Instant noodle competition boils over

Kokomyun challenging longtime favorite Shin Ramyun as top choice

By Kim Jae-won

Korea’s massive market for instant noodles has long been ruled by Nongshim and its flagship product, Shin Ramyun. However, the company now sees an unlikely challenger in the relatively small Korea Yakult, which appears to have a game-changing weapon.

Kokomyun, Korea Yakult’s instant ramen inspired by the personal recipe of television personality Lee Kyung-kyu, has been taking supermarkets across the country by storm and food bloggers have been raving about its unique, chicken broth flavor.

For Nongshim, Shin Ramyun continues to be a reliable but boring seller. Its efforts to generate excitement with Shin Ramyun Black, a premium ramen, have been cut short. The Fair Trade Commission (FTC), which acts as the government’s anti-inflation tool, declared Shin Ramyun Black was a ploy by Nongshim to raise prices and pass on the elevated costs of ingredients to its customers, and decided to fine the company.

The bad publicity was coupled with underwhelming sales, and Nongshim recently announced it will discontinue its production of Shin Ramyun Black from this month.

“We saw sales of Shin Ramyun Black tumble below the break-even point of 6 billion won in sales a month due to its relatively high price and the economic downturn. Lowering prices from 1,600 won to 1,450 won didn’t help much and we believe it’s time to stop producing the product,” said a Nongshim official, asking not to be identified.

According to the Nongshim official, sales of Shin Ramyun Black marked 9 billion won ($8.4 million) when released in April, but dropped to 6 billion won in May. They plunged to 3 billion won in June, and 2.5 billion won in July. He expects sales of the new ramen will be around 2 billion won for August.

Critics argue that the fair trade agency’s excessive price-control efforts killed the popular item, accusing the company of exaggerating its quality.

The company said Shin Ramyun Black is equivalent in quality to a bowl of “seolleongtang,” or Korean broth made from ox bones. However, the FTC announced in late June that the company exaggerated its quality and imposed 155 million won ($144,800) in fines for spreading false information. Nongshim was also ordered to change the advertisement.

“Shin Ramyun Black has only 78 percent of the carbohydrates of a bowl of seolleongtang. Its protein also marked 72 percent of the ox bone soup. Moreover, the ramen’s iron content reached just 4 percent compared to that of seolleongtang,” the FTC said in a statement.

Critics say that the FTC applied an excessively high standard to the commercial.

“I don’t think that anybody would have believed that the ramen really had equal quality with seolleongtang. It was rhetoric which can be accepted in a commercial. Everybody understands it except the FTC,” said a Seoul-based expert, on condition of anonymity.

FTC Commissioner Kim Dong-soo has been criticized by local media, saying that he focused on the small matter of price control rather than setting a fair rule for companies.

Kokomyun rising

Even before Nongshim bailed on its new product, Kokomyun had been replacing Shin Ramyun Black as the market’s rookie of the year.

Korea Yakult produced 8 million packs of the new ramen over the past month and sales have passed 5.6 billion won. Lee, who first unveiled the chicken soup-based recipe on its popular KBS television show, ``Qualification of Man,’’ is said to be receiving a 2-percent royalty from Kokomyun sales, although Korea Yakult has declined to confirm this.

“We plan to increase sales of our ramen thanks to the success of Kokomyun. We have lagged behind other companies for a long time, but now seek to break through,” said a Korea Yakult spokeswoman.

Nongshim is the biggest ramen maker, accounting for 70.7 percent of market share with 1.2 trillion won in sales in 2010, followed by Samyang Food, which had 12.4 percent, according to the FTC. Ottugi came third with a 9.5-percent market share, while Yakult was ranked fourth at 7.4 percent.

Nongshim has led the industry since 1985 and has accounted for more than 70 percent of market share from 2002. Among the top 10 brands of ramen, eight are Nongshim products, except for Samyang’s Samyang Ramen and Ottogi’s Jin Ramen.