The importance of local tastes, pricing & revenue management
Instant noodles were conceived in the mid 1950s as a nutritious, inexpensive and easy to prepare meal. Chikin Ramen was the pioneer.
Leap forward to 2019 we ate 106 trillion servings of noodles. 5 years later that number had increased by 13% to 120 trillion servings.
Around one third of all consumption is in China, although per capita consumption is highest in Korea and Thailand.
There are clearly significant category growth upsides, however, noodles are a segment where local tastes and flavours are a pre requisite for success.
I am often asked by clients about whether or when they need to adjust formulas for local needs. In China noodles made with a beef stock are common with spices like fennel and cinnamon. Hong Kongers prefer seafood noodles and also breakfast is a key consumptive occasion. Indonesians like fried noodles whilst in Indian curry and chicken tikkas are popular. In Korea, you’ve guessed it spicier offerings are the norm.
These taste preference differences mean that local noodle brands often have commanding market shares. Think Indomee or Nissin in Japan.
Pricing or affordability is key with noodles. The majority of consumers are younger, students or blue collar workers. This demographic faces one of the biggest “cost of living” challenges.
Even if the price goes up by just 500 rupiah, when you add them up for a month, it will have a big impact, now I eat Indomie 3 or 4 times a week, but I’ll have to change that to once or twice a week
Office worker, Jakarta, 2022 (Source: Nikkei Asia)
Wheat flour accounts for between 70-80% of raw materials, and wheat is priced in USD. In the last 3 years there has been much volatility in the spot price. This year prices are down due to a better than expected harvest in Ukraine, however in 2022 prices surged significantly.
Here in Japan, Nissin which markets an array of brands including the eponymous cup noodle, Donbei bowl kitsune ramen and others, has been dragged before the fair trade commission on allegations it coerced retailers to put up prices, and cut back on trade discounts.
This news is still developing but there has not been the media coverage one might normally expect. Look at the furore in Australia recently over supermarket price gouging