Samyang Foods, operating profit surges 101%… Earnings ratio in the 20% range for three consecutive quarters
Overseas sales led the way in the third quarter… Last year’s annual sales already exceeded
Nongshim and Ottogi, hindered by domestic demand… Profitability deteriorates in all
Samyang Foods announced on the 14th that it recorded sales of 438.9 billion won and operating profit of 87.3 billion won on a consolidated basis in the third quarter. These are increases of 31% and 101%, respectively, compared to the same period last year. In particular, the operating profit margin has been in the 20% range for three consecutive quarters.
Samyang Foods’ strong performance this quarter was also driven by overseas sales. It amounted to KRW 342.8 billion, a 43% increase from the same period last year, accounting for 78% of total sales.
Cumulative sales in the third quarter increased 44% from the same period last year to KRW 1.2491 trillion, already exceeding last year’s annual sales (KRW 1.1929 trillion). In the first half of this year, recruitment profits have already exceeded last year’s annual performance, increasing by 131% to a cumulative 256.9 billion won.
Samyang Foods, backed by the Buldak brand, is establishing itself as an export company. The Buldak brand is gaining recognition for its competitiveness not only in Asia but also in the United States and Europe, securing an unrivaled position. It is expected that the recently newly established sales subsidiaries in Indonesia and Europe will settle down in the local market, and that the company will accelerate its efforts to target the global market once Miryang Plant 2 is completed next year.
On the other hand, Nongshim’s profitability deteriorated. Consolidated sales in the third quarter were KRW 850.4 billion
Nongshim’s overseas business also led sales in the third quarter. Focusing on domestic exports (+33.5%), even growth was seen in the United States (+1.4%), Japan (+20.3%), Australia (+15.4%), and Vietnam (+20.4%).
However, it experienced difficulties in domestic sales and Chinese business. First, in the domestic domestic business, sales decreased in categories such as ramen (-1.1%), snacks (-6.6%), and beverages (-13.8%) as the market size decreased due to the economic slowdown. In addition, sales in the Chinese business decreased by 21% due to sluggish online channel sales amid a continued slump in local consumption.
Nongshim plans to achieve results in the fourth quarter, focusing on new products and the U.S. market. A Nongshim official said, “We plan to launch Shin Ramyun Tumba, which has received a great response domestically, in the global market in the fourth quarter, and we plan to improve sales and profits through the expansion of the bowl noodle line at our U.S. subsidiary, which began operation in October. “It is,” he said.
Ottogi also announced that its consolidated sales in the third quarter were KRW 904.1 billion and operating profit was KRW 63.6 billion, down 0.5% and 23.4% from the same period last year.
Ottogi explained, “Overseas sales and profits increased slightly, but domestic sales increased slightly, and profits decreased due to increased selling costs for sales.”
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What strategies have contributed to Samyang Foods’ success in international markets?
Interview Between Time.news Editor and Food Industry Expert: Prof. Sarah Kim
Time.news Editor (TNE): Welcome, Prof. Sarah Kim, and thank you for joining us today. We’ve seen some remarkable figures from Samyang Foods recently, with a 101% surge in operating profit and a significant increase in overseas sales. What do you think is driving this impressive growth?
Prof. Sarah Kim (PSK): Thank you for having me! Samyang Foods’ growth can largely be attributed to their strategic focus on international markets, particularly with their Buldak brand. Their revenue from overseas sales has skyrocketed, accounting for 78% of total sales in the third quarter, which is an impressive figure. They’ve successfully penetrated markets not just in Asia but also in the U.S. and Europe, which illustrates both strong brand recognition and competitive product offerings.
TNE: So, it seems that international expansion is key. How do you assess their approach to entering new markets, especially with the newly established subsidiaries in Indonesia and Europe?
PSK: Absolutely, their approach has been quite strategic. Establishing local subsidiaries allows them to adapt more quickly to regional tastes and market dynamics. Countries like Indonesia and those in Europe have burgeoning demand for instant noodles and spicy flavors, particularly among younger consumers. Being able to tailor products locally will enhance their competitiveness significantly. The completion of the Miryang Plant 2 next year should further bolster their capabilities and output.
TNE: In contrast, we see that competitors like Nongshim and Ottogi are struggling with their profitability. What do you think has caused this downturn, particularly for Nongshim?
PSK: Nongshim is facing a dual challenge. On one hand, while their overseas sales have seen some growth, their domestic sales have declined significantly due to a broader economic slowdown in South Korea. Factors like declining consumption and competition have pressured their ramen and snack sales. Additionally, their performance in the Chinese market has suffered greatly, with a sharp 21% drop in sales, which signals potential issues with their online sales strategy in a very tough market.
TNE: What are Nongshim’s next steps, especially as they plan to launch new products in the fourth quarter?
PSK: Nongshim is right to pivot towards innovation with new products like the Shin Ramyun Tumba. Launching successful products globally is crucial for regaining traction. Their focus on the U.S. market, particularly through expanding their bowl noodle offerings, could be a turning point if executed well. The performance of these new products in both existing and new markets will be closely watched.
TNE: There seems to be a clear divide in performances between Samyang Foods and its competitors. How can other companies in the industry learn from Samyang’s success?
PSK: Other companies should analyze Samyang’s focus on global branding and market research. It’s essential to not only innovate in terms of product offerings but also to understand and adapt to varying consumer preferences across different markets. Building a strong brand presence internationally can be a game changer. Furthermore, leveraging digital platforms for sales, especially in regions like China where e-commerce is predominant, is critical for sustainable growth.
TNE: as we look toward the future of the instant noodle market, what trends should we be aware of?
PSK: The instant noodle market is evolving rapidly. We’re seeing a trend towards healthier options, with consumers seeking alternatives that contain fewer preservatives and more natural ingredients. Additionally, flavors that draw from global cuisines are becoming popular, so companies should consider diversifying their offerings. Sustainability will also be key; consumers increasingly prefer brands that demonstrate environmental responsibility in sourcing and packaging.
TNE: Thank you, Prof. Kim, for sharing your insights today. It’s clear that while Samyang Foods is soaring, the landscape for instant noodles remains intensely competitive and dynamic.
PSK: Thank you for the opportunity! It will be fascinating to see how the market evolves over the next few quarters.