"Well-Selling Amid Recession"…K-Ramen Gaining Spotlight Overseas, Strong Q1 Performance (Comprehensive)

Nongshim, Ottogi, Samyang Foods Achieve Double-Digit Sales Growth
Expansion of Local Production and Distribution Networks in the US and China
Operating Profit Slightly Declines Due to Cost Burden

Domestic ramen industry 'Big 3' companies Nongshim, Ottogi, and Samyang Foods all saw double-digit sales growth rates in the first quarter of this year compared to the same period last year, driven by increased exports and product price hikes. Except for Samyang Foods, which could not offset soaring cost burdens, Nongshim and Ottogi recorded operating profits that exceeded market expectations. This is the result of ramen, a representative item of 'recession-type consumption,' maintaining steady popularity despite the global economic downturn.

A consumer is selecting products at the ramen aisle in a large supermarket in Seoul. [Image source=Yonhap News]

According to the Financial Supervisory Service's electronic disclosure system on the 15th, Nongshim, the No. 1 player in the domestic ramen market, posted consolidated sales of 860.4 billion KRW in the first quarter of this year, up 16.9% from the same period last year, and operating profit grew by 85.8% to 63.8 billion KRW.

Nongshim's first-quarter growth was led by its U.S. subsidiary. In the first quarter of this year, Nongshim's U.S. subsidiary recorded total sales of 164.7 billion KRW, an increase of 47.2 billion KRW compared to the same period last year, and operating profit rose by about 15.4 billion KRW to 18 billion KRW. The U.S. subsidiary accounted for more than half of the total operating profit increase. This was the result of expanded supply due to the operation of the second factory in the U.S.

A Nongshim official said, "Since the COVID-19 pandemic in 2020, Nongshim ramen has come to be recognized as a hearty meal for Americans," adding, "Demand is so strong that supply cannot keep up." Nongshim used to meet demand by exporting products from Korea, but with the operation of the second factory in the U.S., smooth local supply became possible.

The increase in operating profit was also an effect of the second factory's operation. By replacing the volume previously exported from Korea with local production, the burden of logistics costs was reduced, and the production efficiency of the local factory was improved. Nongshim ramen has established itself as a food increasingly sought after by Americans, recording growth rates of 117% at Sam's Club and 57% at Costco, major U.S. supermarkets. In addition, the effect of an average 9% price increase in the U.S. market from the second quarter of last year also contributed.

Nongshim is considering establishing a third factory to accelerate its U.S. market penetration, just one year after starting operations at the second factory. A Nongshim official explained, "The average operating rate of the first and second factories in the U.S. in the first quarter of this year reached the 70% range," adding, "Considering the recent growth rate, a third factory will be needed within a few years."

Samyang Foods recorded sales of 245.5 billion KRW in the first quarter of this year, a 21.5% increase from the same period last year. Ramen accounts for more than 90% of the company's total sales. Of the first-quarter sales, 157.9 billion KRW, or 64%, was generated through overseas businesses in Japan, China, and the U.S. In particular, the Chinese subsidiary, which began operations in February last year, achieved stable sales of its main product, Buldak Bokkeum Myun. In the U.S., after establishing a sales network with Walmart, entry into Costco is also expected. The company explained that brand awareness has increased in Japan as K-food culture spreads.

However, Samyang Foods' operating profit decreased by 2.6% year-on-year to 23.9 billion KRW due to increased cost of sales and selling and administrative expenses. This is lower than the market expectation of 26 billion KRW. A Samyang Foods official said, "Although sales increased in the first quarter compared to the same period last year, raw material prices such as flour and sugar surged sharply, and inland logistics costs increased due to higher cargo volumes, causing a significant rise in cost of sales."

Meanwhile, Ottogi posted sales of 856.784 billion KRW in the first quarter of this year, up 15.4% from the same period last year, and operating profit increased by 10.7% to 65.371 billion KRW. An Ottogi official cited increased sales of ramen and convenience foods as factors behind the improved performance.

Meanwhile, with the overseas businesses of these three companies performing well, ramen export value from January to March this year was tentatively recorded as the highest ever for the first quarter. According to the Korea Agro-Fisheries & Food Trade Corporation (aT) and the Korea Customs Service, ramen export value during this period was 208 million USD (about 274.4 billion KRW), a 14.3% increase from 181.93 million USD in the same period last year, surpassing 200 million USD for the first time ever.

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