MIDA

AN INVESTIGATION REPORT ON
INSTANT

Prepared by:—
J Malaysian Industrial Development Authority

July, 1982.
oo
co
roi
 #( 12FEBW83

AN INVESTIGATION REPORT

ON

INSTANT NOODLE

Malaysian Industrial Development Authority

July, 1982
Access. NO i 0 /

(Glass No.
 T/^BLE OF CONTENTS

Suinmary

1. Product Description 1

2. Domestic Production 1

3. Imports and Exports of Instant Noodles 2

3*1 Imports . 2
3.2 Exports

4. Consumpti on 4

50 Marketing Aspects 6

6» Processing of Instant Noodles 7

7. A Proposed Project 8

7.1 Production Capacity 8

7>2 Proposed Investment 8
7.3 Raw Material Requirements 10
7.4 Employment 11
7.5 Production Cost 12

8. Profitability Indicators 13
9. Conclusions 13
 T/^LES Page
«HM^^^

!• Production of Instant Noodles 1

In Peninsular Malaysia, 1976 - 1980

2. Imports of Instant Noodles from Singapore 2

and Japan, 1975 - 1980

3. Exports of Instant Noodles from Peninsular 3

Malaysia, 1975 - 1980

•I. Consumption of Instant Noodles, Peninsular 4

Malaysia

5» Projected Consumption of Instant Noodles, 5

1980 - 1985

6« Fixed Capital Investment 9

7. Estimated Costs of Raw Materials 10

80 Employment for Proposed treject 11

9. Estimated Labour Costs 11

10. Production Cost of Instant Noodles 12

APPENDICES

I0 Approved Manufacturer of Instant Noodles

II. Machinery Equipment for Manufacture of

Instant Noodles
 Summary

There are three types of instant noodles namely plain

noodles, cupped and seasoned noodles,, Only plain noodles are
available in the local market,, Domestic production of instant
noodles increased from 12,600 tonnes in 1976 to 23,700 tonnes in
198C. The demand for instant noodles is met largely by local
production, supplemented by imports. Imports of instant noodles
arc mainly from Singapore and Japan* Prices of instant noodles
range from 30 - 50 cents per packet* Consumption of instant ncodl-
in 1980 has been estimated at 16,005 tonnes., Given competitive
prices a project with a production capacity of 15 million packets
of instant noodles per annum can be proposed* Such a proposal is
estimated to involve investment of about $2.9 million with a rate
of return on employed capital (after tax) expected to be 16x5% and
payback period of 5 years*
1. Product1Description
As the name implies, instant noodles are edible by
pouring boiled water over them or boiling them in water
for a few minutes. They are made from wheat flour with
various other ingredients added,, Generally they are attached
with small bags of soup made up of dried ingredients* Various
flavours are available e.cjo chicken, prawn curry and laksa.
This type of noodles with bags attached are called plain
noodles. In the local market, only plain noodles are available,,
Otfer types of noodle available are cupped and seasoned noodles.
Cupped noodles are packed in cup form while seasoned noodles
have the flavour added directly into the flour. These two tyjx.E
of noodles however, are'not'popular"in our'local market. Instrnt
noodles are packed in round or rectangular shape-. In Malaysia,
only the latter is available*, The colour of noodles ranges from
light yellow to dark brown. Only light yellow noodles are
popular in the local .market. The colour of instant noodles
is .dependent on rate of drying.

Domestic Production

Domestic production of instant noodles from 1970 tc

1980 is shown in Table 1.

Table 1

Production of Instant Noodles in Peninsular

Malaysia, 1976"-"1980

Year Quantity (tonnes)

1976 12,556.
1977 12,154
1978 15,296
1979 19,058
- - 1960 - - - - 23,746' '
*

Source: MIDA
 - 2

The production of instant nobdles increased rapidly

from 12,600 tonnes in 1976 to 23,700 tonnes in I960 growing zt
a rate of 18% during the period* From information sources, th .r:
were 9 factories being approved by MID/, for the production of
instant noodles as shown in Appendix !„

Based on an estimated weight of 85 gms0 per packet,

the production of a proposed project (as discussed in Fara 7)
amounts to about 1,275 tonnes per year (equivalent to 15,000,0^ "
packets), This represents 5-4% of the total production in 198;,

3. Imports and Exports of Instant Noodles

3.1 Imports

'Instant Noodles' is classified under a bread

trade classification SITC 048300 entitled 'macaroni,
spaghetti and similar products'. However, based on indus-
trial sources, instant noodles are imported mainly from
Singapore and Japan. As such imports from these countries
in the SITC Code 048300 can be regarded as estimates for
instant noodles into i eninsular' Malaysia as shown in
. Table 2.

Table 2

Imports of Instant Noodles from

Singapore^ and Japan, 1975 - 1980

Year Quantity (tonnes) Value ($'000)

1975 92 231
1976 86 " '" ' 104
1977 68 94
1978 54.7 1099
1979 460 933
1980 773 2250

Source: Department of Statistics

 -,. 3 *,.

The above table shows that imports of instant

noodles increased substantially from 1978 to 1980, This
indicates an increased acceptance of the product by local
consumers in view of the nature of the product - being
easy and fast to prepare,

In addition, with population growth it can be

envisaged that consumer demand for instant noodles will
increase further in future as indicated by the trend in
the last few years«

3o2 Export

It is not possible to estimate the export

quantities of instnatnoodles, as the broad SITC Code
048300 does not give a breakdown of instant noodles, Never-
•the-Jess-, most-exports of Macaroniy "Spaghati and similar
products are mainly to Singapore, Sabah_and Sarawak, Such
exports amounted to 9460 tonnes valued at 322*9 million
in 1980 as shown in Table 3.

Exports of Macaroni, Spaghatti and Similar

Lroducts-from, L'eninsul^r Malaysia 1975 -. 1980

Year Quantity (tonnes) Value (j'OOO)

1975 4,524 9,831

1976 7,511 15,654
1977 4,200 9,535
1978 4,770 11, 116
1979 7,638 16,924
1980 9,460 22,896
. . - •- •

Source: Department of Statistics

Based on the above the quantity of exports increased at an

 - 4-

average rate of 23„7% per annum during the period 1975

to 1980.

Consumption
The apparent consumption of instant noodles is
•- • • ' -' • -i'
difficult to estimate particularly the SITC Code 048300 does not
give a detailed breakdown of items. For the purpose of this
report, assuming 90% exports under SITC Code 048300 to be
instant noodles, then the apparent consumption of instant noodle;
is shown in Table 4.

Table 4

Consumption of Instant Noodles, Peninsular

______Malaysia_____
(tonnes)

1975 1976 1977 . 1978 1979 1980

Local Production 8,297 12,556 12,154 15*296 19,058 23,7-6

Import 92 86 68 547 468 773
Export I/ 2,729 4,177 3,493 4,293 6,874 .•:,5l-'
Apparent Consump- 5,660 8,465 B,729 11,550 12,652
tion 2/

I/ Assuming 90% exports under SITC Code 048300 to be instant

noodles - ' - .........
2J Apparent Consumption = Local Production'+ Imports - Exports

. On the basis of the above, the consumption of instant

noodles increased from 5,660 tonnes to 16,005 tonnes over the
period 1975 - 1980. Given the population in 1980 to be 11,138,727
:
the average per capita consumption is 1044 kg. per year« Using
linear regression analysis the apparent consumption would be ns
follows:—
 - 5-

Table 5

Projected Consumption of Instant Noodles

1981 - 1985 I/

Year Quantity (tonnes)

1981 17,221
'1982 19,138
"1983 21J056
1984 22*973
1985 24,890

_!/ Based on a) Y *= 5,716.81 + 1,917.34 x

where Y « Quanti ty
X = Year e a g a 1975
b) correlation r, = 0.98

Table 5 shows that the consumption of instant noocil

is expected to increase from 17,221 tonnes in 1981 to 24,890
tonnes by 1985« The maximum production capacity of approved
companies per shift amounts to 18,108 tonnes per annum. Thus,
a shortfall in supply is envisaged from 1982 onwards.

The increase in consumption of instant noodles can

attributed to its popularity among consumers in view of the
convenience of instant noodles in meal preparation and the
growing population.
 - 6-

Marketing Aspects

The local demand for instant noodles is met largely

by local production supplemented by imports* Imports of
instant noodles arc mainly from Singapore .and Japan.. Some of
the local brands found in the market are 'Esin', 'Chin Tan',
'Mamee', -Vito1, 'White 1'igeon1, 'Koka', 'Chef and 'Maggi1.
(
Among these'brands 'Maggi* dominates the market* 1 rices range
)
between 30 and 50 cents per packet. Hence there is a keen
competition among the producers in terms of prices and brand
consciousness* On the basis of this various techniques of saL.s
have been adopted-such-as giving-quantlty discounts, price re^.ucrtl n
and premiums or other goods being away as a part of sales
promotion.

Moreover, the product is advertised through various

media such"as the newspaper, magazines, television and radio.
The product is marketed through the channel of distribution as
shown below:-

Diaqram I

Simplified Channel of Distribution

RODUCERS

Wholesalers

Retailers

Consumers
 _ 7—

60 1-rocessinc^ of Instant Noodles

The processing of instant noodles is simplified

as follows :-

(i) lXaxing_o_f nRaw Materials

Wheat powder/flour is mixed with additives in

specific proportions such that the mixture will determine
the taste and the quality of the dough* The additives in
the wheat flour are dissolved in common salt solution with
solid additives such as starch powder,, A mixing time of
10 to 15 minutes is recommended.

(ii) Dough Sheet Making

Dough is made into thin sheets through press

rollers. Two dough sheets proceed through 2 pairs of press
rollers and are charged into 3 pairs of rollers where 2
dough sheets are pressed together into one sheet. The dough
sheets are then made thinner finally to some 1»5 mm»

Cuttincf (strip cutting)

The thinnest dough sheets are then cut into stri
by means of a cutting roller,

(iv) ;Measuring

Measure cutting is generally done at the front

or the rear side of the cutter*

(v) Steaming

In the steaming .tunnel, the protein in the dou.;;h

is changed into alpha-protein by steam heating. Through
this process, the strips become more sticky and smoother.,

(vi) Casing

After measured cutting, cut noodle strips are

curled and put into cases for easy frying and also to prevent
 deformation during frying.. The "Cases' are of several typos
namely circular, sqfuare and elliptic. They ore fitted int.-
a net conveyor,

(vii) Frying
:
•; 'Frying is done in order to eliminate moisture in
the noodles, secure a permanent form and promote the
alphanization process0 The drying oil temperature is
generally between 140 C and 150 C. It is necessary to
control the frying temperature as to prevent undesirable
spots. Frying time is about 1 minute,,

(viii) Cooling
Fried noodles are then cooled by cooling air.

(ix) Inspection and Racking

They are then inspected for weight, form and

colour before packing*

7a A proposed I reject

7•'I j-'roduction Capacity

Given all the previous discussions, a project with

a production capacity of 50,000 packets a day based on one
shift operation can be proposed* Assuming 300 working days,
the annual production capacity is 15,000,000 packets. Thu
required machinery is shown in Appendix II«

702 iroposed Investment

The proposed project v/ill involve the following

investment:-
 Table- 6

Fixed Capital Investment Costs

2- 2
Land (0,093 m ) @ $43,00 per m $ 340,440

Factory (1579-m2)--@-S376»00-per m- • $ 593,704

2 2
Office (557 m ) @ 3376.00 per m $ 209,509
2 2
Store Room (92 m ) @ $376.00 per m £ 34,931

Machinery & Equipment V

Fuji total system to produce 50,000 bags 3 450,000

per clay

ing machine:
a) for noodle, speed 100 - 150 bars per min., 3 60,000
b) for soup bcnse, spe^d 40 - 250 packs per £ 20,000
min. ' ''

Vehicle i 00,000
Office Equipment ; $ 20,000
•ijre-oyje rational Expenses £ 101,666
Working Capital S 600,897

Total $2,879,227

Please refer to Appendix II for details.

 - 10 -

7«3 Raw Matari^l Retirements

Several types of raw materials are required and

their costs are estimated as shown in Table 7,

Table 7

Estimated Costs of Raw Materials

a) Haw Material

Requirement Price Requirement

per meal/packet at 50,000
packets
(kg.) S (kg.)

Flour C.C733 1.00 3665

Salt 0.0008 0.30 40
Alkali 1 owder 0.00012 3.50 6
Phosphoric 0.0001 50.00 5
Hydrochloric Acid
Additive 00 00 03 3 8.50 16.5
Natural Colouring 0.00003 20.00 1.5
Soup Base 0.0055 2.00 275

t>) lacking Materials

Soup pack (80 x 50 mm) @ SO.02 cents V-

(aluminium laminate)

Noodle"pack (100 x 125 mm) @ 0.05 cents 2,5,

(Nylon poly)

Total Cost

It should be noted that the above proportions

of raw materials are indicative and provided solely for
purpose of cost estimation.
 - 11 - PERPUSTAKAAN
LKPM
7*4 Employment

The estimated manpower required for the propeso-r'

project is as shown below:-

Table Q

Employment for Proposed L'roiect

Employment No. Required

Direct Labour:
Noodle making 2
Filling 2
Frying 1
Packing & Casing 8

Indirect Labour:
Manager 1
Supervisor 1
Office Staff 3
Sales Representative 2

Total 20

The above tr-ble shows that the factory employs

20 people and their salaries are as estimated below:-

Table 9

Estimated Labour Costs

Salary
Employment No0 Required
ler Month ler Year

Direct Labour 13 $ 300 $ 46,800

Indirect Labour:
Manager 1 2,000 24,OCQ
Supervisor 1 1,000 12,OC-
Office Staff 3 450 16,20';

Sales Representatives 2 450 10,600

EPF, Socso and Medical 21,960
Benefits at 20%

Total Cost 20 S 4,200 $131,760

 - 12 -

7*5 1'roduction Cost

The unit production cost of producing 15,000, 0,,-

packet's of instant noodles a year is estimated below:-

• -. 'Table -10 -• •
Production Cost of Instant Noodles'

Cost ]>gr_ annur

Raw Materials 3 2,450,40-:-

Labour 131, 7^.

Utilities:
Electricity 34,000 Kwh @ ,50.17 per Kwh 14, 2-'::.-
Heavy Oil 24,000 gallons @ S2.10 per 50rk;
gallon
Water 1,065,000 gallons @ £1.20 per 1,27C
1,000 gallons ' '

Depreciation:
Building @ 5% 36, CO;
Machinery and equipment-® 10% . 53,0'X
Of f ice- Equipment © 10% 2,CX:
Vehicle @ 20% 16, Ov/.

Sales & Administrative Expenditure:

.Sales, commission and advertising 99, GO,1
Office 33, A „

Total'Cost" ' $ 2,837,11.

Number of Units ». roducecl : 15,000,000 packets

Cost per packet : £2,887,113 .

15,000,000 * *u'
 - 13 -

Profitability Indicators

Assuming an ex-factory sales price per packet to bo £0«,25,

the expected rate of return of the proposed project is 1605%
and the payback period is 5 years as shown below:-

Cost

Sales 3,750,000
I'roductio'n 'Cost 2,307,110
Gross i rofit 062,882
Less: Tax 45% 380,296
Net L rofit Jtfter Tax 474,586

Expected Rate of Return on Net irofit After Tax x 1

Capital Employment " Total Investment

$474.586
x 100%
* ;,2,079,227

= 16.5%

Total Investment
ayback leriod
Net L'rofit After Tax +

2,879,227________
474,506 + 107,000

2,079,227
581,506

5 years

9, Conclusions

Based on the previous discussions, the conclusions

are as follows:-

1. Instant Noodles can be very price competitive,, Moreover,

consumers can be brand-conscious„ On the basis of this,
wide publicity and good quality of the product are of great
importance,,
 14 -

2U Projections on consumption of instant "ttbWdles indicate

a likely shortfall Ittf supply from 1982 onwards. Such
shortfall could be attributed to demand by the growing
population and to the convenience in the preparation of
the producto

30 Financial indicators show encouraging returns.,

 - 15--

Ai-PENDIX I

Approved Manufacturers of Instant Noodles

Incentive & Status of .

Name-'of Company Factory Location
Approval Date Implement: ticn

10 aestcan Food Technological Ipoh, t'erako i'ioneer In rroduction

fyln. Bhd. 10.7.70

20 International Food Sdn0 Bhd. Shah Alam, 1-vTI In Production

Selangor. 7.9.70

3D Far East Food Industries Johore Bahru, Pioneer In Production

SJn. Bhd. Johore „ 11.7.70

..-o i. ncif ic Pood Products Air Kroh, - . Pioneer In Production

o'M. Bhd. Malacca. 9.7.70

So Vits Mafconan (K0L. ) Sdn. Kuala Uimpur ITC In Producti' n

Bhl. 13.5-76

6. TsenwQ (H) Sdn. Bhd> Chembong , ITC In Product! -in

N. Sembilan 18.5.76

70 Instant Food Industries Shah Alam, WTI Temporarily

Sdn. Bhda Selangor., 21.3.75 Shelved

- 0 Gu-in Hock Seng Food I'rai , Province VJTI In Production

In lustry Sdn. Bhd. Wellesley 31.7.81

. * Sanwn (M) Food Industries Bangi , Selangor WTI In Product! n

;j.'.n0 Bhd. 30.4.79

Source: MIDA.
 - 16 -

Machinery Equipment for Manufacture of

Description Unit

Noodl e L JVfaking JEqui^nent

Kneacler - 2 "
Table- Feeder 1 •
Compound processing roll machine 1
Extending roll machine 1
-. ressing & cutting roll machine 1

Steaming & measuring cutter equipment

Steam tunnel 1
Conveyor 1
Keasuriny, cutting & Folding machine 2

Frying Equipment
Prying machine 1
Exhaust blower 1
H--avy Oil tump 1
>I>?cial Chain with Case 1
Case Cover Conveyor 1
Chain Driving Unit 1
Heavy Oil burner with preheater, frame-eye 1
automatic float-switch- for heavy oil tank 1
Automatic elevating equipment . "1

Coclinq Equipment
Blower 1
Cooling conveyor with driving unit 1