September 18, 2016 7:00 am JST

How Japan's Nissin noodles became Hong Kong's soul food

KEIICHIRO MORIYASU, NQN staff writer

Crowds gathered at Nissin's booth during August's Food Expo in Hong Kong.

HONG KONG -- Demae Itcho, the instant noodle brand made by Japan's Nissin Foods Holdings, has developed a wide following here -- where ready-made ramen is a top comfort food. How Nissin achieved that feat may provide clues for other multinationals hoping to succeed in the global arena.

At Hong Kong's Food Expo in the middle of August, the booth set up by Nissin's local arm drew some of the largest crowds. Attendees were after the travel bags, each stuffed with 15 noodle packs. Those bags cost 100 Hong Kong dollars ($12.89), and they came with free bowls and chopsticks. "We sold out all 6,000 sets," said a booth supervisor.

"My wife likes the bonus items," said a man in his 30s. The bags feature a prominent design of Demae Itcho's popular delivery-boy mascot.

Demae Itcho is said to have so many fans because the flavors mesh well with the tastes of Hong Kongers -- as opposed to pouch ramens made by Chinese manufacturers, which tend to be too spicy. The Japanese noodle packets were first imported in 1968 during a less prosperous period, when Japanese food was considered an extravagance. With dual-income households the norm, Demae Itcho was in fact the taste of home for many children who grew up in the era.

In 1985, Nissin began producing Demae Itcho in Hong Kong, and those noodles were transformed to appeal to local taste buds. Although Demae Itcho is usually sold with soy sauce and sesame seed oil flavorings in Japan, one can have a pick of 15 flavors in Hong Kong, including seafood and black garlic oil pork.

Hong Kong is home to about 5,000 diners called cha chaan teng, of which roughly 4,000 serve menu items containing Demae Itcho ramen. The noodles also command expansive shelf space at supermarkets. Nissin group companies control a 60% share of Hong Kong's pouch noodle market. Demae Itcho alone holds 40%.

However, there are signs that tides are shifting. People in China and Hong Kong ate 40.4 billion servings of instant noodles in 2015, a 12.5% drop from 2013, show data from the Tokyo-based World Instant Noodle Association. Hong Kong and the mainland account for over 40% of the global market.

As income levels rise, more people are opting for healthier foods than sodium-rich instant noodles. The working class used to drive the consumption of noodle packs, which are relatively cheap. But manufacturing jobs are taking flight to countries with low wages.

Furthermore, competition among major rivals has intensified after a round of buyouts of smaller producers. Tingyi Holding and Uni-President Enterprises, two Taiwan heavyweights that Nissin competes with in mainland China, are suffering from slumping share prices.

In April, the Hong Kong press reported that Nissin will spin off and list its Chinese and Hong Kong operations in the Hong Kong stock market. In mainland China, Nissin differentiates itself with high added-value items aimed mainly at the younger demographic. Analysts say the company has plenty of room for growth despite a maturing market -- feeding the anticipation among investors.

"Survival strategies for food companies will depend on localization," said Toshiyuki Murai, chief investment officer at Sumitomo Mitsui Asset Management (Hong Kong). In Southeast Asia, for instance, tastes differ among the Philippines, Indonesia and Thailand. "You won't be successful if you don't meticulously modify products and sales strategies for individual regions," Murai said.

The need to localize is heightened by growing isolationist sentiments, as highlighted by the rise of Donald Trump in the U.S. and the British vote to exit the European Union. Global companies may have to be prepared to adapt to the increasing balkanization of markets. 

Nissin Foods Holdings Co., Ltd.

Japan

Market(Ticker): TKS(2897)
Sector:
Industry:
Consumer Non-Durables
Food: Specialty/Candy
Market cap(USD): 6,505.74M
Shares: 117.46M
Asia300

Uni-President Enterprises Corp.

Taiwan

Market(Ticker): TAI(1216)
Sector:
Industry:
Consumer Non-Durables
Food: Major Diversified
Market cap(USD): 10,097.74M
Shares: 5,682.01M

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