Nissin China unit will pay a total of US$11.5 million to take over control of the parent company’s Vietnamese subsidiary.
The strategy of the acquisition is to take control of the brand’s Vietnam business, which will then supply lower-priced products to its Hong Kong, Macau and Taiwan counterparts.
The Nissin brand is known for being the inventor of instant noodles since 1958 and it has been credited for the launch of cup noodles to the regional market. However, the brand is not popular in Vietnam, a big contrast to its success in China. To correct this, Nissin China unit, HK-listed Nissin Foods Co Ltd, has announced that it will acquire 67% stake in the Vietnam unit for US$9.5 million and inject another US$2 million in new capital.
Nissin Vietnam has been recording a net loss of US$1.4 million in its latest fiscal year. Nissin Vietnam operation comprises mainly of an instant noodle factory in the Vietnam-Singapore industrial park north of HCMC. The factory will draw on its cost advantages to provide instant noodles for the higher-cost Hong Kong, Macau and Taiwan markets.
The latest agreement will also see the Vietnam unit supplying products as well as receiving products from Nissin other units throughout the region.
The fact that Nissin is performing badly in Vietnam, which is also the world’s largest consumer of instant noodles on a per capita basis, appears disappointing for the company. Currently, China is the market leader in terms of volume with 45 billion servings of instant noodles sold in 2022 followed by Indonesia (14.2 billion servings) and Vietnam (8.48 billion servings).