VIETNAM INTERNATIONAL LEASING COMPANY

INSTANT FOOD
INDUSTRY
Internal use only
April 2015

Prepared by: Kieu Hanh Nguyen & Pham Nguyen Yen Lam
Checked by: Dang Vo Quoc Thang

INDUSTRY OVERVIEW
Instant food is considered the largest commodity in FMCG basket and is dominated by two kinds
of products: instant noodles which accounts for 90% of the market share and rice-originated
instant products (such as: instant ph, porridge, min, bn, h tiu (vermicelli)) which makes up
for nearly the rest 10%. Other kinds of products like dried ready meals, dessert mixes, pasta, etc.
currently play a minor role in this sector. Hence, in the extent of this report, we are going to go
further in instant noodles and rice-originated instant products.
Being a leader in this sector, with revenue of USD 1 million in 2014, instant noodles are a fertile
playground for many producers, foreign-invested and local ones alike. Though there are around
50 enterprises in this segment, the top four companies (Vina Acecook, Massan, Asia Foods and
Viet Hung) already occupy 85% of the market share, the rest 14% belongs to medium and small
sized companies. Hence, the competition in this segment is extremely fierce, even between the
big ones. In addition, instant noodles market is reaching its maturity, as the growth rate has
slowed down in recent years (8.3 in 2013 and 7% in 2014) and is expected to fall further in the
near future. Another challenge comes from its substitutes - rice-originated instant products
which, due to its better-to-health characteristic, has experienced impressive growth rate in recent
years (average 10-20 per year).
Food safety and wellness along with marketing activities are major factors which determine
development trend of instant food industry. Improved living standards together with educational
marketing from instant food producers are resulting in a large increase in consumer health
awareness. Consumers are developing greater interest in products that are beneficial to their
mental and physical development. They are paying increasingly more attention to nutrition labels
and choosing products that claim to have a positive impact on health.
MARKET PERFORMANCE
A. Local Market
1. Instant noodles
1.1.
Being the 4th largest noodles consumption country, Vietnam has become a
lucrative instant noodles market for many traders and producers with concentration
on low-price product segment.

Instant noodles are the biggest commodity in the basket of FMCG goods of Vietnamese
consumers, according to market research firm Kantar Worldpannel in its report of Brand
Footprint 2014. FMCG, or fast moving consumer goods, are products that are sold quickly and at
relatively low cost. In Vietnam, instant noodles are served both at popular street shops and luxury
restaurants. Instant noodles are available everywhere, including at Internet agents. The majority
of people have the habit of storing noodles in case they need fast food.
According to World Instant Noodles Association (WINA), in 2013 Vietnam consumed around
5.2 billion noodle packets, ranked 4th in terms of total consumption (behind China, Indonesia and
Japan), and rank 3rd in terms of per capita consumption with 57.3 servings per year (only behind
Republic of Korea and Indonesia). Vietnams instant noodles consumption has been growing
steadily over the last six years. Consumption in 2013 jumped 29% from the 4.04 billion packets
recorded in 2008. The countrys instant noodles consumption growth rate in the five years from
2009 to 2013 was 21%, while this rate was 13% in China, 7% in Indonesia, 3% in Japan and 4%
in Korea for the same period. With impressive figures like these, its no wonder why instant
noodles have become a fertile ground for traders and producers alike in Vietnam, containing 50
producers supplying the market with nearly 600 kinds of different products (in terms of brands
and flavors). The product prices also range considerably different, from USD0.09 to USD1.17, or
even USD7.9 for imported Japan noodles.
Figure 1: Top 15 instant noodles consumption countries

According to Kantar Worldpannels report, some 430 million instant noodles packets were sold
in Vietnam four major cities (Ho Chi Minh City, Hanoi, Can Tho and Da Nang) between July
2013 and June 2014. Each household in these cities consumed a package of instant noodles every
two days, according to the report. In rural areas, instant noodles consumption was far higher: 3.4
billion packages during the 12-month period. Each rural household consumed four packages a
week. Consumers in rural areas spent USD475 million in total just on instant noodles in the time
period while in the cities, the figures was only USD77 million. This can explain why instant
noodles producers keep repeatedly introduce new products but only focus on low-price segment
(ranges from USD0.09 to USD0.16 per pack) since this segment accounts for 80% of the market
share.
Figure 2: Instant noodle purchasing power between urban and rural area

Growth rate
Buying frequency/year
Per household consumption/year
Total spending a year

Urban
0.2%
20 times
182 packs
USD 77 million

Rural
8%
24 times
210 packs
USD 475 million
Source: Kantar Worldpannel

1.2.

However the growth rate is becoming slower as the market reaches its maturity.

According to Euromonitor, in 2013, instant noodles recorded a slower increase in both volume
and value. The total consumption volume was 432,000 tons, increased by 7% compared to 2012;
this is a slight decrease in growth rate compared to previous years. 2013 is also the first year
when growth rate of instant noodles revenue reduced to 1-digit pace (8.3%) after many periods
of 2-digit growth with the sales value surpassed USD1 billion (USD1.01 billion). It is forecasted
that this rate will even fall further in 2014 and 2015 as the market reaches its maturity in the near
future.
In line with higher disposable incomes, higher education levels and higher living standards,
Vietnamese people are becoming more aware of nutrition and their health, which is causing them
to pay more attention to food safety and healthier meals. More people, especially those residing
in big cities, are learning to watch the ingredients used to prepare the food they consume and to
closely monitor the levels of fat, cholesterol and sodium. Many studies have showed that high

level of sodium in instant noodles (around 830mg sodium per serving) is linked to a variety of
diseases such as hypertension, heart disease, stroke and kidney damage. This is why after many
periods of hot growth when low disposable income encourages Vietnamese to buy instant
noodles due to its handy, economical and easy to the taste features, instant noodles will face
rising challenges from foods which are more nutritious and better to health.
Figure 3: Instant noodles consumption volume
600

8.2

8.0

9.0
7.5

7.0

500
400

347

375

8.0

481

458

7.0

6.1

403

6.0

5.1

5.0

300

4.0

200

3.0
2.0

100

1.0

0
2010

2011

2012

432
2013

Volume (thousand tons)

2014e

2015f

Growth rate (%)

Figure 4: Instant noodles consumption value

1,400
1,200

25.0
19.1

18.6

1,000
800

17.4

1,011

1,086

1,146

20.0

797

15.0

671

600

8.3

7.0

400

10.0
5.9

5.0

200
2010

2011

937
2012

Value (million USD)

2013

2014e

2015f

Growth rate (%)

Source: Euromonitor

2. Rice-originated instant products

Holding only a small fraction in the market size, however, rice originated instant food has
been a rising star with average growth rate of 10-20%/year in these recent years.
According to Euromonitor, 10% of the instant food market size belongs to rice-originated
products, specifically, 5% of instant ph, 2% of instant h tiu and 1.2% of instant bn
(vermicelli). There are about 70 kinds of products in this sector, with different prices ranging
from USD0.18 to USD0.7 (which is clearly higher than the average price of instant noodles).
Rice-originated instant products have recorded strong growth in these recent years with average
growth rate of 10-20% per year. Consumption of instant porridge in 2013, for example, increased
61% compared to 2012, with additional 470,000 consumers and 21% of growth rate in per
household consumption. The growth rate of this product in 2014 is projected to be 25% while
that of instant noodles is only 7.0%. Evidently when instant noodles reaches its maturity, riceoriginated instant products are considered a potential segment for instant food producers due to
the healthy and convenient characteristics of these products as well as the ability to control raw
material cost (since 95% of raw material can be found locally).
B. Export
Fierce competition in local market has diverted instant food producers to a new outlet - foreign
markets. Both Vietnamese instant noodles and rice-originated instant products currently have
their presence in many countries: Czech, Slovakia, Hungary and even in foreign markets with
high requirements on food safety: the U.S, Australia, France, Germany, Canada, Hongkong, etc.
While exports only makes up 10% revenue for instant noodle producers, for instant rice
producers, this share is significantly larger, about 30-40% of revenue. This shows that instant rice
products are not only attractive in local market but also have growth prospect in foreign
countries.
3. Key Factors Affecting Demand
3.1.
Food safety along with health and wellness is among consumers top concerns
Following concerns about economic uncertainty and job security, consumers in Vietnam view
health as their third priority of consideration. When questioned about daily activities to stay
healthy, peoples responses of eat and drink in moderation comprised the majority of the survey

population (78%), followed by eating fresh or natural food (47%) and physical exercise
(46%).
Understanding factors that influence shoppers buying decisions about nutritional food helps
producers tailor their message and content on product labels and successfully achieve brand
salience. As such, communicating sufficient nutritional ingredients on healthy products was the
consumers first element of consideration which occupies more than one third of total
participants. Reduced risk of diseases and product affordability were the next two influencing
aspects with 25% and 23%, respectively. A product stamped with the approval by health
professionals was also on the cart of 8% of sample shoppers.
How consumers increasingly pay attention to food safety can be illustrated in the case of fresh
rice noodle (bn ti). In the period from June to August of 2013, when there is information of
Tinopal a harmful substance in fresh noodles, Vietnamese consumers had had strong reaction
to this fact. They stopped eating this fresh one and switched to dried instant products of reliable
producers instead. Sales of instant rice noodle products had increased significantly in this period
around 3 to 4 times compared to a normal month.
Figure 5: Activities to stay healthy

Eat / drink in moderation

78%

Eat fresh / natural food

47%

Physical exercise

46%

Consider the meal's nutrition

41%

Keep mind relaxed

0%

35%

20%

40%

60%

80% 100%

Figure 6: Consideration of purchase nutritional food

8%
8%
36%

Sufficient nutritional
ingredients
Reduced risk of
disease
Affordable

23%

Approved by health
professionals
Others
25%

Source: AC Nielsen

3.2.

Advertising continues to influence buying decisions

68% of Vietnamese respondents confirmed that commercial advertising will increase their brand
preference. This ratio far crossed over that of global consumers (55%), Singapore (49%) and
Hong Kong (40%). It even slightly surpassed the rate of Asia Pacific (67%). As the countrys
social media channels keep growing, Vietnamese people will continuously be captivated by
commercial advertising that will affect their purchasing decisions.
How advertising influences buying decision can be seen clearly in the case of instant noodles.
Advertising makes up 60% of total marketing and selling expenditure of these producers. In
addition, the loyalty of consumers in this sector is at moderate level. On average a person
consumes 3 kinds of different brand names in 1 month. Thus constant and increasing spending
on advertising is a way for businesses to hold as well as increase their market share. For
example, though Omachi is not the first noodle brand of Massan (historically Massan had
launched Chinsu and Kokomi noodle brands but unsuccessful), it has become popular to
Vietnamese consumers thanks to its health-directed message no fear of being heated and dense

frequency of advertising on television at golden hours and popular game shows. After 6
months of launching, this product had accounted 2% of instant noodles market share.
PRODUCTION PROCESS AND TECHNOLOGY
1. Instant noodles

2. Rice-originated instant products

Each different product (ph, h tiu, bn, cho) will have different production process.
2.1.

Instant Ph

2.2.

Instant porridge

2.3.

Instant vermicelli

Since the production technology for these products is rather simple, most enterprises use
production facilities of China, Taiwan or even Vietnam.
COMPETITION
1. Instant noodles sector
The instant noodles sector is quite focused with just 50 companies joining and high concentration
ratio (85.5% of market share is in the hand of four top players Vina Acecook, Masan, Asia
Foods and Viet Hung). Vina Acecook remained the leading companies in the field with share of
43% in 2014, followed by Masan 22%, Asia Foods 12% and Viet Hung 8.5%. The group of

smaller players shares a much modest share (Vifon 4.5%, Saigon Vewong 3.8%, Miliket
Colusa 2.3% and Thien Huong 1.8%).
With revenue up to USD900 million in 2014, instant noodles sector is such a fertile land for
existing players. However, the competition to win share in the market has been so fierce,
especially among the top players. Vina Acecook (with the key brands Hao Hao and Hao 100,
holding over 30% of market share) is now threatened by the aggressive growth of Masan (with
key brands Omachi and Kokomi). Over the period 2008-2014, the proportion of key players in
total sales of the sector has changed astonishingly, with share of Vina Acecook shrinking from
53% to 43%, Asia Foods from 13.4% to 12% while Masans share rose steeply from 1.6% to
22%. Viet Hung, with brand Reeva 3 Mien won 8.5% in market share. And amid the aggressive
evasion of Masan, the situation has become tougher for group of smaller players.
Figure 7: Market share of top sector players from 2008 to 2014

120.0%
100.0%
80.0%
60.0%
Others

19.9%

15.9%

12.5%

12.1%

13.4%
Viet Hung
1.6%

15.0%
AsiaFoods

16.5%
Masan

52.7%

51.9%

51.5%

2008

2010

2012

32.0%

14.5%

12.0%
Vina22.0%
Acecook

40.0%
20.0%

43.0%

0.0%
2014

Source: AC Nielsen

Figure 8: Market share of middle scale players from 2008 2014.

8.0%
7.0%
6.0%
5.0%
4.0%

4.9%
Vifon

5.0%
Saigon Vewong

5.2%
Colusa Miliket

4.8%
Thien Huong

3.0%
2.0%
1.0%
0.0%
2008

2010

2012

2014
Source: AC Nielsen

There are several factors that affect the competition strategy in instant noodles sector.
(i)

Production technology is quite simple, so the main competitive edge lies in the taste
of flavouring powder. Strongly investing in mixing a variety of flavors that match the
increasingly abundant taste of consumers in different region of the country, adding
more addictive, denatured substance to make better flavours and more tenacious

(ii)

noodle threads is one of the most important strategies to win the market.
Since there is not much differentiation in products, a well established distribution
system, professional marketing campaign and eye-catching package design are key
successful factors for instant noodles producers. These take much financial resource.

(iii)

Even with high-priced noodle packs, profit margin per unit still remained quite low.
Over 80% demand comes from the suburbs so the competition in the outskirt zones is
fierce. Middle price range from VND2,000 3,5000 per packets takes the majority
share in the rural areas. Both former players and new players focus on this segment
to win the market share. Growth in demand from suburbs regions maintained at 8%
per year on average, compared to 0.2% in the urban.

(iv)

The competition is expected to be much fierce in the future, in the context of slower
growth rate of instant noodles in recent years (due to the appearance of a variety of
rice originated product such as rice noodles, porridges with abundant taste, and
that the customers are becoming more awarded about health). In 2014, growth of
demand for instant noodles slowed down to 7%, quite low compared to 21% on
average in previous 5 years period. However, revenue from rice-originated instant

(v)

foods has witnessed strong improvement (10% in 2014).

Threat from new entrants is considered not of much worrisome since the sector has
been quite focused (85% of market share is in the hand of 4 leading companies).
Joining in the field required much investment in distribution system and marketing
cost (the case of joint venture between Kinh Do and Saigon Vewong to launch new
brand of instant noodles, of which success is much expected due to the existing
distribution network of Kinh Do). The selling expense burden became the main

barrier for new entrants in this sector.

2. Rice originated instant food sector
This is a quite fragmented sector with over 70 brands for a wide variety of products (ranging
from rice noodles, vermicelli, pho, porridge, shrimp crackers, rice powders, etc). In which, pho
and porridge are the most popular products with largest consumption volume.
The sector attracts a small number of participants (50 companies). And the market is dominated
by some main companies such as Vina Acecook, Vifon, Asia Food with brand names such as
Mien Phu Huong, Pho Xua Va Nay (Vina Acecook), Pho Vifon (Vifon), Gau Do Porridge (Asia
Food), etc. Having a long time in operation, these companies have established firm position in
the market so they easily won trust from customers (it should not be forgotten that in the FMCG
industry, Vietnamese consumers are loyal with brands they formerly chose. Switching to a new
brand name for trials is usual, however, to win their trust and loyalty takes much time and
effort). Compared to the instant noodles sector, the competition among the top companies at
present is still not fierce since this is a quite new segment (value of rice originated instant food
just make up 10% in total sales of instant processing food industry).
Except these top companies, the competition among small and new players is becoming hotter in
recent years, given the rising potential of this sector (demand for these products witnessed better

growth in recent year, amid the slower growth rate of instant noodles (10% in 2014, meanwhile,
the demand for instant noodles slowed down from 25% on average in previous year to just 5% in
2014). Being claimed as more healthy compared to the traditional instant foods, the market of
rice originated processed foods is expected to increased rapidly in value). Masan Consumers
successfully launched its new products Bfast and Komi porridge, posing considerable threat on
the position of existing top players. Meanwhile, traditional players with rather small scale such
as Safoco, Bich Chi, Colusa and Saigon Foods are widening the distribution network in suburb,
where they have more chance to win the market share with low priced products. The sector is
also attracting more new players such as Yen Viet (with Sanest Porridge) and Saigon Food (with
Nutrition Porridge).
BUSINESS PERFORMANCE
In this section, we review the business performance of three companies with full available
financial data Bich Chi, Safoco and Colusa Miliket. In general, COGS ratio remained quite
low, showing that raw materials and other production cost is not of much burden. These
companies also did not rely much on leverage.
FY

Bich Chi

Safoco

Miliket

Total sales

Net profit

Sales

COGS/sale

Liabilities/tota

Net

growth

l resources

margin

2014

15,891,907

1,865,349

11.7%

71.7%

45.6%

11.7%

2013

14,224,605

1,287,488

4.4%

73.7%

46.4%

9.1%

2012

13,628,605

1,805,023

71.0%

33.5%

13.2%

2014

31,024,791

1,112,884

6.6%

87.1%

34.2%

3.6%

2013

29,116,372

950,744

15.9%

87.8%

36.3%

3.3%

2012

25,118,233

928,558

87.3%

34.6%

3.7%

2014

22,645,395

964,093

-12.4%

73.8%

34.6%

4.3%

2013

25,840,698

1,196,837

3.5%

72.7%

38.5%

4.6%

2012

24,978,512

1,453,302

77.1%

36.5%

5.8%

1. Bich Chi Foodstuff JSC

Bich Chi is one of the long-lasting brands in instant food processing industry, established since
1966. Prior to 2011, the company had impressive growth thanks to strong rise in both local and
export market. However, due to the increasing competition in rice originated processed food
sector in recent years, the company has witnessed slower growth of sales lately (after getting
impressive growth of 52% in 2011, sales growth slowed to 4-11% in period 2012-2014). In order
to maintain satisfactory growth rate, the company focused on expanding export (sales from
export occupied over 50% in total sales), with main export markets include the US, EU,
Australia and Korea. In general, business performance remained quite good with average net
margin being 11.3% for period 2012-2014. Thanks to locating in main material zone Sa Dec
province, the company saved much cost of material and transportation, COGS/sales was kept in
good control at around 72%. Leverage ratio remained in safe range with debt ratio being just
41.8% on average in the last three years.
2. Safoco Foodstuff JSC
Business situation of Safoco is fairly stable with average growth rate of 11.6% of total sales and
12.1% of net profit during the latest five year period. COGS remained at stable range,
fluctuating around 87% of sales. Average net margin stood at 3.5%. Self-financing capability
was quite good and the company did not rely much on credit (debt ratio being 34.2% at the end
of 2014). In the first quarter of 2015, business result was quite positive with sales increasing by
13% y-o-y and profit after tax surging by 25% y-o-y (thanks to successfully forecast time to
stock raw materials at favorable price).
3. Colusa Miliket Foodstuff JSC
Being a typical example of small scale player in the battle of instant noodle sector, Colusa
Miliket witnessed shrinking in both revenue and profit during recent years. Since 2011, sales of
the company has decreased from USD26 mil to USD23 mil in 2014. Profit after tax also dropped
from USD1.7 mil in 2011 to USD964K in 2014 (with average decreasing rate of 16.7%
annually). Market share of Miliket shrank through years in front of the evasion of aggressive
players such as Masan and Viet Hung. Traditional market segment of Miliket, low price instant
noodles, now faces with direct competition from Masan when it launched Kokomi and Tien Vua
which are sold at the same price with Miliket but much more eye-catching packed.

Being too conservative in strategy, Colusa - Miliket did not invest in advertisement and
distribution system. Package was kept the same as years ago, and the products are sold mainly in
wet markets, suburb zones without any media advertising. There was almost no innovation in
products (flavors, package). The company maintained quite high proportion of cash in hand (on
average 42% in total assets for period 2012-2014), while no bank loans was employed. In the
context of downtrend in both sales and profit, such business strategy is quite conservative and
inefficient.
Today, in order to survive in the fierce competition, Colusa Miliket is preparing to launched
new rice originated product and expand export sales. However, the result is still in question.
CONCLUSION
With attractive-to-consumer features such as convenient and inexpensive, instant food will still
be a key commodity in the FMCG basket in the future. For instant noodles segment, though it is
a lucrative field with revenue expanding over USD 1 billion per year, as the market is reaching
its maturity and the market share is quite concentrated among the top 4 companies, new entrant
and existing enterprises have to overcome a host of challenges if they want to have a firm stance
on the home market. For rice-originated instant products segment, though the market is still
small compared to noodles, with strong grow rate in recent years, this is a potential and easier-toenter sector for newcomers since consumers are turning more awareness to healthier products,
the raw material cost can be controlled and the expenditure to invest is not as large as in instant
noodles.