Tuyere financial reporter Zhao Chong intern Zhang Lei
On May 16, the news of "Master Kong's instant noodles is going to rise in price" rushed to the hot search, and Master Kong was accused of adjusting the price of bagged noodles and barreled noodles in May, with an overall increase of 0.2 yuan to 0.5 yuan per bag, and the reason for the price increase was "rising raw material prices" and "formula upgrades".
In response to this matter, the financial reporter called Master Kong's headquarters, but as of press time, no reply has been received. The customer service of Master Kong's e-commerce platform told the financial reporter that "no relevant notice has been received at present."
Master Kong's instant noodles are about to increase in price across the board?
The financial reporter visited a number of large supermarket chains in Qingdao, and when the reporter observed the price tag on the shelf, he found that the price of Master Kong's instant noodles sold at present has not increased, and the barrel noodles and bagged noodles sold are still in old packaging. When the reporter asked whether there would be a price increase in the near future, the supermarket staff said that they had not been notified of the price increase.
Master Kong's instant noodles sold in a supermarket in Qingdao
At the same time, the reporter called Master Kong's instant noodles customer service number on the issue of instant noodles price increases, but as of press time, the customer service has not made a corresponding reply to this question. In addition, the reporter also inquired about the official flagship store of Taobao Master Kang and the official flagship store of Jingdong Master Kang, and their customer service said that they had not received a notice of price increase.
According to Zhongxin Jingwei, the staff of Master Kong's Beijing company said that after May Day this year, Master Kong did issue a price adjustment notice to dealers, suggesting that the retail price of classic series products be raised, the suggested retail price of barreled noodles was adjusted from 4.5 yuan to 5 yuan, an increase of 0.5 yuan for a barrel, and the suggested retail price of bagged noodles was adjusted from 2.8 yuan to 3 yuan, an increase of 0.2 yuan for a bag.
In recent years, Master Kong has experienced multiple rounds of price increases. As early as 2021, the company raised the price of 20% of its instant noodle product line. By 2022, Master Kong will once again raise the price of some hot-selling products such as bagged instant noodles and classic barrels to varying degrees. Benefiting from the increase in selling prices, Master Kong's instant noodle revenue achieved a year-on-year increase of 4.17% in the same year.
However, the price increase did not make Master Kong's instant noodle business more profitable.
Instant noodle business revenue fell 2.84% year-on-year
On March 27, Master Kong released its 2023 annual report, and during the reporting period, it achieved revenue of 80.418 billion yuan, a year-on-year increase of 2.16%; The profit attributable to shareholders was 3.117 billion yuan, a year-on-year increase of 18.43%.
In terms of business splitting, Master Kong has three main businesses, namely food business (instant noodles), beverage business (tea, juice, milk tea, coffee and packaged water), and other businesses (including convenience food, investment holding, investment real estate for leasing purposes, logistics and support function business).
The financial report shows that its beverage business has taken on more responsibility for increasing revenue. In 2023, the revenue of the beverage business will be 50.939 billion yuan, a year-on-year increase of 5.39%, accounting for 63.34% of the total revenue. Compared with the beverage business, Master Kong's instant noodle business performed poorly. In 2023, its revenue from instant noodles fell by 2.84% year-on-year to 28.793 billion yuan.
Source: Master Kong's official website
The reporter found that Master Kong's high-priced bag noodles and medium-priced bag noodles performed poorly, dragging down the overall sales of his instant noodles last year. Master Kong's instant noodle products are divided into container noodles, high-priced bag noodles, medium-priced bag noodles, and crispy noodles, and others. Among them, the sales of container noodles are the highest, and the revenue of this segment in 2023 will be 13.507 billion yuan, an increase of only 0.09% year-on-year, and the revenue will be basically the same as that of the previous year; During the reporting period, its revenue from crispy noodles grew the fastest but was smaller, with a year-on-year increase of 28.75% to RMB452 million, while that of high-priced bags decreased by 6.63% year-on-year to RMB11.850 billion, and that of medium-priced bags decreased by 3.61% year-on-year to RMB2.984 billion.
Source: Master Kong's official website
However, in the case of declining revenue, Master Kong's net profit of instant noodles increased by 46.10% year-on-year to 2.008 billion yuan last year. In this regard, Master Kong said that during the reporting period, the decline in raw material prices and favorable selling prices led to a year-on-year increase in the gross profit margin of instant noodles by 3.05 percentage points to 27.00%, thereby driving the net profit up.
If the price increases, what will be the impact on the consumer side? Jiang Han, a senior researcher at Pangu Think Tank, said in an interview with reporters, "Generally speaking, price increases may cause some consumers to become more sensitive to price and buy other more affordable alternatives, but we also see that consumers have higher loyalty to the Master Kong brand, and its product quality and taste are better than other brands, in fact, its price increase may have less impact on sales." In addition, as long as Master Kong can improve product quality, add value-added services or carry out effective marketing at the same time, it may also offset the negative impact of price increases. ”
As of the close of trading on the 17th, Master Kong Holdings (00322. HK) fell 0.57% to HK$10.46.
In addition to the price increase, what else can the instant noodle giants do?
NielsenIQ data shows that from January to November 2023, the omni-channel sales of instant noodles in mainland China fell by 2.4% year-on-year, of which offline channels fell by 0.7% and online channels fell by 17.5%.
The performance of instant noodles is not only declining Master Kong, but the latest financial reports of Uni-President and Nissin giants show that the performance of instant noodles has declined. In 2023, the revenue of the unified food business (including instant noodles and other foods) will decrease by 10.6% year-on-year, of which the revenue of the instant noodle business will be 9.594 billion yuan, a decrease of 1.025 billion yuan or 9.65% year-on-year compared with 10.619 billion yuan last year; Nissin Foods' operating income fell by 5.77% year-on-year, and "instant noodles are not good to sell" is considered by Nissin Foods to be an important reason for the decline in its Chinese mainland business revenue.
In the face of declining performance, instant noodle giants may be unable to sit still, and companies are trying to move closer to the "high-end".
Master Kong's instant noodles sold in a supermarket in Qingdao
In recent years, the growth point of Master Kong's instant noodle business is mainly concentrated in the high-end noodle and ultra-high-end noodle market. Master Kong's strategy is to target the market of cutting-edge white-collar workers and middle-class consumers, and use brands such as Master Tang as the entry point to increase the market share of this market. Master Kong's classic braised beef noodles with a single package of about 3 yuan are divided into the "high-priced bag noodles" section, and the revenue of high-priced bag noodles in 2023 will decline year-on-year, which shows that the current high-end cannot drive its business growth.
Uni-President also pointed out in the financial report that the instant noodle market has undergone significant and drastic changes, but cost-effective products are still mainstream consumption, and more attention is paid to health, safety and innovation. The financial report also highlighted the "Eggplant Emperor" series of products.
Jiang Han, a senior researcher at Pangu Think Tank, told the financial reporter that in the face of the decline in the performance of instant noodles, in addition to price increases, instant noodle giants need to find new growth points to cope with market changes.
"In addition to price increases, product innovation has launched more flavorful, healthier, more nutritious and more convenient instant noodle products to meet the diverse needs of consumers. For example, we can develop low-salt, low-oil, high-protein instant noodles, or launch customized flavors for different consumer groups, which can greatly increase consumers' willingness to buy instant noodles. Jiang Han said.