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MarketScreener Homepage  >  Equities  >  KOREA EXCHANGE  >  Nongshim Holdings    072710   KR7072710007

NONGSHIM HOLDINGS

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Nongshim : 'Two-faced' Ottogi charging consumers more

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01/11/2019 | 01:56pm EDT

By Nam Hyun-woo Ottogi Jin Ramen Ottogi has earned the image of a good company for not having hiked the prices of its instant noodles over the past decade, while Nongshim and other companies have raised prices from time to time. However, it was found to have raised prices of cans of tuna and other products consistently to make up for the shortfall in revenue, industry analysts said Thursday, adding the company has been employing a double-pricing strategy.

Ottogi raised the price of its canned tuna by 53 percent in November 2017, followed by an average 9 percent price hike in its three cooked rice products. In June last year, the company also hiked pepper product prices by 47 percent, apple vinegar by 22.

2 percent and a slew of other food products by from 6 percent to 13 percent. This is in a stark contrast to the company's pricing strategy on its flagship product Jin Ramen noodles.

Ottogi has not touched their price since 2008, when the company made a 100 won hike on three Jin Ramen products. The static price played a huge role in allowing the company to build its current reputation as a 'socially ethical company,' as it said it would not increase the cost to ensure stable consumer prices when its industry rivals were contemplating raising instant noodle prices.

This led the midsize company's Chairman Ham Young-joon to join President Moon Jae-in's meeting with top conglomerates, even though the company's assets are valued far behind chaebol such as Hyundai Motor, LG and POSCO. Along with the reputation, the static price helped Jin Ramen to have a price gap with its rivals.

Currently, a five-noodle pack of Jin Ramen is sold for 2,480 won at Lotte Mart's online mall, nearly 1,000 won cheaper than the same pack of NongShim's top-selling Shin Ramyun at 3,380 won. Buoyed by this, Ottogi narrowed the market share with the top-selling Shin Ramyun.

According to market tracker Nielsen Korea, Jin Ramen's market share was tallied at 13.9 percent in the first half of last year, 3 percentage points lower than Shin Ramyun's 16.

9 percent. Analysts said the two-way strategy may not be as ethical as its reputation, because Ottogi is employing a low-price approach in the competitive instant noodle market, while it can raise prices in markets where the company has a huge market share.

In the glass noodle market, which Ottogi maintains a nearly 70 percent market share, the company raised prices by 10 percent. It also increased the cost of apple vinegar, with which the company has been dominating the market for more than 30 years, by 22.

2 percent. 'It is a free choice for the company to choose such a strategy,' an industry official said asking not to be named.

'From a market-wise perspective, however, that is not helping the entire growth of the market. By employing a low-price strategy in the instant noodle market and making up by profiting in other products, Ottogi can raise its share in the food products market, but not push its rivals to spend more in developing new attractive products because this will drive consumers to only seek cheaper products,' the official said.

'Ottogi keeps the instant noodle price static, as it has a symbolic meaning for the company that it is contributing to consumer price stabilization,' an Ottogi official said. 'In terms of canned tuna and cooked rice, we are latecomers thus we raised prices after other companies did.

Even though people have high expectations of the company's static prices, we are also a company, which has to make a profit.' .

(c) 2019 Korea Times Co. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

Stocks mentioned in the article
ChangeLast1st jan.
NONGSHIM HOLDINGS End-of-day quote.
OTTOGI CORP End-of-day quote.
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Latest news on NONGSHIM HOLDINGS
01/11NONGSHIM : 'Two-faced' Ottogi charging consumers more
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2018NONGSHIM : Ottogi cleared of collusion in US
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Capitalization 402 B
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NameTitle
Dong-Won Shin Co-Chairman & Chief Executive Officer
Choon-Ho Shin Co-Chairman
Dong-Yoon Shin Vice Chairman
Dong-Ik Shin Vice Chairman
Moon-Hui Kim Outside Director
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