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Taiwanese Instant Noodle Makers Move Upmarket in China

2010/04/13 | By Judy Li

Want Want plans to renter the mainland Chinese market with Q-branded rice noodles

With rising living standards in China, consumers are demanding higher quality products, even instant noodles. So Taiwanese instant noodle makers are aiming at upper market segments in China, to gradually replace bottom-end products.

Taiwan's three food giants-Uni-President Group, Ting Hsin International Group, and Want Want Group-have built considerable success in China, with Uni-President and Ting Hsin already known as major instant noodle suppliers backed by popular brands-Master Kong and President.

Master Kong Leads

Master Kong leads China's instant noodle brands, generating 54.6% of the turnover in the segment, with Uni-President being fourth and commanding 12% of the market share. Want Want has recently returned to the segment by cooking up a newer, perhaps healthier version: the newly unveiled "Q" branded rice noodle that differs from the conventional wheat-based noodle from the other two Taiwanese rivals. Want Want is targeting a new niche with this product.

Not surprisingly China is the world's biggest instant noodle market, where quite a few of 1.3 billion people eat it daily, including white-collar office workers, blue-collar laborers regardless of income bracket. Market observers predict that the market value in China may double to US$13 billion by 2012 from the US$6.6 billion in 2008.

As expected, rising affluence in China is giving consumers a rare luxury of more leisure time to ponder issues as improving lifestyle for better health, sometimes known as LOHAS, hence the three Taiwanese instant noodle makers focus on upmarket products that are more nutritious and lower in undesirable fats.

Last year Master Kong generated over 80% of instant noodle revenues with mid- and high-end items and less than 20% from low-end ones. Revealing what is taken for granted, a senior executive at Ting Hsin recalls that Master Kong merely did what any savvy operator would have done 20 years ago: filling store shelves with budget-priced instant noodles to feed the massive throngs in China who were laid off from jobs in state-run firms as the nation steered towards a market economy.

Rising Affluence

Times change. China is predicted to be a top-3 luxury goods market by 2015, and TV shows in Taiwan report that large numbers of tour groups from China descend on Milan and Paris to sweep up designer goods, leaving little for the few Taiwanese counterparts in its wake; while China overtook the U.S. to become the biggest new car market in 2009. Little wonder then that Master Kong is restructuring its strategy to roll out premium noodle products to serve consumers with more disposable cash.

Master Kong initially sold instant noodles in China at less than US$0.14 on average to serve people whose monthly pay was about US$70. The price was then raised marginally over US$0.14 along with rising living standards, and then to US$0.22 in 2007.

Master Kong, betting on China's continually rising prosperity, aims to turn out more mid- and high-end instant noodles instead of bottom-end ones. The company says that it will offer new varieties with added nutritional value to attract a growing consumer class with rising income in China.

Last year Master Kong built a new noodle plant in northern China with a yearly output of 4.8 billion instant noodle packs, enough to meet the full-year demand in Japan. The noodle maker runs 192 instant noodle production lines in China and plans to invest over US$100 million to expand and reinforce facilities this year.

More Health-conscious

C.H. Lo, president of Uni-President, also echoes the sentiment of the other noodle makers, believing rising living standards in China brings along demand for higher priced products. Unlike the harsher days of yore when being filled with food was sufficient, the more affluent consumers in China now are more health-conscious eaters.

Uni-President is adopting the same product strategy, targeting upmarket consumers. Lo says the price of a packet of budget instant noodle is on average US$0.144-0.22, with mid- and high-end ones being US$0.22-0.36.

As with most upscale products, profit margin rises with retail price. The gross profit on budget instant noodle is generally less than 15%, but over 30% on high-end ones, which adds impetus to instant noodle producers in China to go upmarket, Lo says.

The growing high-end instant noodle market in China will push up prices of such products in the near future. So, the time is ripe for Taiwanese noodle makers to tap this segment, Lo believes.

Want Want entered the food market in China some three decades ago, but the instant noodle segment only in 1996. Although successful in China and especially famous for its rice crackers, Want Want however flopped in the instant noodle market, withdrawing after several years.

Second Try

Not giving up totally, Want Want plans to reenter the instant noodle market this year with its newly developed, health-oriented, non-fried "Q" rice noodle, priced online at US$0.55 per pack.

Y.M. Tsai, chairman of Want Want, says the "Q" branded rice noodle is mainly made of rice without frying, which is healthier than the fried counterparts that have long dominated the market.

Tsai believes making one good product is better than making many inferior ones, while a product should be good for consumers above all, boasting that "Q" rice instant noodle is a unique product that targets mainly high-end consumers.