August 2014 - Korea Economic Magazine > Media Room

Founded in 1987, Donseong Foods has been a powerhouse food company, generating over 36 billion won in sales for its products like noodles, rice cakes, and sauces.

In 2001, following the sudden death of its founder, the late CEO Lee Dong-gyun, his son Lee Yong-taek (40), then a reckless 28-year-old, took over the family business. After a brief period of confusion, he has since quintupled the company's profits in just 12 years since taking the helm. Ten years ago, while rewriting the company's vision, this once wavering youth was reborn as a second-generation leader.

I visited the Dongsung Foods factory in Cheoin District, Yongin City, Gyeonggi Province, to meet CEO Lee Yong-taek. As befitting a noodle factory, the smell of wheat flour dough permeated the air from the entrance. Passing through the factory and arriving at his office on the second floor, CEO Lee greeted us with a bright face. His youthful appearance belied his age. Even as the food industry was being hit hard by the recession, the CEO, in his 12th year of leadership, exuded the composure of a CEO who has steadily grown the company year after year.

“I’ve smelled the wheat flour dough since I was a child. Now it’s as familiar as the air. Sometimes, it’s almost strange not to smell it. I can tell the difference between noodles with my eyes closed. I’m the son of a noodle family.”

One memory from CEO Lee’s childhood: The whole family sat in the living room, husking buckwheat. In the winter, they made buckwheat pillows from the husks, and in the summer, they sold buckwheat flour. The buckwheat business soon led to the noodle business.

Dongsung Foods' growth began in earnest in 1991 when it entered the specialized market of highway rest stops. The late Dongsung Foods CEO Lee Dong-gyun discovered frozen noodles on a business trip to Japan and began supplying them to over 90 highway rest stops under the name "Hyangmiam," a specialty udon restaurant brand. At the time, the udon sold at highway rest stops nationwide was known as "Soomyun," a type of noodles that were soft and chewy. Frozen noodles, stored frozen and ready to be thawed and boiled on the spot, were much chewier and more savory than "Soomyun." This, combined with the rich, bonito-flavored broth that replicated the flavor of Japanese Sanuki udon, made Hyangmiam udon incredibly popular.

"Hyangmiam is a first-generation rest stop udon brand. Dongsung Foods prides itself on having the longest history and expertise in the highway rest stop business. In the early 1990s, we boosted our company's sales to 8 billion won with frozen noodles. At the time, Hyangmiam and (now defunct) Teolbonegaekuksu were the two leading brands in rest stop udon, and older customers still remember those days and come to our brand."

In October 1995, the company faced a setback when the highway privatization project began. Sales, which had been on the rise, dropped by more than half, and the financial crisis further exacerbated the situation. The economic downturn pushed the company to the brink of bankruptcy. The major corporations it had been supplying cut off business with. The house that had been financing the business was collateralized. Around that time, my father's health deteriorated due to extreme stress. His chronic hepatitis worsened, and he was diagnosed with liver cancer. He passed away three months later.

The son of a "Myeonga" family, accustomed to kneading flour

Taking over the family business at the age of twenty-eight

He was devastated by his father's unprepared death. His father had been more determined and proud than anyone else in his lifetime. The CEO was even more at a loss because he hadn't even discussed the company with his family, let alone taken any business classes. After majoring in business administration and economics at Korea University, he was gaining practical experience in the sales planning department of a large corporation. He wasn't particularly interested in his father's business. The "difficult and unglamorous" position as successor to Dongsung Foods didn't appeal to him. Nevertheless, he had to do whatever it took for the family he left behind. Fortunately, he had the "gut" he inherited from his self-made father.

"What did a 28-year-old know about business? Inside and outside the company, people were saying things like, 'The kid's parents are lucky,' and so on. I, being the only one who didn't know how to do my job, was in a dilemma. Even as the company faltered, I wandered aimlessly. I even frequented comic book stores, a place I never normally visited. I'd leave the office around 4 p.m., put on a suit, and continue this routine for a year."

Lee spent his first year as vice president of Dongsung Foods in 2002 like that. The following year, he decided to take a gamble, no matter what. At first, it wasn't enough. His pride was dented. However, by the third year, things began to change. He shifted his perspective to turning the company's ongoing crisis into an opportunity, and the situation turned around in his favor.

"I'd read countless business books about the need for a philosophy and vision for entrepreneurs, but I hadn't really felt it in my heart. Then, one day, it hit me. When I started thinking, 'What kind of company should I create and how should I lead it?', I finally had a clear idea of ​​what I needed to do. I believed that my greatest responsibility was to make my employees happy. This was also something my father prioritized. I focused on how to achieve this and began to change the company's policies. That's when I realized the importance of clearly defining a leader's vision. This is especially important for someone like me who suddenly became a second-generation business leader at a young age. Instead of thinking, 'It's just the job I've been given,' I had to find my own reason for doing this. This is something that external (management) consultants can never do for me."

CEO Lee Yong-taek...

Born in 1975.

2001, BA in Economics and Business Administration, Korea University

2008, MBA, Korea University

2010, BA in Counseling Psychology, Seoul Digital University

2000, Joined Doosan Foods BG

2002, CEO of Dongsung Foods (current)

2013, Adjunct Professor, Department of Business Administration, Kangnam University (current)

Once he established his vision, he saw the direction he needed to take. First, he laid off unenthusiastic employees over a one-year period. Instead, he allowed passionate employees to work without a retirement age. To better understand his employees, he even earned a certificate in counseling psychology from a cyber university. He also actively invested in business diversification. In 2012, he built a sauce factory in Yongin, which began operations the following January. While noodle and rice cake businesses often had poor income statements, the sauce business had relatively high profitability. Confident in the growth of the sauce market, CEO Lee invested 6 billion won.

Leveraging his 27-year history in udon manufacturing, Hyangmiam has established a solid position in the rest stop market. Furthermore, the company supplies its products to other restaurants located at highway rest stops. The group meal brand "Sodambanga" products are supplied to large domestic group meal service providers and food supply companies, including Samsung Everland, CJ Freshway, and Our Home. Since 2005, the company has supplied noodles to the Korean Army. The company also exports frozen noodles and rice cakes to the United States, Hong Kong, and China. The company plans to resume its franchise business, which it operated until a few years ago but has since closed. Recently, the company has also actively entered the business-to-consumer (B2C) market, supplying rice cakes and noodles to large supermarkets under the brand name "Singeoun Bapsang."

"When the rest stop business struggled in the past, I saw the company struggle, and I realized I shouldn't put all my eggs in one basket. While the rest stop business's share of total revenue has decreased from a peak of 70% to 45%, sales have actually doubled or tripled. The military supply business, while only accounting for about 6% of total revenue, is attractive because it allows us to accept cash payments and generate fixed costs. While we incurred losses for the first two years, starting this year, our third year, we've become quite profitable."

Targeting KRW 100 Billion in Sales by 2018

"Like Yi Sun-sin, we will manage with the determination to die."

As a result of these diversification efforts, Dongsung Foods' sales, which stood at KRW 6.7 billion in 2000, are expected to increase to KRW 36 billion this year. This is truly a small but strong company. CEO Lee is determined to increase sales to KRW 100 billion by 2018.

"I know it's a very difficult goal. But we must set it high. Our goal is to maintain an average annual growth rate of 7% for the next 10 years. We were the first domestic small and medium-sized food manufacturer (e.g., noodle, rice cake, sauce) to obtain HACCP certification, which certifies hygiene and safety throughout the entire manufacturing process. It's important to strengthen our foundation, not just focus on size. We will ensure that all employees feel proud of our company, which manufactures traditional foods that are easily found in everyday life."

CEO Lee lectures at a university in the Seoul metropolitan area. He lectures on leadership to business administration students and shares his experiences as a second-generation small business owner, sharing his struggles and overcoming them. He also hopes to compile a book about the trials and errors he faced over the past 10 years in the process of inheriting the family business. He said that recently, while watching the film "Roaring Currents," which depicts the Battle of Myeongnyang, he realized the importance of the leadership role of an organization. This reminded him of his father. As I reflected on how lonely and difficult the path he must have walked as a founder, I came to the conclusion that I must survive as a food company beloved by the public for a long time. "I must charge forward with the determination to die."

"If you seek to die, you will surely live; if you seek to live, you will surely die." Admiral Yi Sun-sin's cry, "Death is life, life is death," may be the message he needs most now, as he must lead Dongsung Foods to a century-old future.

Reporter Lee Yoon-kyung ramji@hankyung.com | Photo by Reporter Lee Seung-jae

Original Naver article:

Original article from Korea Economic Magazine