By Kim Tae-gyu
Staff Reporter
Nongshim, the nation's biggest snack maker, might be hoping the financial crisis continues, since it's been yielding greater profits during the economic downturn.
According to Samsung Securities, Tuesday, Nongshim has chalked up rapid growth whenever the economy has slumped thanks to brisk sales of ramyeon instant noodles that account for up to 70 percent of its turnover.
``Despite the price increase of around 10 percent in 2008, demand for Nongshim ramyeon rose, helping Nongshim increase annual sales,'' Samsung analyst Rhoe Sei-yeon said.
Products such as ramyeon are referred to as inferior goods that decrease in demand when consumer income rises, contrary to normal goods, to which the opposite applies.
``When people are short on cash, they dine out less and buy inexpensive foods such as ramyeon,'' said Yu Byoung-gyu, an executive researcher at Hyundai Economic Research Institute.
``In that sense, it is understandable that Nongshim enjoys rapid growth over the downturn. As other examples of inferior goods, we can pick such products as condoms or cheap alcohol,'' he said.
Nongshin has notched up double-digit growth in sales four times since 1997, each time when the economy was headed south.
The Seoul-based firm posted a 23.6 percent growth in 1998, when the currency crisis hit the country. Then it racked up 10-percent and 13.6-percent expansions in 2002 and 2003, respectively, timed with the mini-crisis caused by the credit card bubble.
Nongshim struggled afterward, experiencing contraction for three straight years from 2005, when the international economy fared well.
The outfit reversed the downward spiral late last year, when the financial distress started, and sales are estimated to grow 10.3 percent on a yearly basis to reach a record high of 1.67 trillion won.
As Hyundai's Yu pointed out, inferior goods, including condoms and soju, Korea's low-priced spirit, leaped in sales last year.
According to a survey by the Korean Association of Obstetricians & Gynecologists, condom sales jumped almost 20 percent over the August-November period, when the financial storm hit, in comparison to the first half.
The Korea Alcohol & Liquor Industry Association also said a total of 116.1 million bottles of soju were consumed last year, up 5.6 percent from the previous year.
The year-on-year growth rate was a mere 1.3 percent in 2007.
``Some businesses are in good shape even during the slump. So, investors need to channel their money into such industries to make money when things are difficult,'' Yu said.