China’s progress is killing the instant noodle
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.