On The Cover/Top Stories
Cookie Monster
Tim Kelly, 02.27.06




Parents, beware: Orion is pushing its sweet treat over a wider map.

The cluster of dots on the oversize map facing Byung Sik Joo's desk charts the progress of candymaker Orion Corp.'s bid to conquer the world. It gives the chief operating officer's office in Seoul something of a war-room feel to boot. In the front line of that assault is Orion's Choco-Pie, a squishy, palm-size, chocolate-covered marshmallow cookie sandwich that South Korean kids have munched since 1974.

Joo is the architect of Orion's global push. For the past decade he has devoted himself to making the chocolate treat a household name in China, Russia and Southeast Asia. "Our achievement has been to blend three flavors into one taste," Joo boasts.

Three flavors--and one swelling fan base. From having almost no overseas business ten years ago, Orion's snack quickly overwhelmed rival products in China to take a two-thirds share of the cookie market, not a bad position to hold in an economy that's expanding by 10% a year. Sales there doubled last year as more parents are finding that they have the spare change to buy their kids the cakelike treat. Of Orion's confectionary revenues of $541 million and net of $21 million, a third now comes from outside Korea, and by 2009 Orion expects foreign markets to eclipse domestic sales. Including other business units, in 2004 Orion earned $114 million on sales of $1.4 billion.

"In China the 5-to-10-year-olds are the heavy users," Joo says, through translation. Just that happened in Korea a generation ago. Cholhan Kim, 36, a buyer for a supermarket chain (he gets his company to stock the pies), recalls friends "pitching in the little money they had to buy a box of Choco-Pies" when they were children. Parents, he said, would promise them to their kids to get them to do their homework; sometimes a pie would substitute as a birthday cake when money was tight.

Today Orion is South Korea's number three confectionary company, but it's the leading piemaker. Lotte, which dominates the sector, has a very similar product, which competes directly with Orion's--but Lotte must offer two for the same price as one Orion Choco-Pie. Orion's triumphs haven't gone unnoticed by investors. Its shares last year outpaced the 54% gain in South Korea's Kospi index, soaring by 157%.

Choco-Pie, with 12 billion in total sold, is just the vanguard. Once the company has established a beachhead, the reinforcements pour in: chocolate bars, chewing gum and cakes, which account for 90% of confectionary sales. And it doesn't end at snacks, which are a drag on profitability because of stiff competition. In South Korea Orion owns cable TV channels that air cartoons, sports events and women's magazine programs. The company operates 1,000 convenience stores and restaurants, has a chain of multiplex cinemas, owns a basketball team and runs a lottery that lets people bet on sporting events.

Sounds like a typical Korean conglomerate, but Joo's job is to not take his eyes off the confectionary ball. The wiry 52-year-old wasn't always passionate about snacks. He studied to be an aerospace engineer at the elite Seoul National University in the late 1970s, later joining Tong Yang Group, a South Korean chaebol with interests ranging from cement to financial services. Tong Yang in 2001 spun off 16 subsidiaries to create Orion, making Tam Chul Kon its first chief executive.

Today Tam is busy overseeing what remains a diverse portfolio of businesses. (In South Korean style he and his family, who hail from the Tong Yang Group, own about a third of Orion. His wife's brother in-law is the CEO of Tong Yang.)

That has left Joo to look after taking the vital Choco-Pie franchise global. He got the task back in 1993 after returning from a stint heading up Orion's Tokyo office--he speaks fluent Japanese and was one of a handful of people then at the confectioner with any overseas experience.

Joo's had to develop the expansion blueprint. But his Japanese isn't helping much there: Lotte has a strong market presence in Japan, the world's number two confectionary market, and Orion has basically conceded there, as the cost of denting its rival's lead would be too high. Joo instead is trying to replicate Lotte's success in the rest of Asia.


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