No wind lasts forever, nor does any trough. On July 17, an American consulting firm released a report stating that global instant noodle sales reached 103.6 billion servings in 2018, with the Chinese market accounting for 38.85% of that total. Among them, China's per capita annual consumption was 29 servings, 2.13 times the global average. Similarly, the World Instant Noodles Association also released data indicating that since 2018, China's instant noodle market sales have shown a clear recovery trend, and in 2019, it is expected to return to the level of 2014.

In other words, after experiencing a multi-year trough, instant noodles have once again gained consumer favor!

Lost to food delivery, won by food delivery

In the instant noodle market, there is a saying: "What defeated Master Kong was not Uni-President, but Meituan and Ele.me."

This succinctly reveals the crisis faced by the instant noodle market!

After 2013, as Meituan entered the food delivery market, a subsidy war erupted in the food delivery arena. Driven by price incentives, more and more consumers preferred the "ordering takeout" consumption scenario over "eating instant noodles." The result was a severe decline in instant noodle sales! In 2016, China's instant noodle sales were 38.52 billion servings, the lowest in five years. Over five years, sales dropped by nearly 8 billion servings, equivalent to a daily demand decrease of 7.23 million servings. However, with the formation of a duopoly between Meituan and Ele.me, the food delivery market's tactics also changed. On one hand, the intensity of "burning money subsidies" decreased; on the other hand, the average price of food delivery continued to rise, gradually exiting the 10-20 yuan market. In other words, with the consumption upgrade in food delivery, instant noodles have filled the market gap again!

Some may ask: the image of instant noodles as "junk food" is deeply rooted, so why have they regained consumer favor?

In my view, there are three reasons.

First, "junk food" does not mean consumers will refuse to consume it; this logic is the same as for barbecue and milk tea. Moreover, in terms of convenience, instant noodles remain irreplaceable; Second, in the "lower-tier market," instant noodles are still the first choice, especially against the backdrop of rising food delivery prices; Finally, instant noodle companies represented by Master Kong and Uni-President are continuously promoting product upgrades rather than sitting idly by.

Product Upgrades: Master Kong Seizes the Consumption Upgrade Opportunity

Data does not lie.

Over the past year, Master Kong's high-end instant noodle sales increased by 10.6% year-on-year, while its lower-priced crispy noodles declined by 24%.

Additionally, according to Master Kong's JD.com self-operated store, the "Express Speed Noodle House" has received over 50,000 reviews. In other words, the "high-end noodles" with an average price of 25 yuan per bowl have gained recognition from many consumers.

Furthermore, as Master Kong's offline physical stores, "Master Kong Private Noodle House" has accelerated its store opening pace in recent years. Today, these stores can be seen in many shopping malls, high-speed rail stations, train stations, and bus stations.

Although the price of 45 yuan is slightly expensive, its high-end business format has begun to be accepted by more and more consumers.

Now let's talk about Uni-President.

In 2018, products priced above 5 yuan accounted for 26% of Uni-President's instant noodle sales, an increase of about 5 percentage points from 2017. Its high-end product, Tang Daren, saw sales growth of 30%, with revenue exceeding 2 billion yuan, a nearly 20-fold increase in five years. Similar to Master Kong, Uni-President also launched the "Man Han Da Can" beef noodles with half tendon and half meat at a price of 19.9 yuan, receiving positive feedback from consumers. According to data from Uni-President's JD.com self-operated flagship store, this new product has received over 24,000 reviews, which can be considered a good start. In other words, Uni-President has also achieved fruitful results in the high-end instant noodle market!

It is also worth mentioning that Uni-President has crossed over into the "self-heating rice" field, and its own sub-brand "Kai Xiao Zao" has also achieved good sales. Data shows that the potato stewed beef brisket flavor single item has over 55,000 reviews on JD.com's flagship store, priced at 24.2 yuan.

Therefore, we can draw the following conclusion: Although the instant noodle market is recovering, it is not a "flash in the pan" for low-end instant noodles, but rather a result of quality improvements in mid-to-high-end instant noodles against the backdrop of consumption upgrades.

Profit Margins Recovering, High-End Products Showing Initial Results

Can Brands Shake Off the Gloom?

On the surface, Master Kong and Uni-President have won through product upgrades. In reality, it is the result of brands closely following consumer needs.

In 2018, Master Kong's revenue was 60.6 billion yuan, a year-on-year increase of 2.94%, but net profit surged 35.42% year-on-year; similar to Master Kong, Uni-President's revenue growth was only 4.56%, but net profit growth reached 17.25%.

Clearly, this is no coincidence! On one hand, the increased proportion of mid-to-high-end instant noodle sales has improved product profit margins; on the other hand, while stabilizing the low-end market, the prospects of the mid-to-high-end market have opened new growth doors for Master Kong and Uni-President.

The instant noodle industry has once again demonstrated a truth: On the surface, Master Kong and Uni-President are direct competitors, but in reality, they are more like "brothers in arms who advance and retreat together." Or more accurately, Master Kong and Uni-President are a "community of shared destiny."

Of course, this does not mean that winter is over. For example, whether mid-to-high-end products can sustainably gain consumer favor; whether product quality and safety issues can be effectively controlled.

These are all areas that brands still need to seriously consider.

Source: Chief Brander (ID: CBO688)