Confronting Declining Instant Noodle Sales, Kangshifu Relies on Beverage Business for Growth
In a market where consumer preferences are rapidly evolving, Kangshifu, one of China’s largest food and beverage companies, is facing a challenging reality: a decline in instant noodle sales. According to the company’s 2024 mid-year financial report, instant noodle revenue has dipped by 1%, totaling 138.14 billion yuan. Despite this downturn, Kangshifu’s overall performance is being propped up by its beverage segment, particularly its tea drinks.
A Shift in Focus: From Noodles to Beverages
For the first half of 2024, Kangshifu’s total revenue edged up by 0.7% to reach 412.01 billion yuan, with the beverage division playing a pivotal role. The division’s revenue grew by 1.7%, reaching 270.65 billion yuan, and accounted for 65.7% of the company’s total revenue. Notably, the tea drink category saw a significant increase of 13%, with revenue reaching 113.92 billion yuan. This surge has offset the decline in other beverage categories such as packaged water, juices, and carbonated drinks.
The shift in focus to beverages is a strategic move by Kangshifu to adapt to changing consumer tastes and health-conscious choices. The company has been proactive in introducing new flavors, optimizing product mixes, and enhancing marketing strategies to cater to the evolving demands of consumers.
Challenges in the Instant Noodle Market
The instant noodle market in China has become increasingly competitive, with several local brands innovating and introducing new products. Brands like Jinmailang and Baixiang are gaining traction with unique offerings such as 0 oil-fried noodles and specialized local noodles. This intense competition, coupled with changing consumer preferences, has affected Kangshifu’s instant noodle sales.
Despite efforts to revitalize the segment by introducing multi-price point, multi-flavor, and multi-specification products, Kangshifu’s instant noodle business has seen a decline. The company has attempted to counter this by enhancing core products, promoting innovative items, and expanding into new channels like membership stores and interest-based e-commerce platforms.
A Focus on Quality and Innovation
Kangshifu has also been focusing on product quality and innovation. In May 2024, the company increased the prices of its instant noodle products, a move that did not lead to a comprehensive increase in sales across all categories. However, the company has seen growth in its premium container noodles, while other categories such as high-price bagged noodles and dry noodles have experienced declines.
The instant noodle segment’s gross margin improved by 1.3 percentage points to 27.1% due to favorable adjustments in raw materials and product mix. This, in turn, led to a 5.4% increase in profit for the first half of 2024, reaching 8.5 billion yuan.
Future Prospects
Looking ahead, Kangshifu is optimistic about its beverage business, which has become the cornerstone of its growth strategy. The company is leveraging its established scale advantage, focusing on core categories, and continuously innovating flavors. It is also responding to the trend of sugar-free beverages by introducing several sugar-free tea options.
Kangshifu’s collaboration with authoritative tea research institutions is aimed at driving innovation and maintaining its competitive edge. The company plans to sustain its growth by integrating consumer needs into every aspect of its operations, from research and development to production and sales.
In conclusion, while Kangshifu is grappling with the decline in instant noodle sales, its robust beverage business, particularly its tea drink segment, is providing a strong foundation for future growth. As consumer preferences continue to shift, Kangshifu’s ability to innovate and adapt will be crucial in maintaining its position as one of China’s leading food and beverage companies.
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