Recently, ramen makers raised prices for cup noodles one after another, but kept the prices of bagged noodles that represent their brands, such as Shin Ramyun and Jin Ramen, unchanged. With manufacturers' cost burdens growing, they appear to have chosen a strategy of raising cup noodle prices, where consumers react less sensitively even when prices go up.
According to the food industry on the 15th, Nongshim(004370) recently raised the factory prices of 18 cup noodle items by an average of 6%. OTOKI(007310) will raise the factory prices of 29 cup noodle items by an average of 6.7% starting on Oct. 7. In contrast, the companies' bagged noodles, including Shin Ramyun, Neoguri, and Jin Ramen, were excluded from this round of increases.
On the surface, the cost burden is higher for cup noodles. Because cup noodles require additional materials such as plastic cups, lids, and packaging film, they are more affected by rising packaging prices. A Nongshim official said, "Recently, the cost of sub-materials has risen significantly, and cup noodles carry a bigger sub-material burden than bagged noodles," and added, "To minimize the impact on people's everyday economy, we kept bagged noodle prices and adjusted only cup noodle prices."
However, the industry explains that the cost burden for bagged noodles is by no means small. In addition to palm oil and flour, plastic is widely used for vinyl packaging made from naphtha, soup base sachets, and multi-pack bundling. With international oil and naphtha prices affected by the Middle East situation and a strong dollar adding pressure, manufacturing costs have been steadily rising.
Even so, companies are leaving bagged noodle prices untouched because consumers feel those price changes more. Bagged noodles are often bought in bulk, such as five-packs, at big-box retailers and online, which encourages active price comparisons and makes any increase immediately apparent to consumers. By contrast, cup noodles are a convenient food with a high share of sales at convenience stores. With frequent promotions such as "1+1 deals," resistance to price hikes is seen as relatively lower.
A food industry official said, "Bagged noodles are often sold in bundles at supermarkets, so consumers can feel price changes more," and noted, "Cup noodles are sold more at convenience stores and promotions are frequent, so the perceived impact tends to be smaller."
That said, the industry drew a line that differences in distribution channels are not a direct criterion for pricing decisions. A food industry official said, "Manufacturers sell to distributors at the same factory price, so differences in channel sales methods did not directly affect price adjustments," and added, "It is reasonable to interpret that, from the consumer's perspective, increases in bagged noodle prices may be felt more."
In effect, by maintaining prices for bagged noodles, which strongly function as household staples with steady stockpiling demand, companies are absorbing part of the cost burden through cup noodles, where price resistance is lower.
The industry also sees the expansion of K-ramen exports as a variable influencing domestic pricing policy. As ramen exports rose in the first half and major companies expanded overseas production bases, they have more room to spread out cost burdens through greater overseas sales rather than defending profitability only through domestic price hikes as in the past.
In practice, Nongshim and OTOKI have high domestic market shares, making some price adjustments unavoidable for certain products when cost burdens accumulate, whereas Samyang Foods(003230), whose overseas sales account for 84%, is freezing domestic prices. However, Nongshim also said in its second-quarter earnings release the previous day that its overseas sales share topped 40%.
A food industry official said, "Whether to raise prices is not decided because costs rose for a day or two; it is determined by comprehensively considering accumulated expense burdens and market conditions," and added, "The trend will be to take a strategic approach to which items to adjust first, considering both export performance and consumer burden."