October 13, 2017

Goldman Sach’s Asian private equity arm has invested US$30 million in exchange for a minority 20 percent holding in South Korea-based Sun-in, a producer and distributor of ingredients supplying bakeries, cafes, and confectioneries across the country. Sun-in Chief Executive Hugo Lee will remain the company’s largest shareholder.

Founded in 1987, Sun-in has expanded along with the country’s growing bakery and dessert industry, operating a vertically integrated cold chain business that spans production, imports, storage, and distribution, according to the Korea Times. Over the years the company has become the largest bakery ingredients maker and distributor in South Korea, building its portfolio of 1,000 products to include ganache, fruit fillings, bakery premixes, non-dairy whipping cream, non-melt icing sugar, fruit compound syrups, semi-candied fruits, and other ingredient products.

“This investment will further strengthen our leadership position in the marketplace and introduce new defining products to the market, as well as innovate through the use of technology to further cater to the needs of our clients,” said Lee.

Over the past 10 years the company has seen its sales grow at an average annual rate of 16 percent, and last year posted revenue of $74 million.

“Sun-in is a local industry champion with significant further growth potential given the continuing diversification of diets and palates in Korea,” Stephanie Hui, co-head of private equity at Goldman Sachs in Asia, was quoted by Sun-in as saying.

Who Wants Dessert?

Two paradigm shifts happening concurrently in the South Korean market are having great effect on the food landscape in the country.

First, the growing popularity and proliferation of cafes across the country has been driving significant growth for the dessert industry, as demand climbs for pastries and non-alcoholic drinks, reported Inside Retail.

Between 2013 and 2014 the category saw sales jump by 13.9 percent year-on-year to a value of US$7.9 billion, according to the latest available data compiled by South Korea’s Ministry of Agriculture, Food, and Rural Affairs. That same year, the dessert category accounted for 10.7 percent of the country’s total food service market.

The following year the dessert market topped a value of 1.5 trillion won reflecting a year-on-year increase in value of 90 percent, according to a report issued by Eugene Investment & Securities Co. reported the Korea Herald.

General declines in income and rising job insecurity have resulted in shifts in South Korean consumers’ eating and buying habits. Consumer spending has slowed, and while people are holding back on certain purchases, more young female consumers are willing to still indulge in the relatively smaller commitment of purchasing expensive tasting pastries and desserts, while the trend of posting appealing food pictures on social media has also played a role in driving the popularity of rich pasties.

Another consumer trend in the region is the shift away from rice in favor of breads and pastries. The greater convenience of toasted bread and hand-held pasties compared to rice, as well as influences of Western culture have resulted in wheat demand rising at twice the rate of rice demand in South Korea between 2008 and 2015, according to Reuters. By 2014 per capita consumption of rice had fallen to a record low of 65.1 kilograms per person, as per capita consumption of flour rose to 33.6 kilograms per person.

It is these trends that support Goldman Sachs’ decision to gain capital exposure to South Korea’s bakery and dessert sector; while Goldman’s support will help Sun-in capitalize upon the potential in the category.

“We look forward to leveraging Goldman Sachs’ experience and network in the global food industry to further enhance our operations and grow our company to the next level,” said Lee.

-Lynda Kiernan