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International

Markets

Bureau

MARKET INDICATOR REPORT | JUNE 2010

Consumer Trends

Noodles in Japan

S o u r c e :

M i n t e l



EXECUTIVE SUMMARY INSIDE THIS ISSUE

DID YOU KNOW?

PAGE 2

Consumer Trends Noodles in Japan

Cup noodles were introducedby Nissin Food Products in 1971and revolutionized the instantnoodle market.

Noodle manufacturers are nowlooking to expand into the instantsoup market.

Japanese retail sales of noodles were US $10.9 billion in 2009, adecline of 5.6% from 2008, and the smallest retail sales figure since2004.

This decline was the result of two contributing factors. First, in early2008, a number of noodle manufacturers, including Nissin FoodProducts, Toyo Suisan Kaisha Ltd., and Sanyo Foods Co. Ltd., raisedthe price of noodles; this had not been done in the preceding 17 years.The price increase was necessary, as the price of wheat rose andpackaging costs increased. Fortunately, most wheat prices returned topre-2008 levels by the end of 2009, which returned noodle prices tonormal and brought sales figures back to pre-2008 levels.

Secondly, the noodle industry also suffered briefly at the end of 2008

as a result of a contamination issue involving Nissin Food Products.Nissin recalled half a million instant Cup Noodles, the manufacturer’sleading brand, over fears of insecticide contamination. Both of theseissues appear to have been resolved, so retail sales should return tonormal levels in 2010.

The noodle market is made-up of a combination of instant, plain,chilled, frozen, and snack noodles. Instant noodles accounted for 58%of total value sales of noodles in 2009, with the category divided intopouch, brick noodles and cup/bowl noodles. Pouch and brick noodlesdeclined as consumers selected other convenient alternatives, such asready-meals and other microwavable choices. Product innovations incup/bowl instant noodles were once again quite interesting, with newproducts described as light, hearty, and made with hot milk. The topflavours remained the same as previous years, with soy sauce

maintaining the top position.

Chilled, plain, frozen and snack noodles accounted for the remaining42% of sales in the noodle market, in that order. Frozen and chillednoodle sales grew in volume during 2009, as consumers perceivedthem to be a more complete meal than instant noodles.

Although volume sales are expected to grow in the future, it is unlikelythat value sales will grow because the demand for lower manufacturingprices will drive the selling price down. Furthermore, it is anticipatedthat the number of manufacturers will dwindle, as mergers andacquisitions occur, allowing manufacturers to grow in size to be morecompetitive.

Consumer Trends 3

Retail Trends 4

Japanese Manufacturers 5

Japanese Brands 5

Instant Noodles 6

Individual Sectors 7

New Products 8

Source: Mintel, 2009.



CONSUMER TRENDS

PAGE 3

Noodles are a staple of the Japanese diet and can be consumed hot or cold. Traditional Japanesemeals usually consist of noodles or rice, with a soup and a side-dish of fish, meat or vegetables,to mix in with the noodles or rice.

Consumption of traditional Japanese food is decreasing, as food patterns shift to include more Westernized products.Noodles are being consumed less as consumers choose to experiment with more ethnic meals, including risotto andpasta.

Although going out to eat is a popular social event in Japan, the recession has resulted in people reducing the number of meals eaten out. As a result, instant, chilled and frozen noodles have seen success, as they have becomecost-effective and time-saving alternatives to foodservice, particularly for lunch-time meals.

Ready-made meals are growing in popularity. With less time to spend at home preparing a meal, consumers look for convenient meal options, especially with the size of families decreasing.

Despite new flavour introductions in 2008 and 2009 in the instant noodle category, the most popular flavours of noodlesin Japan remained soya sauce, salted, and miso, all of which are already well-established in Japan.

Consumers were interested in new dairy-based flavours of instant noodles, which were inspired by consumers addinghot milk to regular instant noodles instead of hot water.

Organic foods are popular amongst consumers in Japan and Euromonitor forecasts growth of up to 30% by 2014 for organic products.

Plain noodles

15%

Instant noodles

58%

Chilled noodles

16%

Frozen noodles

10%

Snack noodles

1%

Japanese Noodle Consumption, Average Over 2004 - 2009

Source: Euromonitor, 2009.

10400

10600

10800

11000

11200

11400

11600

2004 2005 2006 2007 2008 2009

V a l u e i n M i l l i o

n s o f U S D o l l a r s

Year

Japanese Noodle Market Size 2004-2009



RETAIL TRENDS

Supermarkets are the most popular distribution channel for noodles in Japan,surpassing convenience stores, markets and Internet sales. Over 80% of theJapanese population lives in urban centers, which has enabled the success of supermarkets.

Local manufacturers continue to dominate the Japanese noodle market.Nissin Food Products Co. Ltd. remains the leader in noodle sales in Japan.

Private label sales of noodles accounted for approximately 5% of noodle salesin 2008. Private labels are most successful in the plain, chilled and frozennoodle categories, whereas their presence in the instant noodle market islimited. Private labels are most often found in retail outlets owned by AeonGroup and 7-Eleven.

Like other Japanese food sectors, the noodle market is highly segmented, asmanufacturers look to target specific consumers (e.g. students, businessmen,women) with their products.

New varieties of instant noodles are introduced regularly, and, according to Japan Times, a new product is on theshelf for just three or four months before it is replaced by a new variety.

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Distribution Channels of Noodles in Japan 2009

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P e r c e n t a g e o f S a l e s





JAPANESE MANUFACTURERS

PAGE 5

Manufacturer 2004 2005 2006 2007 2008

Nissin Food Products Co Ltd 29.5 30 29.7 30.8 27.6

Toyo Suisan Kaisha Ltd 13.6 14 13.5 13 12.7

Sanyo Foods Co Ltd 7.6 7.7 7.7 7.7 7.7 Ace Cook Co Ltd 3.4 3.5 3.6 3.6 3.7

Katokichi Co Ltd 2.6 2.7 2.9 3.1 3.1

Myojo Foods Co Ltd 5 5 3.6 3.2 2.4

Shimadaya Co Ltd 2.2 2.2 2.2 2.1 2.1

Hyougo-ken Tenobesomen Cooperative 1.9 1.8 1.7 1.7 1.7

Oyatsu Foods Corp 1.1 1.1 1.1 1.1 1.1

Nichirei Corp 0.8 0.8 0.8 0.8 0.8

Meiraku Co Ltd 0.8 0.8 0.8 0.7 0.7

House Foods Corp 0.9 0.8 0.7 0.4 0.4

Hakubaku Co Ltd 0.4 0.4 0.4 0.4 0.4

Hoshino Bussan Co Ltd 0.3 0.3 0.3 0.3 0.3

Obinata Co Ltd 0.3 0.3 0.3 0.3 0.3

Yamadai Co Ltd 0.2 0.2 0.2 0.2 0.2

Shigeno Seimen Co Ltd 0.2 0.2 0.2 0.2 0.2

Private Label 5.1 5 5 5.2 5.3

Others 24.3 23.5 25.4 25.3 29.4Total 100 100 100 100 100

Brand Company

Nissin Nissin Food Products Co Ltd

Maruchan Toyo Suisan Kaisha Ltd

Sapporo Ichiban Sanyo Foods Co Ltd

Myojo Myojo Foods Co Ltd

Katokichi Katokichi Co Ltd

Shimadaya Shimadaya Co Ltd

Super Cup Ace Cook Co Ltd

Ibonoito Hyougo-ken Tenobesomen Cooperative

Baby Star Oyatsu Foods Corp

Nichirei Nichirei CorpMeiraku Meiraku Co Ltd

House House Foods Corp

Hakubaku Hakubaku Co Ltd

Hoshino Hoshino Bussan Co Ltd

Obinata Obinata Co Ltd

Yamadai Yamadai Co Ltd

Shigeno Seimen Shigeno Seimen Co Ltd

Japanese Noodle Brands and Their Companies 2009

Percentage Market Share of Japanese Noodle Manufacturers 2004- 2008

JAPANESE BRANDS





INSTANT NOODLES

PAGE 6

Instant noodles accounted for 58% of sales in the noodlemarket in 2009, and therefore had a significant effect on noodle sales as awhole, when sales decreased by 6% as a result of rising prices.

Cup/bowl instant noodles were the leader for product innovation in 2009. One

of the most successful product introductions was Cup Noodles Light whichtargets women looking for healthier meal options.

Sales of instant noodles suffered after Nissin experienced contaminationissues within the Cup Noodles Brand. Consumer confidence fell and allbrands of instant noodles were negatively affected by the scare.

The instant noodle market is known to lack nutritional value, due to extensiveprocessing, and so it is often promoted as an accompaniment to a meal,rather than a healthy meal in itself.

To address concerns of nutritional content, the instant noodle market is fortifying its products with vitamins andminerals, to compete with fresh meal solutions. Furthermore, to address consumer concerns about high salt content andartificial additives, new product launches have emphasized product naturalness.

The premium market of instant noodles is focused in Asia, while the West is more economically focused. In 2009,Nissin Food Products introduced Luxury Ramen Noodles, which was similar to other ramen noodle products, butfeatured a luxury soup base.

In late 2008 and early 2009, new product introductions for children included collagen-enriched noodles and noodlesmade from mixed grains to improve nutritional content.

Flavours 2004 2005 2006 2007 2008 2009

Soy sauce 1 1 1 1 1 1

Salted 2 2 2 2 2 2

Miso 3 3 3 3 3 3

Yakisoba 4 4 4 4 4 4

Kitsune 5 5 5 5 5 5

Tempura 6 6 6 6 6 6

Seafood 7 7 7 7 7 7

Pork 8 8 8 8 8 8

Curry 9 9 9 9 9 9

Leading Instant Noodle Flavours of New Products Introduced in Japan 2004-2009


Source: Mintel



PLAIN NOODLES

PAGE 7

Plain noodles contain the following product types: cellophane noodles, egg noodles, rice noodles,harusame, ramen, and soba. Plain noodles are an important component of traditional Japanesedishes and noodle specialties vary regionally.

Private labels have a strong presence in the plain noodles category, with the majority of manufacturers being local,small and medium-sized businesses.

Volume sales of plain noodles are expected to decrease by 6.1% between 2009 and 2014, while their retail value salesshould decline by 10.2% over the same period.

FROZEN AND CHILLED NOODLES

Both chilled and frozen noodles experienced slight volume growth in 2009 but, due to pricing fluctuations, value growthdecreased.

Chilled noodles that contained all the components of a full meal and were sold in packs, reported high sales in 2009.

This was due to consumers looking for alternatives to eating out, while wanting something with more sustenance thaninstant noodle cups.

Frozen noodles were popular in 2009 as many consumers preferred the taste of frozen noodles to that of preparedinstant noodles and found frozen noodles equally convenient to store as instant noodles.

SNACK NOODLES

Snack noodles are distinguished by their ready-to-eat nature, not requiring preparation or cooking prior to consumption.

Snack noodles experienced the smallest decline of all noodles in 2009, with value losses of -3.5%. This was due, inpart, to the continued interest in snack foods and new snack products in Japan.

Snack noodles are forecast to grow in volume by 2.6% between 2009 and 2014, however, retail value sales growth isanticipated to decline by 5.6% over the same period.

Snack noodles in mini-sized portions were introduced for children’s lunch boxes in early 2009.

2004 2005 2006 2007 2008 2009Japan

Noodles 10,887.6 10,883.9 10,862.0 10,999.7 11,492.4 10,853.2

Plain noodles 1,717.2 1,648.5 1,607.3 1,583.2 1,649.7 1,547.1

Instant noodles 6,151.9 6,220.9 6,266.7 6,409.8 6,659.7 6,260.4

Chilled noodles 1,806.9 1,774.3 1,721.1 1,718.4 1,834.2 1,747.7Frozen noodles 1,090.6 1,117.9 1,143.6 1,164.2 1,219.3 1,172.9

Snack noodles 120.9 122.3 123.2 124.1 129.6 125.0

Sales of Noodles in Japan by Sub-sector in Millions of US Dollars




NEW PRODUCTS

Dip-In Noodles with Japanese-Style Chicken and Salt Sauce

This noodle variety was a new introduction to the Tsukemen No Tatsujindip-in noodles range in Japan. It offers extra thick noodles and a chickenmarrow and seafood rich dip-in sauce. The product also contains aseparate pack of fish powder to enhance the bonito flavour.Company: Nissin Chilled Foods.

Easy Cook Buckwheat Noodles

The Topvalu brand has introduced Easy-Cook Buckwheat Noodles under the Tegaru Ni Chori series. This product contains pre-cooked ingredientsand pre-cut vegetables in order to minimize the amount of preparationtime required.

Company: Aeon.

Milk Seafood Noodles

This product has been reformulated and reintroduced. A member of theCup Noodle instant noodle range, it contains: squid, scrambled eggs,cabbage, Welsh onions and artificial crab toppings.Company: Nissin Food Products.

PAGE 8






The following is a small sample of new products introduced in the Japanese marketplace in 2009.

Rich Kyoto Chinese Noodles

These instant noodles are a combination of flavours designed to imitatethe dishes at the Kyoto noodle bar. This product is made with cloudytonkotsu and chicken soup, medium-thick noodles, and toppings includeroast pork, Welsh onions and sungan.Company: Circle K Sunkus.

Udon Noodles

Udon Noodles are a new product by Best Price. This product does notcontain paper tapes, in order to reduce the cost of the noodles. As Aeon’sprivate label, Topvalue provides consumers with safe and qualityproducts, like Udon Noodles.Company: Aeon.

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Consumer Trends: Noodles in Japan© Her Majesty the Queen in Right of Canada, 2010 ISSN 1920-6615 Market Indicator Report AAFC No. 10650E Photo Credits All Photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada.

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Aussi disponible en français sous le titre : Tendances de consommation: Le marché des nouilles au Japon

The Government of Canada has prepared this report based on primary andsecondary sources of information. Although every effort has been made toensure that the information is accurate, Agriculture and Agri-Food Canadaassumes no liability for any actions taken based on the informationcontained herein.

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