Pasta and Tofu Products Gain Popularity in China
Pulmuone has posted its first net profit in China in 10 years of operations, marking a turning point of its food business in China, the company announced on June 1.
Pulmuone said that Pumeiduo Foods, a Chinese business unit of the company, turned a profit in the first quarter of 2020 with quarterly profit of 700 million won (US$570,000) and quarterly margin of 6.6 percent.
The company reported year-over-year quarterly revenue growth of 34 percent. With the rise of “untact” food consumption due to the coronavirus outbreak, e-commerce and O2O (Online to Offline) sales of Pulmuone in China have soared by 173 percent to drive the overall sales growth. By product category, pastas and tofus grew by 180 percent and 61 percent, respectively, to lead the surge.
The first hit convenience food product of Pumeiduo Foods was pasta. Before Pumeiduo, pasta shelves of groceries in China were mainly filled with dried pastas that take longer than 8 minutes for cooking and had to be mixed with sauce and fried again. Pumeiduo’s pastas, which can be served after only two minutes in a microwave, attracted consumers with its convenient cooking option, establishing Pulmuone’s Chinese operation “Pumeiduo Foods” in the minds of Chinese millennials.
“The recent sharp increase in the sales of convenience foods in China due to the coronavirus shutdown has boosted sales of Pumeiduo’s pasta products, and Pulmuone brand name is continuing to gain popularity in the Chinese market,” said Doo Jin-woo, a general manager of China subsidiary business unit of Pulmuone. “We are expecting to witness sustainable growth of pasta sales as the demand for the Italian dish is continuously on the rise among the 1.4 billion Chinese consumers.”
Recently, Pulmuone also rolled out its hit product “Mozzarella Corn Dog,” a sausage stick stuffed with mozzarella cheese and coated in a cornmeal batter, in the Chinese market and saw positive results. The corn dog was introduced at a home-shopping show broadcast mobile by Hema, Alibaba’s retail grocery chain, and generated 300 percent growth in daily sales for the next two days. The show’s host pointed out that the frozen fried food cooks in a microwave in just a minute and offers great taste with rich mozzarella cheese.
With Pulmuone’s sales of tofu, which is its signature fresh food product, also continuing to grow at a pace of 60 percent annually in China, Pulmuone is set to sustain its growth momentum by entering processed tofu market.
As the only company in China with nationwide distribution capability, Pulmuone completed manufacturing facilities for processed tofu in its tofu plant in Beijing last November. By producing tofus most popular in China, such as tofu sheet, dried tofu and marinated tofu, Pulmuone is stepping up in China’s processed tofu market. Tofu sheet, which is a dried, thin type of tofu, is enjoyed as rolls or noodles; Dried tofu, with a firm-texture just as that of cheese, is consumed as snacks; and marinated tofu is a seasoned version of dried tofu usually tossed in mala sauce.
People in China enjoy water-packed tofu as well, just like Koreans, but prefer to eat processed tofu in general. The proportion of processed and water-packed tofu in the Chinese market is estimated to be 60 percent and 40 percent, respectively.
In 2010, Pulmuone conducted a comprehensive analysis on Chinese food retail structure and predicted that new types of distribution channels such as e-commerce and O2O will dominate the market in the near future. Despite the prevalence of offline distributions at the time, Pulmuone made a bold decision to turn to e-commerce and new channels.
The first-mover decision proved to be successful amid the prolonged impact of coronavirus across the globe. With a number of global retail conglomerates filing bankruptcy and online distributors having difficulties, Chinese food companies are facing rapid changes driven by e-commerce retailers with new distribution channels such as Alibaba’s Tmall and Hema.
Pulmuone has sold tofu products to Tmall and HEMA stores in their early stages, and the company is currently expanding its lineup of refrigerated pastas, frozen corn dogs and dumplings and other convenience foods.
Back in 2017 when Korean foodmakers in China were hit hard by THAAD dispute, Pulmuone focused on pasta products to recover from the crisis and swiftly changed the package designs of its entire pasta lineup printed in Korean into ones with Chinese and English letters at extra cost.
The quick response to the crisis led to positive results. Sales of Pulmuone pastas in China have grown up to 70% annually since 2017, leading the company’s overall growth in the Chinese operations. With a 180 percent sales growth in this year’s first quarter, pasta products served as a key driver of Pulmuone’s quarterly surplus.
“Just as the rapid emergence of e-commerce after the SARS outbreak, the Chinese food retail market is undergoing a quantum change since the coronavirus outbreak," said General Manger Doo. “We are aiming to achieve both growth and profit in the Chinese food market by expanding convenience food lineup based on refrigerated pastas, frozen corn dogs and dumplings and rolling out new processed tofu products.”