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Nissin Foods aims to scoop out niche in Chinese cereal market

Company launches granola production in Hong Kong

The market for breakfast cereal in China is small but growing, prompting Nissin Foods to set up a plant in Hong Kong to ship granola products to the mainland.

HONG KONG -- Nissin Foods, a Hong Kong-listed unit of Japan's Nissin Foods Holdings, will bolster its granola business in China to woo increasingly health-conscious Chinese consumers.

"China's cereal market is growing rapidly and is expected to grow in a unique manner," said Kiyotaka Ando, chairman and CEO of Nissin Foods. "We plan to ship products made in Hong Kong to mainland China and Taiwan."

Nissin test-marketed its granola in Hong Kong last year and the product was well received. In January, the company opened a 30 million Hong Kong dollar ($3.82 million) processing plant in the territory to ship granola to China. Having production facilities in Hong Kong "will enable us to save on transportation costs and tariffs, making it easier for us to handle orders," said Ando.

Nissin produces three flavors of the cereal: fruit, matcha green tea and soybeans. Tariff-free access to China is another benefit of the Hong Kong plant.

Nissin Koikeya (China & HK), a unit of Nissin Foods, is in charge of marketing. Nissin's Demae Iccho instant noodles are also well known in Hong Kong, and the company is increasing sales in China as well. Nissin plans to use its sales and logistics networks to tap the Chinese market.

Nissin production facilities in Hong Kong will reduce transportation costs and allow tariff-free access to the Chinese market.

The market for granola and muesli -- a Swiss-style cold breakfast cereal based on oats and other grains, dried fruit and nuts -- came to a combined $140 million in 2018 in mainland China and Hong Kong, up 80% from five years earlier, according to U.K. market research specialist Euromonitor International. That is less than a third of Japan's market for the products. Further growth is expected, given the size of the population.

Until recently, eating cereal with cold milk was uncommon in China, where many people have rice porridge for breakfast. But a growing number of Chinese are eating cereal for breakfast these days, particularly young people who have studied in Europe and the U.S.

China's breakfast cereal market is growing rapidly in Shanghai and other coastal cities, and Japanese snack maker Calbee's Frugra fruit granola is catching on with consumers. Nissin is trying to catch up with its bigger rival.

The company aims to grow by attracting health-conscious consumers in new markets.

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