TOKYO/HONG KONG -- Japan's food and beverage conglomerate Nissin Food Holdings is set to introduce its potato chips across mainland China. By leveraging sales and the manufacturing channels of its noodle plant in the southern province of Guangdong and locally supplied potatoes, the company aims to nurture the snack to be the second major source of income after its traditional noodle business.
"The Chinese market shines as its growth potential still remains big," said the company's Managing Officer Kiyotaka Ando, who oversees the Hong Kong subsidiary of Nissin Foods. The subsidiary will manage sales and production of potato chips in mainland China.
A new manufacturing facility will be added to its existing instant noodle plant in Guangdong. The initial stage of production will start off small, with plans to gradually expand capacity. Including the new product, the food maker aims to increase sales in Hong Kong and greater China to 53.7 billion yen ($4.72 billion) by the fiscal year ending March 2021, which is about 30% more than the year ended March 2016.
Aiming to hook 1.4 billion stomachs, Nissin plans to season the chips with flavors long popular in Japan. One is from its affiliate company, Karamucho, which features mouthwatering spicy potato sticks, and another adopts the company's instant noodle brand Cup Noodles flavor.
Nissin currently sells products in 80 countries across the world and has been enhancing its presence in greater China. Its packaged noodle brand "Demae Iccho" has been a household name in Hong Kong for decades. In addition, it acquired a 51% stake in MC Marketing & Sales, a food and beverage wholesale company whose operations spread across Hong Kong and Macao, in March from Japan's trading house Mitsubishi Corp.
Meanwhile, Nissin is lagging in China's potato chips market to rival Japanese maker Calbee, which already has expanded its reach with the launch of cross-border e-commerce operations in January last year.
There is fierce competition in China's instant noodle market. Tingyi Holding leads with about 40% market share, while other local and international brands compete for the rest.
Nissin's plan to enter the snack market is part of its strategy to tread water in the boiling-hot noodle market. The company hopes to increase brand recognition by expanding its chip lineup. Satoshi Fujiwara, Nomura's Japan food analyst said, "Nissin has the potential to significantly increase the scale of its business if it can create and expand the cup noodle market even slightly."
Tokyo-listed Nissin's share price closed at 6,480 yen on Friday. This was slightly lower than the close on Thursday, but it has gained 5.5% since the end of last year, outpacing the benchmark Nikkei 225 index's 4% gain over the same period.
After trading on Friday, the company released its latest earnings for the fiscal year ended March 2017. Nissin's revenue increased by 5.9% to 495.7 billion yen ($4.36 billion), while its net profit attributable to shareholders was 23.5 billion yen, down by 12.4%.
Nikkei staff writer Mariko Tai in Hong Kong contributed to this story.