I am Eun Fang, Head of IR Team and Finance Strategy Officer, CJHA J. Dong. We'll now begin the Q1 twenty twenty one Business Results Report for CJCG. Let me remind you that Korean through English simultaneous interpretation will be provided for foreign investors. Let me first introduce today's participants from CJ.
We have Mr. Kang Kyung Seo, Head of Finance Strategy Office Mr. Aang Seung Joon, Head of Finance Planning Department Ms. Yeo Kyung Mi, Head of Treasury Team Mr. Kim Jong Ho, Head of Korea Business Management at Food Mr.
JB Cho, Head of Global Business Management at Food Mr. Kim Hyung Ho, Head of Digital Business Management team at Food Mr. Han Kyung Woo, Head of Management Support Division at Bio and Mr. Hong Yoon Man, Head of Business Planning team at Feed and Care. So Mr.
Kang will first go through the business results, followed by issue and outlook reports by respective presenters. We will then move on to Q and A. Hello, everyone. I am Kang Hyung Seok from Finance Strategy Office of TJCJ. Please go to Page five.
As for the first quarter, we have seen stronger profitability and with expanded sales and market leadership and with results from biosecurity. So thanks to all that, we have been able to grow by 5% in sales and 56% for operating profits. And if we move on to the next page, Page Slide six. If we look at the highlights of the first quarter of twenty twenty one, this is excluding CJ Logistics. In sales, we have seen continuous growth in core products and channels in food.
And in Bio and Feed and Care, we have been able to strengthen market leadership. So we have experienced 5% growth year on year to KRW3.6 trillion. And as for operating profits, with profit driven strategy in food and high margin products in bio as well as rising hog prices in FMC, we have been able to grow 56% to JPY 3 and 42,300,000,000.0. And as for net profits, with the base effect from disposal gains from Kian side last year, it has reduced by 52%. But if we put that aside, we have actually increased by billion.
If we include CJ Logistics, we have seen growth in sales of KRW347.2 billion and KRW109.2 billion in operating profit. And moving on to the following slides. If we look at the performance of each business unit, let us first begin with food business unit. For sales, despite strong one, we have been able to grow 2% year on year. For Korea business, we have been able to select and focus on core products and channels.
So we have seen continuous growth and we have been we have demarketed underperforming products and customers and there has been a timing difference in gifted sales. So we have seen growth of 5% to $1,280,000,000,000 And as per global, we have seen high growth in Japan and China with expanded sales from core products by country. But in The U. S, there has been some issues with foreign exchange and COVID-nineteen that resulted in slow growth in B2B. So we stood at NT1.2 trillion dollars And as for operating profits with efficient resource allocation, we have seen 52% year on year to billion.
In Korea, we have been able to improve cost and profit structure to really strengthen our profitability base. And in global, with expanded K Foods sales, we have been able to increase profitability as well. If you look at the next slide, our operating margin is about 8.3% excluding purchasing price allocation of Schwann's. And if we include that, it's about 7.6%. And let's look at Slide 10.
If we look at the details of Korea business at Food for Food Business Korea, we have seen continuous growth in core products, namely Hefam, Mandu and HMR. And in terms of channels, we have focused on e commerce and convenience stores and processed food. If we move on to the next slide, for global food business, in The U. S, there has been some issues with B2B because of COVID-nineteen and strong one, even so we have been able to grow in B2C. So we have been able to maintain sales similar to last year's level.
And for B2B with active rollout vaccination, we have seen recovery in demand since March for B2B. And as for China, we have expanded sales of core products focused on e commerce and with recovery in dining out demand, have seen increase in B2B demand, which resulted in growth of 13% for K Food and 19% for online. And as for other regions, we have also seen much growth in Japan and other regions as well. If you can go on to the next slide. For Bio, so in line with low use I mean declining use of crude protein, we have been able to raise prices by expanding use of amino acids and we have strengthened market leadership.
So we have seen increase of 15% in sales. And as for operating profits, we have been able to achieve billion, which is an increase of 51% year on year. As for feed additives with technical marketing, we have been able to see expanded share of high margin products with lower use of CP and we have been able to proactively lead ASP. And as for food additives, there has been lack of containers from Chinese competitors. So leveraging on that we have been able to expand sales of nucleotides worldwide and we have accelerated new market developments for Taste and Rich.
And as for operating profits for feed additives, we have been able to proactively lead the market with lysine and tryptophan. And based on cost competitiveness, we have been able to minimize the impact of increase in commodity prices. And as for Food Additives, leveraging our market leadership in euclideic acid, we have been able to expand sales worldwide and we have also expanded sales of specialty products including arginine and histidine. Moving on to the next page for our Bio business. In graph, the operating margin is 9.9%, which is up by two four percentage points from the same quarter last year.
And moving on to Feed and Care, with high continuously high prices for livestock in Southeast Asia, with strong performance in biosecurity. We have been able to also improve productivity. So we have seen increase in sales of 8% for sales and we have achieved operating profits of billion, which is 69% year on year. As for feed, there has been a decline in demand due to ASF and COVID-nineteen, but we have actively increased prices ahead of commodity prices increases and we have been able to see continuous growth in aqua feed. And as for livestock based on thorough biosecurity competency, we have minimized AS mortality rate and we have continuously improved productivity.
So we have seen increase of hog sales in Vietnam by 28% and with increase in prices for Indonesian poultry and Vietnamese costs, have been able to see increase in sales. And as for operating profits, we have been able to continuously improve productivity. And as for Indonesia, we have also improved cost structure and there has been recovery in poultry prices, which resulted in improvements of operating profits. Moving on to the next page, we have seen operating profit margins stood at 15.1%, which is an increase of 5.4 percentage points from the year before.
Next is on Slide 16 for CJ Logistics. Thanks to the increase in the parcel business. The business has gone up by seven percentage year on year to record trillion. As for operation profit, the cost has gone up that goes beyond the price increase of parcel. And unfortunately, that's gone down by 70% to achieve KRW 48,100,000,000.0.
Moving on to Slide 19. This excluding CJ Logistics is looking to SG and A and non operating profit and loss. The SG and A has gone down by 0.7 percentage points excuse me, gone up by 0.7 percentage points to 23.1% and also it's also gone up by zero point for Baiyoo, it's gone up by 0.9 percentage points. Now you can also see the advertising promotion cost has gone up and this is due to the brand campaigns. The total for profit and loss due to the disposal of the KAYANG Land plot is achieved of billion.
But if you exclude that, then actually we've seen an improvement of RMB92.4 billion. The transaction cost was RMB 3,100,000,000.0 loss, excuse me, and the foreign exchange valuation loss was minus RMB 30,700,000,000.0. Now including CJ Logistics, the SG and A was mostly due to CJCJ, so we don't necessarily have to go into the details. Next is on issues and outlook. First, we'll start with the global food business expansion, which is on Slide 22.
Good afternoon. I am JB Cho of Global Food Business. In The U. S, Bibigo brand positioning is being strengthened in the grocery channel, especially with Mandu. Bibigo Mandu's market share in grocery channel was 21.3% in Q1 twenty demonstrating a year on year increase of approximately nine percentage points from 12.6%.
Bibigo brand's market share in Asian snack category was 9.1% in Q1 twenty twenty one, showing a year on year increase of five percentage points from 4.1%. Meanwhile, ACV for Mandu continues to grow as a synergy effect to integrating Schwann's and CJ Foods frozen grocery channel. When we say ACV, it's more like a distribution rate. So it's peaked significantly from 35.1% price integration to 52.4% post integration. By individual grocery stores, ACV jumped from 41.7 to 67.7% with Retailer W As for Retailer Tea, distribution began out of integration to record 82% ACV in March.
Now in the major grocery retailers, we actually are managing the categories and we have actually called this Asian zones, which is a set of shelves offering collection of Asian foods. In one of the largest retailers in The U. S, K, the number of branches with Asian zones that have jumped from just one in March 2020 to 26 this January. And this number is expected to reach 600 by July. Sales growth in Asian frozen food category of stores with Asian zones stood at 69%, much higher than 17% growth rate shown by stores without the zone.
Moving on to China, Mandu is showing continuous sales growth in online channels. China's year on year online sales growth was 19% in Q1, while for Mandu alone, it was 35%. Furthermore, we plan to launch new products in new categories such as Korean style chicken and self heating soups to target Generation Z and the consumer base known as Smart Moms. In terms of channels, we continue to strengthen our position in online platforms such as Tmall and JD, while also expanding into other channels such as TikTok, which is rising in terms of popularity most recently. In Japan, we continue to strengthen the mutual brand by launching new products and expanding channels.
Subsequent to achieving RMB100 billion sales in 2020, high quarter on quarter growth of 28% and year on year growth of 91% was achieved in Q1. Especially new products are also being introduced, introducing including ready to drink products and jelly products, while expanding penetration into new channels such as convenience stores and drugstores. Furthermore, PB Go Mandu, which has richer filling and is bigger in size, key differentiators to local products, is also displaying robust sales of 175% year on year growth. Next is Baiyo's new growth driver on Slide 23. Good afternoon.
I am Han Kyung Hoo. With health and safety, natural and eco friendly rising as major consumption trend keywords in developed countries such as Europe and North America, We plan to expand development, production and sales of sustainable and 100% biodegradable materials derived from plants and manufactured in nature friendly methods. First is clean label, condiment seasoning and flavor materials. Taste and Rich is 100% fermented clean label condiment and seasoning material launched in May 2020, made with natural ingredients such as sugarcane and containing no artificial additives. It maximizes an ingredient's original flavor and offers a balanced taste despite the low sodium content.
The market size is estimated to be around KRW1 trillion as of 2019. CJCJ's Taste and Rich is garnering attention as clean label material, which are additive and allergen free and plant based and are being spotlighted in food and consumer goods market. Sales is picking up particularly in the alternative meat industry. Sales goal for this year is to achieve five fold year on year growth. Flavor Enrich, which is another new material assist team produced in non electrolysis method.
And this March, we have successfully developed world's first mass production technology. Cysteine is a functional amino acid with antioxidants, detoxification and skin regeneration effects and is used as a flavor material to create a meat like flavor. With the recent rise in alternative meat and plant based foods, we plan to target giant global flavor houses and food companies to create double digit CAGR growth. Next is PHA and WhiteBio. PHA developed by CJ CJ's Bio business unit has been certified for its biodegradability in all four areas, industrial, home, soil and marine by TUB, the most prominent eco friendly certifier in Europe.
Production facilities will be completed in Indonesia by the end of twenty twenty one and production will kick off in 2020 at 5,000 ton capacity. Moreover, to expand application, we are actively searching for collaboration opportunities with potential clients and partners. For example, CJCJ will be supplying PHA filament to Helium Polymer, a Dutch three d printing company. And most recently, we have developed and applied PHA packaging to CJ CJ Foods tofu product. To achieve this, we have also set up collaborative relationship with chemical material and compounding companies such as SK Chemicals and Wusong Chemical.
Leveraging PHO properties and the advantages of biodegradation, we will continue to search for clients and partners to expand application cases in order to dominate a leading position in the biodegradable material market. Finally is the outlook for Q2, moving on to Slide 24. So overall, to loss U. B2C base burden and increase in raw material input costs, profit improvement for foods business will restricted. However, with increase in food additive sales price, Bio business is forecasted to show similar performance to the previous year.
Going into specific business segments, I'll start with food business in Korea. The B2C base burden of last year and increase in raw material costs will be a burden, but this is to be offset with recovery of B2B business, expansion into CVS channel and creating of high margin core products and channels. For some items, competition is expected to become more intense, but this will be responded with efficient execution of cost, shift into digital channels and strengthening of fundamental competitiveness driven by brand and R and D. As for global food business, B2C based burden is still present in U. S.
Due to last year's COVID effect, but overall sales growth is expected with increase in sales price of key products such as pizza, expansions on the grocery channels and recovery of B2B channel. For China, sales growth will continue by expanding Monday sales, leveraging our position in the online market, recovering B2B sales, including seasoning and condiments and launching new products such as chicken. For bio, we will reflect the increase in grain and logistics costs to the feed additive sales price as demand rises with the recovery of Chinese hog markets. Profit will also rise for key items such as lysee and tryptophan as it continuously strengthen our cost competitiveness. For food additive market, high growth of Taste and Rich is expected to continue as next generation condiment material along with sales increase for specialty products like arginine and histidine as sales for nucleotide expands based on our market dominance.
For Feed and Care, increasing grain cost expected to heighten the burden for raw materials and cause gradual decline in Vietnamese hog price. However, this is to be offset with increase in feed sales price, expansion of sales volume by improving livestock productivity and active improvement of cost structure. Consequently, CSG's overall sales growth is forecasted to be in the mid to high singles with OP margin 8% to 9%. That is all the presentation prepared for today. Next, we'll move on to Q and A session.
We'll now begin the Q and
you.
So we have the first question from Mr. Park Sang Joon of QM Securities. Ladies and gentlemen, I am Park Sang Joon. Thank you for this opportunity. I have three questions.
The first question has to do with, if you look at there is a lot of increase in commodity prices, so there's a lot of burden from raw material prices. So in terms of defending your margin, do you have plans to raise prices for raw ingredient as well as processed foods products? And my second question is for second quarter guidance for Bio. I think it's pretty the profitability outlook seems very high and that's because of increasing the price of amino acids. So I want to see how you're looking into the profitability outlook for the second quarter.
Is it going to be temporary or is it going to continue into the third and fourth quarter? And the final question has to do with Feed and Care. When we look at the operating margin, it's very good. So we have some doubts about whether it's normalized operating margin for Feed and Care. So we would like to know if there has been any how what would be the outlook as we move forward regarding FMC's operating profit margin?
Okay. So as for your questions, as for the burdens for rising commodity prices, since the second half of last year, there has the commodity prices has been rising already. So we have been factoring that into our second quarter. So we have had some hedging measures and we have also conducted cost saving measures to make sure that we can defend profit margin as much as possible. In doing so, however, we have made a lot of efforts, but for the additional burden that's going to come from additional increase, we may have to we are currently considering raising prices for certain products.
But right now,
we don't have any set plans yet.
So we can't really share that with you at this so I can say that we are currently at we're currently considering potential increase in prices. And as for the second quarter performance of Bio, in the first quarter, we have achieved up until we have I mean, I think we have been able to continue high operating margin until April. And as for the guidance for the second quarter as presented earlier, it's going to be similar to the same period of last year or it's going to be slightly higher. So that's our outlook for the time being. As for the second half of the year, we would have to we are now looking closely looking into the pricing trends, but we can't really give you a specific number right now.
But so it's going to be similar to the third quarter last year or it's going to be slightly less. And as for Feed and Care, regarding the question on Feed and Care, a lot of the operating margin is closely related to Vietnamese hog prices and there has been increase in shipment of hogs, so it's going to decline. So consequently operating margin is going to be similar to last year. So that's our outlook.
Next question is from Mr. Kim Jong Ho of Merit Securities. Please question. Thank you for my opportunity. I have three questions on hand.
First is regarding food. OP seems to have gone up a lot, but if we break this down into Korean global, would that be possible? Secondly, regarding Schwann's, in Q2, the U. S. Is now kind of recovering back from COVID effect.
So it could be bad for B2C, but for B2B could be good news. But if we all put this together, how is Sean going to do in Q2? Finally, the third question, the Feed and Care, if the high POP price maintains, will this profit also be continued? I don't know if it's just me, but I wasn't able to hear the question for the first person's question. So could you repeat the answer to that question, please?
I would like to first answer your question regarding Schwann's, please. So as of March, the base effect for B2C, yes, it was there. However, as of April, the base effect is to be reflected. However, we are going to continue selling the strategic products as well as the K Foods so that we can offset the B2C base effect as much as possible. And as it was mentioned in the slides, as of March, with the vaccinations now being provided, food service and the BE demands are now being rallied.
So as of Q2, we expect it to recover with speed and we think we will be able to achieve growth even based on the USD. As for the first question, the Korea food, the raw material cost actually was reflected here. However, internally, in terms of cost saving and our purchasing efforts, we're able to facilitate the increase in profit. And also the gift set sales during the Lunar New Year, last year that was affected in Q4, but for this year it was fully factored into Q1. So it did show a big hike in profit.
By each unit, unfortunately, we are not able to break this down by like Korea and global. However, overall, for food profit, they did evenly contribute in the profit of food business, both Korea and global. Especially for global business year on year, we
did see a meaningful improvement in margin. And once again for FNC, as for feed, we are seeing continuous increase in commodity prices. So for feed, it's going to be similar or slight decline from the same period last year as for livestock. In Vietnam, there has been declining incidence of ASF and increase in number of livestock. So with increase in shipping, we would be seeing lower prices.
But we would be focusing on biosecurity, so we would be able to see slight increase in operating margin from the same period last year. So we have the next question from Mr. Park San Chun of QM Securities. Please go on Mr. Park.
Thank you again for this opportunity. I just have two additional questions. So regarding the cost burden from commodities, it's not just Korea. I'm sure there is an issue with global business as well. So including Schwannz, whether it be The U.
S. As well as China and Japan, they're all going to be affected. So we want to see whether we're actually seeing the impact of increasing commodity prices translating into your business. And if that's the case, how much increase can we expect in price? I think it's going to be pretty different from what's happening in Korea.
And my second question is regarding Bio as a new growth driver. You have several products in the pipeline. So you have highlighted that in your presentation. So if you look at their share in total mix, how much are you expecting and how what is the outlook for next year? So please give me guidance on that.
Thank you. As for the impact of commodity price increase in global business, just like Korea, we are closely monitoring the trend. Especially COVID-nineteen is now subsiding. Amidst such changes in market environment, we're closely looking into it. And especially for China, we are seeing risk ASF risk.
We are currently looking into their impact on our cost and prices. So one of the things that are highly relevant to our business in Global is the price of pork. So in The U. S, we have seen increase of about 30% versus our initial outlook. So the price has gone up by 30% for pork.
So we want to go for integrated purchasing for global in terms of pork. So we want to hedge with that integrated purchasing. And second, in B2C, in the short term, we want to think about hedging this risk with risk by raising the average sales price. So for The U. S.
And China, this is how we are responding in the short term. And as for your questions regarding new growth driver in Bio, so we have the flavor ingredients and we have our white bio as our new products. So if you look at their share in total sales mix, we can't really give you the specific numbers today, but I can tell you that especially for White Bio, we have begun with 5,000 ton pilot. We have begun the pilot construction and is going as planned. So we are at the initial stage.
So we have to continuously expand sales. So that's where we are at with our new growth drivers for the time being.
Next is Ms. Kim Hyun from Morgan Stanley. Please ask your question. Good afternoon. Thank you for my opportunity.
Have two questions. First is in Korea's processed food industry, HMR growth is currently at a single digit rate. I think it's the first time we have seen this. Of course, the base is already high, however. CJ, CJ, how do you view your Q1 HMR growth?
And what is the target for this year as well? Second question, I think it was mentioned in slides, but B2B, it's not faring very well. So U. S. Growth is a bit weak.
However, B2C, I think it was pretty good. So how much of sales growth can you did you make in terms of USD please? Okay. To answer your first question, HMR category typically during the holiday seasons, the demand does go down. And in Q1, we had one in February and we had a very high base effect of last year.
So on a quarterly basis, yes, the growth rate may be very small. However, not only us, we also have like new launches of the competition as well, which also had an impact. However, as of Q2, we also will be launching new products and we also have a very proactive growth strategies that are to be executed. So we will believe that double digit growth will be profitable in the future. Thank you.
To answer your second question in terms of The U. S, now you asked your question in terms of B2B and B2C, but you're correct. On a monthly basis, if you just look into the sales trend and the growth trend, overall in January, February and March, the U. S. Market was most highly impacted by COVID in March.
So with March becoming a tipping point, we actually are seeing a recovery. And as of base effect of January and February, the overall U. S. Market, the B2B, so the food service channel, yes, it was impacted. However, with B2C pizza market against the previous year, if you'd say it's a bit stagnated, but we actually consider our growth driver with Asian food, which you want to create synergy out of, especially K Food and Mandu with that being high growth in Q1, those were the drivers of the growth.
Due to time constraints, we'll take the final question. So we have Mr. Kim Jong Woo of Merit Securities. I have two questions. First, in processed food, if you think the margin in online and so I want to see a comparison between margin between online and offline.
With increasing online, is it actually contributing to raising margin for the company as a whole. And as for bio, we are seeing very good prices for feed additives. So we want to see what competitors are doing in that space. Regarding your first question between comparison of margin between online and offline, we do not have margin information by each channel, so apologies there. But for the first quarter, for online and offline, in general, for channels in general, in terms of operating margin, we are seeing improvement.
As for the second question regarding bio, there has the market has been very good recently. So we have been monitoring what our Chinese competitors are doing. So for Meihua, since last year, they have already begun capacity upgrade for lysine of about 300,000 tons. So that construction will be completed at the end of this year. So there would be increased capacity there.
But the if we think about GBT, they have long lost their competitiveness. So they have suspended their plant operations. So considering that, we feel that there hasn't been any dramatic capacity increase from competitors as of now. But of course, we will continuously monitor what the competitors are doing. And what I can tell you is that regarding new plans or dramatic CapEx increase, we have not identified we have not detected such movement from our competitors yet.
Okay. So we will now conclude the Q and A session. And we will now conclude today's session. Thank you very much for your time.