This Japanese company, which invented the world's earliest instant noodles, Nissin Foods, has now set its sights on the mainland market with full force. Master Kong and Uni-President, are you okay? In 1958, the world's first instant noodle was sold in Japan, and 13 years later, the world's first cup noodle was also born. The company that achieved both 'firsts' is Nissin Japan. On November 14, its subsidiary Nissin Foods submitted a listing application to the Hong Kong Stock Exchange. Currently, there are already two 'instant noodle stocks' in Hong Kong, namely Master Kong and Uni-President, whose stock prices have been quite bumpy, and even the bull market in Hong Kong stocks has not been able to help them return to historical highs. If Nissin successfully lists, will it replicate their weak trend? Stock prices often reflect performance. Master Kong and Uni-President's performance has declined for four consecutive years, but Nissin's revenue has grown steadily. According to Nissin's first-half performance data, although revenue in the mainland decreased by 3.6%, excluding exchange losses, it grew by 1%. It may seem small, but it is better than a decline. Both are making instant noodles, so why is there such a big difference in revenue? In recent years, consumption upgrades may be related. However, why did Nissin choose this time to make a big push south? How big is the cake of consumption upgrade in the instant noodle market? Why hasn't Master Kong's performance enjoyed the dividend of the upgrade? Tripped by Consumption Upgrade In 1991, Master Kong came to the mainland from Taiwan. Considering the purchasing power of mainland consumers, it positioned itself in the mid-to-low-end market from the start, pricing its flagship product 'Braised Beef Noodles' at 1.98 yuan. In terms of current purchasing power, 1.98 yuan at that time is equivalent to 3.55 yuan now, meaning Master Kong has hardly raised prices in 16 years. Subsequently, overwhelming advertising helped Master Kong capture the mainland market, even leading to scenes of wholesalers bringing sacks of contracts to order. From then on, Master Kong dominated the mainland instant noodle market for over a decade. In 1996, Master Kong was listed in Hong Kong, and the entire company's business was developing rapidly. At that time, the mainstream marketing direction was in third- and fourth-tier cities, and Master Kong's product positioning continued to extend to the low end. At that time, the price level had doubled compared to 1991, but Master Kong's instant noodle prices remained in the range of 1.8-4.5 yuan. Master Kong, which had adapted to market changes twice, failed to adapt to the nationwide consumption upgrade, and its mid-to-low-end positioning, which had kept it as the leader, became a stumbling block. According to Alibaba's 'Quality Consumption Index Report', in the past five years, the quality consumption index for all age groups has been on the rise. The main force of instant noodle consumption is in the 23-35 age group, which is also the age group with the most significant increase in the quality consumption index. So, when consumption upgraded, did Master Kong also 'upgrade'? The average price of the best-selling products on Master Kong's Tmall flagship store is between 2.3 and 2.5 yuan. Although the flavors have diversified, from a cost-performance perspective, it is still the same as 20 years ago, already left behind by the consumption upgrade. Master Kong in Struggle Labels such as 'unhealthy' and 'not nutritious' for instant noodles have always lingered. Consumers crave fresher, healthier, and more quality products, even if it means spending more money. Master Kong is also struggling, but its high-end series, Soup Master and Fresh Feast, still cannot save the shrinking market cake. Three years ago, the Taiwan gutter oil incident and the price war between Master Kong and Uni-President both caused the two mainland instant noodle giants to miss the opportunity to position themselves for the consumption upgrade, and made the instant noodle business worse, completely demonizing it. At the same time, in Japan, ramen, which once had the same status as instant noodles, has completed its consumption upgrade, from instant noodles to physical stores, completely changing the cheap image of ramen and transforming it into a national delicacy. With labels of 'nutritious' and 'hygienic', it, along with Korean instant noodles, has marched into China. After the price war ended, consumption upgrades rose, and Japanese and Korean instant noodles occupied the high-end market. Master Kong and Uni-President suddenly woke up. Both launched high-end products, with the best being Uni-President's 'Soup Master' series, whose sales increased by 90% year-on-year to RMB 1 billion in the first three quarters of this year, contributing most of Uni-President's revenue. Despite this, it is difficult to reverse the situation. In the middle of this year, Uni-President's instant noodle business revenue was 39.54, still down 1.4% from the same period last year. In contrast, Master Kong's performance has clearly recovered, with its first profit increase after three consecutive years of decline. In the first three quarters of this year, Master Kong's total revenue was 48.895 billion yuan, up 5.91% year-on-year; net profit was 1.938 billion yuan, up 37.91% year-on-year. Its container noodle and high-priced bagged noodle sales increased by 3.98% and 11.15% year-on-year respectively, showing that high-end products are the main driver of Master Kong's performance growth. However, whether the old tree can sprout new branches remains to be seen over time. Why is Nissin Attacking Now? The current instant noodle market is emitting two signals. As of last year, the instant noodle market had declined for four consecutive years, but behind the market contraction is the rise of high-end instant noodles. According to Frost & Sullivan's forecast for China's high-end instant noodle market, the compound annual growth rate of China's high-end instant noodle market will reach 11.7% by 2021. As the originator of mid-to-high-end instant noodles, Nissin is riding the wave of consumption upgrade at its strongest, intending to spin off its mainland business and list in Hong Kong to further sweep the mainland instant noodle market. Nissin's advantage over Master Kong and Uni-President is that when it landed in Hong Kong 30 years ago, it positioned itself as 'high-end'. Compared with price, Hong Kong consumers pay more attention to food quality, safety, and nutritional value, allowing Nissin to focus on developing high-quality instant noodles. After decades of accumulation in the Hong Kong market, Nissin has already won at the starting line when facing the consumption upgrade in the mainland. From the pricing of Nissin's flagship store products, the unit price of its popular products is 3.9-4.9 yuan, and the unit price of high-priced products is 5.8-9.1 yuan, with the overall price level above Master Kong's pricing. Its revenue over the years has also been steadily growing, and excluding the exchange impact in the first half of this year, gross profit has also continued to grow. However, it is not easy for Nissin to fully open up the mainland market. Although Nissin has always been the largest instant noodle company in Hong Kong, it is only the second largest high-end instant noodle company in the mainland market, accounting for only 18.2% of the mainland's mid-to-high-end instant noodle market share last year. Master Kong still holds the top position with a market share of 39.5%, more than double that of Nissin. Master Kong's market position and its performance recovery this year indicate that its advantages remain, or it may also represent that domestic instant noodles are moving towards recovery. According to data, in the first half of this year, domestic instant noodle sales even increased by 4% year-on-year, ending the five-year consecutive decline in the instant noodle industry. China's high-end instant noodle war has just begun. Extended Reading:
Uni-President's Three Moves for 2018: Define 'Life Noodles', Increase Unmanned Stores, and Rekindle Entrepreneurship!
Source: Food Industry Expert On the occasion of Uni-President's 50th anniversary, Luo Zhixian, chairman of Uni-President Group, attended an event in Taipei recently. Before the meeting, Luo Zhixian revealed in an interview with the media that Uni-President will redefine its noodle products as 'life noodles', Uni-President 7-11 will open unmanned convenience stores as soon as next year, and next, they will bring back the entrepreneurial spirit... 1 Redefine Instant Noodles as 'Life Noodles' Luo Zhixian is optimistic about self-heating convenience foods ▼ In August this year, Uni-President announced its 'exit from the instant noodle market', causing an uproar. Luo Zhixian said that exiting the instant noodle market does not mean leaving the noodle market, but rather repositioning. Recently, Uni-President announced the launch of a noodle innovation plan, redefining traditional mainland instant noodles as 'life noodles'. In the past, the goal was to eat enough; now, the pursuit is to eat smart. Internally, they have begun researching various new forms of life noodles, and in the future, they will launch noodle products beyond imagination. Luo Zhixian pointed out that by broadening the definition of noodles, the ways products can be presented and consumed can differ from now. The R&D team must rethink when consumers eat noodles, how they should eat them, and even consider how to make a bowl of instant noodles without hot water. Recently, new products such as self-heating rice, self-heating soup, and self-heating hot pot have sparked a wave in the mainland food market. These products use heating packs and water to heat food without needing a stove, microwave, or even hot water, allowing people to enjoy hot soup, noodles, rice, and hot pot. These have attracted Uni-President's attention. Luo Zhixian said that this new type of food industry technology will completely change future eating habits. The decline in mainland instant noodle sales is not due to the booming development of food delivery services, but because past instant noodles no longer fit the lifestyle of current consumers. The food industry must transform accordingly, which is why they are redefining noodles as life noodles. Uni-President has made a series of adjustments to its mainland food business, cutting off inventory and sales channels to start anew, which has greatly improved the profitability of Uni-President China. 2 Technology Empowers 7-11 Uni-President to Increase Unmanned Convenience Stores ▼ Recently, Luo Zhixian confirmed for the first time that 7-11 will apply new technology to open its first unmanned supermarket in the country. Internal planning and preparation have already begun, and it is expected to be launched as soon as the first half of next year. However, Luo Zhixian emphasized that this is not to replace human labor, but to observe the extent of interaction between technology and consumers. They hope to hand over routine work to technology, so that 'people's time can be freed up to do more things.' Luo Zhixian said: '7-ELEVEN's unmanned store may be launched sooner than imagined.' This indicates that internal planning for this store has reached the final stage. There are many technologies available now, and some stores already have the conditions to develop unmanned stores. This matter seems simple on the surface, but behind it involves a very intricate system, and there is no conclusion yet. 2017 is known as the first year of new retail. In this year, the new retail form of 'unmanned vending' flourished, attracting many industry giants to compete for layout. Although unmanned retail still has many loopholes at this stage, 'unmanned vending' is a trend in the future. In Taiwan, the future labor gap will widen, and an aging population structure is an inevitable trend. The retail industry must walk ahead of consumers. The future has arrived, so Uni-President is seizing the time to prepare for the future. 3 Rekindle Entrepreneurship Uni-President's Reform in 2017 Welcomes New Changes ▼ Facing the group's 50th anniversary, Luo Zhixian pointed out that in the future, they will do more interesting and fun things, and develop in three directions: character, taste, and brand. At the same time, they hope to return to the past. He mentioned that the founder used to emphasize gratitude, selflessness, and cherishing blessings, but many new colleagues may not understand or even complain. He hopes to bring back the entrepreneurial spirit of that time. Luo Zhixian previously used the 'clear the drawer strategy' to describe the current Uni-President Group. They have already dealt with many assets, making the group's operations easier, and slimming down has improved its figure. 'Poverty taught me to cherish blessings, growth taught me gratitude, and responsibility taught me selfless pioneering.' This is the belief of Uni-President founder Kao Chin-yen, and also his personal life insight, which has subtly influenced the thinking and demeanor of every Uni-President employee. In the highly competitive mainland Chinese market, Uni-President does not engage in price wars. It locks onto and is optimistic about the high-priced food market opportunities in the mainland, launching the best beverages and instant noodles to seize the 'high-quality' pie of 1.3 billion people. Although its market share is still difficult to catch up with the market leader, Master Kong, its star products in recent years have begun to make competitors uneasy. Consumption upgrades, with products moving towards high quality and high prices, are the breakthrough for corporate profits. The success of Xiao Ming Classmate and Soup Master has shown Chinese food companies the dawn. In the next stage, Uni-President will brew the next 'purple storm' of 'life noodles'. Uni-President is laying out in the mainland to shift 'from quantity to quality', launching multiple '2.0 products', with the goal of becoming the most valuable FMCG company in mainland China by 2020. -END-