Ramen Industry Yields to Government Pressure, Calls for Further Price Cuts Grow Louder

Price Reduction Around 5%, Only Half of Last Year's Increase
Selective Price Cuts Excluding Main Products
Performance Improvement Outlook Also Drives Additional Reduction Requests

Major domestic ramen companies announced price cuts following repeated government pressure, but voices demanding further reductions continue to emerge in the market. Compared to last year's double-digit price hikes, the scale of the cuts is only about half, and with significant performance improvements expected in the first half of this year, the impact of the current price cuts is seen as minimal. Moreover, each company has excluded their flagship products from the price reduction items, suggesting that controversies are likely to persist.

According to the industry on the 29th, Nongshim announced on the 27th that it would reduce the price of Shin Ramyun by 4.5%, lowering the retail price from 1,000 won to 950 won, a 50 won decrease. Immediately after Nongshim's announcement, Samyang Foods also lowered the prices of 12 products by an average of 4.7%. The day before, Ottogi announced a 5% average price cut on 15 products, and Paldo also joined the price reduction trend by lowering prices of 11 products by an average of 5.1%. As the government targeted ramen to curb inflation due to rising consumer burdens from high prices, the ramen industry finally surrendered and implemented price cuts.

Despite the successive price reductions, the public's view of the ramen industry remains cold. This is because the reduction rate is only about half compared to last year's price hikes. Last fall, due to the Russia-Ukraine war, raw material costs such as wheat and palm oil surged sharply, prompting the ramen industry to raise prices by more than 10% on average to respond to the crisis. Nongshim, the industry leader, raised the ex-factory prices of major products by an average of 11.3%, while Ottogi and Samyang Foods increased prices of their main products by 11.0% and 9.7%, respectively. However, in this round of cuts, Nongshim reduced Shin Ramyun by only 4.5%, with the reduction rate hovering around 5%.

The exclusion of flagship products from the price reduction items also raises suspicions that the industry is merely showing minimal goodwill in response to government pressure. Ottogi and Samyang Foods excluded their most popular products, ‘Jin Ramen’ and ‘Buldak Bokkeum Myun’ (Hot Chicken Flavor Ramen), respectively, from the price cuts. A Samyang Foods official explained, “Buldak Bokkeum Myun has a large overseas sales proportion, so domestic and overseas prices must be aligned. Therefore, lowering domestic prices would significantly impact sales, making it difficult to reduce prices easily.”

As the scale of the price cuts fell short of expectations, the Consumer Organizations Council issued a statement saying, “Consumers have borne the burden of rising raw material costs so far,” and urged, “Instead of superficial price cuts forced by the government and social pressure, a substantial price reduction that consumers can feel should be decided,” pressing for further cuts. Earlier, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho mentioned the ramen price issue on a broadcast on the 18th, saying, “The government cannot investigate costs one by one and control prices,” and added, “It would be good if consumer groups exert pressure on this issue.”

Additionally, the expectation that the ramen industry's performance will improve significantly in the second quarter following the first quarter is another reason for demands for further price cuts. According to financial information firm FnGuide, Nongshim's expected sales for the second quarter of this year are 860 billion won, up 13.7% from the same period last year, and operating profit is estimated to increase by 702.0% to 34.1 billion won.

Last year, due to the sharp rise in wheat and palm oil prices in the second quarter, Nongshim's domestic division recorded an operating loss, resulting in an operating profit of only 4.3 billion won, but a significant performance improvement is expected this year. If the forecasted results materialize, sales will reach a record high for the second quarter, and operating profit will be the second highest since the second quarter of 2020 (41.4 billion won).

Ottogi, which recorded double-digit growth in sales and operating profit in the first quarter, is also expected to see second-quarter sales of 886.2 billion won and operating profit of 55.3 billion won, up 12.3% and 16.0% year-on-year, respectively. During the same period, Samyang Foods is also expected to increase sales by 11.4% to 284.5 billion won and operating profit by 9.1% to 29.8 billion won compared to a year earlier.

The trend of improved performance in the ramen industry is expected to continue even after the third quarter, when the current price cuts take effect. Although downward revisions of forecasts are inevitable, ramen demand remains robust due to high inflation. According to the World Instant Noodles Association (WINA), per capita ramen consumption in Korea last year was 77 servings, an increase of 4 servings compared to the previous year. Heeji Ha, a researcher at Hyundai Motor Securities, predicted, “With strong demand for low-priced ramen and a clear downward stabilization of raw material prices, margin improvements are expected.”

The rising recognition of K-food and rapidly increasing overseas demand are also reliable factors for the ramen industry. Nongshim is accelerating its North American market penetration by expanding its presence in major retail channels such as Costco. Amid the global inflation environment, the value-for-money trend is spreading in the U.S., expanding the ramen consumer base and supporting steady sales growth. Samyang Foods is also expected to sustain sales growth in the second half as the new factory in Miryang, responsible for export volumes, increases its operating rate. Samyang Foods plans to further raise its export ratio, which reached 66.6% last year, this year.

However, the ramen industry is showing reluctance. Although international wheat prices have dropped about 50% compared to last year, they remain higher than average, and there is a 3 to 9-month lag before fluctuations in international wheat prices are reflected in import prices, so raw material costs remain burdensome. The industry explains that price increases were not determined solely by wheat prices but were a comprehensive result of other rising factors such as labor costs, logistics, and energy expenses.

In the securities sector, Nongshim's price cut decision is expected to lower this year's operating profit forecast by 2 to 3% from previous estimates. Sangjun Park, a researcher at Kiwoom Securities, said, “This price cut will reduce Nongshim's annual sales by 18 to 19 billion won, and the price reduction effect of flour from milling companies will save at least 8 billion won,” adding, “Operating profit on a consolidated basis is expected to decrease by 2 to 3% this year.”

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