Instant noodles have finally become something that young people can't afford to eat

New Retail Business Review

2024-06-26 16:37

Author: Beihai | Editor: Ge Weiwei

"How the hell did all this happen?"

Good essay 3737 words | 6 minutes read

The title picture is from the TV series "Late Night Canteen"

"I can't seem to afford instant noodles."

This is indeed an exaggeration, but have you ever experienced such a momentary cognitive change: the price of ordinary and affordable instant noodles in your memory is so unfamiliar that it seems to have passed centuries.

Here's the thing:

During a trip to the train station, because he didn't prepare to eat in advance, the retail gentleman walked into a convenience bee convenience store on the side of the road, and wanted to pick up two buckets of Master Kong's braised beef noodles to settle the bill, but his hands trembled the moment he saw the price. A total of 106g of flour cake + seasoning is sold for 5.8 yuan in regular barrels, and 7 yuan for large food buckets. As a big star, the big food bucket has always been the regular version...... But don't the barrels always sell for three or four dollars?!

The memory of the retail gentleman is not confused, but over the years, the price of instant noodles has already increased unconsciously.

In order to exclude the particularity of the price of a single channel, the retail gentleman looked at several other retail channels.

Taking the most classic barreled Master Kong braised beef noodles as an example, 711 has the same price as Convenience Bee, with a regular barrel of 5.8 yuan and a large food bucket of 7 yuan; the street mom-and-pop shop is cheaper, with a regular barrel of 5 yuan and a large food bucket of 5.5 yuan; on Meituan, the original price of a regular barrel is 5.9 yuan, and the discounted price is 4.5 yuan, but there is no big food bucket version; and in Hema, sorry, the cheapest and most common brand is the white elephant's bagged soup and delicious old hen soup noodle five packs.

Photo by New Retail Business Review

On the shelves of 711 or Hema can see two significant trends in the instant noodle market today.

First, the traditional old instant noodle enterprises, in addition to the classic flavors such as braised water, spicy and Laotan sauerkraut, there are also new flavors such as unified eggplant and white elephant soup in recent years, the price is much more expensive than the classic taste (711 channel barrel is expensive 1 yuan), it can be said that the innovation of instant noodle companies is surging in the direction of high-end, after all, even the white elephant, which is known for its cost performance, the newly launched coriander instant noodles are sold to 4 yuan a bag.

The second is the "invasion" of foreign brands such as Japan's Nissin and South Korea's Samyang, the former's Hewei Cup Noodles and Izumae Yiding, and the latter's turkey noodles and fried noodles, which have almost become synonymous with expensive instant noodles on various platforms. A cup of mini cup noodles with a taste will be sold for 8.8 yuan for 711.

This makes people wonder: how did instant noodles, which were originally synonymous with affordability and even cheapness, happen when they are "almost unaffordable"?

 Realistic pressure 

Needless to say, China is by far the world's largest consumer of instant noodles.

According to the instant noodle demand data released by the World Instant Noodles Association (WINA), in 2023, the demand in Chinese mainland and Hong Kong will reach 42.21 billion servings, more than three times that of Indonesia, which ranks second, and in the special epidemic period of 2020~2022, it will reach 46.36 billion, 43.99 billion and 45.07 billion respectively.

Source: Official website of the World Instant Noodles Association (WINA).

The market is also expanding. iiMedia data shows that in 2022, the market size of the national instant noodle industry will reach 145.90 billion yuan, and it is expected to exceed 180 billion yuan in 2025.

Under the huge demand, the market is still controlled by a few traditional brands. At present, in China's instant noodle market, Master Kong's market share is about 46%, unified about 15%, the two are stable in the top two, and occupy more than half of the market share, Jinmailang and Baixiang are ranked behind, the market share is around 10%, in addition, the mainstream products on the market also have foreign brands Samyang, Nissin and local regional brands Siyuan, Yuzhu and Huafeng.

Despite this, for the eldest and second, the situation is still grim. According to the data of 2017, Master Shan Kang and Uni-President accounted for more than 7% of the domestic market share with a market share of 50.6% and 21.1% respectively. In other words, over the years, when the cake has become bigger and bigger, Master Kong has eaten even smaller.

In terms of performance, this is indeed the case.

Master Kong Holdings' 2023 annual performance report shows that the company's revenue reached 80.418 billion yuan that year, a year-on-year increase of 2.16%, and the revenue exceeded 80 billion yuan for the first time, but it was not the contribution of instant noodles. Its beverage business exceeded 50 billion yuan for the first time, a year-on-year increase of 5.39% to 50.939 billion yuan, accounting for 63.34% of the group's total revenue, while instant noodles fell 2.84% year-on-year to 28.793 billion yuan, accounting for 35.8% of the group's total revenue.

It's the same with unification. Its 2023 annual report shows that for the whole year of last year, the revenue of the beverage business was 17.776 billion yuan, a year-on-year increase of 8.4%, accounting for 62.2% of the group's total revenue, while the revenue of the food business where instant noodles are located was 9.847 billion yuan, a year-on-year decrease of 10.6%.

This result is based on the two price increases of the instant noodle category in the previous two years. In 2021 and 2022, Master Kong took the lead in raising the price of some of his instant noodle products twice, and in the end, the bagged instant noodles rose from 2.5 yuan to 2.8 yuan, and the regular barreled noodles increased from 4 yuan to 4.5 yuan. Since then, Unification has followed suit with a price increase of about 12%.

Even the Japanese instant noodle giant Nissin has started a price increase strategy after 11 years. From March 1, 2022, Nissin announced that a number of domestic products on sale, including Hewei, Izumaed, and pasta, will increase their ex-factory prices.

Photo by New Retail Business Review

The "three-in-a-row" came soon.

In mid-May, the news of Master Kong's price increase came out again, although it was not officially confirmed, but from many offline retail channels, the price increase is a sure fact. The braised beef noodle bagged version of the representative product has risen from 2.8 yuan to 3 yuan, and the regular version of the barrel has risen from 4.5 yuan to 5 yuan. According to past examples, it is only a matter of time before other brands such as Uni-President follow suit and increase prices.

Of course, for the instant noodle giants, performance is the ultimate guide to price increases, not the direct cause.

Including Nissin's price increase in 2022, it was mentioned that the unstable supply of raw materials and soaring prices led to the decision. Master Kong and Reunification are also facing the same problem. This has been the case for several price increases since 2021. According to public information, the prices of wheat and palm oil, which are raw materials for instant noodles, have increased in recent years.

According to an interview with senior practitioners by Southern Weekly, raw materials are only a small part of the factors, and the greater impact comes from the significant increase in the distribution costs of various brands, that is, additional expenses such as "barcode fees" to enter retail channels, as well as dealer labor costs.

 The trend is surging 

Before paying attention to the phenomenon of "instant noodles becoming more and more expensive", it is difficult to deny that most young people have a more advanced experience: eating less and less instant noodles.

There is no doubt that there are more choices, one is the development of the takeaway industry, and the other is the abundance of fast food.

According to data from the China Business Industry Research Institute, since 2014, the sales volume and retail sales of China's instant noodle market have declined year by year, entering an era of negative revenue growth. In 2017, the sales volume of Master Kong's instant noodles decreased by 1.3 billion barrels compared to the same period in 2015.

The National Bureau of Statistics also has data showing that the scale of the mainland convenience food manufacturing industry reached its peak in 2016, and the sales revenue of enterprises above designated size reached 406.369 billion yuan, and then began to decline, and in 2018, due to the rapid development of the takeaway industry, it further declined to 295.970 billion yuan. This is strongly related to the development process of the food delivery industry.

In terms of fast food, the emergence of instant noodles such as self-heating pots, instant rice, and snail noodles has obviously made instant noodles, a traditional fast food, "unfragrant". Taking Liuzhou snail flour, a representative product, as an example, the sales of bagged products have continued to grow since the sales of bagged products exceeded 10 billion yuan in one fell swoop during the epidemic in 2020.

The only way out left for traditional instant noodles seems to be the most difficult innovation and the most "volume" marketing.

Master Kong mentioned in the annual report that relying on "high-priced noodles" and "high-end noodles/ultra-high-end noodles", brand discussion and sales volume have increased significantly. For example, with an insight into young people's curiosity and the pursuit of brand co-branding, he launched a new product "Braised Beef Noodles with Ice Black Tea Flavor" in conjunction with the "Tmall Super Brand Day", which sparked billions of topic discussions on the whole network, and the new product of "Master Kong's Good Soup Noodles" was launched, and the spokesperson Zhou Shen was signed. "Master Soup" launched a new flavor "Tom Yum Beef Noodles" to enrich the brand image, and "Royal Feast" uses real materials to create a top-quality instant noodle image with real meat and "spicy selected beef noodles".

The high-end price is like this: in the official flagship store, the price of three boxes of "Royal Feast" is 39.9 yuan, and the instant noodles fly directly to the era of 10 yuan.

Source: Master Kong's annual report

Unified instant noodles are not far behind, and its high-end line "Manchu Han Meal", the official flagship store sells for 4 boxes at 79.9 yuan, which is already comparable to a pasta meal. In recent years, relying on "Tang Daren" and "Eggplant Emperor", these product lines that are slightly more expensive than traditional tastes have won a lot of market share in addition to "Laotan Sauerkraut Beef Noodles".

Because of the identity of pure domestic products and the cost performance of the white elephant that once led to wild consumption, from the perspective of its development process, it is also based on the process of high-end. Its signature product, "White Elephant Big Bone Noodles", was launched in 2003, and since then, it has been upgraded to "Finely Stewed Big Bone Noodles" in 2010 and "Big Bone Noodles" in 2013. In 2018, the "Delicious Soup" series of instant noodles was launched, announcing a new standard of bidding farewell to traditional soy sauce powder packets and only boiling broth, helping White Elephant successfully get a piece of the pie in the high-end market.

Of course, "high-end" is actually not a smooth road, which high-end line can run out, it is still too fateful.

Master Kong has 200 products (flavors), and traditional flavors such as braised beef noodles are currently supporting the sales figures. After the "soup is delicious", the white elephant has also tried expensive product lines such as "fresh noodles" and "walking the streets and alleys", and from the perspective of market popularity and acceptance, there is almost "no such noodles".

In addition, it is difficult to ignore the "invasion" of Japanese and Korean instant noodle brands such as Nissin and Samyang. The latter's famous "turkey noodles" have been popular on social media for many years, and they are also a star product that Internet celebrities are willing to try and try. And the former is even more worth talking about.

Photo by New Retail Business Review

As the originator of instant noodles, Nissin entered the Hong Kong market in the 80s of the last century, and gradually developed to the mainland.

How to argue that it is a veritable high-end instant noodle? In the middle of last year, Shenzhen's Qianhai Sam's Store opened, and the most popular product was the "giant instant noodle bucket" with a taste of Hewei, which contained 24 small cups of noodles and was priced at 168 yuan, but in the scalper channel, it was once fried to thousands of yuan.

The high-end route that Nissin has been taking undoubtedly provides consumers with a refreshing choice in addition to traditional affordable noodles such as Master Kong, but with the sharp decline in demand for convenient fast food after the epidemic and the general rational consumption mentality of consumers, Nissin's life is becoming more and more difficult. In the first quarter of this year, Nissin's Chinese mainland business revenue fell about 9.1 percent, compared with a 5.3 percent decline in the whole of last year.

However, in the future, Nissin said that it will still adhere to the high-end route and "further consolidate the positioning of the high-end strategy we are pursuing." The company mentioned this in the financial report.

 Conclusion 

What can reassure major brands is that for young Chinese, instant noodles can be eaten sparingly, but they are indeed indispensable. After all, who hasn't secretly drooled for the late-night instant noodles in the short video?

The limited growth of the objective market space can stimulate the innovation of major brands, which is also a situation that consumers are happy to see, but it is undeniable that innovative tastes do not have to be too much. Just like the coriander instant noodles that have become popular recently, one is launched, all the staff follow the trend, and the price is expensive, relying on curiosity and traffic, how far can such a new product go?

This generation of young people only wants to "eat well and afford to eat".

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