Namyang Dairy, which returned to profit last year after five years of losses, is stepping up expansion of its cafe franchise Backmidang. Backmidang was established as a separate company in 2024 and grew rapidly, accounting for 30 percent of Namyang Dairy’s total operating profit last year. Namyang Dairy sees Backmidang as a key business to drive continued profitability improvement and has begun an aggressive expansion this year.

The company opened the Hapjeong store, its first new outlet this year, on Feb. 25, the industry said on Tuesday. The store is located in the Hapjeong Mecenatpolis complex mall, aimed at improving accessibility. Since last year, Namyang Dairy has been opening Backmidang outlets in major commercial districts in central Seoul, focusing on locations with strong accessibility.

Around the time Namyang Dairy’s largest shareholder changed to private equity fund Hahn & Co in 2024, the company scaled back its dining brand operations but supported Backmidang’s growth by setting up a separate company, Backmidang I&C. The dining brands that were wound down included Italian restaurants Il Cipriani and Osteria Stesso, and Cheol Grill. Those brands were seen as failing to deliver results during the management efficiency drive.

Backmidang’s survival during the efficiency push has been attributed to visible profitability. Its number of franchise outlets and sales are not large, but Backmidang’s operating profit is seen as a strong contributor within Namyang Dairy’s overall operating profit. Backmidang I&C posted 5.28 billion won in sales and an operating loss of 300 million won in the first quarter last year, but recorded 11.9 billion won in sales and an operating loss of 50 million won in the first half. It then turned a profit in the third quarter, moving onto a growth track.

Backmidang’s operating profit rose to about 30 percent of Namyang Dairy’s total operating profit. According to the Financial Supervisory Service’s electronic disclosure system, Backmidang I&C’s cumulative consolidated operating profit through the third quarter last year was 835.28 million won, representing 30.9 percent of Namyang Dairy’s total operating profit of 2.7 billion won. Its sales are smaller, but it is serving as a key brand in terms of profitability. Over the same period, sales were 237.5 billion won for Namyang Dairy and 20.1 billion won for Backmidang, putting Backmidang’s sales share at about 8.5 percent.

Backmidang also aligns with Namyang Dairy’s strategy to reshape its brand image. While it has recently been increasing specialized stores focused on bakery and coffee, Backmidang started as a premium ice cream brand when it was established. It began as an extension of Namyang Dairy’s core milk business.

Kim Hyun-rak (김현락), appointed as Backmidang I&C chief executive in September last year, also serves as head of Namyang Dairy’s management strategy headquarters. He is seen as a figure who can transplant Namyang Dairy’s strategic direction and operating system into Backmidang. That is why Namyang Dairy is expected to expand consumer touchpoints for its core milk business through the Backmidang franchise brand.

Some see Hahn & Co, the private equity firm that became Namyang Dairy’s largest shareholder in 2024, as having picked Backmidang as a savior to improve Namyang Dairy’s profitability. They expect the company to continue expanding its footprint through new store openings.

Namyang Dairy plans to continue opening new Backmidang outlets this year, focusing on bakery-specialized stores, including in areas outside the Seoul metropolitan region. It will also continue developing specialized menu items using local specialties, based on a regional co-prosperity development agreement signed with the Ministry of the Interior and Safety last year.

A Namyang Dairy official said, "We will boost accessibility in Seoul and the Seoul metropolitan area, while also planning to improve Backmidang’s accessibility in other regions outside the metropolitan area going forward."