Chapter one   Analysis of China's instant noodles industry

China's instant noodles industry, after 30 years of development, is on its way to glory. In 2010, the industry reached a new high and led convenience food industry sales. In the convenience food industry, 90 percent of the market share goes to the instant noodles industry, whose branch industries are also becoming increasingly supplementary and diversified. Statistics from the World Association of Instant Noodles showed that in 2010, the annual sales volume of instant noodles in China amounted to 42.2 billion servings, half of the world's total.

Presently, China's instant noodles industry sees growth in product added value and firm size. In addition, the market is increasingly mature and diversified. However, the market also has encountered price cut-down, market disorder and a lack of development guidance.

First, Development course of China's instant noodles industry

Instant noodles, one of the greatest inventions in the 20th century, were invented by Mr. Ando, a Japanese citizen, in 1958. In the early 1970s, instant noodles were introduced into China. In 1988, the production quality standard was set in China. Yet the rapid development of the industry began from the 1990s, when the brands Master Kong and President came into China successively. With advanced production equipment, R & D of flavor technology, top management concepts and marketing strategy, these enterprises soon gained popularity nationwide. What followed was the rapid development of China's flour industry. Hereafter a host of brands made their way into China, adding to the popularity of instant noodles in China. Over the past 30 years, the industry has brought people convenient and delicious instant noodles.

In particular, the rapid development of the industry began with the coming of Master Kong in 1992, after which the low-quality, low-cost and low-margin status of instant noodles was greatly changed. Braised beef noodles, a symbol of the Master Kong brand, sells well nationwide, and is the most popular mainstream instant noodle in China. Moreover, multiple types of noodles have been developed. At present, Master Kong leads the industry, followed by Jinmailang, President and Baixiang. Second-level enterprises also see emergence of new brands.

Judging product demand, instant noodles are becoming increasingly high-end. Previously, instant noodles were viewed as a luxury item, and were even positioned as festive gifts for relatives in rural areas. Modern instant noodles are becoming more delicious and healthy. The instant noodles industry, to attract more consumers, is gradually moving its consumer base from cities to the countryside. With entrenched consumer focus, manufacturers are beginning to adjust their product positioning, pricing and marketing strategies to attract more consumers. With the improvement of living standards and the growth of spending power, consumers have become more mature and a single taste fails to attract them. So, more brands and flavors are to be expected. Surveys show that the penetration rate of the instant noodles industry has reached 100 percent, popular throughout the entire public.

Second, Global instant noodles Industry pattern

The focus of instant noodles globalization lies in Asia, especially China. The main consumption market of instant noodles is in Asian countries, and accounts for about 90 percent of the world's total. And China's production volume of instant noodles accounts for about half of the world's total. The reason why the instant noodles industry is developing rapidly in Asia is due to regional cultural and the rapid development of China's instant noodles industry.

Third, Layout of China's instant noodle market

After 10 years' rapid development, instant noodles have become an extremely popular product in China. The food, a necessity for daily life, travelling and emergency relief, has found its way into many grocery stores. Instant noodles, enjoying a huge market demand, are changing people's lives.

a) Market size and capacity

China leads in the production and sales of convenience foods. 30 years' promotion has enabled instant noodles to become the most popular convenience food, holding 90 percent of the market share.

At present, the instant noodles market share is still concentrating. The four brands, with Master Kong as the top, see growth in market share. In 2010, Master Kong, Jinmailang, Baixiang and President accounted for 80 percent of the market, increasingly concentrating and maturing. Yet competition is unavoidable.

The industry has only seen a decline in its growth rate in 2004 and 2009, rebounding in 2010. The instant noodle industry faced an uncertain future from 2005 to 2007, when instant noodles were listed as one of the "Top Ten Junk Foods" by the media. Also, price fluctuations in edible oil also added to the decline. Fortunately, after innovation and optimization, the industry regained its strength in 2007. The industry was again affected by the economic crisis in 2008, after which sales volume recovered.

According to AC Nielsen's survey, container noodles take up 25 percent of the industry and boast an increasing market share. However, the market share of low-price noodles is experiencing a declining trend. Industry profits are on the rise, a symbol of maturity.

50 years ago, the instant noodles industry saw a profitable future. With the development of people's living standard, and the increase of purchasing power and consumer demand, people began to buy instant noodles for different reasons. When purchasing noodles, people only wanted to fill their stomachs prior to 1997, putting importance on the net weight. After 1998, people have paid more attention to flavor, which is becoming more and more diversified. And in 2007, hosts of convenience foods, like convenient noodles, vermicelli and other noodles emerged.

China's flour industry, the world's largest, also has its own characteristics. China's instant noodles industry prospers with coordination and growth of every branch. Chinese food culture, the foundation of the Chinese flour industry, also makes many loyal instant-noodles consumers.

b) Market competition and the instant noodles industry dilemma

China's flour industry zigzagged its way to prosperity. Brands like Master Kong, President and Jinmailang went through innovation and refreshment. The industry, after 2011, began to attach more importance to rural areas.

c) Huge space for medium-priced noodles

Chinese citizens, on average, consume 30 servings of noodles per year, lower than their counterparts in Japan, who consume 50. There's huge space for the Chinese noodles industry to expand. Due to a lack of connection between production and consumption, the industry, like an hourglass, sees prosperity in high-end and low-end noodles, but backwardness in medium-priced noodles. After 2007, the situation gradually changed, and changed for the better. The coordinated coexistence of high-end, medium-end and low-end noodles is to emerge in the near future.

In 2011, the industry saw substantial improvements in quantity and quality. In the next decade, China's per capita consumption of instant noodles is to rise to 60 servings. If the nation's total population reaches 1.5 billion, the sales volume will top 90 billion servings. Therefore, the goal of 100 billion servings is also attainable in the near future.

Four, Three industry trends boast of a promising future

A. Diversification of convenience foods

Diversification finds its way into convenience foods industry. Foods like noodles and vermicelli only take up 10 percent of convenience foods. But they enjoy a rapid speed of development. In addition to companies which produce fried instant noodles, companies which produce convenient noodles and non-fried noodles are beginning to take shape.

Instant noodles are symbolic of convenience foods, accounting for 90 percent. Furthermore, fried noodles take up 90 percent of instant noodles. Four instant noodles giants, Master Kong, Jinmailang, Baixiang and President are all authentic fried noodles makers. Food like noodles, rice noodles and non-fried noodles are subordinate to fried noodles, taking up 10 percent of the convenience foods industry. Although the rate is low, they boast a promising future, and are beginning to exert their influence on the pattern of the convenience foods industry.

The fried instant noodles industry, after 10 years' rapid development, began to decline in growth speed in 2004, and industry insiders appealed to diversify the industry for stability and safety. The diversification trend of convenience foods is inevitable. Collective efforts lead to common prosperity. It can be asserted that the sales goal of 100 billion servings of noodles is possible with expanding market share.

B. Industrial upgrade a necessity

In 2008, Master Kong, Jinmailang, Baixiang and President, holding firm their status in market share, successively promoted new products. Competition in the high-end instant noodles market is becoming increasingly fierce.

Instant noodles innovation has gone through three stages: bread innovation stage; material package innovation stage; value-added products stage. In recent years, instant noodles are paying closer attention to health, nutrition and added value. Industrial upgrade is therefore a necessity.

C. Great potential space for market

After 30 years of development, instant noodles have become highly market-oriented. Moreover, as to marketization, technical indicators and technological innovation, China is a global leader. However, trapped by some corporations' internal reasons and accidents, the growth rate of the Chinese noodles industry has been lower than 10 percent for three successive years. Even so, the instant noodles industry shows no sign of decline. On the contrary, with the expansion of market demand, the enterprise market is to further expand.

 

Chapter Two   Contribution of the instant noodles industry to China's agriculture, farmers and rural areas

In a macro-economic context, China's flour industry directly affects various aspects of the nation. The role of instant noodles has always been ignored. However, with the 2007 price fluctuations, instant noodles, to a considerable extent, influenced the public as well as the up- and downstream industry chain. Therefore, people gradually changed their outlook on instant noodles. Indeed, the instant noodles industry can affect various fields of the nation.

A. The instant noodle industry exerts influence on Chinese economy

The instant noodles industry's rapid development of the past 20 years has not only attributed to the joint effort of many enterprises, but also to the strong domestic demand and stable agricultural policy. Take a bag of instant noodles for example, over 60 per cent of its ingredients is related to agricultural products. It is exactly for this reason that the industry is firmly supported by the Chinese government.

More preferable policies are expected to be adopted within the instant noodles industry. Nowadays, the national policy firmly supports agricultural development and the further processing of agricultural products. The instant noodles industry, which possesses the longest industrial production chain, depends greatly on the national policy. More support from the government is bound to foster the industry's further development. So many insiders look forward to preferable tax policies being adopted within the instant noodles industry.

Moreover, palm oil used in instant noodles is mainly imported. Presently, palm oil is distributed to companies by rationing, which greatly hinders industry development. Therefore, the direct use of palm oil in instant noodles-making companies shows its importance. The instant noodles makers' policies of low pricing in rural areas decisively rely on production costs. In recent years, the price of palm oil is getting higher and consequently so is the price of the instant noodles. Therefore, more preferable policies are expected.

After China's WTO entry, the nation's embrace of imported wheat is bound to push Chinese agriculture to the forefront of market competition. The grain and oil processing industries, aiming at producing high-grade products, must use high-quality raw materials. The problem is that some regions fail to output qualified wheat. Therefore, the instant noodles industry, on the one hand, should assist in the production of more high-quality wheat and, on the other hand, should pay more attention to the global market.

Wei Yingzhou, chairman of Master Kong, thinks that an advantage of the Chinese market is the nation's 900 million-plus rural population. In China's reform and opening up, urban development comes before rural development. China's instant noodle industry also fosters in line with this rule. Looking several years down the road, the market potential will lie in the vast rural market. In this regard, Hualong Group is a successful example in Hebei Province.

Fan Xianguo, chairman of Jinmailang, puts forward that, over the past 14 years, Jinmailang has always been absorbing rural labor, offering over 20,000 jobs and thus greatly reducing unemployment figures. Gradually, the primary, secondary and tertiary industries are coordinated and promoted. Statistics show that Jinmailang, at least, leads 36 million farmers to having a well-off life.

Yao Zhongliang, chairman of Baixiang Food Group, suggests that more attention be paid to the safety of agricultural cultivation and breeding, in order to realize food safety. Due to the existing problems in the instant noodles industry, people long for a competent association to lead the industry to a new peak.

B. Three potential trends of the Chinese noodle market

Sales of 42.2 billion copies show the great market share of instant noodles. However, the instant noodles industry is still small compared to the huge food industry in China. To reach the goal of 100 billion copies, market space should be expanded and more potential consumers should be encouraged to buy instant noodles. The expansion strategy should focus on the following aspects:

First, it's necessary to make consumers more willing to buy instant noodles. Regular users can be divided into two types. One type inlcudes people who are busy with work and turn to convenience; the other inlcudes people who seek flavor and taste. To turn passive acceptance into active purchasing, it is essential to raise the quality of instant food and improve its taste plus added value.

Secondly, it's necessary to make instant food go to people who are non-users and who really need the convenience. Due to today's fast-paced life, people demand more instant foodstuff. How to make more potential consumers willing to buy instant food, remains to be solved.

On a third note, it's necessary to expand the rural market, especially the market in urban and rural integrated regions. It is worth mentioning that it's risky to put all your eggs in the basket of rural areas. When dealing with rural markets, the local spending power, the maturity degree of the instant foodstuff plus the development of the fast food industry, should all be taken into account. A rushed or premature expansion of rural markets will both lead to danger as well as hurt the instant food industry itself.

In conclusion, no company can by itself realize all the goals listed above. It's imperative that a competent "Chinese Instant Noodles Association" be set up to steer and guide China's flour industry.

 

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