Leading noodle maker to expand beverage business

By Dominique Patton

- Last updated on GMT

Related tags Cent Marketing China

Tingyi, manufacturer of China's leading instant noodle brand,
MasterKong, said sales of its ready to drink beverages surged in
2005, and additional capacity being added this year will continue
growth from this segment of its business.

The Cayman Islands registered company, based in Tianjin, northern China, reported an overall sales increase of 25.8 per cent to US$1.84 billion during 2005. More than 90 per cent of the revenue came from its noodles and beverage segments, which saw sales rise by 15.5 and 46.5 per cent respectively.

In a statement released yesterday, Tingyi noted that China's GDP had grown by 9.9 per cent during 2005, with a 12.9 per cent increase in the retail market.

It said that it had managed to capture this growth through expanding its productions lines. It added 27 noodle lines during 2005, designed to meet growth of container and high-end packaged noodles as well as the low-end instant noodle segment popular in rural areas.

It also added 12 bottled water production lines in major cities like Beijing and Nanjing, as well as a new production line for thin crackers under its smaller bakery business.

It will continue expansion during 2006, investing US$210 million on beverage and noodle productions lines.

The beverage business, which saw particularly strong sales growth, now holds China's leading ready to drink tea brand, Master Kong, with a market share of 52.2 per cent and 51 per cent respectively by sales volume and sales value, according to AC Nielsen's December 2005/January 2006 report.

Market share was boosted by consolidating the RTD teas and bottled water platform under the Master Kong brand, said Tingyi. It also introduced a scented tea that attracted strong consumer demand.

The beverage unit also recorded an almost five-fold rise in operating profit to $46.9 million, thanks to the "flexible marketing strategy and effective control over operating costs"​, said the company.

It said that "high efficient production facilities and...strengthening of production management capability"​ helped offset rising PET and sugar costs.

The firm's chief financial officer Frank Lin predicted that China's beverage market would continue its 20 per cent or higher growth rate in the next few years, creating "a very good opportunity to further expand its market shares and profit on its beverage business."

"We expect our turnover from beverage business to increase from 38.1 per cent of the total in 2005 to 40 per cent of the total in 2006,"​ he told reporters, adding that Tingyi will add a further 13 production lines for RTD tea and diluted juice drinks during the coming year.

This will bring its total beverage production lines from 80 in 2005 to 111 in 2006.

New production lines will allow it to launch seven new beverages this year.

The noodle business, which accounts for more than half of the group's overall turnover, has also held onto its market-leading share, with 25.7 per cent of overall sales volume and 36.9 per cent of China's noodle market value thanks to the high-end container noodles.

Higher sales were also generated by new, local flavours such as Sichuan Spicy or Best of Yangtze River.

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