Japan-China noodle venture

Related tags Ramen Japan China

Japan's number one producer of instant noodles says it has reached
the initial stages of an agreement to form an alliance with the
Hebei Hualong Food Group, a major Chinese food processer.

The Japanese company has confirmed that it is aiming to take a 33.4 per cent share in the company at a cost of yen 20 billion (€153.8m), a deal which will make Nissin the largest stake holder in China's second biggest instant noodle maker.

"By forming an alliance with the number two [Chinese] instant noodle maker, Hualong, we hope to build a sales network and increase sales in China, which is rapidly expanding as a noodle market,"​ Nissin said in a statement.

The company added that it will invest significantly in Hualong, a move which aims to move Hualong into the top position on the China market for noodles.

Hualong said that the added impetus from the Japanese investment should allow it to embark on a programme to build five further production facilities in China, a move that is expected to boost its production capacity by 30 per cent. The further capacity is expected to be met by rising demand on the domestic market as well as increasing its exports to overseas markets, mainly within the Asian region.

The company has set itself quite a challenge. Currently Hualong has a 20 per cent share of the China noodle market in China, but it is still a long way behind market leader Tingyi which has a 40 per cent market share.

To date the deal is believed to be one of the largest joint venture projects that a Japanese food processor has undertaken in China. In the past ten years a host of Japan's leading food and beverage companies have been competing to make their mark in the lucrative China market.

Having a foothold on the market serves to both expand into one of the world's fastest growing and biggest economies and also gives Japanese producers the opportunity to re-export produce back to Japan at considerable cost savings given the lower production costs in China. Due to a lack of arable land and high production costs Japan has historically been a net importer of foods and has become increasingly reliant on cheaper Chinese imports in recent years.

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