The rumor that the price of Master Kong's instant noodles is about to rise is just like a “butterfly” that could trigger a tornado by tapping its wings in South America.

As of May 17, people familiar with the incident include a self-proclaimed employee of Master Kong's Beijing company, a dealer in Beijing, and an agent in Henan. However, in responses from various parties, Master Kong's official customer service staff on various online shopping platforms basically point to the point: no relevant notice has been received yet.

Picture: Master Kong Taobao customer service response

Returning to the central point of contention of the incident - price. What we need to clarify is what is the price increase cycle in the FMCG industry, especially instant noodle products?

And what impact did the consumer sentiment behind this market shock caused by “butterflies” have on instant noodles, a highly penetrating and high-profile product category that acts as a “basic food for people's livelihood”?

Price Motivation and Market Perception

Since 2023, many FMCG products, including Yakult, Nestle, and Pepsi, have completed a new round of price increases, and even some brands that have not increased prices for a long time, such as Baoguerli Electrolyte Water, have broken conventions and adjusted product prices upward.

As for the reason for the price increase, most FMCG products blamed it on the rise in raw material prices in their official explanations. As for the instant noodle industry, the rise in raw material prices is also the most intuitive and core reason, and is affected by the relationship between supply and demand in the market. Furthermore, increased packaging, transportation and storage costs, market competition, and brand premiums will also affect product price fluctuations.

At this stage, the main players in the instant noodle market include the two leading companies already listed, Master Kong and Unification, as well as two unlisted companies, Jinmai Lang and Baixiang. Currently, all four major brands have adopted an omni-channel operation strategy, but they all have different priorities.

In offline channels, due to the influence of the consumption environment in the province, city, district (county) where they are located, dealers usually adopt different price strategies based on the brand's recommended retail price. Since dealers have different degrees of acceptance and execution of price adjustment notices from brands, it is difficult to discuss prices in the same dimension.

In contrast, it is more objective to observe the sales price situation of the brand's official flagship store in e-commerce channels.

Taking classic products in bags of the same type as a comparison, the average price of Master Kong Taobao's best-selling product is 2.49 yuan/bag (104 g); the average price of the “Jiahuang” egg-flavored instant noodles, which are the most sold in unified sales, is 3.99 yuan/bag (116 g); the most sold “soup is delicious” instant noodles in Baixiang Taobao's official flagship store. The average price of the “one and a half bag” instant noodles in a bag (103g) is 2.20. yuan/bag (133g).

Figure: Price comparison of the classic products of the four major instant noodle brands

Taking high-end new products as a comparison, Master Kong's “Express Noodle Restaurant Sichuan Spicy Beef Noodle” is an average price of 19.95 yuan/bowl (85g of pasta); the average price of the unified “eggplant yellow Italian tomato sauce flavor layout” is 4.5 yuan/bag (126 g); Bai Xiang has successively launched new products such as crab yolk noodles and coriander noodles, and the average price of their products is 21.95 yuan/box (208 g) and 4.58 yuan/bag (115g); today, the average price of Mylang's “Spicy and Sour Golden Soup Fatty Beef” is sold separately 9.96 yuan/barrel (137 g).

Figure: Comparison of the prices of high-end products of the four major instant noodle brands

Whether it is a classic line or a high-end line, Bai Xiang, which focuses on national feelings, has more expensive products than Master Kong, but as a listed company, Master Kong's classic products are more affordable than uniform.

From this perspective, the price range of Master Kong's instant noodles is generally medium and inclusive among leading players in the industry. There are no products that are too cheap but of poor quality, nor are there so-called IQ tax products that use marketing gimmicks to pass costs on to consumers.

Although Master Kong has not officially confirmed the truth of the price increase, why is the rumor about an upcoming price increase sparking widespread industry discussion?

I think there are two reasons:

First, Master Kong's comprehensive advantage in terms of market share and loyalty means that it is easier to perceive market changes and grasp industry trends, that is, it plays the role of a category trend vane, so its small market movements will attract strong attention;

Second, in addition to passive price increases such as rising costs and inflation, the subjective factors that instant noodle companies choose to increase prices are due to growth considerations. What consumers cannot accept is a “bad intention” price increase, such as the industry commonly using packaging changes to increase prices in disguise, etc., but quality upgrades that have stood the test can win the hearts of rational consumers.

What kind of instant noodles do consumers need to upgrade competition on the racetrack?

In recent years, with the upgrading of the convenient fast food industry and the updating and iteration of technology development, more and more new fast food categories have entered the public eye. Although instant noodles have a strong national base and strong consumer awareness, various fast food products such as snail powder, hot and sour powder, self-heating hot pot, and self-heating rice have also rapidly reached the front desk, seizing part of the instant noodle audience.

More and more young customers are returning to rational consumption itself in the midst of “sobriety on earth,” which will inevitably lead the instant noodle market competition into an upgrade period of stock games and incremental expansion.

In conjunction with the “2023-2024 China Convenience Food Industry Development Research Report” jointly released by the Chinese Society of Food Science and Technology and iiMedia Research (iMedia Consulting) in September last year, diversified demand is driving the convenience food industry to become more segmented, and healthy, nutritious, and high-end convenience foods will become a future trend.

Figure: “2023-2024 China Convenience Food Industry Development Research Report”

The report also revealed a message: Whoever can grasp user needs and take the lead in seizing various product segments can be expected to reap the next stage of dividends.

Furthermore, if an enterprise wants to achieve long-term growth, it depends to a certain extent on its ability to concentrate on the market and the speed of product innovation and upgrading.

Focusing on the four leading players, in addition to marketing the country with “classic” fist products and pursuing the “greatest common denominator” of taste, Master Kong has in recent years introduced good products with different styles and even those that measure “aerospace quality” by increasing investment in industry-side innovation and upgrading, thus meeting the needs of consumers in different walks of life for high-quality and healthy food.

The author observes that the “Kangtong” duos that people were talking about in the past were also unwittingly replaced by “Kang Bao” (Master Kong's barreled noodles), to make peace with Master Kong's unification side for more than 20 years, and had to face the risk of the category's potential declining. According to the 2023 performance data, the Unification side's instant noodle business contributed 9.594 billion yuan in revenue in 2023, a decrease of 1,026 billion yuan from the previous year's level of 10.62 billion yuan, a year-on-year decrease of 9.65%. Unification had to cover up the decline in instant noodle growth with high growth in the beverage business.

Figure: Revenue comparison between Master Kong, Unification, and Nissin 2023 earnings

Although it is frequently popular with the “Light of Domestic Products” label, Baixiang is not a pioneer in the high-end field and has always mediated in the low-end market. This also lays a low-end cognitive anchor for users, which in turn will make it more time-consuming and laborious to transform into the high-end in the future.

Now Mailang, which is also an old domestic brand, has also begun to keep pace with the times and create new products. Starting in 2022, the new high-end brand “Ramen Van” will be launched, focusing on zero-frying, healthy, and high-end labels. While it can promote high-end, food safety issues are still a hurdle that Mylang cannot overcome today.

Looking back at the FMCG market, discussions about “price” can often stir up consumers' nerves, but price is not the only criterion for judging the strength of a brand, nor is it the only link between brands and consumers that are close and close.

Zhong Xuegao, once known as the “ice cream assassin,” is already drowning in the torrent of the times. Small price movements that are in line with the industry's development cycle can be understood by consumers. Conversely, those methods of increasing prices in disguise by reducing weight and writing big articles on packaging and marketing are difficult to convince.

In the long run, companies compete for “who can actually launch an epoch-making product”, which can occupy a high mental position in terms of product quality, craftsmanship, reputation, and nutritional content. This is a true picture of strength.

This article is from Retail Business Finance, by Liberal Arts.