The Chinese travel industry boomed in the late 1980’s, when midlevel managers, students, and elderly people traveling both for business and for pleasure. However with airports and train stations packed, there were no catering services in place to feed hungry travelers – only restaurants that closed early and hot water. Recognizing an opportunity, Tingyi sold noodles in Styrofoam bowls providing plastic utensils and packaged seasonings at the same time. Muscling its way into the Chinese market, Tingyi has maintained its market leadership through innovations such as new seasoning. Currently, Tingyi offers more than 200 flavors – appealing to different climates and cultures across China – and churns out 16 billion noodle servings a year in highly automated mainland factories.
Among its three most significant competitors in the Chinese instant noodle market – Uni-President (統一), Hualong (華龍) and Baixiang (白象) – Tingyi dominates the market with over 55% of the market share (Figure 1.1). Although increased price of raw materials such as flour and palm oil decreased Tingyi’s gross margin in 2010 to 28.83%, the company was able to adjust its product structure and increase efficiency allowing single-quarter sales to grow by 35.56%. According to Tingyi’s annual report, market shares in terms of sales value for Tingyi’s bowl noodle and high-end packet noodle was nearly 70% in 2010.
Even though Tingyi increased its selling price in April 2011 by RMB0.50 per pack (average of 15%) to offset rising costs, Chinese consumers are incredibly loyal to Master Kong’s products largely because of the company’s brand awareness and market penetration. Therefore, Tingyi has no fear of losing market share especially since its competitors also have to increase selling prices under the stress of rising costs. Consequently, in line with China’s rising CPI, unit prices for instant noodles increased by 11% in 2010 and 9% in 2011.
Master Kong, betting on China`s...