On behalf of the board of directors (the “Board”) of Nissin Foods Company Limited (the “Company”), I am delighted to present the Annual Report of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2022.
2022 was the final year of COVID-19 and in the first half of theyear we focused on responding to the pandemic. In addition, we experienced rising raw material prices and a sharp increase in logistics and warehousing costs in Hong Kong due to supply chain disruptions. In line with our founder Momofuku Ando's corporate philosophy that “food-related job is a sacred profession (食為聖職)”, the Group was able to supply products throughout the year without production interruption, contributing to consumers' enjoyment of foods.
The Group achieved positive results, exceeding last year's results. The profit attributable to the owners of the Company increased by approximately 4.2% year-on-year to HK$316.5 million. The robust demand for instant noodles for domestic and overseas markets in Hong Kong’s operations and price adjustments in both Hong Kong and Mainland China resulted in an increase in the net profit, offsetting the spike in raw materials and logistic and storage costs. The Group’s revenue increased by approximately 4.1% year-on-year to HK$4,025.0 million. The operations in Mainland China managed to maintain a positive growth trend in annual sales volume despite a weaker consumption sentiment in the second half of 2022. On the other hand, we saw an increase in the sales volume of instant noodles in our Hong Kong operations due to vigorous demand from local and overseas markets throughout the year. Furthermore, due to the resilient demand of frozen food in Hong Kong, currently ranking first in terms of market share of the frozen dim sum category, our Hong Kong operations increased its annual revenue.
Over the past decades, there has been continuous consumption upgrade among the Chinese population, with increasing per capita income in Mainland China. In 2021, the Company upgraded Cup Noodles, bringing smoother noodles and improved soup quality in newly updated containers.
Also, Hong Kong operations launched 100% Hokkaido made wheat flour Demae Iccho in Hong Kong in 2020. The Group has rolled out four flavours under the newly upgraded Demae Iccho, bringing a variety of tastes to an even wider audience of its consumers. In Mainland China, we also stepped up our efforts launching 100% Hokkaido made wheat flour Demae Iccho in 2022. The Company expects to launch more premium products in the future.
In order to enhance Nissin Food’s brand loyalty amongst consumers, the Company launched a membership programme named “Nissin Foodium” in Hong Kong in July 2022 and in Mainland China in August 2022, respectively. Consumers can scan the QR code on the back of the Cup Noodles’ W-tab design lid with a double flap by smartphone to get points in the WeChat mini program, which can be used to redeem various items and novelties. This digital marketing can reinforce brand loyalty because the program is used to understand the preferences of individual consumers and, to obtain their feedback in developing new products. This W-tab design lid with a double flap on which the QR code was printed can adhere to the container more easily and securely than the previous lid with a closing sticker after pouring hot water and thus it can improve consumer‘s convenience.
On corporate development front, year 2022 was pivotal for the Group. In November 2022, the Group acquired the remaining equity interest in Zhuhai Golden Coast Winner Food Products Limited ( 珠 海市金海岸永南食品有限公司) (“Zhuhai Winner”), the former joint venture with the Chinese regional government since its establishment in 1993. Upon completion, Zhuhai Winner became an indirect wholly owned subsidiary of the Company and allowed the Group to further expand the instant noodle business and capitalise on the long term growth trends in Mainland China.
In line with our founder Mr Momofuku Ando’s corporate philosophy that “Create food to serve society (食創為世 )”, the Group is committed to sustainability management as a responsible company and citizen and contributing to the sustainable development of the community in the long term while the Group grows steadily.
The Group expanded the power generation capacity at the Zhejiang plant by installing additional solar panels. Furthermore, a new solar power generation system was installed at the Zhuhai Nissin Packaging plant which commenced operation in December 2021. In 2023, Zhuhai Winner plant will install a new solar power generation system. We will continue to utilise renewable energy in our business.
From an environment management perspective, the production of Cup Noodles’ new W-tab design lid on the back of which QR code is printed successfully uses less PET (polyethene terephthalate) than the previous lid with a closing sticker.
The Group has continued to invest in human resources for future sustainable growth via different stages of recruitment, induction and on-going trainings. A total of ten training sessions in the form of lectures are held annually for newly recruited employees to cover our vision, culture, knowledge on instant noodles and its development, marketing and sales, and other aspects to raise employees’ awareness and allow employees to acquire operational expertise in our industry in both Hong Kong and Mainland China. In addition, the Group provided fringe benefit system for employees, including medical insurance and offering health checks and flu vaccines to employees every year.
The Nissin Foods (Hong Kong) Charity Fund was established in 2020 to contribute to the well-being of the community. Nissin Foods Scholarship for supporting future Hong Kong food scientists was launched in The Chinese University of Hong Kong, and five BSc and two Ph.D students studying Food and Nutritional and Sciences were awarded the scholarships in 2022. Moreover, Nissin Foods Scholarship for supporting the future Hong Kong Physical Education teachers for food education was established in The Education University of Hong Kong and four students studying Health Education were granted the scholarships in 2022.The Group will continue the scholarship programmes to encourage outstanding students.
With the most recent easing of COVID-19 in Hong Kong and Mainland China, the spike in prices of raw materials, particularly palm oil, have stabilised, and logistic costs, particularly sea freight, are returning to a more normal level. We expect to benefit from the current situation. The government of Mainland China is expected to boost consumption so as to stimulate the economy, while the Hong Kong SAR government has already introduced stimulus measures to bolster economy and launched “Hello Hong Kong” campaign to attract tourists coming to the city. The Group is optimistic that the number of tourists to Hong Kong from Mainland China and the overseas is expected to increase significantly.
In Mainland China, its operations will mainly focus on the expansion of the sales volume of Cup Noodles and other instant noodles products substantially, particularly by expanding distribution networks to key accounts and local stores in Western and Northern regions. During the pandemic, the influx of people slowed down in Mainland China. In due course, the Company plans to increase contacts with consumers in places with high public flows, such as in retail outlets and transport hubs from the promotion and advertisement perspectives. On the non-noodle category business, the distribution business in Mainland China will strive to expand the trading of the “Made-in-Japan” confectionary.
Hong Kong’s operations will mainly focus on expanding the sales of 100% Hokkaido made wheat flour Demae Iccho. The distribution business aims to capture the demand for mineral water and other products from the tourism and catering industry where their sales substantially dropped during the pandemic. In terms of frozen food business, the Group will focus on the sale of premium frozen foods and strive to capture the demand from the overseas market.
Year 2023 marks the start of post pandemic where the Group’s true value and performance will be evaluated. We stay committed to further penetrating Cup Noodles, Demae Iccho, and other premium products into Mainland China and Hong Kong, to returning to a high growth trajectory in terms of sales volume and to deriving higher profits from the non-noodles business.
I am determined to maximise business outcomes while efficiently developing the Group’s business operation and organisation, and aiming to create long-term value for all stakeholders, including shareholders and investors of the Company. The Group is also committed to contributing to local communities for bringing sustainable growth to the community.
With such goals in mind, again, I believe in enriching lives of people through the production and distribution of tasty, secure, and affordable food, and I share with you the corporate philosophy of our founder, Mr Momofuku Ando, that “Create food to serve society (食創為世)”.