Last year marked the 50th anniversary of the invention of the instant noodle and its introduction to the Japanese market. A second milestone in 2008 was the consumption around the world of more than 100 billion meals of the flavorful, inexpensive and convenient food, which requires only boiling water. From 2002 to 2007, there had already been an increase of 66% in production, according to data from the World Instant Noodle Association (WINA) in Japan.
Thus, the product is one of a number of wheat-based foods whose globalization continues to stimulate international trade in the world’s top-ranked grain in terms of harvested area.
The instant noodle, it could be argued, has been Japan’s main contribution to global cuisine, or at least to the diet of a wide variety of consumers, from students and office and construction workers to the children of harried mothers with no time to cook. Indeed, in a survey in 2000 the Japanese voted instant noodles as their country’s number one contribution to the world in the 20th century, ahead of karaoke, the compact disc player and other ubiquitous electronic gadgets.
The product is now known under various names like top Ramen and Cup Noodles, and it is sold with a seemingly infinite variety of flavorings, noodle types and packaging. Production and sales are measured in individual servings or meals, which is simply one packaged piece of product typically weighing between 65 and 100 grams.
Current trends suggest that the food category will continue to grow in popularity, particularly in rapidly developing and urbanizing countries like Indonesia, Vietnam, Brazil and Nigeria, where wheat is a non-traditional food, not to mention China, where wheat noodles have been consumed for 4,000 years.
In Indonesia, according to the USDA, a 50% share of annual imports exceeding 5 million tonnes of wheat and wheat flour goes to noodle production, of which instant noodles are the biggest segment. In 2007, consumption was 15 billion meals, up 38% from five years ago. Indonesia ranks as the number two producer in the world.
Indofood is the country’s largest processed food company, and it dominates the market for instant noodles, upon which its success has been based. It operates two mega flour mills, including the P.T. Bogasari mill in Jakarta, which has a daily milling capacity of 12,000 tonnes, to supply wheat flour to a network of noodle plants spread through the archipelago nation.
Indonesia was one of the first nonwheat growing countries where instant noodles have become an urban staple food. This was partly due to government support through subsidies of imported wheat to provide low-cost food for lower income groups in cities.
Nigeria is a country that could duplicate Indonesia’s experience, though without wheat subsidies. Production began only in the late 1990s, but already 1 billion servings were sold in 2007 and demand is accelerating. The dominant producer is a joint venture between Indonesia’s Salim Group, owner of Indofood, and Tolaram Group of Singapore.
CHINA NUMBER ONE
Easily the number one market is China, which accounts for over half of global instant noodle demand and the lion’s share of growth. Consumption over five years increased 117% to 50 billion servings in 2007. Rapid urbanization and the change to fast-paced lifestyles have caused a switch in preference from traditional noodles to the easier-to-prepare variety.
Instant noodles are at the vanguard of the entry of wheat-based foods into the diets of southern Chinese, where the traditional grain staple has always been rice.
In China, annual sales of instant noodles are now put at $6.6 billion by industry analysts. Tingyi Corporation has grabbed a market share of over 44% with six large plants. It has used its success in instant noodle brands to diversify and build a branded food and beverage empire. Tingyi is a Hong Kong-listed company with majority ownership from Taiwan’s Ting Hsin, and a 30% minority share by Japan’s Sanyo Foods.
The next two largest instant noodle producers in China are Nissin’s joint venture, with a 14% share, and another Taiwanese company, Uni-President, at 11%, bringing the top three to 70% overall. This is a high degree of concentration for a market which is expected to double again within four years to $13 billion.
Vietnam is another country where all wheat is imported, but instant noodles have expanded at a breakneck pace. The market now exceeds 4 billion servings per year. The market leader is a joint venture between Japan’s Sanyo Foods, with its AceCook brand, and a stateowned Vietnamese food company.
In the two countries where the instant noodle enjoyed its earliest success, Japan and Korea, the market has matured and overall demand growth has ceased. However, South Korea is still among the top two in per capita consumption at 64 servings per year, having lost its number one position in 2007 to Indonesia with 65.
JAPAN’S SPECIAL ROLE
In Japan, one of the top wheat importers at over 5 million tonnes per year, total consumption has held steady for several years at around 5.5 billion meals. However, as the birthplace of the instant noodle, the country still plays a special role. Production of all noodle and pasta types account for 28% of wheat use, and instant noodles represent 27% of that category.
Hundreds of new instant noodle products are launched on the Japanese market every year, mainly based on new flavor variations, innovations in packaging, or the use of other grains like rice.
Nissin Foods, whose founder, Momofuku Ando, invented the instant noodle a half century ago, enjoys a 40% to 50% market share in Japan. The number two player is Toyo Suisan with its Maruchan brand.
Nissin Foods, a company whose entire history has been based on its founder’s invention, has pioneered the introduction of the instant noodle to many other countries. It is now a diversified food company with 25 plants in 10 countries, nearly 17,000 employees, and annual sales turnover of $3.2 billion.
Not surprisingly, the focus of international expansion of the leading instant noodle companies is now the four large and rapidly growing economies known as the BRIC countries (Brazil, Russia, India and China). In January, Nissin announced its agreement to acquire a 33.5% share in the largest instant noodle producer in Russia for $298 million. Russia is the ninth-largest market for instant noodles. Nissin built a plant in Brazil in 1981 after first establishing a sales subsidiary in 1975. The market for its products continues to grow there.
The greatest growth potential may be in India, where the market has nearly quadrupled in just five years to 1 billion meals. But with 1.1 billion people, that still amounts to less than one serving per person per year.
The two main Japanese producers also dominate the U.S. market, which is the fourth largest and continues to expand. However, in contrast to Japan, the Maruchan brand is the market leader in the U.S. with a two-thirds share. Nissin Foods has almost all of the remaining third.
Nissin introduced the novel food item into the U.S. market with exports before building its first U.S. plant in the early 1970s. Now each company has two plants, one on each coast. Competition has been fierce, as there were at one time at least eight manufacturers in the U.S. A third company is a niche player, Nongshim Ltd, featuring spicy Korean flavors.
Maruchan also claims an 80% share of the Mexican market thanks to exports from its Los Angeles factory, which accounts for one quarter of total output, according to a company spokesperson.
Insiders now report insufficient capacity in North America to meet expanding demand in recessionary times, particularly for the 3-ounce (85-gram) "pillow packs" that sell at retail for just 20¢ to 25¢ each.
BARRIERS TO ENTRY
Barriers to entry can be high, which helps to explain the domination of the global market by a handful of multinational companies. There are large capital costs associated with the production process, which involves both steaming and deep frying in palm oil prior to drying and packaging. Separate production lines are needed for top Ramen pillow packs, and Cup Noodles. The learning curve to achieve consistent product quality can be steep, adding to risk.
Economies of scale are critical to competitiveness. The highest capacity production lines now churn out 1,200 meals per minute. The ability to negotiate low prices for consistent quality wheat flour and palm oil is also a key, since these two ingredients make up about 60% and 40% of the product by weight.
Product development and advertising costs can also be prohibitive. Companies are constantly striving to introduce new flavors to stimulate demand. Flavor packets are developed for each country to match local palates.
Packaging innovations are also critical in creating demand and getting an edge on rival products. The most revolutionary was the introduction in 1971 by Nissin of instant noodles sold in a styrofoam container, making possible a hot, ready-to-eat meal with practically no set-up, preparation or clean-up beyond a teapot to boil water. The product is distributed, cooked and eaten in the same container.
Creating brand loyalty is a key success factor. Among certain consumer groups, instant noodle products have achieved nearly a cult following, as evidenced by the numerous websites and blogs devoted to discussion of the myriad brands and panoply of flavors.
The major producers have been able to first gain footholds in promising markets through exports and local distribution supported by advertising to create brand recognition. Indofood first established its Indomie brand in Nigeria with exports, and then built a production plant.
Instant noodles are well-suited to overseas shipments due to their very long shelf life, resistance to breakage, and light weight. For these reasons and because they are good for air drops, they are commonly used in disaster relief programs.
Cheap and convenient, the instant noodle can provide budget relief to consumers in disastrous economic times as well. Some studies have shown sales to positively correlate with declines in GDP and rising unemployment in mature markets, as people forego more expensive foods. If this is so, the instant noodle would appear to have bright prospects for the foreseeable future in many countries. WG
David McKee is a grain industry consultant providing market research and other services to companies seeking to initiate business in new markets. He can be reached by e-mail at