The nation's instant-noodle sector is expected to experience a shakeup after its two biggest rivals form a strategic alliance, but how their individual operations are integrated will hold the key to determining the project's overall effect on the market, an analyst said yesterday.
Uni-President Enterprises Corp (統一企業), the nation's largest food conglomerate, said in a statement released late on Wednesday that the company has decided to invest NT$640 million (US$19.3 million) in securing 50.04 percent of Wei Lih Food Co's (維力食品) secured debts, making it one of its smaller rival's creditors.
These two companies together enjoy a combined 70-percent market share of the nation's instant-noodle sector.
"This deal would undoubtedly help them foster advanced cooperation in Taiwan and China, where instant noodles have become an important food category.
But deciding who will assume the leading role in the alliance will pose the biggest challenge," said Jennifer Wang (王琇姿), associate director of retail measurement services at market research and information company ACNielsen Taiwan.
Wang said these two businesses are very likely to benefit from joint purchasing power at a time when prices of raw materials are edging up. However, regarding the decision on who will be the boss, it is worth further observation, as this might undermine the deal's synergy, she added.
Of the nation's NT$9 billion per annum instant-noodle market, Uni-President has a 47 percent share, followed by Wei Lih's more than 20 percent, Vedan Enterprise (味丹企業) holds 13 percent, with the next biggest, Master Kong's (康師傅), holding under 10 percent.
Uni-President's sizing up of Wei Lih, which is now in debt to the tune of nearly NT$3 billion, gives them a considerable strategic advantage, considering Wei Lih's dominant position in the dry instant noodle segment.
"Uni-President is strong in manufacturing soup-style instant noodles. But, with Wei Lih's edge in the other key niche market, this alliance should have positive effects for both sides, as we can integrate resources and maybe carry out joint purchases," said Simon Hung (洪士民), spokesman of Uni-President.
In the annual NT$2 billion dry noodle market, Wei Lih secures over 70 percent with its star product, fried-sauce noodles (炸醬麵), which are a long-time local favorite.
While reiterating that both sides have reached a consensus to share operating networks, Hung said there is no timetable available now as to how the cooperation will be carried out.
The deal will also draw Uni-President closer to another of its rivals, Tinghsin International Group (頂新集團).
Chinese-language reports said 18.5 percent of Wei Lih's shares are held by Cheng Yi Food Co (
While many have commented that the top two players' alliance will slash Master Kong's market share in Taiwan, ACNielsen's Wang said this is not necessarily a bad thing as now Uni-President and Tinghsin, both now related through Wei Lih, would have more opportunities for direct communication.
Michael Su (蘇守斌), managing director of Wei Chuan Food Corp (味全食品), which markets Master Kong noodles in Taiwan, said the company remains confident in the local market.
"We'll work harder to win over consumers' trust and aim at securing a 20 percent market share in the long run, up from the current 10 percent," he said.