Instant Noodles Get an Upgrade, but Who Will Buy a 29.9 Yuan Bowl?

What are instant noodle brands doing to counter the declining market?

If Uni-President keeps its word, this month it will launch a premium instant noodle product called "Man Han Yan." Currently, all known details about it are: non-fried noodle block, four seasoning packets including vegetables and meat, and so-called special non-plastic folding chopsticks and a lid. Its most attention-grabbing feature is the high price of 29.9 yuan, along with a monthly limited release of 6,000 bowls. Initially, you can only find it in these places: Uni-President's e-commerce platforms (WeChat store, Tmall, JD.com, 1号店), boutique supermarkets in first-tier cities, and 7-11 stores in Shanghai under Uni-President's supermarket chain. Uni-President has created a lot of hype for the launch. From the 2015 performance report released by Uni-President on March 21, you can roughly see the reason for launching such a seemingly outrageous product. According to the financial report, Uni-President's instant noodle revenue in the mainland market in 2015 was 7.5674 billion RMB, a decrease of 4.9% compared to the same period in 2014. However, net profit reached 174 million RMB, reversing the losses of the past two years. Uni-President attributed the profitability of its instant noodle business to "continuous product structure adjustment, with the sales share of high-priced noodles gradually increasing, resulting in a 4.7% year-on-year increase in gross margin for instant noodles;" and "benefiting from lower raw material prices (such as palm oil)." A trend is that the overall instant noodle market is declining. AC Nielsen data shows that in 2013, the overall instant noodle market sales declined 1.3% compared to 2012. In 2014, the instant noodle market declined by as much as 7%. The latest data shows that in 2015, overall instant noodle sales declined 6.3%, but due to the growth of high-priced instant noodles, the decline in sales value was only 2.6%. What makes Uni-President proud is its performance in the high-priced instant noodle market. Its Tang Daren brand achieved revenue of 500 million RMB last year. In the financial report, Uni-President even used language like "grasping the trend of young consumers towards mid-to-high-end instant noodles, becoming the main brand in the price range above 5 yuan." Uni-President launched the Tang Daren series in 2008, priced at around 7.5 yuan per bowl. After several years of consumer cultivation, Tang Daren's revenue grew exponentially in 2014, and maintained triple-digit growth in the first half of 2015. Following Tang Daren, Uni-President successively launched new instant noodle products, including Champion List and Ge Mian, both priced above 5 yuan per unit. Man Han Yan seems to be Uni-President's ultimate attempt in the high-end instant noodle market. In 2015, Uni-President's General Manager Hou Ronglong stated that in the future market strategy, they would focus on "2.0 products" priced above 5 yuan per unit—those upgraded instant noodles and beverages. He estimated that the revenue from these mid-to-high-end instant noodles and beverages could reach 28-30% of the total in 2016. Their goal is to further increase the share of "2.0 products" to 40% by 2017. Behind the high-priced instant noodles is the transformation and upgrading of the entire brand. In Uni-President's design, Man Han Yan mainly serves a high-end image. In fact, Uni-President's "archrival" Master Kong is doing something similar. In 2014, they launched the Aixian Dacan series, which emphasizes "healthy, delicious, and low burden." Zhao Tianyang, brand manager of Aixian Dacan in Master Kong's instant noodle business group, told Curiosity Daily: "Aixian Dacan is quite special; it was launched to enhance the parent brand's image." Later, Master Kong introduced "Tang Da Shi," positioned similarly to Tang Daren, but it came relatively late: it was only launched in October 2015. These are also products priced above 5 yuan per unit. According to Master Kong's latest financial report, in 2015, the instant noodle business, which accounted for 39.69% of the group's total revenue, saw sales decline 12.69% year-on-year, and net profit fell 23.99%. Overall performance was below expectations, and Master Kong directly attributed this to "hesitation in the strategy to upgrade and raise prices of instant noodle products." To date, Master Kong does not have a high-priced instant noodle with obvious market competitiveness. Besides Master Kong and Uni-President, Jinmailang, Nissin, Nongshim, and others have also launched higher-priced instant noodles, intending to enter the market before it fully booms—this probably confirms that the mid-to-high-end instant noodle market is indeed more profitable. What is the difference between these and instant noodles priced below 5 yuan? Why do expensive instant noodles sell better? You may have noticed from the chart above that, in terms of product positioning, mid-to-high-end instant noodles are more personalized. Compared with mass-market products (such as braised beef noodles and old altar pickled cabbage noodles), mid-to-high-end instant noodles have more segmented positioning. For example, Tang Daren's product appeal focuses on the deliciousness and freshness of the "soup." Champion List emphasizes "Chinese flavors," with products featuring regional characteristics (such as knife-cut noodles and Lanzhou拉面). Accompanying the segmented positioning is a diversification of flavors. For example, Japanese tonkotsu, coconut chicken soup, assorted seafood, tomato and egg, etc. Basically, each product has at least three flavors. This makes consumers who like to try new things willing to pay for it. According to Kantar Worldpanel, from 2014 to 2015, the annual sales growth of imported instant noodles reached 22%. If you know that imported instant noodles sell well, you can probably understand why instant noodle brands are putting effort into flavors. Besides the perception that imported food is safer, one of the main reasons for consuming imported instant noodles is actually the novelty of flavors. In imported instant noodles, you can choose flavors that are not commonly seen domestically, such as curry, tom yum, laksa, etc. In Japan, the birthplace of instant noodles, the flavors are very rich. Nissin's "Cup Noodles" series, with a 45-year brand history, has had 73 flavors; Demae Itcho has 16 flavors; another brand, Marutai, has 10 flavors. The entire market updates products very quickly, with some brands launching new flavors every month or week. For example, Nissin has updated 15 flavors in the past month. This is a good way to stimulate and tempt consumers. You may also notice that the marketing terms for these high-priced instant noodles mostly include information like "non-fried" and "no artificial preservatives," trying to convince consumers that "this is healthy." Some even label the calorie content. But as Zhao Jinjing told Curiosity Daily, in fact, the calorie difference among most instant noodles is not significant. Eating instant noodles definitely ignores health concerns. She once wrote a review of instant noodle brands and ate instant noodles about once a week—making her a heavyweight instant noodle enthusiast. Zhao Jinjing said she likes eating Hong Kong-produced Demae Itcho the most, and the main factor determining whether she will repurchase is flavor. So from the merchant's perspective, it's not so much about alleviating consumers' health concerns as it is about reducing a bit of the guilt of eating instant noodles. To this end, they claim to have "upgraded" the configuration of mid-to-high-end instant noodles. These noodles use "healthier" noodle processing technologies: for example, Aixian Dacan uses a steamed noodle technology, and the noodle block has lower fat content; Nissin's Raoh uses non-fried noodle blocks with a patented 3-layer thick straight technology. To add more added value, the seasoning packets are also used as a selling point. For example, they label imported beef bone broth, and often have separate packets for meat, vegetables, and seafood. According to a 2014 noodle report by Mintel, 76% of respondents agreed that "I want to see more instant noodle products sold in combination with side dishes." In this way, instant noodles at least appear more nutritionally balanced: not only carbohydrates, but also protein and fiber. Packaging also gets attention, such as removable lids and octagonal bowls. All are designed to attract attention and increase consumer purchase frequency. To encourage you to eat more instant noodles in different scenarios, Uni-President's Tang Daren launched a 72g light version, which may be one of the few series that has bag, cup, and bowl formats. Learning from the Japanese instant noodle market, Uni-President and Master Kong launched light series, namely "Qingshu" and "Zhenliaoduo." Compared to the original bowl or bag noodles of around 100g, light noodles often use cup packaging, with smaller weight and lower calories. They can better reduce your guilt and are more suitable as a late-night snack or even breakfast. Returning to Uni-President's 29.9 yuan "Man Han Yan," all the selling points it currently boasts—non-fried, four seasoning packets, unique packaging—are already available in current instant noodles priced around 8 yuan. "Man Han Yan" does not have more outstanding competitiveness. According to Uni-President, the target group for "Man Han Yan" is high-income people aged 30-48, hoping to become a high-end meal replacement option for those who pursue quality of life but lack time to eat. But the problem is that this group is not the main consumer of instant noodles, and young people under 30 are clearly more eager to try new things. The current hype-filled marketing of "Man Han Yan" seems to be speaking more to young consumers. We collected some reasons from the internet from people who like to buy imported instant noodles (to some extent, this group overlaps and is similar to those willing to consume high-priced instant noodles): 1. After watching TV series or videos (with scenes of eating instant noodles or recommendations); 2. Stocking up at home; 3. Recommended by friends; 4. To try something new or satisfy cravings; 5. Ate abroad and continue buying after returning; 6. Bought offline and repurchased online. Currently, instant noodles priced above 20 yuan are also very rare. Popular online products like Korea's Samyang Fire Noodles and Singapore's KOKA are priced at 3-6 yuan per pack. The slightly more expensive Japanese brand Marutai is priced at 29.8 yuan per unit in boutique supermarkets. Consumers do now expect more novel and diverse flavors, as well as healthier ratios, and are willing to pay a higher premium for them. For now, the 29.9 yuan price may exceed the premium tolerance of most instant noodle consumers. And from Uni-President's limited release of 6,000 bowls, you can also see that Uni-President is quite cautious about this, and their confidence in the product may not be as high as they claim. For now, rather than launching a new product, it looks more like brand marketing under the guise of a new product launch. "I would be willing to try a 29.9 yuan instant noodle, but whether I will continue to buy depends on the taste," said Zhao Jinjing. But she also thinks it's expensive; she spends most on products between 6-10 yuan. This is also the current market mainstream. Uni-President stated in its financial report that this year they will focus on promoting the "Qingshu" series, not "Man Han Yan." 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