What can we tell from China's reviving sales of instant noodles?

Ko Tin-yau October 14, 2019 10:39

Instant noodle sales have seen a rebound in China due to a combination of factors. Photo: Bloomberg

China has witnessed a rebound in sales of cup noodles since last year after a drastic fall in 2017. Does that mean the economy is getting better or worse?

The nation’s instant noodle sales hit a peak of 44.4 billon servings in 2013, but dropped by 12 percent from that level to 39 billion in 2017. That was interpreted as a sign of consumption upgrade at that time, meaning more people opted for a regular meal over instant noodles.

Because of the popularity and importance, instant noodle is often used to gauge whether Chinese consumers are upgrading or buying cheaper alternatives to cut back on spending.

But is it that straightforward? Considering the wide wealth disparity among different regions of China and complex factors behind instant noodle demand, there is often no simple answer.

Sales rose back to more than 40 billion servings last year, according to data released by AI Ries. The consultancy expects sales of instant noodles to expand further this year. There could be several explanations for the sales recovery.

Instant noodles may be considered low-end in big cities, but as the rural sector continues to undergo urbanization, consumers from these villages and towns might be excited to try out instant noodles for a change. This could be one factor fueling the comeback.

A price war in the takeaway app market might be another critical factor.

Previously, major apps like Ele.me, Meituan and Baidu were burning cash like crazy to fight for market share. Generous subsidies offered were believed to have drawn customers away from instant noodles.

But since last year, the war has settled down. These platforms are now charging for their service instead of offering subsidies. That might have prompted some customers to shift back to instant noodles.

Instant noodle sales growth is happening not just in China; Japan, India and Vietnam markets have also all displayed similar trends. Probably because workers are getting busier than ever and simply have no time for a proper meal.

Lastly, instant noodles do not always come cheap. Some firms, such China’s Tingyi Holding, have launched high-end lines, and they are reportedly selling very well.

Costing between US$3-5 per serve, these pricey instant noodles have also contributed to the expansion of the overall market.

This article appeared in the Hong Kong Economic Journal on Oct 11

Translation by Julie Zhu

[Chinese version 中文版]

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Ko Tin-yau

Hong Kong Economic Journal columnist

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