Documente Academic
Documente Profesional
Documente Cultură
INSTANT FOOD
INDUSTRY
Internal use only
April 2015
Prepared by: Kieu Hanh Nguyen & Pham Nguyen Yen Lam
Checked by: Dang Vo Quoc Thang
INDUSTRY OVERVIEW
Instant food is considered the largest commodity in FMCG basket and is dominated by two kinds
of products: instant noodles which accounts for 90% of the market share and rice-originated
instant products (such as: instant ph, porridge, min, bn, h tiu (vermicelli)) which makes up
for nearly the rest 10%. Other kinds of products like dried ready meals, dessert mixes, pasta, etc.
currently play a minor role in this sector. Hence, in the extent of this report, we are going to go
further in instant noodles and rice-originated instant products.
Being a leader in this sector, with revenue of USD 1 million in 2014, instant noodles are a fertile
playground for many producers, foreign-invested and local ones alike. Though there are around
50 enterprises in this segment, the top four companies (Vina Acecook, Massan, Asia Foods and
Viet Hung) already occupy 85% of the market share, the rest 14% belongs to medium and small
sized companies. Hence, the competition in this segment is extremely fierce, even between the
big ones. In addition, instant noodles market is reaching its maturity, as the growth rate has
slowed down in recent years (8.3 in 2013 and 7% in 2014) and is expected to fall further in the
near future. Another challenge comes from its substitutes - rice-originated instant products
which, due to its better-to-health characteristic, has experienced impressive growth rate in recent
years (average 10-20 per year).
Food safety and wellness along with marketing activities are major factors which determine
development trend of instant food industry. Improved living standards together with educational
marketing from instant food producers are resulting in a large increase in consumer health
awareness. Consumers are developing greater interest in products that are beneficial to their
mental and physical development. They are paying increasingly more attention to nutrition labels
and choosing products that claim to have a positive impact on health.
MARKET PERFORMANCE
A. Local Market
1. Instant noodles
1.1.
Being the 4th largest noodles consumption country, Vietnam has become a
lucrative instant noodles market for many traders and producers with concentration
on low-price product segment.
Instant noodles are the biggest commodity in the basket of FMCG goods of Vietnamese
consumers, according to market research firm Kantar Worldpannel in its report of Brand
Footprint 2014. FMCG, or fast moving consumer goods, are products that are sold quickly and at
relatively low cost. In Vietnam, instant noodles are served both at popular street shops and luxury
restaurants. Instant noodles are available everywhere, including at Internet agents. The majority
of people have the habit of storing noodles in case they need fast food.
According to World Instant Noodles Association (WINA), in 2013 Vietnam consumed around
5.2 billion noodle packets, ranked 4th in terms of total consumption (behind China, Indonesia and
Japan), and rank 3rd in terms of per capita consumption with 57.3 servings per year (only behind
Republic of Korea and Indonesia). Vietnams instant noodles consumption has been growing
steadily over the last six years. Consumption in 2013 jumped 29% from the 4.04 billion packets
recorded in 2008. The countrys instant noodles consumption growth rate in the five years from
2009 to 2013 was 21%, while this rate was 13% in China, 7% in Indonesia, 3% in Japan and 4%
in Korea for the same period. With impressive figures like these, its no wonder why instant
noodles have become a fertile ground for traders and producers alike in Vietnam, containing 50
producers supplying the market with nearly 600 kinds of different products (in terms of brands
and flavors). The product prices also range considerably different, from USD0.09 to USD1.17, or
even USD7.9 for imported Japan noodles.
Figure 1: Top 15 instant noodles consumption countries
According to Kantar Worldpannels report, some 430 million instant noodles packets were sold
in Vietnam four major cities (Ho Chi Minh City, Hanoi, Can Tho and Da Nang) between July
2013 and June 2014. Each household in these cities consumed a package of instant noodles every
two days, according to the report. In rural areas, instant noodles consumption was far higher: 3.4
billion packages during the 12-month period. Each rural household consumed four packages a
week. Consumers in rural areas spent USD475 million in total just on instant noodles in the time
period while in the cities, the figures was only USD77 million. This can explain why instant
noodles producers keep repeatedly introduce new products but only focus on low-price segment
(ranges from USD0.09 to USD0.16 per pack) since this segment accounts for 80% of the market
share.
Figure 2: Instant noodle purchasing power between urban and rural area
Growth rate
Buying frequency/year
Per household consumption/year
Total spending a year
Urban
0.2%
20 times
182 packs
USD 77 million
Rural
8%
24 times
210 packs
USD 475 million
Source: Kantar Worldpannel
1.2.
However the growth rate is becoming slower as the market reaches its maturity.
According to Euromonitor, in 2013, instant noodles recorded a slower increase in both volume
and value. The total consumption volume was 432,000 tons, increased by 7% compared to 2012;
this is a slight decrease in growth rate compared to previous years. 2013 is also the first year
when growth rate of instant noodles revenue reduced to 1-digit pace (8.3%) after many periods
of 2-digit growth with the sales value surpassed USD1 billion (USD1.01 billion). It is forecasted
that this rate will even fall further in 2014 and 2015 as the market reaches its maturity in the near
future.
In line with higher disposable incomes, higher education levels and higher living standards,
Vietnamese people are becoming more aware of nutrition and their health, which is causing them
to pay more attention to food safety and healthier meals. More people, especially those residing
in big cities, are learning to watch the ingredients used to prepare the food they consume and to
closely monitor the levels of fat, cholesterol and sodium. Many studies have showed that high
level of sodium in instant noodles (around 830mg sodium per serving) is linked to a variety of
diseases such as hypertension, heart disease, stroke and kidney damage. This is why after many
periods of hot growth when low disposable income encourages Vietnamese to buy instant
noodles due to its handy, economical and easy to the taste features, instant noodles will face
rising challenges from foods which are more nutritious and better to health.
Figure 3: Instant noodles consumption volume
600
8.2
8.0
9.0
7.5
7.0
500
400
347
375
8.0
481
458
7.0
6.1
403
6.0
5.1
5.0
300
4.0
200
3.0
2.0
100
1.0
0
2010
2011
2012
432
2013
2014e
2015f
25.0
19.1
18.6
1,000
800
17.4
1,011
1,086
1,146
20.0
797
15.0
671
600
8.3
7.0
400
10.0
5.9
5.0
200
2010
2011
937
2012
2013
2014e
2015f
Source: Euromonitor
population (78%), followed by eating fresh or natural food (47%) and physical exercise
(46%).
Understanding factors that influence shoppers buying decisions about nutritional food helps
producers tailor their message and content on product labels and successfully achieve brand
salience. As such, communicating sufficient nutritional ingredients on healthy products was the
consumers first element of consideration which occupies more than one third of total
participants. Reduced risk of diseases and product affordability were the next two influencing
aspects with 25% and 23%, respectively. A product stamped with the approval by health
professionals was also on the cart of 8% of sample shoppers.
How consumers increasingly pay attention to food safety can be illustrated in the case of fresh
rice noodle (bn ti). In the period from June to August of 2013, when there is information of
Tinopal a harmful substance in fresh noodles, Vietnamese consumers had had strong reaction
to this fact. They stopped eating this fresh one and switched to dried instant products of reliable
producers instead. Sales of instant rice noodle products had increased significantly in this period
around 3 to 4 times compared to a normal month.
Figure 5: Activities to stay healthy
78%
47%
Physical exercise
46%
41%
35%
20%
40%
60%
80% 100%
8%
8%
36%
Sufficient nutritional
ingredients
Reduced risk of
disease
Affordable
23%
Approved by health
professionals
Others
25%
Source: AC Nielsen
3.2.
68% of Vietnamese respondents confirmed that commercial advertising will increase their brand
preference. This ratio far crossed over that of global consumers (55%), Singapore (49%) and
Hong Kong (40%). It even slightly surpassed the rate of Asia Pacific (67%). As the countrys
social media channels keep growing, Vietnamese people will continuously be captivated by
commercial advertising that will affect their purchasing decisions.
How advertising influences buying decision can be seen clearly in the case of instant noodles.
Advertising makes up 60% of total marketing and selling expenditure of these producers. In
addition, the loyalty of consumers in this sector is at moderate level. On average a person
consumes 3 kinds of different brand names in 1 month. Thus constant and increasing spending
on advertising is a way for businesses to hold as well as increase their market share. For
example, though Omachi is not the first noodle brand of Massan (historically Massan had
launched Chinsu and Kokomi noodle brands but unsuccessful), it has become popular to
Vietnamese consumers thanks to its health-directed message no fear of being heated and dense
frequency of advertising on television at golden hours and popular game shows. After 6
months of launching, this product had accounted 2% of instant noodles market share.
PRODUCTION PROCESS AND TECHNOLOGY
1. Instant noodles
Instant Ph
2.2.
Instant porridge
2.3.
Instant vermicelli
Since the production technology for these products is rather simple, most enterprises use
production facilities of China, Taiwan or even Vietnam.
COMPETITION
1. Instant noodles sector
The instant noodles sector is quite focused with just 50 companies joining and high concentration
ratio (85.5% of market share is in the hand of four top players Vina Acecook, Masan, Asia
Foods and Viet Hung). Vina Acecook remained the leading companies in the field with share of
43% in 2014, followed by Masan 22%, Asia Foods 12% and Viet Hung 8.5%. The group of
smaller players shares a much modest share (Vifon 4.5%, Saigon Vewong 3.8%, Miliket
Colusa 2.3% and Thien Huong 1.8%).
With revenue up to USD900 million in 2014, instant noodles sector is such a fertile land for
existing players. However, the competition to win share in the market has been so fierce,
especially among the top players. Vina Acecook (with the key brands Hao Hao and Hao 100,
holding over 30% of market share) is now threatened by the aggressive growth of Masan (with
key brands Omachi and Kokomi). Over the period 2008-2014, the proportion of key players in
total sales of the sector has changed astonishingly, with share of Vina Acecook shrinking from
53% to 43%, Asia Foods from 13.4% to 12% while Masans share rose steeply from 1.6% to
22%. Viet Hung, with brand Reeva 3 Mien won 8.5% in market share. And amid the aggressive
evasion of Masan, the situation has become tougher for group of smaller players.
Figure 7: Market share of top sector players from 2008 to 2014
120.0%
100.0%
80.0%
60.0%
Others
19.9%
15.9%
12.5%
12.1%
13.4%
Viet Hung
1.6%
15.0%
AsiaFoods
16.5%
Masan
52.7%
51.9%
51.5%
2008
2010
2012
32.0%
14.5%
12.0%
Vina22.0%
Acecook
40.0%
20.0%
43.0%
0.0%
2014
Source: AC Nielsen
8.0%
7.0%
6.0%
5.0%
4.0%
4.9%
Vifon
5.0%
Saigon Vewong
5.2%
Colusa Miliket
4.8%
Thien Huong
3.0%
2.0%
1.0%
0.0%
2008
2010
2012
2014
Source: AC Nielsen
There are several factors that affect the competition strategy in instant noodles sector.
(i)
Production technology is quite simple, so the main competitive edge lies in the taste
of flavouring powder. Strongly investing in mixing a variety of flavors that match the
increasingly abundant taste of consumers in different region of the country, adding
more addictive, denatured substance to make better flavours and more tenacious
(ii)
noodle threads is one of the most important strategies to win the market.
Since there is not much differentiation in products, a well established distribution
system, professional marketing campaign and eye-catching package design are key
successful factors for instant noodles producers. These take much financial resource.
(iii)
Even with high-priced noodle packs, profit margin per unit still remained quite low.
Over 80% demand comes from the suburbs so the competition in the outskirt zones is
fierce. Middle price range from VND2,000 3,5000 per packets takes the majority
share in the rural areas. Both former players and new players focus on this segment
to win the market share. Growth in demand from suburbs regions maintained at 8%
per year on average, compared to 0.2% in the urban.
(iv)
The competition is expected to be much fierce in the future, in the context of slower
growth rate of instant noodles in recent years (due to the appearance of a variety of
rice originated product such as rice noodles, porridges with abundant taste, and
that the customers are becoming more awarded about health). In 2014, growth of
demand for instant noodles slowed down to 7%, quite low compared to 21% on
average in previous 5 years period. However, revenue from rice-originated instant
(v)
growth in recent year, amid the slower growth rate of instant noodles (10% in 2014, meanwhile,
the demand for instant noodles slowed down from 25% on average in previous year to just 5% in
2014). Being claimed as more healthy compared to the traditional instant foods, the market of
rice originated processed foods is expected to increased rapidly in value). Masan Consumers
successfully launched its new products Bfast and Komi porridge, posing considerable threat on
the position of existing top players. Meanwhile, traditional players with rather small scale such
as Safoco, Bich Chi, Colusa and Saigon Foods are widening the distribution network in suburb,
where they have more chance to win the market share with low priced products. The sector is
also attracting more new players such as Yen Viet (with Sanest Porridge) and Saigon Food (with
Nutrition Porridge).
BUSINESS PERFORMANCE
In this section, we review the business performance of three companies with full available
financial data Bich Chi, Safoco and Colusa Miliket. In general, COGS ratio remained quite
low, showing that raw materials and other production cost is not of much burden. These
companies also did not rely much on leverage.
FY
Bich Chi
Safoco
Miliket
Total sales
Net profit
Sales
COGS/sale
Liabilities/tota
Net
growth
l resources
margin
2014
15,891,907
1,865,349
11.7%
71.7%
45.6%
11.7%
2013
14,224,605
1,287,488
4.4%
73.7%
46.4%
9.1%
2012
13,628,605
1,805,023
71.0%
33.5%
13.2%
2014
31,024,791
1,112,884
6.6%
87.1%
34.2%
3.6%
2013
29,116,372
950,744
15.9%
87.8%
36.3%
3.3%
2012
25,118,233
928,558
87.3%
34.6%
3.7%
2014
22,645,395
964,093
-12.4%
73.8%
34.6%
4.3%
2013
25,840,698
1,196,837
3.5%
72.7%
38.5%
4.6%
2012
24,978,512
1,453,302
77.1%
36.5%
5.8%
Being too conservative in strategy, Colusa - Miliket did not invest in advertisement and
distribution system. Package was kept the same as years ago, and the products are sold mainly in
wet markets, suburb zones without any media advertising. There was almost no innovation in
products (flavors, package). The company maintained quite high proportion of cash in hand (on
average 42% in total assets for period 2012-2014), while no bank loans was employed. In the
context of downtrend in both sales and profit, such business strategy is quite conservative and
inefficient.
Today, in order to survive in the fierce competition, Colusa Miliket is preparing to launched
new rice originated product and expand export sales. However, the result is still in question.
CONCLUSION
With attractive-to-consumer features such as convenient and inexpensive, instant food will still
be a key commodity in the FMCG basket in the future. For instant noodles segment, though it is
a lucrative field with revenue expanding over USD 1 billion per year, as the market is reaching
its maturity and the market share is quite concentrated among the top 4 companies, new entrant
and existing enterprises have to overcome a host of challenges if they want to have a firm stance
on the home market. For rice-originated instant products segment, though the market is still
small compared to noodles, with strong grow rate in recent years, this is a potential and easier-toenter sector for newcomers since consumers are turning more awareness to healthier products,
the raw material cost can be controlled and the expenditure to invest is not as large as in instant
noodles.