Yesterday we discussed a strange news issue: instant noodle sales declined, but Master Kong, a giant in the industry, saw a counter-trend increase, which we ultimately attributed to consumption upgrading. A reader then asked in the background: with the increasing competition from the food delivery market, who will ultimately prevail in this battle between instant noodles and food delivery? We think this question may be difficult to explain in a few sentences, so we might as well use an entire article to specifically discuss how this offensive and defensive battle between instant noodles and food delivery will evolve in the internet era.

A Cross-Border War Initiated by Food Delivery

The Chinese nation is one that regards food as the primary necessity. Eating is the core of Chinese culture. Perhaps only in China can a documentary like "A Bite of China," which focuses on food, surpass the ratings of TV dramas. However, when it comes to the culinary world, in recent years two distinct factions have emerged. Of course, we exclude regular meals, otherwise major catering giants would come looking for trouble. Beyond regular meals, the food market has formed two major camps: food delivery and instant noodles.

Speaking of instant noodles, everyone is familiar with them. Since the reform and opening-up, they have rapidly occupied the non-regular meal tables of Chinese people. Take the famous instant noodle giant Master Kong as an example. In 1992, when the market economy fully emerged, Master Kong created its first packet of braised beef noodles in Tianjin. This variety of instant noodles can be said to have captured the childhood memories of most Chinese born in the 1980s and 1990s, and it can be regarded as the number one instant noodle variety in the Chinese market. Since then, other instant noodle categories, such as pickled cabbage and pepper noodles, and black and white pepper noodles, have also held certain market shares. By 2013, the average annual consumption of instant noodles by Chinese people had surged to 46.22 billion packets, making instant noodles almost the absolute leader on the non-regular meal tables of Chinese people.

However, the problem also emerged in the peak year of 2013, when the Chinese food delivery market began to rise. It was in this year that famous venture capital firms such as Sequoia Capital and GSR Ventures began to lay out their plans in the food delivery market. Since then, China's food delivery industry officially started, and in less than five years, food delivery has shown vigorous development in China. With the new Ele.me (Ele.me + Baidu Delivery) and New Meituan-Dianping (Dianping + Meituan) as representatives, food delivery giants have developed rapidly in the market. According to the "2016-2017 China Online Catering Food Delivery Market Research Report" released by iiMedia Research, from 2011 to 2016, the scale of China's online food ordering market grew from 21.68 billion yuan to 166.24 billion yuan, an increase of nearly 8 times in six years. According to the agency's forecast, the online food ordering market will exceed 200 billion yuan in 2017. The "2016 National Food Delivery Bill" shows that in 2016, Chinese people ordered 3.3 billion food delivery orders, and the footprints of delivery personnel were equivalent to running 80,000 laps around the Earth's equator.

In this cross-border war triggered by the internet, the food delivery industry has rapidly developed competitive advantages through the internet, forming industrial competitive advantages. With a wide variety of options, it has shown rapid development in the market. Therefore, there are voices in the market saying: food delivery will completely overturn the instant noodle market, and food delivery will completely replace instant noodles. Is this really the case?

Who Will Laugh Last: Instant Noodles or Food Delivery?

From the perspective of market development, the growth of the food delivery market is part of China's consumption upgrading. As people's income and living standards have improved significantly, their dietary needs have also upgraded, which is why the food delivery market has developed rapidly. However, whether food delivery will completely defeat instant noodles is an exaggeration. There have been numerous articles analyzing the advantages of food delivery, and I have also specifically discussed the advantages of the food delivery market before. Today, let's analyze again how the battle between instant noodles and food delivery will evolve.

From the overall market development trend, food delivery will have a golden period of development, and this trend has already formed. However, saying that food delivery will completely overturn the instant noodle market is an exaggeration. The main reasons are as follows:

First, the self-evolution of instant noodles in the competition with food delivery.

As analyzed above, in the overall competition with the food delivery industry, instant noodle companies represented by Master Kong have already begun their self-evolution process. From the current market effects, the high-end product strategy implemented by Master Kong and other instant noodle companies has been relatively effective. In the third quarter, they successfully reversed the decline in performance and achieved a net profit growth of more than 30%. At the same time, through a series of recent strategic measures by Master Kong, we can see that instant noodle companies represented by Master Kong have always been upgrading their products. According to recent public reports, in addition to the traditional braised beef noodles, Master Kong has also developed multiple flavors of instant noodles, with more than 260 varieties. For example, at the cooperation between Master Kong and the China Space Foundation on November 9, Master Kong expressed its intention to participate in the research and development of space food, aiming to make instant noodles that can be eaten in space. These examples show that in the face of competition from the food delivery industry, instant noodle companies have been continuously self-improving and innovating. It can be expected that in the future, the competition between instant noodles and food delivery in terms of food quality will become more intense.

Second, the increasing emphasis on standardization and food safety in food delivery.

In essence, food delivery companies like Ele.me or Meituan are platform-based economies. They rely on a large number of food delivery stores to provide services to consumers. The advantage of this reliance is that there are many flavors, which can meet the differentiated needs of most consumers. However, the disadvantage is also obvious: the quality of meals varies. In recent years, while the food delivery market has been booming, reports on food safety issues in food delivery have also emerged one after another. However, the open development model of platform-based economies determines that platform companies find it difficult to uniformly supervise the product quality of merchants participating in the market. They cannot build their own food safety testing centers like instant noodle companies, such as the food safety testing center established by Master Kong in Tianjin. Food safety will become a powerful weapon in the hands of instant noodle companies.

Third, the flattening of labor cost competition.

The vigorous development of China's food delivery industry largely relies on China's low-cost labor advantage. We can hire delivery personnel at very low prices to handle food delivery. However, China's demographic dividend has entered a period of decline. In recent years, the relatively high income of delivery personnel is largely the result of food delivery companies burning money on subsidies. Once this subsidy period ends and delivery personnel's income returns to the average level, the biggest problem facing food delivery companies will be high labor costs, which will further increase with the disappearance of China's demographic dividend, inevitably increasing the cost of food delivery and leading to higher food costs. In contrast, the advantages of instant noodles, such as self-service and low cost, are very obvious. This will gradually reduce the competitive gap between the two sides, or even bring them to parity. This is also why instant noodles in countries like Japan and South Korea have always maintained an advantage in competition with food delivery.

Fourth, the important consideration of time cost.

Food delivery has always had a major problem: time cost. Many people have to wait a long time after ordering food. If they encounter peak dining hours or bad weather such as wind and rain, this time cost will further increase. However, instant noodles and other fast foods do not have this problem. With the gradual enrichment of instant noodle categories, the increasing options, and the improvement in quality, the time advantage of instant noodles may become the last mile moat protecting the industry's development. This is similar to the principle of why convenience stores and community small shops can develop rapidly in the e-commerce era, because neither e-commerce nor food delivery can solve the last mile problem, which is a fatal flaw.

Fifth, the price complementarity.

As we all know, another important reason why instant noodles are widely popular is their low price. The average selling price of a food delivery order plus delivery costs is close to 20 yuan per order, but the cost of low- and mid-range instant noodles is only 4-5 yuan. Even high-end instant noodles rarely exceed 20 yuan. This gives instant noodles a strong price complementarity advantage, especially in the 5-20 yuan range, which is also the competitive advantage of mid-to-high-end instant noodles in the future.

Based on the combined effect of the above five reasons, we can judge that in the competition between food delivery and instant noodles, a pattern of equal division may emerge. That is, instant noodles find it difficult to defeat food delivery, and food delivery also finds it difficult to defeat instant noodles. Each side occupies a segmented field, and mutual complementarity may be the development trend of the entire market. Therefore, it is too early to say that food delivery will completely defeat instant noodles, and whether the self-development of instant noodles will show a trend of gradual high-endization like in Japan and South Korea also seems highly likely.

Source: Jianghan Vision Observation (ID: jianghanview)

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