--- title: "Wugu Daochang Put Up for Sale: Is COFCO Set to Abandon Its Instant Noodle Business?" description: "COFCO Wugu Daochang Food Co., Ltd. is listing its 100% equity and 53.679 million yuan in claims for transfer on the Beijing Equity Exchange. The move signals COFCO's potential exit from the instant noodle business, as the subsidiary has struggled with losses and declining market share." author: "New Distribution" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2016-11-26" language: "en" canonical: "https://xinjignxiao.com/en/articles/wugu-daochang-put-up-for-sale-is-cofco-set-to-abandon-its-instant-noodle-4cf9c6ca/" markdown: "https://xinjignxiao.com/en/articles/wugu-daochang-put-up-for-sale-is-cofco-set-to-abandon-its-instant-noodle-4cf9c6ca.md" original_source: "https://mp.weixin.qq.com/s/_UYt9NodTQm4y4ZI6w2rvw" translation: "https://xinjignxiao.com/zh/articles/%E4%BA%94%E8%B0%B7%E9%81%93%E5%9C%BA%E8%A2%AB%E5%87%BA%E5%94%AE-%E4%B8%AD%E7%B2%AE%E6%88%96%E5%B0%86%E5%BD%BB%E5%BA%95%E6%8A%9B%E5%BC%83%E6%96%B9%E4%BE%BF%E9%9D%A2%E4%B8%9A%E5%8A%A1-4cf9c6ca.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/wugu-daochang-put-up-for-sale-is-cofco-set-to-abandon-its-instant-noodle-4cf9c6ca/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Wugu Daochang Put Up for Sale: Is COFCO Set to Abandon Its Instant Noodle Business? > COFCO Wugu Daochang Food Co., Ltd. is listing its 100% equity and 53.679 million yuan in claims for transfer on the Beijing Equity Exchange. The move signals COFCO's potential exit from the instant noodle business, as the subsidiary has struggled with losses and declining market share. > **News:** > > Yesterday, it was learned from the Beijing Equity Exchange that COFCO Wugu Daochang Food Co., Ltd. is listing its 100% equity and 53.679 million yuan in claims for transfer. COFCO Wugu Daochang Food Co., Ltd. is a limited liability company (wholly owned by a legal person), located west of Xingli Village, Liulihe Town, Fangshan District, Beijing. It was established on October 10, 2004, with a business term until October 9, 2034, and a registered capital of over 1 billion yuan. The company is currently wholly owned by COFCO Natural Grains Food Investment Co., Ltd. > **The Past and Present of Wugu Daochang** Wugu Daochang was once hailed as a dark horse in the industry, reaching the sixth position in the national market in just six years. In 2001, 13 shareholders led by Wang Zhongwang invested 1.7 million yuan to establish Hebei Zhongwang Food Co., Ltd. (the predecessor of Zhongwang Group). In 2005, the group's headquarters moved from Longyao County, Hebei Province, to Beijing, and the Wugu Daochang brand began operations. In 2006, Wugu Daochang's sales reached 1.5 billion yuan, earning Zhongwang Group the top spot on the fifth China Growth Enterprise 100 list. On February 12, 2009, COFCO Group acquired the shareholder equity for 109 million yuan. On February 26, 2009, COFCO Group officially took over Beijing Wugu Daochang Food Technology Development Co., Ltd. and appointed a new senior management team: Song Guoliang, one of the founders of Master Kong and former president of Baixiang Instant Noodles, as general manager; Wang Haihui, former executive president of Wugu Daochang, as deputy general manager; and two COFCO executives, Li Dongming and Zhang Xiaoshi, as deputy general managers. Through the restructuring of Wugu Daochang, COFCO successfully entered the convenience food industry. After Ning Gaoning took over COFCO, he consistently hoped that all COFCO businesses would move up the value chain and launch competitive end products, rather than being content as raw material suppliers at the lower end of the value chain. Industry insiders believe that COFCO holds a leading position in flour, oils, sauces, flavors, and other upstream industries, giving it control over raw materials for instant noodles. It also has downstream channel support from brands like Fulinmen, Great Wall, and Jindi. There is a certain foundation for entering the convenience food industry. Now, COFCO Wugu Daochang Food Co., Ltd. is being listed for sale. The listing information also shows that the transfer has been approved by the COFCO Group President's Office meeting, with the transfer conditions listed as "to be determined" and the transfer amount as "negotiable." Does this mean COFCO will exit the instant noodle business? > **Why Was Wugu Daochang Abandoned by COFCO?** Wugu Daochang once became famous for its "non-fried" concept, but due to excessive factory construction by its founder, cash flow problems arose, forcing the sale of assets. In 2009, state-owned COFCO Group specifically allocated 109 million yuan to settle debts and pay bankruptcy costs for Wugu Daochang, thereby acquiring 100% equity. Since then, Wugu Daochang has been a subsidiary of COFCO Group. Despite having COFCO as a solid backing, Wugu Daochang failed to benefit from the shade of a big tree. Since it was not incorporated into the listed company segment, Wugu Daochang's operating data has not been made public. However, Zhu Danpeng, a researcher at the China Brand Research Institute, introduced that after being incorporated into COFCO Group, Wugu Daochang has been unable to change its loss-making status. COFCO has not given up on the brand, providing financial support, extensive brand promotion, and product taste adjustments, but none of these measures have worked, and Wugu Daochang's market share has continued to shrink. It is understood that Wugu Daochang's own sales team has been disbanded, and its management is now handled by other COFCO subsidiaries. It can only be said that the status quo is being maintained. Today's listing also reveals to the industry that Wugu Daochang's current operating situation is not optimistic. According to its 2015 annual financial report, the company's revenue last year was approximately 126 million yuan, operating profit was approximately -151 million yuan, and net profit was approximately -193 million yuan. The company's total assets last year were 118 million yuan, with liabilities of 927 million yuan. However, in 2016, from January to September, COFCO Wugu Daochang's revenue was 79.05 million yuan, operating profit was -5.1935 million yuan, and net profit was -5.0406 million yuan. The gradual decline of Wugu Daochang is first closely related to the consumption environment for instant noodles. Due to challenges from health concepts and the rise of substitutes, the instant noodle industry is declining. Data shows that in 2015, China's total instant noodle production was 36.249 billion packs, down 8.54% year-on-year; instant noodle sales were 49.091 billion yuan, down 6.75% year-on-year. Among the existing 22 companies, 6 exited the market, and 13 others saw production declines. When the overall industry faces a cold winter, small and medium-sized enterprises are the most vulnerable. Secondly, Wugu Daochang's own problems are also prominent. Zhu Danpeng analyzed: "For the instant noodle industry, non-fried is a pseudo-innovation. In addition, Wugu Daochang did not highlight this feature. Whether in product, channel, or price, Wugu Daochang did not keep up with market changes, being left far behind by companies like Master Kong and Uni-President, thus becoming a declining instant noodle brand." In fact, COFCO's current move to dispose of Wugu Daochang is not surprising. Besides the above reasons, it may also be related to COFCO's strategic adjustment. An article titled "Live but Not Chaotic, Promote Strengthening, Optimizing, and Expanding" published on COFCO's official website in August this year stated that while focusing on core businesses, COFCO should promote mixed-ownership reform of non-core businesses, eliminate and exit non-main business bad assets, and win the battle for quality and efficiency improvement. "COFCO will reorganize, integrate, and eliminate 100 enterprises within three years, reducing legal entities by 20%," the article said. It is reported that this year, COFCO has already disposed of assets such as Jindi Chocolate and Chateau Junding. > **Where Will Wugu Daochang Go?** Several years ago, Wugu Daochang instant noodles, with its "non-fried, healthier" brand positioning, broke the industry's traditional perception of instant noodles. The subsequent overwhelming advertising and channel stocking made Wugu Daochang sweep the market, with sales climbing all the way to an annual sales scale of 1.5 billion yuan, earning Zhongwang Group the top spot on the fifth China Growth Enterprise 100 list. But good luck seemed to peak there, followed by a sharp decline in sales, cash flow problems, and direct bankruptcy, leading to acquisition by COFCO Group. Now, Wugu Daochang has been around for 11 years. Can it go further on the instant noodle path? Gao Chunli, a senior consultant at Hejun Consulting, once said: Wugu Daochang proposed the sales proposition of "non-fried, healthier" in brand positioning. From a marketing perspective, the proposal of this concept and the shaping of marketing appeals were successful. However, in specific operations, several practical difficulties were not handled well, which is the underlying reason why this brand rose suddenly but failed to sustain. First, the category market capacity for Wugu Daochang's brand positioning was too narrow, failing to lead consumer trends. Second, it only considered health but not consumer taste. Third, brand operations focused too much on channels, neglecting terminal sales. The "non-fried" category needs deep cultivation. Because establishing a new category is not an overnight matter. This concept is innovative, but the shortcoming is that the concept of this category, especially the idea that non-fried is healthier, has not been truly felt by consumers. Why? Let me illustrate with a simple fact: Would you let your family, especially children, eat instant noodles every day? Even non-fried instant noodles? If the answer is no, then is the brand appeal of "non-fried, healthier" a false proposition? **Now, Wugu Daochang stands at the crossroads of changing hands again. Who will be the next new owner? Who will be the next buyer? Can it help Wugu Daochang rebuild its former glory? 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