China’s progress is killing the in­stant noo­dle

The Myanmar Times - - News | Views - ADAM MIN­TER news­room@mm­

A CRUM­PLED in­stant-noo­dle bowl ground into the mud is an un­likely sym­bol of eco­nomic vi­tal­ity. But dur­ing China’s boom years those bowls were as ubiq­ui­tous around Chi­nese con­struc­tion sites as the high-rise cranes above them.

That was no ac­ci­dent. For mil­lions of Chi­nese work­ers, in­stant noo­dles were the con­ve­nient meal of choice, avail­able for a few cents in ev­ery com­mis­sary and convenience store. And China’s in­stant-noo­dle mak­ers pros­pered. Be­tween 2003 and 2008, an­nual in­stant-noo­dle sales ex­panded to US$7.1 bil­lion from $4.2 bil­lion.

But just as China’s econ­omy has slowed, so too has its ap­petite for in­stant noo­dles. Ear­lier this month, Tingyi, China’s big­gest noo­dle maker, was re­moved as a com­po­nent of Hong Kong’s Hang Seng In­dex af­ter see­ing its noo­dle prof­its drop 60 per­cent. China’s in­stant-noo­dle sales are down 6.75pc this year, the fourth con­sec­u­tive year of de­cline.

The first prob­lem is de­mo­graph­ics. China’s in­stant-noo­dle mak­ers grew in par­al­lel with an eco­nomic boom that was fu­elled by the mi­gra­tion of low-cost work­ers from the coun­try­side. But China’s work­ing-age pop­u­la­tion has been in de­cline since 2010, and in 2015 the mi­grant pop­u­la­tion fell for the first time in 30 years. With more work­ers stay­ing home, the in­cen­tive – and de­sire – to eat a prepack­aged bowl of noo­dles was likely to de­cline, and it has.

There’s also the mat­ter of the slow­ing econ­omy. In 2015, sales growth of in­ex­pen­sive food and con­sumer prod­ucts hit a five-year low, ac­cord­ing to a June study from Bain. De­clines were par­tic­u­larly steep in prod­ucts that cater to blue-col­lar work­ers, such as cheap beer and in­stant noo­dles – a phe­nom­e­non that Bain partly blames on Chi­nese jobs mi­grat­ing to low­er­wage coun­tries.

What’s bad for noo­dle mak­ers is great for many oth­ers. Ris­ing wages have im­proved liv­ing stan­dards and ex­pec­ta­tions for mil­lions of Chi­nese work­ers. Pay a visit to a south­ern Chi­nese fac­tory these days, and the food op­tions are much im­proved. With em­ploy­ees be­com­ing more scarce, ben­e­fits like bet­ter food are be­com­ing in­creas­ingly im­por­tant.

China’s work­ers are also able and will­ing to pay more for their day-to-day needs. Ac­cord­ing to one re­cent sur­vey, half of China’s con­sumers now seek out the “best and most ex­pen­sive” prod­uct. A 25-cent bowl of in­stant noo­dles doesn’t make the grade.

Then there are health con­cerns. In­stant noo­dles have de­vel­oped a nasty rep­u­ta­tion in China thanks to scan­dals and ru­mors and a 2012 food-poi­son­ing in­ci­dent. There are long-stand­ing al­le­ga­tions that noo­dles are con­tam­i­nated with plas­ti­cis­ers. Le­git­i­mate or not, scan­dals don’t help the rep­u­ta­tion of a down-mar­ket prod­uct that’s loaded with salt and preservatives.

Even with these prob­lems, in­stant noo­dles had the ad­van­tage of convenience. Now even that edge is being dulled. The streets of Chi­nese cities are swarmed by mo­tor­cy­cle and bi­cy­cle food-de­liv­ery men and women rac­ing to de­liver or­ders that are com­pet­i­tive in price with Chi­nese fast food. In 2015, the value of those de­liv­er­ies was US$20 bil­lion – up 55pc from 2014. Fast, health­ier op­tions are just an app away, even for stu­dents and fac­tory work­ers.

China’s in­stant-noo­dle mak­ers and im­porters are strug­gling to restart growth. But these days there’s com­pe­ti­tion from South Korea, with its far su­pe­rior food-safety rep­u­ta­tion. One op­tion is to sell noo­dles to other emerg­ing Asian economies such as Viet­nam, where con­sump­tion is still growing along with the man­u­fac­tur­ing sec­tor. That won’t make up for China’s shrink­ing mar­ket, but China’s new class of con­sumers don’t of­fer more en­tic­ing op­tions.

– Wash­ing­ton Post

Adam Min­ter is an Asia-based colum­nist at Bloomberg Views.

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