A new change in 2014 was that instant noodles began to lose favor among Chinese people. The author finds that the sales of 'national food' instant noodles are a suitable barometer for measuring Chinese consumer behavior.

Early signs of decline in total sales: instant noodles gradually losing favor among lower-income consumer groups

Small brands are either defeated or abandoned

"'Now Uni-President and Master Kong occupy almost 100% of the instant noodle market. In supermarkets, only these two can survive; small brands can't withstand the competition and are eliminated.' In Carrefour, Bubugao, and other supermarkets, the shelves are basically filled with products from the two giants, Uni-President and Master Kong." This excerpt from the September 30, 2013 issue of Changsha Evening News captures the plight of small instant noodle brands.

The low-price instant noodle market has long been chaotic, with many small and medium enterprises, and large companies also not letting go. However, soon the big fish ate the small fish, and many small brands disappeared from the market. In 2010, the 10th China Noodle Products Conference released data showing that from 2000 to 2010, 90% of instant noodle companies were eliminated. The remaining small and medium enterprises also struggled. The change in numbers cannot be explained simply by the winner-take-all nature of industry giants. The sales networks of China's instant noodle giants are still heavily concentrated in economically developed areas such as the eastern coastal regions and first- and second-tier inland cities. In fourth- and fifth-tier cities and the vast rural market, there are still opportunities for small brands. What exactly happened? This is related to changes in brand perception. In 2013, a survey by China Confidential, a research institution under the UK's Financial Times, of 1,500 migrant workers across China showed that although their brand awareness was still in its infancy, with rising incomes, they were rapidly forming preferences for some Chinese and foreign brands, including instant noodles from the two giants, Uni-President and Master Kong.

The disappearance of small brands is both a result of being defeated by big brands and being eliminated by consumer groups

Big brands' insufficient shift to fourth- and fifth-tier cities, and significant voluntary loss of favor

If the loss of favor of small brands is passive, then the loss of favor of big brands has many active components. In 2008, affected by the financial crisis, a wave of migrant workers returned to their hometowns, and China's instant noodle sales, which had grown rapidly for over two decades, declined for the first time. Therefore, some analysts at institutions like Citibank believed that the decline in instant noodle sales was related to demographic changes, as the number of migrant workers and students decreased (the former's impact is, of course, much more severe). However, data from the National Bureau of Statistics' 'Migrant Worker Monitoring' does not support this conclusion. The latest statistics show that from 2008 to 2013, the total number of migrant workers and out-of-town migrant workers in China continued to increase.

The secret lies in geography. First, in terms of regional direction, the number of migrant workers in manufacturing and construction shows an increasingly obvious trend of shifting from the east to the central and western regions. Second, in terms of administrative level, starting from 2012, a significant change is that migrant workers are no longer flocking to large and medium-sized cities; the proportion of migrant workers working in prefecture-level cities has increased. The change in geography does not mean a change in taste or preference for instant noodles. After all, instant noodles can be spicy or sour, and are close to the tastes of the Chinese public. Where exactly is the problem?

The number of migrant workers in China is still increasing; the problem is that the spatial distribution has changed, but instant noodle manufacturers have not fully kept pace.

As mentioned earlier, the sales networks of large instant noodle companies were originally focused on eastern and inland first- and second-tier large cities. Master Kong accounts for half of China's instant noodle market. Reviewing its annual reports, one can see that it has been making some adjustments accordingly. For example, its sales network extended inland, adding three sales networks in Guiyang, Nanning, and Baotou in 2011. However, in the 2012 and 2013 annual reports, the sales territory remained unchanged. Production bases also did not change. Moreover, the instant noodle giants have become somewhat overwhelmed by years of cost wars; the 'small profits, quick turnover' low-end market is clearly less attractive than 'high added value.' So, last year, the competition of 'buy instant noodles and get a ham sausage free' officially ended, with noodle companies losing money for publicity and ham sausage companies reaping the benefits. Noodle companies are moving toward high-end, high-end, and even higher-end.

Consumer behavior of lower-income groups is upgrading

Small brands have been eliminated, but big brands have not kept up. Therefore, the decline in sales of mid-to-low-end instant noodles is inevitable. The causes are complex, and one important factor is the change in consumer attitudes among these groups. China Confidential calls this group 'a powerful consumer group,' mainly rural migrant workers. In recent years, many migrant workers have seen wage increases, and their consumption concepts are also changing. The 1,500 migrant workers surveyed by the institution began to have vague brand awareness and spent a lot on mass fast-moving consumer goods. The report estimates that migrant workers spent a total of 4.2 trillion yuan on goods and services in 2012. However, consumer brands' products and services targeted at them have not kept up well.

Declining sales: instant noodles also gradually losing favor among higher-income consumer groups

Instant noodles are striving to go high-end, but the label 'junk food' is a curse.

An interesting thing is that in 2008, although instant noodle sales volume declined, overall sales revenue increased. Faced with this situation, the two giants both analyzed that this proved the potential of the high-end instant noodle market. But the increase in sales revenue became smaller and smaller, and finally in 2014, both sales volume and revenue declined together. It turns out the high-end market is not a panacea. According to AC Nielsen data, in the first half of 2014, instant noodle sales revenue fell 1.9% year-on-year, and by the third quarter, the year-on-year decline reached 4.4%.

If the stumbling sales in previous years did not alarm noodle companies, but instead made them more convinced to focus on high-value-added products that 'sell less but earn more,' last year's situation was enough to make them tremble. The reason is related to people's stereotype of instant noodles, such as no matter how high-end, they are considered 'junk food' without nutrition and unhealthy. Noodle companies are aware of this and hope to fight back. In September last year, a heated debate about 'which is more nutritious, instant noodles or steamed buns' was in full swing.

Interestingly, foreign instant noodles seem to 'chant scriptures' better

Japanese and Koreans like instant noodles more than Chinese. Especially Koreans, who consume an average of over 70 packs per person per year, about 40 packs more than Chinese. Therefore, some comparative analyses claim that Chinese companies have not fully tapped the potential of instant noodle consumer groups.

Chinese eating habits differ from Japan and Korea, and the potential of the instant noodle consumer group cannot be arbitrarily concluded. However, Chinese consumption of 'high-end Japanese and Korean instant noodles' is indeed tapping potential. Nissin and Nongshim are representative brands from Japan and Korea, respectively. Looking at the financial reports of Nissin's Japanese parent company, an interesting phenomenon emerges: a certain cup noodle product aimed at young Chinese began selling well around 2012. So last year, Nissin recruited staff in China to add new factories. The Korean brand Nongshim is even more interesting: thanks to the male and female gods from 'You Who Came from the Stars' eating instant noodles in the hit TV drama, China surpassed the United States for the first time in the first half of last year to become the company's largest overseas market. It should be noted here that Master Kong and Uni-President are both Taiwanese enterprises, not mainland companies, but they have been rooted in mainland China for many years and are considered authentic 'domestic brands' in the minds of Chinese people.

The scenes of 'male gods' eating instant noodles directly boosted Korean instant noodle sales in China; the quality of consumer goods people pursue also includes lifestyle.

Higher-income people naturally want good quality

AC Nielsen's latest survey report says that three-quarters of Chinese respondents said they are willing to pay a higher price for foods considered 'healthy.' In this survey, 'healthy' labels include 'all-natural,' 'no artificial MSG,' 'non-GMO,' etc. This well explains the loss of favor of instant noodles. Although instant noodles can be eaten in many ways and the sauce packets can have various flavors, they are essentially the same: not 'all-natural' and require 'artificial additives.'

So why are people willing to spend seven or eight yuan or even more than ten yuan to buy Japanese and Korean instant noodles? Here, it must be said that high quality is a composite concept; 'health' is a label, and fashion and taste are also. When Chinese people talk about Chinese instant noodles, the lingering impression is 'the artifact of Spring Festival travel.' But when talking about Japanese and Korean instant noodles, they are more likely to associate them with the urban, fashionable, and fast-paced 'lifestyle.' The promotional effect of 'You Who Came from the Stars' on Korean instant noodles is the best example.

The 'Instant Noodle Index' is an excellent indicator of the iteration of Chinese consumer behavior

Chinese people have long had the concept of pursuing high-quality consumer goods, and now their actions are gradually catching up.

Instant noodles are a food and a fast-moving consumer good. They have a strong mass base. At the same time, they are not big-ticket items like home appliances—even the most expensive ones cost only ten or twenty yuan, so people buy them almost entirely based on their own concepts and feelings, without considering too many 'external factors' (buying a TV often requires family discussion). Therefore, using the 'Instant Noodle Index,' i.e., the sales volume and revenue of instant noodles, to measure the iteration of Chinese overall consumer behavior is very appropriate. It should be noted that the iteration of 'concepts' does not mean the upgrade of 'actions.' For example, many people pursue famous brands but only buy counterfeit goods. The counterfeit Master Kong brand 'Kang Shuai Fu' still has a market in some rural areas.

'Kang Shuai Fu' and similar products will gradually lose market share; spending money on 'genuine good products' is becoming an increasingly mainstream consumer behavior

However, times are changing, and people are paying more and more attention to the quality of consumer goods (safety, health, taste, etc.), and they are increasingly motivated and able to choose. On the one hand, this is related to income growth; on the other hand, it is also related to the development of the internet. With a quick online check, one can roughly know the real price and grade of a consumer product. If you don't like it, you can vote with your feet, such as eating bread or biscuits if you can't find suitable instant noodles. In other words, although consumers still like and pursue high quality, they are definitely not 'rich and stupid,' and gradually no longer 'buy counterfeits when genuine goods are unavailable.' In the past, when talking about consumer behavior upgrades, only higher-income groups were mentioned. In fact, a society's consumer behavior cannot be viewed in isolation; the pull and imitation effects between high- and low-income groups objectively exist.

Moreover, the interaction between consumer behavior and enterprises forces enterprises to reform. The embarrassment for consumers is that the consumption needs of low-income groups are easily overlooked, while the consumption needs of high-income groups are more oriented toward foreign countries. As you can see, last year, Chinese local dairy companies launched brands with foreign names, trying to associate themselves with foreign countries in every way. But this trick is difficult for instant noodle companies to replicate, or has not yet been applied. Because in previous years, benefiting from the demographic dividend, instant noodles grew too fast, with relatively extensive development, very different from the dairy industry after the melamine scandal.

Conclusion

The 'Instant Noodle Index' comprehensively reflects changes in the consumption behavior of the general public. Everyone has the need to strive for better, and when capable, they put that need into action. The problem is that domestic mass consumer brands should plan more. They cannot partially ignore low-income groups while also failing to meet the needs of high-income groups.

Reply with the following keywords to categorize and read related professional articles: Sales Supervisor, Second-Tier Management, Regional Manager, Distributor Management, New Channels, City Manager, Competition, 2015, Manufacturer-Dealer Game, Product Slow Sales, Terminal Visit Management, Route Management, Deep Distribution, Internal Management, Sales Skills, Profit Improvement, Recruitment, Distribution, Daily Management, Team Motivation, Trade Promotion, Sales Misconceptions, New Product Launch, Township Market, New Product Pricing, Sales Target Achievement, Closing, Market Visit and Inspection, Baijiu, Beer, Sales Increase, Agency Products, Cross-Region Sales, KA, Terminal Merchandising, New Market, Market Operation, Learning, Book Recommendations, Inventory Management, New Salespeople, Consumer Promotion, Execution, Old Products, Expired Product Handling, Model Market, Investment Attraction, New Media, Distributor Development, Performance Appraisal, Assessment, Annual Planning, Shopping Guide, Morning Meeting, Display, Transformation, Stock Pressure, Holidays, Distributor Cost Control, Channel Operation, Marketing Theory and Laws, Brand Truth, Order Meeting, Team Management, Training, Debriefing, Debriefing Report.