CJ expanding its biotech businesses abroad

From its origins as a sugar manufacturer to its biotech present, CJ CheilJedang is hungry to chart a new course for the green biotech sector.

More familiar to Koreans as a manufacturer of sugar and the seasoning Dashida, the company is looking to the green biotechnology sector for its future, which CJ Group Chairman Lee Jay-hyun believes will help make it a global corporation. Green biotechnology refers to biotechnology applied to agricultural processes.

Lee has told his executives “To become the dominant player in global green biotechnology, CJ should continue investments in R&D to excel over all our competitors in quality and expertise.”

The nation’s largest food maker held a groundbreaking ceremony in Fort Dodge, Iowa, on May 15 for a lysine manufacturing factory with an investment of $300 million.

Lee Jay-hyun

When completed in 2013, the facility will be able to produce 100,000 tons of lysine annually, which will be sold in the U.S. market. Lysine is an essential amino acid often added to animal feed.

The company said Cargill, the world’s largest trader of agricultural commodities, will provide the plant with starch sweetener, a key material for lysine.

Industry observers said the U.S. plant will help CJ CheilJedang gain ground in the lysine market in the U.S. The United States is the third-largest lysine market with 340,000 tons of consumption in 2011, trailing Europe (500,000 tons) and China (520,000 tons).

The Korean food maker had no other option but to watch Japanese and U.S. competitors gobble up the U.S. market because it had no manufacturing facility there.

“Currently China’s GBT is the No.?1 player in the $3 billion lysine market while CJ CheilJedang and Japan’s Ajinomoto are tied for second place followed by the U.S. company ADM,” said Chae Min-su, a spokesman for CJ CheilJedang.

“We aim to be the No. 1 player when our Shenyang plant in China is completed within the first half of this year as it will help us control 25 percent of the market. When the Iowa plant is completed, we expect to have 30 percent of the market.”

After the company established its first overseas biotechnology plant in Pasuruan, Indonesia in 1991, it opened three more plants in Jombang in Indonesia, Liaocheng in China and Piracicaba in Brazil that produce nucleic acid, lysine and tryptophan.

CJ will run seven plants in 2013 when three new plants in Malaysia, the U.S., and China open.

In case of nucleic acid, CJ aims to control 48 percent of market by 2013 to widen the gap between No. 2 player Ajinomoto by 10 percentage points with the opening of the Shenyang factory.

CJ CheilJedang’s biotechnology business has grown about 30 percent annually.

Last year, it had 1.4 trillion won ($1.2 billion) in sales from the overseas biotech business alone, just a year after it became the first Korean company to surpass 1 trillion won in overseas biotechnology sales.

Now it aims for 3 trillion won in sales by 2015.

Analysts at securities firms give a bright outlook for CJ’s biotech business.

Meritz Securities on Wednesday raised its share-price estimate to 500,000 won from 430,000 won, citing the company’s lysine and methionine business overseas.

“CJ CheilJedang is expected to grow an average 20 percent per year between 2012 and 2013 and it is expected to reap 40 percent growth in sales in 2014 as CJ is entering methionine production in Malaysia in 2013 and it’s also increasing production capacity of lysine by opening the Iowa plant in the same year,” said Song Gwang-soo, an analyst at Meritz.

By Kim Mi-ju [mijukim@joongang.co.kr]