Can noodles compete in Europe’s snack food market?

With compound annual growth (CAGR)reaching 4% globally, noodlesis one of the fastest growing sectors in world packaged food. Growthwas derived mainly fromcontinuing strong performance in its main Asia Pacific market (with the notableexception of Japan), increasing by over US$2 billion in the region between 1998 and 2002.

Poorlyestablished, albeit growing, in the rest of the world

An integral part of Asian diets, noodlesis a new and relativelyunestablished product in the rest of the world. That said, in the US sales increased by 16% between 1998 to 2002,making itthethird largest noodle market in the world behind Japan and China. Demand is driven bystrong exposure to Asian cuisine in foodservice, mainly through the rising number of noodle shops, which in turn prompted retailers to stock a wider variety of noodles, making the product more readily available to consumers.

In major European markets, noodles, especially easy-to-prepare instant noodles, also saw strong sales growth, however the total market remains comparatively small. Noodle sales in Western Europe are just over 2% of global sales. Nevertheless, they were, after snack bars, the fastest-growing sector in the five years to 2002.

Demand for convenience offers sales opportunities

As with the US, demand in major European markets is driven by market trends towards snacking, convenience and ethnic cuisine. Instant noodles for example enjoy increasing popularity as an in-between snack or even as a light meal. Demand for plain or chilled noodles is also rising, as some consumers try to recreate Asian meals at home, however in terms of total market size they remain of only marginal importance.

Noodles’ main importance currently continues to lie within the snack food market. As such they are a comparatively well-established product in particular in the UK, the country with the arguably most developed snacking culture in Europe. The UK currently accounts for over 60% of Western Europe’s total noodles, and over 75% of instant noodle sales. The most convenient format, cup/bowl instant noodles, clearly dominates, accounting for over 60% of the overall noodle market in the UK.

The ‘Pot Noodle phenomenon’ in the UK

While sales of instant noodles and above all the cup/bowlvariants are aided by a trend towards snacking and convenience food, their popularity in the UK cannot entirely be attributed to this.

Strong sales of cup/bowl instant noodles are rather due to the popularity of one single brand and its advertising strategy, namely Unilever’s Pot Noodle. The brand is targeted at a 16-24 year old male audience, and humorous as well as controversial advertising is perfectly tailored towards this consumer group.

The company’s highly controversial ‘slag of all snacks’ campaign in 2002 for instance resulted in a significant increase in Pot Noodle sales. Sales of Pot Noodle, which holds a share of nearly 90% of cups/bowl instant noodles in the UK, are therefore driven mainly by advertising rather than a trend towards snacking and convenience food.

Competition from alternative snacks

As a snack product, instant noodles face intense competition from alternative products which are better established in Europe, require no preparation and can be consumed on-the-go. Snack bars, biscuits and savoury snacks have been able to capitalise on the snacking trend to a greater extent, and manufacturers have furthermore adapted their product offering to better serve the snacking market by offering mini or bite-size versions or through packaging innovation.

Unilever introduced hot water dispensers in UK convenience stores in order to make its Pot Noodle more convenient, and according to the company sales increased considerably as a result. Nevertheless, Pot Noodle is unlikely to be able to establish itself as an alternative to snacks which can truly be eaten on-the-go.

The company has ambitious growth plans forthe brand however, aiming to double Pot Noodle sales by 2006. While the snacking trend will leave scope for growth for cup/bowl instant noodles, sales growth is likely to be driven primarily by the continuous introduction of product variants and by the continuation of edgy advertising which is tailored to appeal to Pot Noodle’s key consumer group.

Noodles lag behind in the rest of Europe

While noodles have a fairly significant consumer base in the UK, sales are expected to remain marginal in other European countries. Snacking and demand for convenience will drive growth to some extent, but sales are not expected to reach UK proportions for some time. In Germany, for instance, sales of cup/bowl instant noodles have already reached saturation and without a similarly strong brand there is little scope for the ‘Pot Noodle phenomenon’ to be applied.

In fact noodles face a far greater obstacle to growth in continental Europe: the strong heritage of pasta. Pasta is too intrinsically linked to the cultures of many European countries, most notably Italy, where there is no market for noodles at all. Noodles are too similar to pasta to establish themselves as an alternative (in Germany pasta is in fact called ‘Nudeln’). Pasta, in the form of dried ready meals, will therefore be better positioned to capitalise on the snacking trend than noodles.

Thus, while noodles may have made inroads into Europe, it remains a niche product. While they are unlikely to become an integral part of the region’s snack food market, it remains to be seen whether the internationalisation of consumer tastes, the growing number of Asian restaurants and the availability of ‘authentic’ products from Asian players will result in stronger integration of noodles into main meals.