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While Chinese restaurants have always been popular in India, Nestle’s launch of
Maggi 2-minute noodles in 1982 mark the creation of ‘instant noodles’ category in
India. And today, it is amongst the fastest growing packaged food category in
India at an est. market size of US$350m in size. Nestle enjoyed virtual monopoly
for nearly three decade. In 2010, there have been three high profile launches by
ITC (Sunfeast Yipee), HUL (Knorr Soupy Noodles), GSK Consumer (Horlicks
Foodles). While Nestle has lost shares, its growth momentum has been continuing
and the competition has actually resulted in accelerating the market growth rates.
Instant noodles in a sweet spot
Instant noodles are amongst the fastest growing consumer category in India.
The category, like overall packaged foods, is riding on strong growth drivers like
rising disposable income, women joining workforce, need for convenience etc.
Nestle created the instant noodle market in 1982…
Nestle created the category in 1982 with launch of its 2-minute noodles, ‘Maggi’.
The offering was initially targeted at working women on convenience platform (with
ads tagline, Fast to cook, good to eat) but met muted response.
An internal study suggested that kids were the biggest consumers which brought
about a change in its entire strategy (product positioning, advertising).
The new strategy was a success and Maggi became synonymous with noodles.
… and enjoyed a virtual monopoly for nearly three decades
In 1988, Japanese firm, Nissin Foods entered India to set up Indo Nissin Foods
which launched instant noodles under the brand ‘Top Ramen’ in 1991…
… but failed to gain traction due to limited distribution (even today has 7% share).
All this while, Nestle continued to dominate. For example, when it realized that
instant noodles scored low on health, it launched Vegetable Atta noodles in 2000.
Competition has actually helped in market growth
The real action began in 2010 with three high profile players entering viz. ITC
(Sunfeast Yipee), HUL (Knorr Soupy Noodles), GSK Cons. (Horlicks Foodles).
While apparently, Nestle has lost over 10ppt share since the launches, it continues
to launch new products aggressively with strong double digit growth rates…
… ITC has gained 8%+ share while HUL is at ~6% and GSK at ~3%; Indo Nissin
also seems to picked up and has re-vamped its portfolio with new ad campaign.
All this clearly highlights that competition could actually help in accelerating growth
rates, thanks to higher investments (advertising, promotions). We expect this trend
to be visible in number of other emerging categories as well.
Nestle created instant noodle category in India in 1982
Maggi noodles were launched in India in 1982 with focus on working women;
television ads carried tagline ‘Fast to cook, good to eat’. The product met
with limited success despite initial investments by Nestle.
An internal study revealed that kids were biggest consumers and hence, the
company decided to change its focus from working women to kids. The
advertising too was changed around this. Nestle spent a lot on sampling the
products and did quite a lot to connect to its target consumers i.e. kids. There
were a lot of school programs where the product was freely sampled.
Indo Nissin entered and later became aggressive
While Nestle tasted success during the first decade, investments continued to
remain high. But the product was clearly gaining traction and realizing the
potential, Indo Nissin Foods launched Top Ramen noodles in 1991. Initially
repose to the product was lukewarm as Maggi continued to dominate.
In 1997, however, Maggi changed its formulation by launching air dried
noodles instead of oil fried. Around that time Indo Nissin was aggressively
investing behind its brand and took Indian film actor, Shah Rukh Khan as
brand ambassador. Top Ramen was successful in gaining market shares as
consumers rejected new taste of Maggi; few other brands like Wai-Wai
noodles (Thailand) etc. emerged but were restricted to a few geographies.
Re-launch of original Maggi format; slew of initiatives
In 1999, Nestle accepted consumers verdict and re-launched Maggi in its
original format which paid off handsomely. Top Ramen could not sustain the
growth and also faced distribution challenges (Indo Nissin had entered into
distribution tie up with HUL/ Marico) but was marginalized by Maggi.
In early 2000, Nestle globally started focusing on health and wellness; Nestle
India launched Maggi Vegetable Atta to counter health concerns regarding the
refined flour (ie maida) used in instant noodles. This was also reflected in the
product baseline "taste bhi health bhi" (tasty as well as healthy).
In 2005, Maggi made a first move towards opportunities at the bottom of the
pyramid by launching noodles at Rs5/pack. And this was the first time that
Maggi brand took Indian film actress, Priety Zinta as the brand ambassador to
popularize the small affordable pack which indeed met with good response.
round of competition began in 2010; this time really aggressive
In the beginning of 2010, GSK Consumer, on the legacy of ‘Horlicks’, launched
multigrain “Foodles” as a healthier alternative to maida noodles; Nestle
reacted without delay with the launch of Maggi multigrain noodles.
Mid-2010 saw HUL extending its Knorr soups into a differentiated product,
soupy noodles to combine noodles with soup that is often seen as healthy.
End-2010, ITC launched Sunfeast Yippee which comes in round stacks to
ensure longer noodles strands. ITC studied consumer behavior and found: a)
some of noodles in market become sticky if are not consumed early; b)
children prefer to slurp noodles while eating and therefore prefer a longer
noodle; c) many kids add sauce to enhance the taste and look of noodles.
Figure 7
Portfolio overview
Company Brand Positing Remarks
Nestle Maggi
Taste and health
Variety of flavors
Maggi is almost a generic name for instant noodles;
present in India for 25+ years
Nestle has scaled up efforts significantly post rise in
competition; strong trend in new launches/ ad campaign
GSK
Consumer
Horlicks
Foodles
On health through
Horlicks platform
~6% share in south/ east within a year of launch
Expanding distribution in west and north as well
Has not invested in own capacity and doesn’t plan to do so;
arrangement with Indo Nissin
HUL Knorr Soupy noodles
(soup plus noodles)
Extension of its Knorr franchise to combine noodles with
soup that is often seen as healthy
ITC Sunfeast
Yippe
Non-sticky noodles
Key differentiators based on study which suggested: some
of noodles in market become sticky if they not consumed
early; children prefer to slurp noodles while eating & prefer
longer one; many kids add sauce to enhance taste
Comes in round stacks cf. rectangular to ensure longer size
Indo Nissin Top Ramen Vitamin & energy
First leap of market share occurred in after Maggi changed
its formulation in 1997 and lost popularity
Still commands 6-7% of market share from loyalists
Source: Industry, CLSA Asia-Pacific Markets
Aggression from incumbent as well as new players
Even while competition was rising, Nestle continued to remain aggressive and
kept launching new variants. In 2010, it reinforced its emotional connect with
consumers through an interactive campaign ‘Me & Meri Maggi’ on completing
25 years in India – selected ones were published on the product packaging.
2011 has now seen the aggression from Indo Nissin as well which earlier
distributed its products through HUL and Marico from 1991 to March 2008.
The company has now been expanding distribution on its own and has roped
in badminton player, Saina Nehwal to endorse Top Ramen noodles.
ITC gained significant traction in 2011; the company had hoped that its Pune
plant would be sufficient to meet demand for few months, but is already
running at full capacity. ITC is expanding the capacity in this plant and is also
planning to set up two new plants in the north and east. HUL as well as GSK
have been witnessing rapid growth rates.
Nestle lost shares but not momentum; market growth accelerates
Our recent channel checks indicate that ITC has gained 8%+ share while HUL
is at ~6% with GSK at 3%+. This has obviously resulted in market share
losses for Nestle which is now down to around 72-72% (cf. 85% in the past).
Interestingly though, feedbacks indicate that this has not impacted the
growth rates for Nestle; in fact the entry of new players has brought
investment in the category which has accelerated the market growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
While Chinese restaurants have always been popular in India, Nestle’s launch of
Maggi 2-minute noodles in 1982 mark the creation of ‘instant noodles’ category in
India. And today, it is amongst the fastest growing packaged food category in
India at an est. market size of US$350m in size. Nestle enjoyed virtual monopoly
for nearly three decade. In 2010, there have been three high profile launches by
ITC (Sunfeast Yipee), HUL (Knorr Soupy Noodles), GSK Consumer (Horlicks
Foodles). While Nestle has lost shares, its growth momentum has been continuing
and the competition has actually resulted in accelerating the market growth rates.
Instant noodles in a sweet spot
Instant noodles are amongst the fastest growing consumer category in India.
The category, like overall packaged foods, is riding on strong growth drivers like
rising disposable income, women joining workforce, need for convenience etc.
Nestle created the instant noodle market in 1982…
Nestle created the category in 1982 with launch of its 2-minute noodles, ‘Maggi’.
The offering was initially targeted at working women on convenience platform (with
ads tagline, Fast to cook, good to eat) but met muted response.
An internal study suggested that kids were the biggest consumers which brought
about a change in its entire strategy (product positioning, advertising).
The new strategy was a success and Maggi became synonymous with noodles.
… and enjoyed a virtual monopoly for nearly three decades
In 1988, Japanese firm, Nissin Foods entered India to set up Indo Nissin Foods
which launched instant noodles under the brand ‘Top Ramen’ in 1991…
… but failed to gain traction due to limited distribution (even today has 7% share).
All this while, Nestle continued to dominate. For example, when it realized that
instant noodles scored low on health, it launched Vegetable Atta noodles in 2000.
Competition has actually helped in market growth
The real action began in 2010 with three high profile players entering viz. ITC
(Sunfeast Yipee), HUL (Knorr Soupy Noodles), GSK Cons. (Horlicks Foodles).
While apparently, Nestle has lost over 10ppt share since the launches, it continues
to launch new products aggressively with strong double digit growth rates…
… ITC has gained 8%+ share while HUL is at ~6% and GSK at ~3%; Indo Nissin
also seems to picked up and has re-vamped its portfolio with new ad campaign.
All this clearly highlights that competition could actually help in accelerating growth
rates, thanks to higher investments (advertising, promotions). We expect this trend
to be visible in number of other emerging categories as well.
Nestle created instant noodle category in India in 1982
Maggi noodles were launched in India in 1982 with focus on working women;
television ads carried tagline ‘Fast to cook, good to eat’. The product met
with limited success despite initial investments by Nestle.
An internal study revealed that kids were biggest consumers and hence, the
company decided to change its focus from working women to kids. The
advertising too was changed around this. Nestle spent a lot on sampling the
products and did quite a lot to connect to its target consumers i.e. kids. There
were a lot of school programs where the product was freely sampled.
Indo Nissin entered and later became aggressive
While Nestle tasted success during the first decade, investments continued to
remain high. But the product was clearly gaining traction and realizing the
potential, Indo Nissin Foods launched Top Ramen noodles in 1991. Initially
repose to the product was lukewarm as Maggi continued to dominate.
In 1997, however, Maggi changed its formulation by launching air dried
noodles instead of oil fried. Around that time Indo Nissin was aggressively
investing behind its brand and took Indian film actor, Shah Rukh Khan as
brand ambassador. Top Ramen was successful in gaining market shares as
consumers rejected new taste of Maggi; few other brands like Wai-Wai
noodles (Thailand) etc. emerged but were restricted to a few geographies.
Re-launch of original Maggi format; slew of initiatives
In 1999, Nestle accepted consumers verdict and re-launched Maggi in its
original format which paid off handsomely. Top Ramen could not sustain the
growth and also faced distribution challenges (Indo Nissin had entered into
distribution tie up with HUL/ Marico) but was marginalized by Maggi.
In early 2000, Nestle globally started focusing on health and wellness; Nestle
India launched Maggi Vegetable Atta to counter health concerns regarding the
refined flour (ie maida) used in instant noodles. This was also reflected in the
product baseline "taste bhi health bhi" (tasty as well as healthy).
In 2005, Maggi made a first move towards opportunities at the bottom of the
pyramid by launching noodles at Rs5/pack. And this was the first time that
Maggi brand took Indian film actress, Priety Zinta as the brand ambassador to
popularize the small affordable pack which indeed met with good response.
round of competition began in 2010; this time really aggressive
In the beginning of 2010, GSK Consumer, on the legacy of ‘Horlicks’, launched
multigrain “Foodles” as a healthier alternative to maida noodles; Nestle
reacted without delay with the launch of Maggi multigrain noodles.
Mid-2010 saw HUL extending its Knorr soups into a differentiated product,
soupy noodles to combine noodles with soup that is often seen as healthy.
End-2010, ITC launched Sunfeast Yippee which comes in round stacks to
ensure longer noodles strands. ITC studied consumer behavior and found: a)
some of noodles in market become sticky if are not consumed early; b)
children prefer to slurp noodles while eating and therefore prefer a longer
noodle; c) many kids add sauce to enhance the taste and look of noodles.
Figure 7
Portfolio overview
Company Brand Positing Remarks
Nestle Maggi
Taste and health
Variety of flavors
Maggi is almost a generic name for instant noodles;
present in India for 25+ years
Nestle has scaled up efforts significantly post rise in
competition; strong trend in new launches/ ad campaign
GSK
Consumer
Horlicks
Foodles
On health through
Horlicks platform
~6% share in south/ east within a year of launch
Expanding distribution in west and north as well
Has not invested in own capacity and doesn’t plan to do so;
arrangement with Indo Nissin
HUL Knorr Soupy noodles
(soup plus noodles)
Extension of its Knorr franchise to combine noodles with
soup that is often seen as healthy
ITC Sunfeast
Yippe
Non-sticky noodles
Key differentiators based on study which suggested: some
of noodles in market become sticky if they not consumed
early; children prefer to slurp noodles while eating & prefer
longer one; many kids add sauce to enhance taste
Comes in round stacks cf. rectangular to ensure longer size
Indo Nissin Top Ramen Vitamin & energy
First leap of market share occurred in after Maggi changed
its formulation in 1997 and lost popularity
Still commands 6-7% of market share from loyalists
Source: Industry, CLSA Asia-Pacific Markets
Aggression from incumbent as well as new players
Even while competition was rising, Nestle continued to remain aggressive and
kept launching new variants. In 2010, it reinforced its emotional connect with
consumers through an interactive campaign ‘Me & Meri Maggi’ on completing
25 years in India – selected ones were published on the product packaging.
2011 has now seen the aggression from Indo Nissin as well which earlier
distributed its products through HUL and Marico from 1991 to March 2008.
The company has now been expanding distribution on its own and has roped
in badminton player, Saina Nehwal to endorse Top Ramen noodles.
ITC gained significant traction in 2011; the company had hoped that its Pune
plant would be sufficient to meet demand for few months, but is already
running at full capacity. ITC is expanding the capacity in this plant and is also
planning to set up two new plants in the north and east. HUL as well as GSK
have been witnessing rapid growth rates.
Nestle lost shares but not momentum; market growth accelerates
Our recent channel checks indicate that ITC has gained 8%+ share while HUL
is at ~6% with GSK at 3%+. This has obviously resulted in market share
losses for Nestle which is now down to around 72-72% (cf. 85% in the past).
Interestingly though, feedbacks indicate that this has not impacted the
growth rates for Nestle; in fact the entry of new players has brought
investment in the category which has accelerated the market growth.
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