Image source @ Visual China
Wen | open pineapple finance, the author | Jiaoying Wu, Editor | Golden Dragon
Instant noodles, which were just rejected last month for "soil pit sauerkraut," have recently become "hard currency" on the list of home quarantine materials.
Many young people have found that no matter how fast the takeaway is on weekdays and how fresh the prepared dishes are, it is convenient and simple to store, and it must be instant noodles that are ready to be eaten.
Of course, if it were not for the exposure of the "soil pit sauerkraut" incident on March 15 this year, many people would not have noticed that after thirty years of competition for supremacy, the "top stream" of China's instant noodle industry is still Master Kang, Unity, and Jinmalang, except for doing more high-end and selling at a higher price, there is no new story to tell.
What is more exaggerated is that even the new consumption tide that has swept the food and beverage industry in the past two years has not been able to "roll" a new player into the climate in the instant noodles.
In the instant noodle industry, which seems to have a low threshold, where is the invisible moat? This may be a question worth exploring.
The answer given by many analysts is that the giant's strong control over the sales channels is almost blocked, resulting in new brands can only enter the market through online, but online traffic costs are high, the return on investment is low, and it is difficult to sustain. Coupled with the high visibility of traditional brands, cost control under economies of scale, keen awareness of defense and the narrow space for innovation of the category itself, instant noodles have become an industry with strong and strong and weak after waves.
To some extent, this has also led to a detour of cutting-edge brands, which have made young people fall in love with snail powder, self-heating hot pot and convenient rice noodles by cutting into more subdivided fast food categories and more focused consumption scenarios, so as to get a piece of the convenience fast food market.
At the moment when new convenience foods are rapidly exploding and the traditional instant noodle market is gradually shrinking, the teachers and masters who build cities and rivers and the new apprentices who attack alone will inevitably have a war in the future.
There is no new story about instant noodles
The dispute over the instant noodles of Master Kang, Unity and Immairi has to start from the early 1990s.
In the late 1980s, Wei Yingzhou, a Taiwanese business owner, came to the mainland to invest and inadvertently found that he had brought instant noodles on the train to fill his hunger, which attracted the attention of many passengers. Seeing the business opportunities, he quickly led the team to Tianjin to build a factory and founded the instant noodle brand "Master Kang". In the early 1990s, as soon as Master Kong's braised beef noodles came out, he dominated the Chinese mainland market, selling 200 million bales in two years.
Not to be outdone, the reunification of the then Taiwanese instant noodle giant soon built factories on the mainland to seize the market. However, the unification shrimp instant noodles, which sold well in Taiwan, encountered Waterloo in the mainland market and have rarely been popular since then. Until 2008, the old altar sauerkraut beef noodles turned out, and Unification finally had the courage to compete with Master Kang.
Master Kong braised beef noodles vs unified lao tan sauerkraut beef noodles
Compared with Master Kong and Unification with a Taiwanese background, Jinmai Lang is a local enterprise born and raised.
The predecessor of Imabari lang is the Hebei food enterprise "Hualong" established in 1994. When Master Kong and Unity competed for urban shelves, Hualong aimed at the townships and rural areas at a lower price and took a cost-effective route. In 2002, Hualong entered the mid-to-high-end market with "Jinmalang Elastic Surface", and then continued to win more market share with a larger "one and a half barrel" series, ranking among the top three in the industry. At the beginning of 2021, Jinmalang's listing counseling recorded relevant information disclosure, and then passed on the listing plan after two sprint IPO failures.
The white elephants, who also take the route of "the countryside encircling the city", are not so lucky.
Born in Henan in the late 1980s, Baixiang officially became a noodle products company in 1997, and once became the biggest competitor of Immalang in the "1 yuan instant noodles" market, and also gained a firm foothold on the city shelves with the "White Elephant Bone Noodles". But when rivals have welcomed foreign investment, coupled with the failure of the IPO plan, the white elephant has to retreat to Henan. Until this year, due to "1/3 of the employees are disabled" and "there is no cooperation with the flag planting vegetable industry involved", the traditional domestic brand white elephant has finally returned to the public vision and ushered in a wave of "wild consumption".
Imabari "1 1/2 barrels" vs white elephant "half a barrel"
After decades of competition, the market pattern of China's instant noodles has gradually stabilized. According to Analysys, in 2020, Master Kong, Unification and Jinmalang accounted for 47%, 21% and 11% of the market share of instant noodles in China, respectively, and have been going on for many years.
The situation where traditional giants firmly occupy the head position is not uncommon in all walks of life. Carbonated drinks include Coca-Cola and Pepsi Cola, dairy products include Mengniu and Yili, and water drinks include Nongfu Spring and Wahaha... However, in the new wave of consumption in the past two years, a new generation of brands that "newborn calves are not afraid of tigers" have disrupted the rhythm of giants.
What is surprising is that the enduring industry of instant noodles has never appeared unicorns such as Yuanqi Forest.
Even the capital that frantically spends money on new consumption rarely sets its sights here. In the past three years, there are only three instant noodle companies that can be publicly queried to obtain financing of 100 million yuan: in February and June 2020, Baijia Akuan Food completed financing of 110 million yuan and 200 million yuan respectively; in June 2020, Baixiang Food completed a strategic investment of 174 million yuan; in February 2022, Jinmalang received an exclusive investment of 600 million yuan from Jiahua Capital.
Among them, Baixiang and Jinmailang are traditional veterans, and Baijia Akuan Food, which became popular with "red oil dough skin" and has sprinted for IPO in January this year, is one of the few "internet celebrities" in the instant noodle industry in recent years. However, compared with Master Kang, Unification, and Imabari Lang, Bai Jia Akuan is not only much smaller in size, but also has a worrying profitability.
Its prospectus shows that in 2020, Baijia Akuan Food revenue of 1.1 billion yuan, with 120 million bags of red oil dough skin sold in 1 year, its instant noodle revenue of 570 million yuan, an increase of 103.6% year-on-year. However, its net profit for the year was still only 76.08 million yuan, and the net profit margin was only 6.9%. By the first half of 2021, its revenue reached 590 million yuan, but its net profit was only 19.81 million yuan, and its net profit margin was as low as 3.4%.
In the face of Master Kang and Unification, this can be said to be minimal. According to Master Kong's financial report, in 2019, 2020 and 2021, its instant noodle revenue was 25.3 billion yuan, 29.5 billion yuan and 28.4 billion yuan, respectively; the contribution profit was 2.2 billion yuan, 2.733 billion yuan and 2.004 billion yuan, respectively. According to the unified financial report, in the past three years, its instant noodle revenue has remained at 8.5 billion yuan, 9.055 billion yuan and 9 billion yuan.
Ramen said vs. A lasagna peel
In the bubble noodle industry, another new consumer brand with a large voice of Internet celebrities is "Ramen Theory", which was founded in 2016. With the typical traffic play of "big anchor with goods + KOL planting grass", Ramen said that it was strong in 2019, selling sales of 250 million yuan.
However, ramen's story of "high-end health" doesn't seem to last. Magic Mirror market intelligence data shows that during the first round of pre-sales of Double 11 in 2021, the sales of ramen said were close to waist-cutting compared with the previous year, and the category sales ranking fell significantly.
Nowadays, the tide of new consumption is receding, and the online road of Internet celebrity brands is more difficult to sustain, and there is still no new story to tell after thirty years of hegemony.
Channel blockade and innovation are too difficult, and new consumption is not long?
In the new consumption era of "all brands are worth redoing", why are there no new head players in instant noodles?
Many analysts believe that a major factor that keeps new players out of the head of the track is the giant's strong control over the near monopoly of sales channels.
"Food and beverage products rely heavily on offline channels such as supermarkets and convenience stores, but unlike online channels, shelves are limited, and if you want to be on the shelves, you have to pay an 'entry fee'." Li Yingtao, research director of the Brand Retail Industry Center of Analysys Analysis, analyzed Pineapple Finance.
The so-called "entrance fee" is not everyone is eligible to pay.
Li Yingtao said that based on the scale effect and brand awareness, the bargaining power and discourse power of traditional big brands in front of channel vendors are very strong, and even can form a channel blockade through long-term agreement cooperation, "You can imagine that a supermarket or convenience store does not have master Kong, Unity or Nongfu Spring, Coca-Cola products, basically unlikely." ”
Moreover, as a well-developed traditional category, the offline dealer system of the instant noodle industry has also been quite stable. "High-quality dealers have established long-term cooperation with giant brands, and it is difficult to break new brands in the short term."
In 2021, Master Kong's dealership will reach 80,000 and the number of direct retailers will exceed 250,000, while as of June 2021, there will be only 1,041 offline distributors of Akuan Food, and most of them are small.
Wang Yang, a supplier in the noodle industry, believes that the best solution for new brands to lay offline channels may be chain convenience stores. "They prefer to give new brands the opportunity to showcase, but may require brands to sign exclusive agreements, that is, they may not be allowed to enter other chain brand convenience stores, which will make it easier for you to be positioned as a niche brand and make it more difficult to expand other channels."
In the new brand shelf battle, the yuanqi forest of offline shopping and online marketing is regarded as a model of success. But in Wang Yang's view, in the instant noodle industry, it is difficult for a brand to pay a high channel cost like the original Yuanqi Forest, "the return on investment is not high in the short term, and there are certain risks." ”
Therefore, most new consumer brands can only start from online channels and embark on the road of "internet celebrity". "Online channels are easy to explode in a short period of time, but the brand has no bargaining power and right to speak in front of the platform and the head anchor in the early stage, and even if it makes a blockbuster SKU, it also has to pay extremely high traffic costs." Li Yingtao said.
This can be seen from the prospectus of Baijia Akuan Food.
Its annual revenue of 1.1 billion yuan, the gross profit margin of its main business is 35%, and the net profit is only 76.08 million yuan, which is dragged down by the rising marketing costs. According to the prospectus, in 2020, the e-commerce self-operated income of Baijia Akuan Food was 230 million yuan, and the e-commerce channel service fee was 56.46 million yuan, accounting for 24.73% of the e-commerce self-operated income. That is to say, for every piece of red oil dough skin sold by Akuan Food that sells for 44 yuan (the average price of Akuan instant noodles in 2020), it has to spend 11 yuan on anchors and e-commerce platforms, and then excludes the cost, and the profit margin is naturally low.
The ratio of Akuan Food e-commerce channel service fee to e-commerce self-operated income is source @ prospectus
"Dissuading" entrepreneurs is also the defensive awareness and imitation ability that the giants have trained in years of fighting.
At that time, the giants wanted to grab the low-end market, and master Kang had "good strength", and Master Kang had "Fu Manduo"; later, the unified launch of a higher quality "Tang Da Ren", Master Kang launched a benchmark "Tang Master"; and later, unified with "Manchu Dinner" to seize the high-end boiled noodle market, Master Kong also quickly cut in with "Speed Noodle Restaurant".
"Once we see a certain type of emerging demand erupt and a small brand begins to grow rapidly, the giant will quickly follow up after the market judgment and tilt the entire team resources to support the new business." In Li Yingtao's view, therefore, if a new brand wants to complete the scale accumulation and brand recognition before the giants react, learn to imitate and even surpass, the growth time is very short.
What's more, unlike the beverage industry, there is not much room for innovation in the instant noodle category. In the past few decades, whether it is a traditional brand or a new brand, the innovation dimension has only stayed in the two aspects of health upgrade and quality upgrade. Such upgrades also mean higher prices and a niche consumer base.
After decades of accumulation, the traditional giants have firmly established a moat with channel control, brand awareness, cost control under scale effect and standardized production, making the instant noodle industry a "strong and strong" market, and it is difficult for latecomers to break through.
With snail powder and self-hi pot, can you grab the rice bowl of the instant noodle giant?
Under the interception of the giants, the new brand had to take a detour.
Since 2017, new types of convenient fast food represented by snail powder, self-heating hot pot and self-heating rice have achieved explosive growth. According to the Head Leopard Research Institute, in 2017, the size of China's convenient fast food market increased by 23.7% year-on-year to 279.5 billion, and continued to grow to 294 billion in 2018, declined in 2019, and grew to 294.5 billion in 2020.
According to the "2021 Convenience Fast Food Industry Insight Report" released by CBNData, instant noodles as an old category still account for more than 30% of the sales share, but the growth rate of new fast food products such as rice noodles, snail powder, and instant rice is much higher, and brands such as Zi Hi Pot, Hao Huan Snail, Li Ziqi, Ramen Said, and A Kuan have become the most popular cutting-edge brands in 2020.
Once consumer demand is verified, these new fast foods will soon become the darlings of capital. In 2021, snail powder brand Li Ziqi, self-heating hot pot brand Zi Hi Pot and Mo Xiaoxian all won hundreds of millions of yuan in financing, although they may not have built their own supply chains, but only adopted the OEM model of production.
A variety of convenient fast food products on e-commerce platforms
Through more subdivided categories, more focused scenes, and fresher gameplay, emerging Internet celebrity brands are trying to cut a cake that is convenient for fast food, and Master Kong and Unity have to guard against it.
For example, in 2019, Unification developed the hot rice brand "Open Small Stove", and successively launched self-heating hot pot, brewed wontons and other fast food products, through the signing of star spokespersons, head anchors with goods to quickly open up popularity, in order to resist the impact of cutting-edge brands.
At the same time, the category anxiety of traditional giants is also related to the gradual shrinking of the instant noodle market in recent years.
Although since 2020, due to the quarantine at home caused by the epidemic, the instant noodle market has ushered in a small rebound, but overall, in recent years, with the cultivation of takeaway mentality, the instant noodle industry has been impacted, and the market size has continued to shrink.
According to Nielsen data, the overall sales volume of the instant noodle industry in 2021 fell by 4% year-on-year, and sales fell by 2.7% year-on-year. Specific to the brand, the revenue of instant noodles in 2021 also fell by 0.6 percentage points year-on-year; Master Kong's instant noodle revenue in 2021 fell by 3.6% year-on-year, coupled with the impact of rising raw material prices, profits fell by nearly 27%.
In Li Yingtao's view, it is almost an inevitable trend for all kinds of new fast food to squeeze the market space of traditional instant noodles, which is quite obvious in the Japanese and Korean markets. "With the increase in the cost of human services, the cost of eating out and cooking at home will increase, compared with traditional instant noodles, new foods such as cooked noodles with higher prices but better quality and better flavor will be reflected as a supplement to meals."
He also pointed out that at present, in China, the four major consumption scenarios of instant noodles are still widespread, and the market size is quite large compared to other fast food categories, so the growth rate of the instant noodle industry may slow down, but it will not be completely swallowed.
Back on the instant noodle track, the new brand is not completely without the opportunity to hit the giants.
Li Yingtao believes that the opportunity for new brands to break through may exist in the trend of domestic substitution in all walks of life. "Master Kong and Unification are both enterprises with Taiwanese and foreign-funded backgrounds, and 'domestic products' are becoming a major influencing factor affecting the consumption of young people, and there will be great possibilities for domestic substitution in the future instant noodle track."
Wang Yang told Kai Pineapple Finance that the "moat" of Master Kong and the unified industry is not without loopholes, and in time, new brands with brand power and product power will still be worth imagining through the path of breaking through the blockade through innovative SKUs.
Today, while new consumption has yet to create a new top of the bubble noodle industry, it has made the industry more rapidly changing than at any time in the past three decades. This is also a reminder to new and old brand players that if they want to be not squeezed out of the track, there are more things to do in addition to price increases and marketing.