TOKYO — Nissin Foods Holdings’ Cup Noodles products are catching on as an emergency food, as people are told to stay home to slow the spread of the new coronavirus.
Many of those who dig in to Cup Noodles during disasters are eating the instant noodles for the first time in many years. The Japanese food processor aims to win new fans in the U.S., a growing source of profit in recent years.
In March, around 7.19 million cup-type instant noodle packages were sold at supermarkets in Japan, a 13% gain from a year earlier, according to data collected by Nikkei POS. The top-selling product was Nissin’s 78 gram, standard size Cup Noodles. There is no data on overseas sales, but “demand is strong,” a company representative said.
Nissin’s April-December operating profit rose 2% from a year earlier to 35.5 billion yen ($325.8 million), based on international accounting standards. About 80% of that came from Japan, and roughly the same proportion came from its instant noodle business.
But strong sales growth is unlikely in Japan, given the country’s aging, shrinking population. While the U.S. accounts for about 10% of the company’s profit, that share has risen significantly since the late 2010s, after Nissin altered its strategy there. In addition to its three-for-$1 value packs, the company began focusing on premium products priced at more than $1 each.
While the Cup Noodles brand is well-known in the U.S., Nissin has been under pressure to cut prices due to fierce competition. The company views the U.S., with its multiethnic population, as an important arena. If it can win the fight for market share there, it believes it will have the upper hand in other parts of the world.
In the premium segment, last year Nissin released Cup Noodles Stir Fry, a microwaveable, take-out-style product. While most people in Japan make their instant noodles by adding boiling water to them, many Americans add the water first and cook the noodles in the microwave. Cup Noodles Stir Fry was developed with such differences in mind.
U.S. retail giant Walmart has begun selling the Japanese-style pan-fried noodle product at its 2,800 stores across the country. Nissin is trying to raise premium products to between 40% and 50% of sales, up from around 30% at present, by introducing items priced above $2.
In the Americas, including the U.S., Nissin’s April-December sales rose 5% from the year-earlier period to 48.5 billion yen as it logged an operating profit of 3.6 billion yen. Although the company posted a loss of 200 million yen the previous year due to a temporary rise in labor and logistics costs, the company’s profit there began climbing from the 300 million yen it logged during the same period in 2015, backed by rising sales.
Even before the coronavirus pandemic, the company’s “focus was centered on an investment strategy in the U.S.,” said Naomi Takagi of SMBC Nikko Securities.
With the pandemic hitting U.S. consumer spending as many companies lay off employees, Nissin’s cheaper Cup Noodles products are winning over low-income earners. If it runs into trouble with its premium product strategy, Nissin will have to outperform the competition at the low-end of the market.
Nissin’s company cafeteria has a real-time stock price board. It tries to improve employee morale by offering special menu items in the cafeteria when the stock price goes up.
The staff might be happy at the moment: Nissin’s stock price hit an all-time high of 9,440 yen on March 27, and the company has a market value of 931.2 billion yen, based on Friday’s closing price. The 1 trillion yen valuation target set for fiscal 2020 by CEO Koki Ando four years ago is nearly within reach.
To achieve that target — with the help of a one-off rise in demand from the coronavirus outbreak — it is important to satisfy hungry Americans with both inexpensive Cup Noodles and fancier varieties of their old favorites.