In the story of companies, we explore how the world moves. I am reporter Lee Jae-deok. On the day of the dog days of summer, many people enjoy Samgyetang, right? Those who dislike the heat might choose chicken instead. After all, it's all chicken. Today, I would like to talk about Harim, a company that has grown to rank 27th in the business world. In 1978, a young man in his twenties, who had dropped out of college, started a poultry farm in Iksan, North Jeolla Province, where he lived. The young man's name is Kim Hong-guk. Even during high school, he raised chickens and pigs at home, selling them to make money, and he was quite entrepreneurial from a young age. This was around the early 1980s, a time when people's income levels were rising, leading to an increase in meat consumption, and the farming business was flourishing.

In his early twenties, he was already considered one of the largest poultry farmers in Iksan, Jeollabuk-do. At that time, there were many farms raising livestock for meat, as the government actively encouraged this industry, even providing subsidies. However, as the number of farms increased, supply surged, leading to a drastic drop in prices. This situation is referred to as the livestock crisis. The poultry farm run by Kim Hong-guk was not able to escape this crisis either. As he expanded his business, even using borrowed money, loan sharks began to swarm, demanding repayment. Eventually, he had to close the farm. He then worked at another pig farm while carrying debt and created a small temporary dwelling in one corner of the pigsty, living alongside the pigs as he paid off his debts. The difficulties faced by poultry farms stem from the price of chickens.

The fluctuation in prices is too large. How can we solve this problem? If chicken can receive a stable price in the market, farmers would be able to run this business more steadily. Across the Pacific, in the United States, they have already addressed such issues. This system was invented by a feed company in Georgia over 30 years ago, in the 1950s. The biggest costs for poultry farms are feed and chicks. So, this feed company supplies feed and chicks to poultry farms without charging them upfront. The farmers simply raise the chickens. Once the farmers provide the chickens back to the feed company, they only pay for the costs associated with raising the chickens. The feed company then has a slaughterhouse that processes the chickens, preparing them for the market.

이렇게 하나의 기업이 사료, 양계, 도계, 유통을 모두 관여하는 것을 수직 계열화 모델이라고 합니다. 한 회사가 이 모든 것을 관리하니까, 중간 마진을 줄일 수 있겠죠. 시장의 수요에 맞춰 공급하는 것도 가능해집니다. 닭고기 비수기라서 가격이 떨어질 것 같으면, 농가에 공급하는 병아리를 적게 공급합니다. 그러다가 닭고기 수요가 증가하여 성수기가 다가오면, 미리 계약한 농가에 보내는 병아리의 수를 더 늘리는 식으로 공급을 조절하게 됩니다. 이렇게 되면 가격이 상대적으로 안정적이게 되겠죠. 미국에서는 1960년대에 이런 수직 계열화 사업이 전국에 퍼졌습니다. 그런 방식으로 성공한 회사가 바로 미국의 타이슨 푸드입니다. 이 회사는 돼지 사업으로도 그 영역을 넓혀가기 시작했고, 지금은 미국 제1의 축산 유통 회사가 되었습니다.

In 1986, during the Asian Games and the 1988 Seoul Olympics, the popularity of fried chicken and seasoned chicken chains began to rise. This led to an explosive increase in the demand for chicken. To meet this demand, CEO Kim Hong-guk acquired a slaughterhouse in Iksan in 1990. At that time, the company also changed its name to Harim, which we are familiar with today. CEO Kim Hong-guk anticipated that the market would continue to grow explosively. Therefore, the following year, he built the largest slaughterhouse in the East, capable of processing 300,000 chickens a day. Around this time, government policies also started to change. Previously, the market was not only selling processed products but also live chickens. However, the government revised the Livestock Product Sanitation Act, which affected the poultry industry.

The law is being changed to require that all poultry be processed at slaughterhouses and supplied as meat. As a result, the distribution of live chickens will disappear, and the wholesale distributors, as well as large distribution companies, will cease to exist. Farms that previously operated independently will begin to become contract farms for integrated companies like Harim. Now, what else is needed? The number of contract farms will increase, which means the supply of chicks to these farms will also need to rise. To ensure a good supply of quality chicks, Harim has formed a partnership with Cobb-Vantress, a subsidiary of Tyson Foods in the United States, to import high-quality breeds by air. The chickens from Cobb-Vantress have historically excelled in poultry breed competitions in the U.S., always winning awards for their exceptional quality. Consequently, from the perspective of general meat poultry farms, the system of integrated companies like Harim is becoming increasingly significant.

If we don't go inside, we will reach a point where we can't obtain such high-quality chick tea. This is how the number of contract farms with Harim began to increase. In 1986, there were only 16 contract farms, but by 1991, it exceeded 100, and in 2002, it surpassed 600. Even now, many chicken restaurants advertise that they only use Harim chickens. This indicates that Harim chickens are clean and reliable. In fact, this is largely due to Harim's long-standing attention to its brand image. For example, the quality assurance mark known as the KS mark, which is certified by the South Korean government, was previously only applied to industrial products. However, in 1995, Harim requested to apply for the KS mark for livestock products, becoming the first to have Harim chicken certified with the KS mark.

KS mark has been obtained. In the past, at places like Jeong Yu-jeong, whole chickens were sold as they were. However, Harim has started to package chicken. Now, why do they package it? There was no thought of not packaging it. But Harim packages it, attaches the case mark, and labels the origin as 100% domestic refrigerated products. They also label it as Harim Chicken. At the same time, they run TV advertisements. In this way, they begin to build a brand around Harim Chicken. Furthermore, a crucial turning point for Harim's growth came when the government mandated chicken packaging in 2006. But why did this mandate for chicken packaging begin? In the early 2000s, university restaurants across the country started serving Chuncheon dakgalbi. It became a massive trend. However, many times they used imported chicken, only using the lean meat. Consequently,

At that time, the domestic chicken market share reached 80%, but it began to gradually decline. We were struggling with how to respond to the cheap chicken from the United States and Brazil. As a result, imported chicken started to be disguised as domestic products, and packaging became mandatory. Once packaging was introduced, people began to purchase based on brands. Therefore, starting in the 1990s, Harim began to gain an advantage by managing chicken brands. However, Harim didn't just sell packaged products. During the summer, when there are traditional chicken dishes, there weren't major issues, but during the off-season, excess inventory began to accumulate. This led Harim to develop products like nuggets and Yonggari chicken. The Yonggari chicken, made from chicken thigh meat, became a hit from that point onward. Additionally, they started to sell whole chicken parts combined in various ways, such as selling thighs separately.

By selling parts separately, such as wings and legs, and dividing them into portions, you can sell them for a higher price than selling the whole chicken. The meat from the drumsticks increases significantly, and during the 2002 World Cup, hot wings also sold very well. Some of the less popular breast meat is used for products like fried chicken and nuggets. However, if there is still too much breast meat left, Harim developed canned breast meat in 2007, creating a market for portioned meat and leading to significant growth for Harim. But Harim didn't stop there; having conquered the poultry industry, they turned their attention to pigs. In 2007, they acquired the pig farming company Seonjin, and in 2008, they bought the well-known company Hifork. Additionally, in 2001, they founded NS Home Shopping to utilize it as a sales channel. Of course, Harim's success continued.

No, during that time, we also faced difficulties. In particular, in 2003, the largest poultry processing plant in the East, located in Iksan, burned down. It was said that this plant could process 300,000 chickens a day. During that period, Harim had established group companies, acquired businesses, and invested heavily in various facilities, resulting in significant expenditures. However, the core facility, the poultry processing plant, was completely lost. But it wasn't just about the loss of the plant; the farms that had contracts with Harim across the country needed to send out large chickens every day. Since the poultry processing plant was burned down and shut down, they couldn't do so. Furthermore, this Iksan plant accounted for 27% of the total domestic chicken production at that time. Naturally, this created an imbalance in the supply and demand of the entire domestic chicken market. Consequently, at that time, the financial sector concluded that Harim was finished.

I could even hear the outlook, but what kind of company is Harim? It's a large company that has built a factory centered around Iksan in North Jeolla Province, gathering farmers as well. So, the people of Iksan and the residents of North Jeolla Province began to send donations. Articles started to appear in local newspapers urging people to buy Harim products and support Harim. This began to create a stepping stone for Harim to make a comeback. At that time, Harim had another factory in Sangju, Gyeongbuk, in addition to the one in Iksan. This facility could process 200,000 chickens a day and operated 24 hours a day, slaughtering all 28 chickens in a single day. Employees from the Iksan factory started commuting to the Sangju factory, which took a total of six hours round trip, working in shifts to keep the factory running. Even factories that were not owned by Harim began to align with Harim's operations.

They received the livestock, slaughtered, and processed it. In the meantime, Harim was completely destroyed, but they successfully restarted the Ik-sang factory after a year. This achievement was likely due to the successes Harim had achieved up until that point. In the mid-1990s, the agricultural market was opened up. However, unlike other agricultural sectors, despite the market opening, domestic chicken remained competitive. This was a result of Harim gathering farmers, implementing vertical integration, and establishing a perfect distribution network. Everyone had a strong desire to support Harim, which is why they helped him out. Thus, Harim succeeded in making a comeback. However, from that point on, the perception of Harim in the surrounding community was not entirely positive. The core of Harim's industry was the contracted farmers, and when settling accounts with these farmers, their performance was taken into consideration.

We evaluate and provide incentives and breeding costs accordingly. Originally, this was an absolute evaluation, and if the chickens grew well with an appropriate amount of feed, we would provide incentives to the farmers. So, the farmers all worked hard to exceed that standard. However, from Harim's perspective, the money going into incentives began to increase significantly. When the farmers exceeded that standard, they no longer considered increasing productivity. As a result, Harim changed the incentive system to a relative evaluation. In this relative evaluation, the farmers work very hard to gradually increase productivity, but no matter how much they improve, if other farmers perform better, they won't receive the incentive. If one farmer invests a lot in facilities, then other farmers...

Farmers begin to feel anxious. As the farmers compete, productivity continues to improve. From Harim's perspective, this is advantageous since there is no need to increase incentives. In fact, Harim's role model, Tyson Foods in the United States, also grew in this manner. Thus, Harim has progressed from a small business to a medium-sized enterprise and is now at the threshold of becoming a large corporation. While Harim's growth rate is remarkably fast, the contracted farmers underneath are not experiencing the same. Since the 2000s, dissatisfaction among Harim's affiliated farmers has begun to rise. They feel, Why are you monopolizing the profits? We should share together. In this context, in 2014, Chairman Kim Won-guk purchased a Napoleon hat for 2.6 billion won at an auction. Even though it was his own money, the situation seemed quite disheartening to the farmers contracted with Harim.

In 2014, when Chairman Kim Eun-guk bought the Napoleon hat, Harim truly became Korea's Tyson Foods. They became number one in chicken and even number one in pork. However, Harim was not satisfied with this. At that time, the shipping company Pan Ocean came up for sale in the M&A market, with a bidding price of a staggering 1.08 trillion won. Many were skeptical, saying, What does a company that sells samgyetang have to do with shipping? But Chairman Kim Won-guk's determination was firm. He believed that acquiring Pan Ocean would create synergies with other businesses like livestock, food processing, and feed. At that time, 35% of Harim's total revenue came from the feed business. They saw that even the volume that Pan Ocean could bring in would be sufficient for business viability. So, after investing over 1 trillion won, Harim finally acquired Pan Ocean, and with that, Harim...

Harin will grow to rank 28th in the business world. Currently, another issue at Harin is the process by which Chairman Kim Won-guk is passing on the group to his eldest son. As I mentioned earlier, the independent factory in Sangju, Gyeongbuk, is being gifted by Chairman Kim Won-guk to his eldest son. The company receiving this gift is called Olpum. Later, Olpum grows by taking on work from Harin's subsidiaries. As Olpum gradually expands its influence over the Harin Group, it now shares control of Harin Holdings, the holding company of Harin, with Chairman Kim Won-guk. Therefore, it is important to note that the background of various businesses being conducted by Harin is tied to succession. In this process, there is a high possibility that efforts will be made to demonstrate the management capabilities of the eldest son in the future. In a country where agricultural competitiveness is considered lacking, the company Harin clearly represents that we can also succeed.

This company has shown potential. Of course, during that process, it would have been nice if the contract farmers had also shown growth together. I do feel a bit regretful about the fact that the farmers involved could have grown just as much during the process leading up to the reopening on the 28th. Next time, we will select a company that is a hot topic and bring it to you. Thank you, this was reporter Lee Jae-deok.

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