increase in commodity prices.
So we'll move to the next question. Next question is from Mr. Kim Jong hoo from Merit Securities. Thank you for the opportunity to ask the question. So I have three questions.
So first is on Processed Food. Do we see coming back of the COVID-nineteen and I see B2C declining and then maybe impact on B2B for process with business. And then if you look at SG and A and I see that the transportation cost is going up and I'm wondering if this trend will continue on the next quarter and also advertising cost is higher. And then I am wondering you could actually highlight some of your plans for SG and A. And also I see growth for Micho in Japan.
And is there any change in the market landscape in Japan to really boost the growth of Micho and also market share for Micho in Japan as well? Thank you. Yes, on your first question regarding the processed food. So as you mentioned for B2B on an offline, we expect that dine in demand will go up continuously. And then just like last year, things are not looking rosy for B2B.
We actually launched B2B brand called Create. And right now the prime cost is going off across the B2B industry and now we're just looking to execute strategies to actually address that concern of B2B clients. And I we just about that there could be some debt challenge for B2B and a setback for our B2B business, but that was not that bad for this quarter. And then we believe that we will actually see moderate performance in B2B segment going forward for the rest of this year. Regarding your question on Micho in Japan, So Micho is actually posting a remarkable growth continuously.
So as you can see in the slide, just two years before, it was just only KRW50 billion in sales, but now it posted a triple growth from that point. So does the drinkable vinegar market in Japan, I think actually could be categorized differently Locally in Japan, there's a different types of vinegar like vinegar for beauty and like vinegar drinks, but Micho is one of the vinegar drinks that are on the market in Japan. And there is about a $200,000,000,000 market of drinkable vinegar market in Japan and half of the market has been taken up by our Michio. So Michio can Michio is a diluted vinegar that as one of our ready to drink product is and we're looking to expand our lineup. For example, we're trying to diversify the format, ice cream, for example, water jelly type.
And we are going to take our success in Japan as a best practice and roll out the best press into Southeast Asia and as well as other countries, for example, Taiwan.
And as for SG and A for the company as a whole, for logistics or advertising in the second quarter logistics, I mean, we have to think about the ocean freight charges and there has been some variables that has pushed up the price of ocean freight charges and that's going to likely to persist into second half of the year. And as for advertising in the second quarter, there had been some strategic execution of advertising. And in Korea, ahead of the summer vacation season to maximize our sales, we've had some strategic spent on advertising and in The U. S. In Schwannz, we have been focusing on I mean in order to reinforce Vivo brand, we have spent on advertising and we've also had some advertising investments for Micho as well in Japan.
So after the third quarter, for future growth, we would be making continuous investments, a strategic investment, and that's going to help us strengthen brand equity. And of course, we will also be coupling that with our R and D efforts for new product launches. But even when we are executing these costs, we will be making sure that we can save elsewhere, especially in terms of other miscellaneous expenses. And as for SG and A, despite the increase in advertising costs, it stood at 22.3%, which is the same as the same period last year. And we'll take the next question.
We have a question from Mr. Park Sang Joon of QM Securities. This is me again. Thank you for the opportunity. I have two additional questions.
So we talked about increasing price and we talked mostly about processed food. And what about food ingredients? I feel that there would be changes in food ingredients like flour and cooking oil. So I'd like to know about the price trends as well as your outlook for the third quarter. And my second question also has to do with Micho for Japan.
Our market share is near 50%. That means that we have to have the growth for the market as a whole, which would benefit us. So I'd like to know about the category growth rate for Bicho and what kind of market growth we can expect for drinkable vinegar markets? As for Food Ingredients, in the first half of the year, I mean, there has worsening situation for inventories in global. So the market is very strong.
So the price is quite high. And internally, we have been preemptively getting the commodities that we have been trying to have efficient manufacturing, but there has there is pressure on cost. So for food ingredients, most of them are sold through B2B contracts. So by contract, we're trying to make revisions and trying to reflect that in our pricing as we move forward. As for Micho market growth outlook, So we I mean, in addition to what the presenter mentioned, so the market size of 200,000,000,000, it's for the diluted drink market.
And we account for about half of that. But of course, we have to think about growing this market altogether. So if we calculate back from our growth, the total market is growing at about 40% to 50% on an annual basis. So if you think about sales growth in diluted drink market, we have to we will be adding new flavors. In addition to that, other than diluted drink, we want to pursue further growth for brand itself.
So we would be adding new TPOs including jellies. And other than Japan, we want to go on to Thailand or other countries and make expansion with Micho. Due to time constraints, we'll take the final question and wrap up. We have the next question from Mr. Kim Jin Song of Namshan Partners.
Lee Taesop actually. So just one question. Regarding PHA, I heard that you're having facility to make 5,000 tons in Indonesia and you will be beginning production later next year. So is it going as planned regarding the main production plan and 5,000 tons compared to leading global players, that's not very significant. So I mean, there's a lot of demand with little supply.
So you need to really speed up your expansion plans. So we'd like to know about your expansion plans after building the 5,000 tons. And you have since built a joint venture for PAK and that's going to help you supply ingredients with Hyundai HTP. So can you elaborate on your partnership plan with HDC please? Yes.
So regarding PHA, as we have mentioned earlier in Indonesia at our Paraswan plant, we will be going into main production from next year. So everything is going as planned. Regarding expansion in capacity, this is the first time we're entering White Bio. So at the beginning, we want to focus on stabilizing our yield and we want to optimizing cost. So these would be our initial focus areas.
So we do not have specific plans that can be communicated regarding additional capacity increase. As for the joint venture with HDCEP, So let's say PHA is the ingredient for biodegradable plastic and Hyundai EP specializes in compounding. So through joint venture with Hyundai EP, in addition to supplying ingredients, we want to further expand our value chain to compounding as well. And other than PHA, we want to expand to other applications as well. All right.
With that, we will now wrap up the reports for today. Thank you everyone for your time.