China Consumer

Storm in a noodle cup

How a Japanese shareholding has hurt Tingyi’s Chinese sales

Storm in a noodle cup

Anti-Japanese rhetoric continues to hit firms from that country operating in China. As we reported in WiC170 the country’s carmakers have been particularly hard hit.

Nissan was the latest to report on the commercial impact this week. Its joint venture with Dongfeng Auto sold 41% fewer vehicles in China in October than a year earlier. But the collateral damage over the row about disputed islands in the East China Sea is now spreading more widely, even – somewhat unexpectedly – pulling in two well-known Taiwanese firms.

Tingyi, the producer of China’s most popular instant noodle brand Master Kong, was the first company to complain about being sucked into the row, after it emerged that one of its largest shareholders is a Japanese firm, Sanyo Foods with a 33.2% stake.

Faced with rumours of deeper ties with Japan, Tingyi quickly issued a statement denying that the company is Japanese-owned, and saying that it has never hidden the fact that it has Japanese shareholders. It also noted that Taiwanese investors own a majority stake in the noodlemaker through Ting Hsin International, with the Taiwanese also enjoying management control.

“There is nothing special about an enterprise introducing foreign funds, and it should not be treated any differently,” Tingyi said in a statement.

Why did such ownership issues even crop-up at all? Tingyi is accusing its major rival of stirring up trouble over the Japan issue, reports 21CN Business Herald. “We have good reason to believe that it was the work of Uni-President,” one staffer told the newspaper “[Chinese] people hate anything related to Japan. They hate our products too and it has ended up impacting our business.”

The company says that it has reported the matter to the police, who have agreed to investigate.

But even the rumours have been enough to sour Tingyi’s reputation with some of its customer base. During an anti-Japanese riot in Beijing in September, some protesters were heard shouting “boycott Master Kong,” says the Global Times.

But Uni-President says that Tingyi employees have been trying the same tactic, spreading rumours of a Japanese connection with it too. Separately, International Finance News has reported that “patriotic leaflets” have been circulating in Hunan province claiming that Uni-President is a Japanese-invested firm and thus also deserving of a boycott.

Wang Danqing, an industry analyst, says that slanderous attacks between competitors are common in today’s market. “The sad thing is, they work,” he told the newspaper.

More than 48 billion bowls or packs of instant noodles were consumed in China last year, for sales revenues of approximately Rmb80 billion ($12.8 billion).

Tingyi and Uni-President are the two leading players and have been fighting a bitter battle for market share. The industry is consolidating (in the decade to 2010, the number of instant noodle manufacturers in China fell from 800 to 80) but overall market demand is shrinking for the first time too. As the commercial battle between the two firms continues, it becomes something of a zero-sum game, says Oriental Morning Post, with each additional sale by one firm often coming at the expense of the other.

Last year, noodle sales dropped 1.9% from the year before, according to AC Nielsen. Analysts say people are cutting down on instant noodle consumption as they grow more health conscious. If so, that’s a worrying development for the two Taiwanese food giants, which rely on noodle sales for a significant share of their overall business.

Total revenues for Tingyi were about Rmb49.1 billion last year, with approximately Rmb22.4 billion of those sales coming from its instant noodle business. Uni-President made about Rmb17 billion, of which Rmb6 billion came from instant noodle sales.

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