Source: Photo by Times Finance
On May 16, the news that "Master Kong's instant noodles are about to increase in price across the board" came out. The customer service staff of Master Kong's Taobao and Jingdong's official flagship stores responded that they have not yet received relevant notices. As of press time, Times Finance has not received a response from Master Kong.
However, Times Finance learned from a person who is said to be a salesman of Master Kong that there is indeed a price increase in Master Kong's bagged and classic bucket instant noodles. According to its understanding, there is no official announcement within the company at present, but there is a general direction, "the recommended retail price of bagged noodles has been increased from 2.8 yuan to 3 yuan, and the classic barrel has been increased from 4.5 yuan to 5 yuan." At present, downstream retailers are asked to increase the price first, and the supply price will be adjusted after a while. ”
Image source: Courtesy of the interviewee
Zheng Rong, who runs a supermarket in a second-tier city, told Times Finance that at present, Master Kong's new packaging of instant noodles has been launched.
According to him, the packaging of Master Kong's bagged instant noodles that was shipped a week ago has been replaced, and the slogan "upgraded, eggs and noodles are smoother, and vegetables are more material" has been printed on the basis of the original packaging, and the lower left corner of the package is also marked with the words "recommended retail price of 3.0 yuan". Previously, Master Kong's bagged and barreled noodles were sold at 2.8 yuan and 4.5 yuan respectively in his supermarket.
In the first quarter of this year, Master Kong has raised the price of its 1L drinks, and Zheng Rong is still selling at the original price by compressing his profit margins, but he said that if the manufacturer increases the price of instant noodles, he will also follow suit, "because the profit is too low."
There are too many new ones in the advent period, and instant noodles can't be sold?
In recent years, Master Kong's performance has become more and more pressured. According to the financial report data, Master Kong Holdings (00322. HK) revenue growth rates from 2021 to 2023 will be 9.56%, 6.26% and 2.16% respectively.
In 2023, as consumers spend less time at home, the rigid demand for instant noodles decreases, and the performance of instant noodle giants will be affected. Although Master Kong Holdings' revenue in 2023 increased by 2.16% year-on-year to RMB80.418 billion, this was mainly due to the year-on-year growth of 5.39% in revenue from the beverage business, while the revenue of its instant noodle business fell by 2.84% year-on-year.
Another industry giant, Uni-President, also encountered a similar situation, in the context of the 2023 full-year earnings increase, Uni-President Enterprise China (00220. HK) food business recorded a decline of 10.6%, of which instant noodle revenue shrank by more than 1 billion yuan.
The perception that instant noodles "can't be sold" is especially obvious in the terminal. When Zheng Rong was tallying, he found that the situation of convenience in his supermarket was becoming more and more common. Under normal circumstances, when sales continue to decline, merchants often make two choices, one is to stimulate sales by cutting prices, and the other is to increase the unit value of loyal consumers through price increases. At the moment, Master Kong is more inclined to the latter.
In addition, another reason for the price increase of Master Kong's instant noodles may be to make up for the increase in costs caused by the increased after-sales pressure. According to the above-mentioned salesman, Master Kong provides merchants with free after-sales service for temporary instant noodles, and the demand for this service has increased since 2023.
The salesman said that the reason for the price increase of Master Kong's instant noodles is that on the one hand, the same series of products in the industry are benchmarked, and the barrel noodles of Jinmailang and Baixiang are 5 yuan or more; On the other hand, the company's expenses have increased, especially the greater after-sales pressure brought by the replacement of expiring products. In 2023, Master Kong's distribution cost will be 17.883 billion yuan, compared to 16.810 billion yuan in the same period of the previous year.
According to Zheng Rong's recollection, there was almost no expired return of Master Kong's instant noodles in his store before, but since last year, there has often been a need for replacement during the expiration date, "At present, the sales of instant noodles are declining, and basically every store has expired returns, and the amount of replacement is not small, which will bring higher costs to the brand." ”
After Master Kong's price increase, the channel switched to Wahaha
In recent years, Master Kong has made several adjustments to the price of instant noodles.
In 2021, Master Kong raised the price of 20% of its instant noodle products; In 2022, it will adjust the prices of bags, 5 bags, classic barrels and mini cups, with bagged instant noodles rising from 2.5 yuan to 2.8 yuan, 5 bags rising from 12.5 yuan to 14 yuan, classic barrels rising from 4 yuan to 4.5 yuan, and mini cups rising from 3 yuan to 3.5 yuan. In the same year, Master Kong's instant noodle revenue increased by 4.17% year-on-year.
In 2023, Master Kong will "repeat his old skills" in the beverage business. In November last year, a notification letter from Master Kong about the price increase of tea/juice was circulated on the Internet, and Master Kong's customer service responded at that time that it was due to the rising cost of raw materials and labor. In the first quarter of this year, Master Kong officially raised the price of its 1L tea/juice drinks, including iced black tea, green tea, jasmine honey tea, etc., and the retail price rose from 4 yuan to 5 yuan, and launched a new packaging, and the bottle was also printed with the words "recommended retail price of 5.0 yuan".
On the one hand, this can improve the gross profit of enterprises, and on the other hand, it also plays a role in promoting the consumption of enterprise inventory in the short term. Zheng Rong told Times Finance that at the end of last year, he learned from the distributor that the price of Master Kong's 1L bottled drink had risen, so he increased the purchase volume and stocked up on hundreds of more pieces.
However, in order to stabilize customers, the sales price of Master Kong's 1L drink in Zhengrong Supermarket is still maintained at 4 yuan per bottle. He said that before 1L of iced tea could earn more than 1 yuan per bottle, but after the purchase price of one piece (12 bottles) rose from 35.36 yuan to 40 yuan or even 41 yuan, the profit was almost negligible. ”
But he also mentioned that the follow-up supermarket purchases will be inclined to brands that have not increased in price, such as Wahaha and Uni-President. The same situation also occurs in the mass snack channel, in addition to operating a supermarket, Zheng Rong is also a franchisee who is very busy with mass snack brand snacks. He revealed that around February this year, the snack system was very busy, and due to the increase in the purchase price, Master Kong's 1L bottled drink was removed from the shelves.
Zheng Rong said that if the purchase price of Master Kong's instant noodles rises this time, the retail price of supermarkets will also rise, because the profit of a pack of instant noodles is only 5 cents.
It is clear that Master Kong's price increase will lead to a re-examination of the new price system by consumers, distributors and retailers, who will also vote in their own interests.
(At the request of the interviewee, Zheng Rong is a pseudonym in the article)
(Source: Times Finance)