---
title: "Master Kong Instant Noodles Sold 11 Billion in Half a Year: Is It Due to Slowing Food Delivery Growth or 'Consumption Downgrade'?"
description: "Master Kong Holdings recently released its 2018 interim results, with revenue of RMB 30.996 billion, up 8.5% year-on-year, and profit attributable to shareholders of RMB 1.306 billion, up 86.59%. The instant noodle business continued to recover, driven by high-priced noodles, amid a slowing food delivery market and discussions of 'consumption downgrade'."
author: "猫妹小姐姐"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2018-09-04"
language: "en"
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# Master Kong Instant Noodles Sold 11 Billion in Half a Year: Is It Due to Slowing Food Delivery Growth or 'Consumption Downgrade'?

> Master Kong Holdings recently released its 2018 interim results, with revenue of RMB 30.996 billion, up 8.5% year-on-year, and profit attributable to shareholders of RMB 1.306 billion, up 86.59%. The instant noodle business continued to recover, driven by high-priced noodles, amid a slowing food delivery market and discussions of 'consumption downgrade'.

Recently, Master Kong Holdings released its 2018 interim results. During the period, revenue was RMB 30.996 billion, a year-on-year increase of 8.5%; profit for the period was RMB 1.488 billion, up 69.1% year-on-year. Profit attributable to shareholders was RMB 1.306 billion, an increase of 86.59% year-on-year.

It is worth noting that after a slight recovery last year, Master Kong's instant noodle business continued to see modest growth in the first half of this year.

**Instant Noodle Business Recovers Thanks to High-Priced Noodles**

Master Kong Holdings' performance has long relied on its instant noodle and beverage businesses. During the reporting period, the proportion of each business segment's revenue to total revenue remained unchanged compared with the first half of 2017. Instant noodles accounted for 36% of total revenue, beverages 62%, convenience foods 1%, and other businesses 1%.

According to the financial report, revenue from Master Kong's instant noodle and beverage businesses increased by 8.4% and 9.19%, respectively. Meanwhile, convenience foods and other businesses declined by 3.2% and 9.03% year-on-year.

The overall growth of the instant noodle business was driven by sales of container noodles and high-priced bagged noodles—the types we commonly see as cup noodles and bagged noodles like Master Kong's Braised Beef Noodles—which grew 7.01% and 14.83% year-on-year, respectively.

In the first half of 2018, the domestic instant noodle market continued to recover. Nielsen data shows that overall market volume grew 5.9% year-on-year, and sales value grew 10.1% year-on-year. In the first half of 2018, Master Kong held a 43.7% market share by volume and 49.4% by sales value, continuing to rank first in the market.

Master Kong Holdings explained in its financial report why the instant noodle business continued its growth trend after the market recovery last year:

Continuous optimization of product mix, product upgrades, earlier price adjustments, and sales growth increased the gross margin of instant noodles by 2.31 percentage points to 29.83%. The company continued to advance its multi-price-point product strategy, consolidating high-priced noodles and developing premium noodles to align with consumer upgrades and health-conscious demands, while meeting different consumption scenarios through multiple specifications, leading to steady sales growth. Through sports marketing such as marathons and the Pyeongchang Noodle House, the company continued to inject vitality into the brand and convey the safe and healthy image of instant noodles...

In summary, the company increased the gross margin of instant noodles, continued to focus on high-priced and premium noodles, introduced flavors such as spicy pepper, pickled pepper, pork bone, and golden soup; responded to consumers' health needs; and conducted brand marketing in sports and aerospace sectors with high health requirements. It even partnered with Honor of Kings to rejuvenate the brand image and boost sales.

Despite this, a Master Kong Holdings representative told Time Finance in an interview: "The growth rate of Master Kong's premium noodles is below the industry average. How to use innovation as the core driver to respond to the changing external competitive environment remains an important issue for us."

**Instant Noodle Market Recovery: Credit to Slowing Food Delivery Growth or 'Consumption Downgrade'?**

As the top two players in the domestic instant noodle industry, Master Kong and Uni-President have seen their performance significantly affected by the industry in recent years. Data from the World Instant Noodles Association shows that from 2013 to 2016, China's instant noodle demand declined continuously, with annual sales volume falling from 46.22 billion packs to 38.52 billion packs, a drop of 16.66%.

As for why instant noodles stopped selling well, public opinion is divided. Some believe that with the current advocacy for healthy living, eating instant noodles is unhealthy; others think the advent of the high-speed rail era ended the slow speed and long duration of green trains, thereby reducing demand for instant noodles; and some believe the arrival of the food delivery era was the fatal blow to instant noodle sales.

Sister Cat believes these views all have merit, but essentially, people's quality of life has improved, and consumption levels have been upgrading. National data shows that from 2013 to 2016, residents' consumption level rose from RMB 16,190 to RMB 21,285, an increase of 31.47%.

In the past, a bowl of instant noodles was convenient and time-saving, easily satisfying hunger. Nowadays, a variety of healthy instant foods are available, and even in a very short time, one can enjoy 'delicacies'. Moreover, with a simple food delivery order, you can enjoy the pleasure of 'eating out' at home without lifting a finger.

Sister Cat compiled data on the sales revenue and year-on-year growth rates of Master Kong Holdings and Uni-President China's instant noodle businesses from 2008 to 2017.

From the chart below, it is clear that from 2011 to 2016, the year-on-year growth rates of both companies' instant noodle businesses began to slow overall. From 2013 to 2016, Master Kong even experienced negative growth, and although Uni-President China only saw negative growth in 2015, the overall decline was still significant.

In addition, fluctuations in the instant noodle business also had a significant impact on both companies' revenue and profits.

Sister Cat compiled the revenue and profit performance of Master Kong Holdings and Uni-President China from 2008 to mid-2018. It can be seen that the overall performance of both companies is basically consistent with the trend in instant noodle sales.

It is worth noting that in the face of market adversity, Master Kong and Uni-President have adopted basically the same approach, both targeting the high-priced noodle market and continuously enriching flavors. At the same time, both companies have increased investment in their beverage businesses to alleviate the embarrassment caused by declining overall performance.

In 2017, China's instant noodle sales volume increased slightly from 38.52 billion packs in 2016 to 38.97 billion packs. As for why the instant noodle business saw a slight recovery in 2017, Sister Cat believes it is related to the slowdown in the food delivery market.

China Industry Information analysis shows that the growth rate of China's online food delivery market size has continued to slow. As the industry's demographic dividend gradually fades, growth will stabilize, and users will shift from incremental to existing users.

Meanwhile, on January 18 this year, Meituan-Dianping Research Institute released the '2017 Food Delivery Development Research Report'. The report also pointed out that after the initial period of rapid growth, the online food delivery market has slowed down, and compared with first- and second-tier cities, third- and fourth-tier cities have higher year-on-year growth in food delivery orders. In 2017, the market size of China's online food delivery market reached RMB 205.27 billion, with a growth rate of 23%. The number of online food ordering users reached 300 million, a year-on-year increase of 18%, but the growth rates of both market size and users declined compared with the previous year.

Thus, the recovery of the instant noodle market is due, on the one hand, to the early transformation of instant noodle giants like Master Kong and Uni-President, which have spared no effort in laying out high-priced noodles and promoting health concepts, so that high-priced noodles have now basically completed large-scale layout and replacement; on the other hand, the slowdown in food delivery market growth has slowed the decline of the instant noodle market, and overall growth has begun to stabilize.

Despite this, due to factors such as increased health awareness, further upgrading of consumption levels, and the future stable growth of the food delivery market, Master Kong and Uni-President's transformation in the instant noodle business will face unprecedented challenges, and the future market remains a long and arduous road.

The recovery of the instant noodle market also reminded Sister Cat of the recent hot topic of 'consumption downgrade'.

At the end of July this year, Starbucks' financial report showed that its China operating margin fell 7.6% year-on-year, and same-store sales fell 2% year-on-year, marking the first decline in nine years.

Meanwhile, in the first half of 2018, Fuling Zhacai's revenue was RMB 1.064 billion, up 34.11% year-on-year, with net profit reaching RMB 300 million, a surge of 77.52% year-on-year. (Fuling Zhacai's pickled vegetable business accounts for 84.12% of total revenue.)

Shunxin Agriculture, which produces Niulanshan Erguotou in the low-end liquor market, also saw a significant increase in performance. Revenue reached RMB 7.233 billion, up 10.45% year-on-year; net profit was RMB 481 million, a surge of 96.78% year-on-year.

Also, Shuanghui Development, which has a ham sausage business, saw revenue of RMB 23.732 billion, down 1.3% year-on-year; net profit was RMB 2.385 billion, up 25.28% compared with the first half of 2017.

Instant noodles, pickled vegetables, and ham, with a sip of liquor, taste even better. From this perspective, the recovery of the instant noodle business is not isolated.

The recovery of instant noodles, pickled vegetables, and Erguotou is partly due to corporate marketing and product upgrades, but on the other hand, in the market environment of 'consumption downgrade', it is also a choice consumers are forced to make.

Source: Sister Cat Finance (ID: maocaijing)
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