Increased NPD could rehydrate consumer demand for instant noodles in China says Mintel

April 18, 2012

The versatility and convenience of instant noodles has made them hugely successful in China – today, they are so common a product that they are consumed at least once a week by nearly half (47%) of surveyed Chinese consumers. However, it appears that success has come with a downside, with consumers taking this everyday commodity for granted. Indeed, according to exclusive new research from Mintel, instant noodle product innovation will be essential if the market is to stir the Chinese consumer into increasing their spend on what has become an everyday commodity.

Mintel’s new report into the Noodles market in China reinforces the notion of instant noodles’ ubiquitous appeal, finding almost all those surveyed consumed these products within the previous three months, while 82% of Chinese consumers eat them at least once a month. Even more telling is that 6% of Chinese consumers surveyed admit to eating instant noodles at least once a day – a body of people equivalent to half the UK population.

Yet, a lack of new product development, coupled with lowered consumer enthusiasm, had led low single-digit growth in the market while the consumer economy is still growing at double-digit rates (estimated 12.2% total retail sales growth in 2011). The instant noodles market in China was facing a big problem. Volume sales had been declining up to more recently, and value sales growth continued to look weak despite a greater contribution from value-added products. But the situation has begun to improve, and 2010 saw sales begin to pick up, increasing by around 3.5% per year between 2009 and 2011. Last year China consumed some 3.5 million tonnes of the stuff, but levels have still not returned to those seen in 2006, when the market was 3.7 million tonnes. In value terms, the market reached RMB 60.5 billion in 2011, up 27% since 2006.

Matthew Crabbe, Research Director APAC at Mintel, said:

“Instant noodles are accepted as a daily commodity, but until more recently were not exciting consumers with new product innovation. The past two years has seen the start of more dynamic innovation, with the leading companies introducing more products targeted at specific consumer groups’ different tastes and needs. Real growth is only going to be achieved by developing value-added, premium products, but development in this market is in its infancy, and there is scope for new flavours and concepts to rejuvenate popular interest.”

Instant noodles’ widespread popularity and well established presence in consumption habits had led to a commoditised, mature market. Meanwhile, competing markets such as savoury snacks and ready meals were showing significantly stronger growth over the 2006-11 period, at 99% and 77% respectively, compared with instant noodles (27%), as consumers have been attracted by innovation in those markets that met their changing needs.

One shining light in the sector has been bowl noodles. The added convenience of the bowl has helped the sector to gain share from the dominant packet noodles over the past five years, capturing 35% of the market in value terms with sales of RMB 21 billion and 26% in volume terms at 880,000 tonnes.

When it comes to flavours, the top five are: Beef – with 64% of consumers surveyed claiming this as their favourite, Spare Rib (51%), Pickled Vegetable (45%), Spicy (43%) and Seafood (41%). According to Mintel’s survey results, the most popular time of day to eat noodles is as an evening snack after dinner (53%), followed by breakfast at (40%) and for dinner itself at 37%. A surprisingly low number of consumers (30%) eat noodles at lunchtime.

“The past two years have seen the noodles market innovate, but to continue competing effectively with these markets further changes are needed. The targeting of specific consumer groups, most particularly women, and underutilised occasions such as lunchtime, can extend usage amongst important user groups, whilst new flavours, particularly those from different regions, are a natural driver of consumer trial and therefore engagement. Innovation in packaging has yet to maximise the opportunities to create a more exciting category on shelf, and results in ‘walls’ of products that fail to differentiate.”Matthew continues.

Health concerns are making a big impact on the marketplace in China and Mintel’s research reveals some 73% of consumers surveyed claim to actively choose healthy noodles (e.g. low salt, low in fat, non-fried etc) while nearly a quarter (23%) of those agreeing strongly with the statement. Meanwhile, 72% try to avoid noodles with artificial ingredients and the same number (72%) think non-fried instant noodles are a healthier alternative to fried instant noodles and try to buy noodles that have natural ingredients. Some 58% tend to avoid MSG when buying noodles, the same number being more likely to buy diet or low calorie noodles. Notably, some 37% of consumers claim to regard instant noodles as junk food.

“Although there is a strong consumer preference for healthier noodles, we have yet to see that translate into a more widespread appearance of healthier features among the new products being launched onto the market. The vast majority of claims refer to speed or convenience or ease of use, and only a small proportion are health related. However, there has been a slight rise in the number of products making health claims in the past year, offering signs that the market is slowly changing tack. With rising debate about the role of junk food as a part cause of China’s obesity epidemic, any association between instant noodles and junk food would have negative long-term ramifications for the market.”Matthew concludes.

Overall, just 12% of Mintel survey respondents stated that they have a strict budget for food, and nearly a fifth of respondents claim to think little about the price of food they buy. Some 60% of urban respondents are aware that their food bill has increased in the past year, but for most urban consumers, their increased incomes more than compensate for the rises in food prices. Indeed, some 60% of consumers claim to be spending more on food than a year ago and as many as one in five (19%) claim they rarely think about price. Despite this, it seems consumers still have an eye for a bargain with, 31%”always looking”for special offers and 12% having a ‘strict’ budget for groceries.

The total market for instant noodles in China is forecast to grow by about 12% in volume terms to 3.9 million tonnes by 2016. According to Mintel’s report, the largest group of respondents are those who spend, on average, between RMB10.00 and RMB14.99 per week on instant noodles. The average urban weekly income in 2011 was RMB815, so average spending on instant noodles represents between 1% and 2% of weekly income, highlighting a significant capacity to trade up.

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