Ladies and gentlemen, thank you for joining us today. We'll now begin the conference call for Q2 2021 results reports by CJ CheilJedang. For today's conference call, we'll first have the presentation by CJ CheilJedang, followed by a Q&A for all the participants here today. If you have any questions later, please press star and number one . We'll first begin with the presentation by CJ CheilJedang.
Ladies and gentlemen, I am Won Song, Head of IR Team at Finance Strategy Office at CJ CheilJedang. We'll now begin the Q2 2021 business result report for CJ CheilJedang. Let me remind you that Korean to English simultaneous interpretation will be provided for foreign investors. Let me first introduce today's participants from CJ CheilJedang. We have Mr. Kang Kyoung Suk, Head of Finance Strategy Office, Mr. An Sung Jun, Head of Finance Planning Department.
Mr. Kim Jung Un, Head of Korea Business Management at Food Business Unit. Mr. Cho Jae Bum, Head of Global Business Management at Food Business Unit. Mr. Kim Sung Pil, Head of Business Planning Team at Bio Business Unit, and Mr. Hwang Yun Han, Head of Business Planning Team at Feed and Care. Mr. Kang Kyoung Suk, the Head of Finance Strategy Office, will first walk you through the business results, followed by issue and outlook reports by respective presenters. We'll then move on to Q&A.
Ladies and gentlemen, I am Kang Kyoung Suk, Head of Finance Strategy Office at CJ CheilJedang. Let's first look at page five. In the second quarter of 2021, we achieved growth of 9% in sales and 26% in operating profits year-on-year.
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, our plans to build and reinforce the bibigo brand abroad are well on track. In bio, based on market leadership, we have proactively increased prices of strategically expanded sales, resulting in significant increase in operating profits. In FNC, rising grain prices decline in hog ASP have been mitigated by biosecurity performance and productivity enhancements. Next page, please. Here you can see the highlights of Q2 2021 results. Excluding CJ Logistics for sales, with expansion of key products at growth channels both in and out of Korea for food, an increase in sales for bio and FNC based on market leadership.
We have been able to achieve sales of KRW 3.7558 trillion at 9% from the same period last year. For operating profits with continuous improvements in profit structure at food, strategic price increase in bio and improvement in livestock productivity in FNC, we have achieved operating profits of KRW 379.9 billion, up 26% from the same period last year. In terms of net profits, we reached KRW 219.2 billion, representing an increase of 75% year-on-year, with improvement in operating expenses, along with the rise in operating profits. Including CJ Logistics, sales grew 6.6% year to KRW 6.3092 trillion, and operating profit rose 22% to KRW 469.6 billion. 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 and growth channels, namely B2B, convenience stores and e-commerce. 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 KRW 1.2023 trillion in sales at home. For global, there has been some decline in sales when converted to 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 KRW 1.0113 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 KRW 129.9 billion, recording 3% increase in year-on-year. 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., in China and Japan. If you look at the slide on the next page, Q2 OP margin is around 6.2% when excluding Schwan's PPA and 5.9% when including Schwan's PPA. If we look at page 10, I would like to take you into the specifics of sales in food in Korea and global.
In Food Business Unit in terms of products, we have seen continued growth for core products such as HMR and mandu. We have also been leading the market with launch of new premium products such as gourmet pizza, sweet and sour pork, and wash and eat noodles. In terms of channel, we focused on growth channels for processed food, namely e-commerce, B2B, and convenience stores. In Q2, sales for Food Business Unit is KRW 1.2023 trillion. Page 11 for global Food Business Unit. 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. Compared to Q2 2019 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 K12 and C-store channels, leading to sharp recovery in sales. For Asia Pacific and Europe, we have continued with high growth thanks to strong B2B, with recovery needing out an expansion of K-food sales. As a result, China grew 5% and Japan grew 51%. For Q2, global sales reached KRW 1.0103 trillion. 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 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 and maximized product sales, we achieved record high quarterly operating profit of KRW 193.9 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 bases 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. By promoting high-margin specialty products and accelerating efforts to develop new markets with TasteNrich, 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.
You can also see the increase in share of specialty products in total sales mix. 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 aqua feed enabled by R&D and improved productivity through biosecurity. In terms of sales, FNC experienced 19% growth year-on-year with increase in feed ASP, expanded sales of high value-added aqua feed, improved productivity through livestock biosecurity, and expanded downstream volume. In terms of operating profits, it was down by 13% year-on-year to KRW 56.1 billion. To make up for the belated pricing increase that came only after the rise in 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 belated pricing increase weighed down on profitability, but FNC pursued stable volume expansion in hog and poultry with profit-driven structural improvement. FNC 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 low livestock prices. In Indonesia, we have secured cost competitiveness with continuous improvement in profit-driven business structure. With declining supply of poultry in the market, prices have risen, resulting in increased operating profits. If you look at the next page, you can see that OP margin for FNC declined by 3.2 percentage points year-on-year to 9%. Let's look at CJ Logistics performance on page 16.
CJ Logistics pursued increase in prices in response to rising costs for supporting parcel delivery drivers and parcel classification work. There has been base effect in domestic logistics, including port handling volumes. The sales in Q2 stood at KRW 2.7472 trillion, up 4% from the previous year, and OP at KRW 96.6 billion. Slide 19 shows SG&A and non-operating income and expenses, including CJ Logistics. CJ and SG&A expenses, similar to last year, was 22.3% out of the sales. Non-operating expenses, down by KRW 48.3 billion or negative KRW 40.5 billion. For inflation in sea freight cost and oil price drop of transportation cost by KRW 38.4 billion, promotion and advertising costs jumped by KRW 22.1 billion, but SG&A remained at a similar level to last year's.
For non-operating expenses, the interest income improved by a great margin of KRW 14.5 billion. The total non-operating expenses were up by KRW 48.3 billion. With CJ Logistics included, the SG&A and non-operating income are mostly determined by CJ CheilJedang businesses. We'll skip slide 20. We'll go over progress in key strategy and outlook. First, we will begin with an update on the U.S. business. That will be presented by Mr. Jaebum Cho.
Good afternoon. My name is Jaebum Cho, Head of Global Food Business Department. Last year's panic buying due to COVID-19 and this year's B2C pizza market contraction were manageable enough for our food business to drive a moderate level of sales so far. Pizza business market share grew. 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 is 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. Schwan's Home Service is a frozen food delivery business, which was not excluded from the Schwan's Company acquisition deal. Schwan's Company currently manufactures and supplies frozen food to the home service unit. Compared to pre-COVID, Schwan's Company sales grew at the fastest pace among other frozen food manufacturers in the U.S.
If you look at the graph on the left, i n the B2C frozen food segment, the annual sales as of June 2021 grew 32% compared to the annual sales as 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 Schwan's Company in 2019, the B2C pizza market saw continued growth of Schwan'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.
Schwan's Food Service sales in the second quarter grew 79%, with broader vaccination and schools reopening throughout the months following September or the high season for K12 channel, dumpling shipments and accounts will jump in number to continue a fast-paced growth. Now, moving to K-food business growth in the U.S. The dumpling market share in the grocery channel continues to expand. Bibigo's dumplings market share in the grocery channel grew from about the 14% in Q2 last year to about 25% in Q2 this year by 11% point. With Schwan's Food's existing brand, bibigo's dumplings market share combined together, our dumpling market share in the grocery channel is 38%, now we're number one in dumpling grocery channels. Dumplings for the U.S. market in the pipeline are chicken, the fried rice, and K-sauce.
Our chicken's crispiness and garlic and gochujang-based Korean flavor present 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 authentic taste. It has been distributed to 3,000 retailers, which will expand further in the second half. For K-sauce, the very first product, GOTCHU, a gochujang-based hot sauce, was launched in the U.S. In 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. Micho long-term brand building is also underway for our brand bibigo through social media, banner ads, and influencer endorsement. We raised unaided awareness from 22%- 26%.
In the second half, the consumer trial events and promotions during sports events will continue. We have worked with the retailers to create in-store Asian destination zones, which continue to grow in number. Kroger, in March 2020, had one store with the Asian destination zone. The number went up to 293 as of June this year. We are set to drive up the number to 600 by the end of the year. Other than Kroger, we're going to expand the Asian destination zone in other retailers. Next page on update on the Micho business in Japan. Japan's vinegar drink market's initial target consumer segment was the middle-aged group, but Micho was aimed at females in their 20s and 30s. Fermented fruit-flavored K-beauty drinks, having a successful concept of differentiation in Japan.
10 years from the launch in Japan, Micho has now become a powerful brand worth KRW 100 billion. In the first half, it has posted sales of KRW 73.6 billion. 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's primary focus was Costco. Now we're making our way into convenience store and drugstores, with Micho's penetration B2C reaching 60% in the second half. For a stronger brand awareness of Micho, we did TV commercials. Also we were on Instagram and other social media platforms to communicate how to enjoy Micho to consumers with different lifestyles.
Menu development with tea and coffee chains are underway as we discuss potential mashups with bakery, cosmetics, and apparel brands to further amplify the brand awareness. We'll move to an update on Bio's progress in creating new growth momentum. Mr. Kim Sung Pil.
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. 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 bioplastic materials to develop applications to solidify our position in the white bio space. The Bio Business Unit competency in microbial 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, ChunLab, which specializes in strain profiling and genome analysis.
With ChunLab's competency and our expertise in microbiology technology combined together, will create the synergy to accelerate microbiome-derived drug development and gain differentiated competitive advantage in customized health functional food. Next is an ESG update. CJ CheilJedang operates under the motto of "From nature to table to nature" to create a virtual 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 to run a council to fund local farmers, and source 100% of their soybeans as part of the feed project. Development of 100% 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 compostability certifications by TÜV Austria.
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 are also working to ensure human rights of stakeholders. To identify human rights as staked events and contribute to addressing relevant issues, detailed work plans are currently in execution, also to commemorate the international year for the elimination of child labor this year, CJ Cheiljedang 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. Within the board, climate change, sustainable sourcing, sustainable supply chain will be among things to be addressed by the committee. Other key ESG matters will be discussed and reviewed for strategies and finally pass the committee. We'll now move to our outlook for the third quarter.
Inflation of commodity price and logistics cost and declining livestock prices in key countries are expected to stay to other unfavorable business environment, while continue focused 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 this 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 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-food growth, including dumpling, will continue to drive a fast growth in sales. Bio's feed additive business will face headwinds due to a slowing hog cycle in China and commodity price and logistics price hike. With continued feed transportation price inflation, we'll take advantage in the logistics cost enabled by our global presence. Leading trend 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, TasteNrich is expected to yield a high growth while other specialty products. Next is on our CJ Feed&Care. Another wave of COVID-19 in Southeast Asia will lead to contraction in overall demand, as well as lower livestock prices. For feed 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 a similar level with the same period last year. 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.
We'll now begin Q&A. If you have any questions, please press star and number one. If you want to cancel, please press star and number two. Please make sure that you speak closer to your receiver so that everyone can hear you fine. We have the first question from Kiwoom Securities, Mr. Park Sangjun.
Hello, I'm Park Sangjun from Kiwoom Securities. I have three questions. 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. It could be because of changes in bio market situation or margin spread in F&C. Regarding that, could you please elaborate on your Q3 outlook? As for the second question, it has to do with U.S. food business. For Schwan's business, it seems like the market share has risen. Whether it be Red Baron portfolio upgrade or you mentioned you're focused on high-margin products. Can you also elaborate on why, how that was possible? My third question also has to do with U.S. business. For mandu, we are seeing increased distribution rate in the U.S. In the past, I feel that there has been a lot of diversion from our existing focus from Costco. I'd like to know about the specifics of how the channels have been diversified from the existing focus on Costco.
Regarding Schwan'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. Last year we've had the COVID-19, so what happened was that the prices have gone up. As for our mass products, we have seen much stronger profitability with that. Schwan's has the competency with direct sales delivery or DSD, which is about getting our products direct to the stores.
With that competency of DSD for Schwan's, we actually have that connection with 700 stores. That helped us raise market share. Based on that competency, as we move from 2020, amid COVID-19, we have been able to narrow the market share gap against our competitor, Nestlé. As for diversified channels for dumplings or mandu in the U.S., as for the ethnic channel, we have penetrated our mandu, and we have leveraged the channel of Costco. As for the mandu that were sold by Schwan's and CJ Foods, we want to leverage Schwan's existing sales platform. One of that was expanding dumplings or mandu in the grocery channel. For grocery, we have the Walmart or Kroger or Target. These are the areas that we really want to penetrate in the grocery channels.
In terms of distribution rate, compared to a major Asian competitor, our distribution rate has been significantly higher. It's actually a 58% distribution rate. 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%. For the remaining year, we want to raise that to 60%. 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. If we think about the second quarter, whether it be bio or in F&C, it has been quite high in the second quarter in terms of operating profit. I think you should take note of that.
In bio, it was 21.1%, in F&C, it was 9% in terms of operating profits. For bio, in terms of spot prices, the prices of feed additives has been on a decline from the peak. That would be reflected later in the contract prices. Compared to second quarter, we will see decline in the third quarter, but it would still be higher than the same quarter last year. As for F&C, if we think about Vietnam hog ASP or poultry prices, it's going to be lower than the second quarter. We factor that in as well. 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 set sales, so it's going to increase on a quarter-to-quarter basis.
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 our IRI. That is actually equivalent to the distribution rate at grocery channel. 57% I mentioned earlier is based on the IRI data. It's actually based on 13 weeks on an annual basis. On a quarterly basis, it's about 50%. In the material, it says 54%, but that's actually based on four weeks. Just to clarify on the timeframe of how the numbers have been calculated.
All right. We'll take the next question. We have the next question from Ms. Kim Hyeeun from Morgan Stanley.
Thank you for the presentation. I have three questions. First, on bio. Operating profit above 20% for bio, this is actually quite unprecedented.
Of course, there has been increase in price and there has been a lot of improvements in product mix. 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? My second question is regarding Food Business Unit overseas. You have elaborated on the details of the sales, in terms of operating margin, if we think about Schwan's operating margin, seems like it has dipped somewhat. Maybe that's because you are investing in diverse things, so that is why you have lower operating margins. If we take Schwan's aside, I want to know about how the margin for other global business is moving. My final question is, with increasing commodity prices, we have been increasing prices as well.
If we think about commodity prices burden 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 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. There has been high grain prices and there has been some weighing down by increasing commodity prices, 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, there has been some hiccup with logistics. As a result, the supply from China had not been directed to overseas markets.
Because we have worldwide sales network, we had been able to have additional price increase and additional expansion in volume. That was one of the temporary reasons why we have seen high spike in the second quarter. Among logistics issues, such logistics crunch has been addressed, the price has peaked and it's now climbing down. At current pace, we will not be able to achieve as high a operating margin, we would be able to offset such increasing commodity prices with our technical sales network as well as our competency, that we would be able to maintain high level of operating profit margin. As for global food margin, I would like to ask for your understanding in the fact that we would not be breaking down the margin for each region.
If you look at Schwan's, in terms of standalone, it seems like the operating margin has come down somewhat. The biggest reason is that there has been increase in logistics cost amid pandemic situation, and we have also seen increase in advertising cost compared to the same quarter last year. It has to do with the fact that we are actually making mid to long-term investment to strengthen our brand equity, and we have launch of new products under Red Baron, so we're investing in advertising. That could have been one of the reasons for taking that decline. As you have seen in the handout, we can see that increased bibigo 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 in the mid to long term.
Other than Schwan's, as for the other regions, there are discrepancies among regions. In general, we have seen increase in operating profits in global worldwide. It is pretty much similar as the same quarter last year. As for increase in price for processed food in Korea, in February, for tofu, and bean sprouts, 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. After the price increase in February, some of that had been reflected in our second quarter performance. As for the increase in commodity prices, we have made some internal efforts to mitigate that impact by cost saving. For areas where it would be difficult to lower cost, we would be directing that to increase in price.
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. In the third quarter is the highest season for food business at CJ CheilJedang. Especially, we would be focusing on expanding sales of gift sets for Chuseok, and we would also be expanding mega products. 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.
We'll move to the next question. Next question is from Ms. Kim Jung-wook from Meritz Securities.
Thank you for the opportunity to ask the question. I have three questions. First is on processed food. Do we see a coming back of the COVID-19? I see B2C are declining and then maybe impact on B2B for processed food business. If you look at SG&A, I see that the transportation cost is going up, and I'm wondering if this trend will continue in the next quarter? Also advertising cost is higher, then I am wondering if you could actually highlight some of your plans for SG&A. Also, I see a steep growth for Micho in Japan. 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, o n your first question regarding processed food. As you mentioned, for B2B, on an offline, we expect that dining demand will go up continuously. Just like last year, things are not looking rosy for B2B. We actually launched a B2B brand called Creeat. Right now, the prime cost is going up across the B2B industry, and now we are just looking to execute strategies to actually address that concern of B2B clients. We just thought that there could be some challenge for our B2B in aspect for our B2B business. That was not that bad for this quarter. We believe that we will actually see a moderate performance in B2B segment going forward for the rest of this year. Regarding your question on Micho in Japan. Micho is actually posting a remarkable growth continuously.
As you can see in the slide, just two years before, it was just only KRW 50 billion in sales, but now it posted a triple growth from that point. Just the drinkable vinegar market in Japan, I think actually could be categorized differently. Locally in Japan, there's different types of vinegar, like vinegar for beauty and vinegar drinks. Micho is one of the vinegar drinks that are on the market in Japan. There is about a KRW 200 billion market of drinkable vinegar market in Japan, and half of the market has been taken up by our Micho. Micho is a diluted vinegar that is one of the ready-to-drink product. We're looking to expand our lineup. For example, we're trying to diversify the format, ice cream, for example, water jelly type.
We are going to take our success in Japan as a best practice and roll out the best practice into Southeast Asia, and as well as other countries, for example, Taiwan. As for SG&A for the company as a whole. For logistics or advertising in the second quarter logistics, 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 likely to persist into the second half of the year. As for advertising in the second quarter, there has been some strategic execution of advertising. In Korea, ahead of the summer vacation season to maximize our sales, we've had some strategic spend on advertising.
In the U.S., in Schwan's, in order to reinforce bibigo brand, we have spent on advertising, and we've also had some advertising investments for Micho as well in Japan. After the third quarter, for future growth, we would be making continuous strategic investment, and that's going to help us strengthen brand equity. Of course, we will also be coupling that with our R&D efforts for new product launches. Even when we are executing these costs, we will be making sure that we can save elsewhere, especially in terms of other miscellaneous expenses. As for SG&A, despite the increase in advertising cost, it stood at 22.3%, which is the same as the same period last year. I will take the next question.
We have a question from Mr. Park Sang-jun of Kiwoom Securities.
This is me again. Thank you for the opportunity. I have two additional questions. We talked about increase in price, and we talked mostly about processed food. What about food ingredients? I feel that there would be changes in food ingredients like flour and cooking oil. I'd like to know about the price trends as well as your outlook for the third quarter. 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. I'd like to know about the category growth rate for Micho and what kind of market growth we can expect for drinkable vinegar markets.
As for food ingredients, in the first half of the year, there has been a worsening situation for inventories in global. The market is very strong, the price is quite high. Internally, we have been preemptively getting the commodities, and we have been trying to have efficient manufacturing. There is pressure on the cost. For food ingredients, most of them are sold through B2B contracts. By contract, we are trying to make revisions and trying to reflect that in our pricing as we move forward. As for Micho market growth outlook, in addition to what the presenter mentioned, the market size of KRW 200 billion is for the diluted drink market, and we account for about half of that. Of course, we have to think about growing this market altogether. If we calculate back from our growth, the total market is growing at about 40%-50% on an annual basis.
If we think about sales growth in diluted drink market, we will be adding new flavors. In addition to that, other than diluted drink, we want to pursue further growth for Micho brand itself. 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.
There are no questions waiting. If you have questions, press star and press one on your phone. We have the next question from Ms. Kim Tensong of Namsan Partners.
Itesok, actually. 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. Is it going as planned regarding the main production plan? And 5,000 tons compared to leading global players, that's not very significant. There's a lot of demand with little supply, so you need to really speed up your expansion plans. We'd like to know about your expansion plans after building the 5,000 tons. You have since built a joint venture for PHA, and that's going to help you supply ingredients with Hyundai EP. Can you elaborate on your partnership plan with HDC, please?
Yes. Regarding PHA, as we have mentioned earlier, in Indonesia at our Pasuruan plant, we will be going into main production from next year. Everything is going as planned. Regarding expansion in capacity, this is the first time we are entering white bio. At the beginning, we want to focus on stabilizing our yield, and we want to optimizing cost. These would be our initial focus areas.
We do not have specific plans that can be communicated regarding additional capacity increase. As for the joint venture with HDC Hyundai EP, let's say PHA is the ingredient for biodegradable plastic, and Hyundai EP specializes in compounding. Through joint venture with Hyundai EP, in addition to supplying ingredients, we want to further expand our value chain to compounding as well. Other than PHA, we want to expand to other applications as well.
All right. With that, we will now wrap up the report for today. Thank you everyone for your time.