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3. INSTANT NOODLE MARKET STABLE INDOFOOD ACQUIRED BY NISSIN.

Production and sales of instant noodle in 1998 is estimated at 8 billion packs or around 600,000 tons, down 7.7% from 8,66 billion packs (649,765 tons) in 1997.

The decline in the production of instant noodle was recorded mainly in the first semester of 1998 when Indfood raised the price of its instant noodle. The riots in May 1998 contributed to the decline in production that year as the riots hampered distribution.

In the second semester of 1998, sales were relatively good though declining slightly. The Mie Peduli produced by Indofood with low price succeeded in jacking up sales. But Indofood which has a 90% share of instant noodle in the country recorded a decline of 6.2% or 500 million packs in sales in 1998.

In 1999, PT Indofood Sukses Makmur sets a production target of 7.5 billion packs or about the same as in 1998. The decline in the buying power of the people and the rising price of instant noodle are the main factors for setting a low target of production in 1999. The price of flour has risen to Rp 3,000 a kg from only Rp 800 in January 1998.

With production peaking at 8.66 billion packs in 1996, Indonesia is the second largest producer of instant noodle after China which produces 16 billion packs a year. Other major producers are Japan 5.32 billion packs and South Korea 3.89 billion packs.

Table - 1 Indonesia's production of instant noodle, 1993- 1997
Year Production Pack Growth
 (tons) (*)) (%)

1993 168,516 2,246.9 -
1994 210,815 2,810.9 25.1
1995(*)) 472,290 6,297.2 124.0
1996(*)) 590,695 7,875.9 25.1
1997(*)) 649,765 8,663.5 10.0
1998(**)) 600,000 8,000.0 -7.7



(*)) Data corrected;

(**)) tentative

Source: Department of Industry and Trade/Data Consult

Indofood becomes PMA

Late December 1998, 60% of the shares of Indo Sukses Makmur were taken over by Nissin First Pacific BV, which is owned by Nissin Food of Japan (50%) and First Pacific Co. Hongkong (50%). In the Firs Pacific Co. the Salim Group is a 53% owner.

Although Nissin Food Corp. has a 30% shares indirectly in Indofood, but the ambition of the owner of 70 noodle production units in the world to transfer its technology to the Indonesian food giant was rejected by its shareholders in January as Nissin charged a fee of US$1.7 million-US$3 million for technical assistance and transfer of technology for 10 years or about 1% of the net sales of Indfood for instant noodle. The assistance included packaging, processing system for basic materials and all procedures of producing noodle to improve quality and competitive edge. The rejection did not affect Indfood plan to go international by relying on its own technology.

Based on a company report in September 1998, Indfood posted a profit of Rp 13.3 billion bringing its total net profit to Rp 81.8 billion in the first 9 months of 1998. Its sales in the first nine months of that year were valued at Rp 6.4 trillion or an increase of 81% from Rp 3.5 trillion the same period in 1997.

Table - 2 Shareholders of Indofood Sukses Makmur
Before (%) After (%)
acquisition acquisition

- Salim Group 62.66 Nissin First Pacific BV 60.00
 - Nissin Food Corp. (30%)
 - First Pacific Co. (30%)
- Government 10.18 Government 10.18
- Public 27.16 Public 27.16
 Salim Group 2.66



Source: Data Consult

Basic materials

After the government stripped Bulog of its monopoly in the trade of wheat grain and flour in September 1998 followed with the removal of subsidy on wheat flour, now general importers are free to import the foodstuff and the price of the basic material of instant noodle depends on the import price.

When Bulog held the monopoly, production was handled mainly PT Bogasari Flour Mills, which was also controlled by the Salim Group. Indofood, therefore, was better guaranteed in the supply of its basic material than other consumers. Instant noodle industry accounts for 14% of wheat flour consumption in the country.

Table - 3 Imports of wheat grain and flour, 1993 - 1998
Year Wheat grain Wheat flour
 ('000 tons) (US$ '000) (tons) (US$ '000)

1993 2,525.5 442,004.3 41,564 7,546.2
1994 3,295.0 579,059.8 24,943 5,672.9
1995 4,054.2 803,406.5 157,890 43,438.1
1996 4,111.8 1,048,930.9 20.211 4,666.9
1997 3,611.6 775,949.5 15.219 3,799.5
1998(*)) 2,101.3 405,057.1 5.386 1,203.9



(*)) January - July

Source: CBS/Data Consult

Exports of wheat grains down

Exports of instant noodle in 1997 dropped 43.1% in volume and 42% in value. The largest buyers are Russia to which exports totaled 9,063 tons valued at US$ 5.02 million in 1997, followed by the Philippines to which exports totaled 2,779 tons valued at US$1.85 million, Japan 2,533 tons valued at US$1.8 million and Germany 1,397 tons valued at US$ 778,000.

Table - 4 Exports of instant noodle, 1993 - 1998
Year Volume Value
 (tons) (US$ '000)

1993 9,560 9,075
1994 11,758 10,600
1995 5,868 8,334
1996 38,604 25,006
1997 21,969 14,500
1998(*)) 4,838 3,381



(*)) January - July

Source: CBS/Data Consult
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Comment:3. INSTANT NOODLE MARKET STABLE INDOFOOD ACQUIRED BY NISSIN.
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Feb 16, 1999
Words:921
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