Orion behind original Choco Pie to invest $580 million in new plants

Orion Corp., a South Korean confectionery and snack manufacturer, will inject 830 billion won ($580 million) over three years to expand snack manufacturing facilities at home and abroad to meet growing demand for its snacks overseas.

The company announced in a regulatory filing on Tuesday that its board of directors approved a plan to spend 460 billion won on building an integrated snack manufacturing-to-logistics center in Jincheon, Korea.

This is the largest investment by a Korean food company at home in five years since its bigger crosstown peer CJ CheilJedang Corp.'s investment of 540 billion won to build a new local instant rice plant.

It will also inject 240 billion won and 130 billion won, respectively, into its operations in Russia and Vietnam.

The Korean snack maker's bold facility investment aligns with its aim to meet an insatiable appetite for its snacks in other countries, especially Choco Pies, chocolate-covered small round cakes with marshmallow filling.

The company expects its latest investment plan would allow it to achieve 1 trillion won in annual operating profit on sales of 5 trillion won in the mid to long term.

In 2024, the Korean confectionery company reported 543.6 billion won in consolidated operating profit, topping the 500 billion won threshold for the first time since its inception. Its sales also hit a record high of 3.1 trillion won.

MANUFACTURING-TO-LOGISTICS ONE-STOP CENTER

Orion plans to build an integrated center in Jincheon that houses its production, packaging and logistics bases under one roof to increase efficiency.

The new one-stop complex will be built on a site of 188,000 square meters, equivalent to 26 soccer fields.

Once the plant is completed in 2027, the company’s production capacity at home is expected to be ramped up to a volume worth up to 2.3 trillion won.

The company will use dividends from its overseas affiliates in China and Vietnam to build the new plant in Korea.

Since 2023, the Korean headquarters has received a cumulative dividend of 640 billion won from its overseas affiliates. It is expected to collect about 290 billion won in dividends thanks to brisk sales of its snacks abroad.

OVERSEAS PLANTS RUN AT FULL RATES

To meet the strong demand for its products overseas, some of those snacks produced from the new Korean plant will be exported to other countries.

In Russia, Orion has seen a double-digit rate increase in sales for six consecutive years until last year.

Given Russians’ voracious appetite for Choco Pie, its plant in Tver runs at over 120% utilization rates. Still, the company suffers from a supply shortage of its signature chocolate-covered cake snacks in the country.

This is why the company has decided to invest 240 billion won to build a new facility at its Tver plant.

The new investment comes just three years after the Korean confectionery company opened the Tver plant in 2022.

Once the new manufacturing facility is completed, the total capacity of the plant in Tver is expected to double to 750 billion won worth of output.

With an additional investment of 130 billion won in its operations in Vietnam, which generated more than 500 billion won in sales last year, Orion hopes to cement its strong position in the Southeast Asian country’s snack market.

The Korean confectionery company operates a wholly owned subsidiary, Orion Food Vina Co., in Vietnam. It started exporting Choco Pies to the nation in 1995 and established Orion Food Vina in 2005 to meet Vietnam's strong demand for the snack cake.

It operates two factories in the country — one in Hanoi and the other in Ho Chi Minh City.

In 1995, it also built its first Chinese affiliate, Pan Orion Corp. In the world’s second-largest economy, Orion reaped more than 1.4 trillion won in sales last year.

Orion was the first to introduce the chocolate-covered cake snack Choco Pie in Korea in 1974. Its crosstown rival Lotte Wellfood Co. later started selling the same product under the same name, but the originator lost to the latecomer in a trademark lawsuit.

On Tuesday, the company reported that its operating profit in the first three months of this year reached 132.4 billion won on sales of 806 billion won, up 6% and 4% from the same period of last year, respectively.

Its shares rose 3.5% to end at 120,800 won on Wednesday, while shares of Orion Holdings Corp., the snack maker’s holding company, also added 2.8% to close at 16,740 won.

Write to Jong-Seo Park at cosmos@hankyung.com

Sookyung Seo edited this article.