While instant noodles are still going strong in their conquest of Western markets, the Chinese seem to be ready for a change.
One of the most intriguing headlines I read in the Chinese food industry media when I started this blog is in the shape of a question: ‘have instant noodles past their peak?‘ The national output of instant noodles in 2014 was 10,256,640 mt, down 1.55% compared to 2013. Total sales of instant noodels in 2015 decreased with 6.3% and the turnover with 2.6%. The market saw an increase of 0.9% in 2016, positive for the first time since several years.
According to a survey conducted mid 2017, the largest market segment are consumer of the age group 23 – 28, followed by the section 29 – 35. In both groups, women consume significantly more than men.
The following table shows the development of the Chinese instant noodle output from 2006 thru 2014.
Whether instant noodles are on retreat is indeed a bold question. If there is one Chinese food product that has seemingly conquered the world in the sense that it is known and available in supermarkets on all continents it is instant noodles.
Yes, soy sauce was know in most Western countries long before the first pack of instant noodles appeared on the shelves of our supermarkets and yes, instant noodles are probably a Japanese invention. However, it was that huge neighbour of Japan that posed the single largest market for this convenience food and it was through the Chinese diaspora that it ended up in supermarkets in regions like Europe, North America, or Australia. The products on offer in Western shops are not only imported from Asia, but also partly produced by Western companies like Unilever’s Unox brand.
One theory says that the rise of instant noodles was partly caused by the mass movement of surplus rural labour to the Chinese cities. Instant noodles became the favourite food of the migrant workers. It was cheap, tasty and easy to prepare. Migrants have now accumulated enough wealth to move on to more healthy foods, causing a drop in instant noodle sales.
Then there is the appearance of bullet trains. Railroad stations and trains used to be major sales points for instant noodles in China, but with the shortening of train trips, the demand for instant noodles in that section is decreasing as well.
Market not endless
The market for instant noodles in China seemed to be growing endlessly. From a convenience snack it has become a regular meal for many white-collar workers. The growing spending power in the Chinese created an ever-larger number of new adaptors for this food. The following video gives an impression about the an instant noodles production line.
What we could notice during the past few years was that the manufacturers of instant noodles had to go into ever-larger lengths to create new flavours and textures, new additions like dried pieces of meat that could be rehydrated like the dried vegetables that were a more traditional ingredient of instant noodles. With hindsight, this can be regarded as a sign that the consumers were getting a little bored and needed to be stimulated again.
Against the background of the many food scandals of recent years, Chinese consumers have grown more conscious of food safety and healthy food in general. While instant noodles are not unhealthy, it is surely not healthy food. Major players are noticing that the need to rid their product of the ‘junk food’ image.
All top manufacturers have already switched from fried to boiled instant noodles, reducing the fat content, which also decreases the need for antioxidants.
Another recent trend is that several producers of instant noodles, even market leader Master Kong, have started diversifying, adding soft drinks or other foods (like biscuits) and beverages to their product range. Their strategists may have read the signs on the wall.
Master Kong, a brand of Taiwan-based Tingyi, is the absolute leader in this market. In 2013, the company operated 23% of all instant noodle production lines in China, was good for 46.6% of the national turnover of the industry and produced 34.5% of the national volume. Moreover, Master Kong was the fastest selling Chinese brand in 2013, for the second time in row. 91.4% of the respondents in the survey had been in contact with the brand. That even this company has stopped placing all its eggs in the instant noodle basket is telling. Tingyi is reporting a serious drop in net profit in 2014. The net profit of the 3rd quarter of 2014 was 13.85% lower than in the same period of 2013.
Tingyi, the owner of the Master Kong brand makes half the instant noodles eaten annually in China, yet revenue is stagnating as middle-class consumers abandon the salty, fatty cups for healthier options. Tingyi is on a mission to reinvent the humble noodle, pouring millions of dollars into customer education, food science, Olympic Games sponsorships and “Kung Fu Panda” movie shorts to convince diners the cheap meal can be part of their gastronomic aspirations. “We want to continue to grow up, and ‘premium up,’ with our Chinese consumers,” Richard Chen, Tingyi’s chief technology officer, said at the company’s Shanghai research centre. “In a couple of years, we will be able to reach the gold standard, which is when you can’t tell our noodles apart from what you would get in a noodle shop.”
The latest innovative move of Master Kong to keep its leading position is launching two sister varieties based on Western flavours: black and white pepper steak.
Innovators at Tingyi once focused on practical advancements such as foldable forks and double-layer packaging so working-class Chinese could wolf down noodles on their commutes. Now, they work out of an RMB 500 mln research complex in Shanghai, with Tingyi tapping the nation’s top food-science university programs and partnering with Japanese companies such as Itochu Corp. to develop chemical-free flavorings and palm oil-free noodles.
Master Kong’s main competitor is another Taiwanese company: Uni-President. While Master Kong is still the leader, it is struggling with decreasing sales (-1.51% in the first half of 2014), while Uni-President is still showing, low, increasing sales (1.3%).
There could be some truth in the predictions of the author of the above-mentioned article. We need to wait and see how this market develops. For the time being it remains huge.
Master Kong launched yet another new range of instant noodles in the summer of 2016; this time with a broader spectrum of dried vegetables and meats. These ‘healthier’ noodles are advertised using a famous actor.
We can also see an increase in regional variation in these production and sales statistics. The biggest decrease in output during the first half of 2014 was in Sichuan (-46.75%), and the largest increase in Guangxi (27.38). These figures are much higher than the slight decrease in the national output, so perhaps we are witnessing a regional shift in production, that is temporarily creating a downturn on the national level.
Faster trains – fewer noodles
A surprising factor influencing the decrease of instant noodle consumption in China is booming development of the high speed rail network. In a special post on train food in China, I have reported that railroad stations are important points of sales for instant noodles. However, with the shortening of the time between any two cities, the demand for instant noodles decreases proportionally. This comes on top of the rise in living standard, which makes Chinese rail travellers buy more fancy lunch boxes, on the expense of cheaper instant foods.
Food delivery offers more variety
The rise of food delivery has also played a role in the declining fortunes of the instant noodle industry. Food delivery gives consumers access to quick meals of more diversified tastes. Users of food delivery services reached 295 mln by the end of June 2017, a 41.6% increase from the end of 2016, according to the China Internet Network Information Center. Food delivery services have even reached high-speed trains (see the previous paragraphs). In mid-July 2017, 27 major railway stations across China launched a pilot on-demand food delivery service for high-speed trains passing through the stations.
Nissin severs ties with Jinmailang
Nissin has sold its interest in three joint-venture operations for RMB 450 mln to partner Jinmailang late 2015. Nissin said that in the future, the company would focus on expanding its business in China through local subsidiaries, without elaborating on exactly why the agreement had been ended. Insiders note that there is a growing preference for foreign brands of instant noodles, particularly in the larger cities such as Beijing and Shanghai, which bodes well for Nissin.
Africa the new frontier?
However, wouldn’t it be an interesting thought that some time in the near future, the consumption of instant noodles in the Western countries could be higher than in China?
Or will the Asian manufacturers succeed in reviving this product with more, and in particular healthier, formulations?
Anyway, I just (Aug. 27, 2014) read an interesting news item on a Chinese food industry site, with an even more intriguing title than the one this blog starts with: ‘Chinese instant noodles are attacking Coca Cola in Africa‘. It starts by reporting that a cup of instant noodles (see the above illustration) is already replacing the traditional corn porridge Kenkey as the typical breakfast in urban Ghana. The reporter then conjectures that Chinese instant noodles are pushing Coca Cola from its position as the leading foreign food and beverage product in that country. Food for thought indeed.
Export to . . . Chinese tourists
A report released jointly on Sept 28 by Alibaba’s Alitrip and Internet finance platform Wacai showed once and for all that Chinese tourists have a true, unswerving love for instant noodles. The report noted that up to 31.29% of Chinese tourists have packed instant noodles in their luggage when going abroad, and 58.24% have bought instant noodles after reaching their outbound destinations. The report shows that 66.14% of tourists born in 1970s pack instant noodles in their luggage, whereas the number is reduced to 53.82% for those born in the 1980s, and 50.96% for babies of the 1990s.
Still a newcomer
Early September 2014, Taiwan-based Wantwant Group suddenly announced that it intends to enter the instant noodle market. Wantwant is a major producer of candy, flavoured dairy beverages, snacks and other leisure food, but so far completely unfamiliar with instant noodles. The only link I can see so far is that the above mentioned top players also originate from Taiwan. Master Kong and Uni-president have not yet reacted to Wantwant’s announcement.
High end experiments
Uni-president attempted to open up a new market segment for its instant noodles by launching a line priced at RMB 30 per cup early 2016. The experiment failed utterly, and the products were recalled within a month after launch.
Flavour maker Haoji (Sichuan) has relaunched its non-fried instant noodles in November 2016. This instant noodle product — branded 99 Love, or phonetically “long-lasting love” in Chinese — is marketed as a healthy product that is made primarily from wheat, corn, buckwheat and potato sourced from high-altitude unpolluted areas; it is steamed, as opposed to fried, during the manufacturing process. An earlier launch failed, because Chinese consumers were apparently not ready for such an innovative product.
However, instant noodles have will remain to be the absolute favourite for one application: quick relief in times of disasters. When parts of China are shut off from the rest of the country due to floods or earthquakes, it is always possible to get a supply of light-weight instant noodles to the disaster area to prevent people from starving.
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Instant noodles will remain an important pillar in the Chinese food industry, but it is a mature market and the main players will be fighting fiercely for a few percent for some time to come.
Eurasia Consult’s database includes 342 producers of instant noodles.
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Peter Peverelli is active in and with China since 1975.