One of the perks of working in a big-enough company or institution in Korea is getting balanced meals from cafeterias at relatively low prices compared to nearby restaurants.

The operation of most of these canteens is consigned to large firms ― Samsung Everland, Our Home (which spun off from LG Group in 2000, but is still entirely owned by the founder’s grandchildren), Hyundai Green Food, Shinsegae Food, Hanwha Hotels & Resorts, CJ Freshway, Dongwon Home Food and ECMD (of Pulmuone).

These companies, five of which belong to conglomerates with total assets of more than 5 trillion won, run canteens in all of their affiliates as well as other firms, hospitals, universities, training centers and nursing homes. 

Elementary through high schools, however, cannot outsource cafeteria operation under a legal revision made after a food poisoning case in 2006, although they are supplied with food materials from companies like CJ.

Many small food service providers that mostly catered to schools have gone bankrupt since then.

Thanks to economies of scale, large firms have an incomparable advantage over small players. The bigger the meal service business, the more lucrative it becomes because after fixed costs such as salaries and kitchen facility expenses, the cost per meal drops as the volume grows. Large firms can also cut costs since they distribute food supplies at the same time.

As of 2010, Our Home and Samsung Everland each commanded nearly 30 percent of the cafeteria market. Hyundai Green Food and Shinsegae Food together accounted for about another 30 percent, and the rest was taken up by Hanwha Hotels and Resorts and CJ Freshway.

Until early last year, nearly half of the canteens in public institutions including government agencies were run by the six chaebol companies.

Their market shares dropped significantly, however, after the Finance Ministry forbade them from bidding for cafeteria business in public institutions last year, hoping to give more of a chance to small players.

But the move led to an unexpected outcome: Foreign meal service providers and sizeable domestic firms like Dongwon and Pulmuone replaced those six companies.

Eight public institutions including Seoul City’s Dasan Call Center and the Korea Credit Guarantee Fund selected Arakor, the Korean arm of American food service company Aramark, as their new canteen operator last year.

Aramark, one of the world’s three largest meal service providers, employs some 260,000 people across 22 countries and its annual sales amount to 14 trillion won, more than 10 times the sales of Our Home (1.24 trillion won in 2011).

Aramark set up Arakor in 1993 as a joint venture with an affiliate of Daewoo Group to provide meals for Daewoo affiliates. After Daewoo collapsed in 2001, Aramark bought its entire stake in Arakor.

“Armed with cheaper food materials and advanced systems, global food providers can dominate the market in no time,” said an official at a local meal service provider.

“Japan’s cafeteria market was taken over by global giants like Aramark and Britain’s Compass Group when local firms weakened.”

With the six chaebol affiliates out of the picture, Dongwon Home Food and ECMD of Pulmuone, which do not belong to Korea’s largest conglomerates but boast substantial sales, are also seizing the opportunity.

Sales of Dongwon Home Food and ECMD are estimated to be around 110 billion won and 180 billion won respectively, compared to CJ Freshway’s 170 billion won. Arakor made about 93.3 billion won in 2011.

Leecho Catering Service, an SME with annual sales of around 10 billion won, said the ministry’s measure did help SMEs a little, but not significantly.

“We cannot say we did not benefit at all from it, but chances are still very limited for SMEs,” said an official at Leecho.

“Companies like Dongwon and ECMD are major companies in the canteen business, and it seems unfair that they were excluded from the measure.”

Nearly half of the 37 public institutions that renewed their cafeteria operators last year chose Dongwon and ECMD.

In addition to the political calls for stronger regulations on chaebol, some complain that the cafeterias they run in companies other than their own lack food quality.

A foreign pharmaceutical firm recently replaced its cafeteria operator, which was one of the six big shots, due to employees’ discontent.

“Our previous canteen operator offered terrible food. But when I went to the canteen in its own headquarters, the food was so much better and even much cheaper,” an employee said.

The National Commission for Corporate Partnership, which last week barred large firms from entering the restaurant business, said it had no plans to consider similar restrictions on conglomerates’ canteen business.

“We start reviewing a certain trade (to determine whether big companies should stay out of it) once we receive plausible proposals,” said Lee Woo-yong, head of public relations at the state-funded panel.

“But rather surprisingly, we have not received any complaints on the cafeteria business.”

By Kim So-hyun (sophie@heraldcorp.com)