Fortunes are diverging for the overseas performances of the three leading domestic ramyeon companies (Samyang Foods, Nongshim, and Otoki). Based on this year's third-quarter outlook, Samyang Foods appears to have seen no drop in demand for Buldak spicy ramyeon despite the United States' high-tariff policy. Nongshim, which faced shareholder criticism at the shareholders meeting in Mar., is also being evaluated as having produced meaningful change in overseas markets. By contrast, Otoki's overseas report card is the weakest among the three. The food industry sees specific reasons why Otoki's push into overseas markets is uniquely difficult.
◇ Among the three ramyeon makers, only Otoki's operating profit forecast falls
According to FnGuide on the 3rd, securities firms estimated Otoki's average third-quarter sales at 941.9 billion won and its operating profit at 60.4 billion won. Sales rose about 4% from a year earlier, while operating profit fell about 5%. At this rate, Otoki's operating profit will have steadily declined since the second quarter of last year.
By contrast, securities firms estimated Samyang Foods' average third-quarter sales at 600.9 billion won, up 37% from a year earlier. Average operating profit was 136.2 billion won, up 56%. Nongshim's average third-quarter sales were 882.1 billion won, up 3.7% on-year, and average operating profit was 44.5 billion won, up 18%.
Overseas markets split the performances of the three companies. Based on third-quarter sales, overseas revenue accounts for nearly 80% of Samyang Foods' total. Samyang Foods had been singled out as the company most likely to be affected by the U.S. high-tariff policy. Because it lacks local U.S. production facilities, all Buldak spicy ramyeon shipped abroad are exported. However, as demand for Buldak spicy ramyeon has risen in overseas markets excluding the United States, the actual impact is being tallied as not large. Samyang Foods has recently been raising product prices in overseas markets.
For Nongshim, overseas sales account for around 40% of total revenue. Many expect that share to expand next year. Products have been displayed on U.S. Walmart shelves since Oct. last year, and a sales subsidiary was established in Europe in Mar. this year. In addition, collaboration with the globally popular Netflix animation "K-Pop Demon Hunters" is expected to give Shin Ramyun a lift in overseas expansion. The collaboration products will be sold through the first quarter of next year.
Otoki is also moving aggressively into overseas markets. In Nov. 2023, Otoki Chair Ham Young-jun recruited former LG Electronics Executive Vice President Kim Kyung-ho, father-in-law of his eldest daughter Ham Yeon-ji, as executive vice president of the global business division. Also, Ham Yeon-ji joined the U.S. unit Otoki America Holdings in May last year and, together with her husband, oversees local operations. A food industry official said, "The owner family jumping into overseas business is a signal that the will to expand exports is that strong."
But results remain modest. Overseas sales account for only about 10% of Otoki's total. A fund manager at an asset management firm said, "They need to clearly show results overseas like Samyang Foods or raise expectations for market expansion like Nongshim," adding, "Otoki is not at that stage yet."
◇ "Lack of a flagship brand and a structure that makes it hard to focus only on ramyeon"
There are several reasons Otoki is slow to show results overseas. First, structurally, it is hard to focus only on ramyeon. The center of the recent overseas K-food boom is ramyeon. According to the Korea Customs Service, K-food exports from the start of the year through the end of Sept. totaled $8.48 billion, up 8.9% from a year earlier. By item, ramyeon contributed the most. During the same period, ramyeon exports rose 24.5% to $1.13 billion.
Otoki is a general food company, not a ramyeon specialist. Unlike Samyang Foods or Nongshim, ramyeon accounts for only about 30% of Otoki's total sales. The rest is curry, sauces, and ready-to-eat foods. A food industry official said, "Because curry and sauces are at the core of the business, it is structurally difficult to devote all resources to ramyeon."
The lack of a flagship brand is another reason. Samyang Foods is going overseas with Buldak spicy ramyeon, and Nongshim with Shin Ramyun. Otoki is watching for opportunities in the market with Jin Ramen at the center, but its overseas recognition lags behind Buldak spicy ramyeon, which leads with buzz, and Shin Ramyun, which has long established a foothold in the United States centered on the Korean diaspora. A food industry official said, "In today's food and beverage (F&B) market, unless you have long-standing brand value (heritage), you have to compete on buzz," adding, "Fresh moves that combine Jin Ramen with commerce and content are needed to improve the situation."
Another factor is that Otoki's other mainstays—sauces based on overseas food cultures such as ketchup and mayonnaise—are areas of strength, which also becomes a stumbling block in overseas markets. K-sauces are gaining popularity, but they are often based on gochujang or soy sauce. A food industry official said, "Abroad, ketchup naturally means 'Heinz,' and it is hard for Otoki to wedge into that space," adding, "That is why Otoki's overseas results are unlikely to come quickly."
In the food industry, pioneering overseas markets is now seen as an unavoidable task. With the domestic economy slowing and consumer sentiment weakening, room to raise prices is shrinking, and the more the government tightens price controls, the more companies must find a breakthrough in overseas revenue. A food industry official said, "The only answer to offset weak domestic demand is to expand exports," adding, "For Otoki, this may be the last chance to overhaul its global business."