Three Major Ramen Companies' Poor Performance Last Year... "The Year Before Last Sold Too Well"

[Image source=Yonhap News]

[Asia Economy Reporter Koo Eun-mo] The 'Big Three' ramen companies?Nongshim, Ottogi, and Samyang Foods?all posted sluggish results last year. This appears to be influenced by the base effect following the surge in ramen sales due to increased 'stay-at-home' demand in 2020, the first year of the COVID-19 pandemic.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 19th, Nongshim, which sells 'Shin Ramyun,' the number one product in the domestic ramen market, recorded an operating profit of 106.1 billion KRW last year, down 33.8% from the previous year. Ottogi and Samyang Foods also saw their operating profits decrease by 16.1% and 31%, respectively, compared to 2020.

The Big Three ramen companies commonly explained in their investment briefing materials that their poor performance was due to rising costs of raw materials, logistics, and other expenses. However, the industry views the impact of the 'reverse base effect' from the strong performance in 2020 as equally significant. In 2020, as people experienced 'social distancing' for the first time, consumption of convenient foods like ramen surged, but as the COVID-19 pandemic prolonged, ramen demand returned to normal levels.

In fact, Samyang Foods, whose ramen business accounts for more than 90% of its total, saw its operating profit in 2020 increase by 21.9% compared to the previous year, setting a new record high. Compared to such record figures, last year's results appeared relatively weaker.

Nongshim experienced a similar situation. Riding the 'stay-at-home' trend in 2020 and the popularity of 'Jjapaguri' (a combination of Chapagetti and Neoguri) featured in the movie Parasite, Nongshim achieved its highest-ever performance. Its operating profit increased by a staggering 103.4% compared to 2019. However, from the second half of 2020, demand for alternatives such as meal kits and delivery food grew, causing profits to decline again.

The base effect experienced by the Big Three ramen companies is also evident in the numbers. Comparing Samyang Foods' operating profit last year to 2019, before the COVID-19 outbreak, it was about 16.4% lower, which is significantly less than the 31% decrease compared to 2020. During the same period, Nongshim and Ottogi's operating profits actually increased by 34.6% and 12.3%, respectively.

The industry expects that the price increases for ramen products implemented around August to September last year will soon be reflected in their performance.

This content was produced with the assistance of AI translation services.