Nongshim and Samyang surrender to government pressure on instant noodles: Will snacks and ice cream follow?

Major products by Nongshim

The food industry eventually waved a white flag at the government’s pressure to lower prices. The food industry made the decision in response to the government’s strong advice to lower prices after the price of food, such as instant noodles, became an increasingly heavier burden on the working class in an age of high prices. Experts believe the latest decision could also influence other food products.

Nongshim and Samyang Foods decided to lower the price of instant noodles next month. This is the first time in thirteen years since 2010 that the two companies lowered their prices.

On June 27, Nongshim announced that it would lower the price of Shin Ramyun and Saeukkang by 4.5% and 6.9% respectively starting July 1. Thus, a pack of Shin Ramyun, which sold for 1,000 won at a retail store, will be sold for 50 won less, and a bag of Saeukkang, which was 1,500 won, will be 100 won cheaper. This is the first time that the company has lowered the price of Saeukkang.

According to Nongshim, the company decided to lower prices because the price of flour supplied from a domestic flour milling firm will drop by 5% in July.

The company expected to save nearly 8 billion won in annual costs due to the lower flour price and estimated its customers to benefit by over 20 billion won a year.

A representative of Nongshim said, “Shin Ramyun (pack) and Saeukkang, which will be marked down, record sales of 360 billion won a year in South Korea. They are popular with the people, known as the ‘national ramyun’ and ‘national snack,’” and explained, “The latest price cut may add some pressure on management, but we made the decision to lower the price of products closely related to the people’s lives.”

Samyang Foods also announced on Tuesday that it would lower the prices of twelve of its major products including Samyang Ramen, Chacharoni, Masitneun Ramen and Yeolmu Bibimmyeon by an average of 4.7% beginning July.

The price of a set (5 packs) of Samyang Ramen in discount retailers will drop 4.2% from 3,840 won to 3,680 won. The price of a 4-pack set of Chacharoni will drop 4.7% from 3,600 won to 3,430 won and the price of a 4-pack set of Yeolmu Bibimmyeon will drop 15.3% from 3,400 won to 2,880 won.

However, Samyang Foods’s iconic product, Buldak Ramen, will not be included in the latest markdown. Exports account for a big portion of Buldak Ramen sales, so the company has to adjust domestic prices with international prices. Also a cut in domestic prices could have a significant impact on the company’s sales.

Ottogi, the maker of Jin Ramen, announced that the company was considering marking down its major products including instant noodles some time in July. However, the company has yet to determine the specific rate of cuts.

Earlier last September, Nongshim raised the factory price of its instant noodles by an average of 11.3%. Paldo and Ottogi followed by raising the price of their products by 9.8% and 11.0% respectively, and Samyang raised the price of its products by an average of 9.7% in November.

The price of instant noodles rose by 12.4% in the first quarter this year, the highest increase in fifteen years since the fourth quarter of 2008 (14.7%), when the world witnessed the global financial crisis. The prices of bread (14.3%), chips and cookies (13.1%), and ice cream (11.8%) also rose by more than 10%.

Last week, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho mentioned the recent drop in international grain prices and “recommended” companies to lower the price of instant noodles. Then on June 26, the Ministry of Agriculture, Food and Rural Affairs asked the milling industry to lower the price of flour. The milling companies began deliberating the possibility of lowering prices in July, which added more pressure on food companies to lower the price of instant noodles.

The international wheat futures price rose to $419/ton last May due to the war in Ukraine, but the price has been falling since then. This month, the wheat futures price was $243/ton, about 58% of the price last May.

The market’s attention is on whether prices of other products, such as snacks and ice cream, will follow the example of instant noodles. The price of ice cream also jumped nearly as significantly as instant noodles since the second quarter of 2009 (14.5%).

Binggrae, which raised the price of its ice cream including Melona by nearly 20% in February, said, “At present, we have no plans to lower ice cream prices.” Orion, which raised the price of sixteen popular snacks including Choco Pie, Poca Chips, Ye Gam, and Kkobuk Chips by an average of 15.8% last September, is also not considering lowering its prices.

A representative of Orion said, “The amount of flour contained in each product is small and we use a lot of potatoes, so we are not considering a markdown following the drop in flour prices.”

Previously in 2010, food companies lowered product prices when the price of ingredients dropped under the Lee Myung-bak government. At the time, Nongshim lowered the price of its main products, such as Shin Ramyun, by 2.7-7.1%, and Samyang Foods lowered the price of five products including Samyang Ramen by up to 6.7%.