Before the year 2003, Indomie domination (Indofood) in instant noodles market was unbeatable. It succeeded with hardly any competitors. Several attempts to take over the market share of instant noodle market was done by competitors and failed. Instead Indofood succeeded to defeat them. Even multinational company like Unilever which had skill to develop brand and wide distribution network tried to enter the instant noodle market to no avail. Mie&Mie brand (Unilever) was forced to exit market by Indofood. This also included the failure of Tara Nasiku, an instant rice brand launched by Unilever in 1999, with intention to switch consumer buying behavior from instant noodle to instant rice. Although the production budget and development of Tara Nasiku exceeded boundary of new product launching, consumers still preferred Indomie. Initially, Indofood did not suspect that Mie Sedaap from Wingsfood would succeed in taking over the market share. Although Wings Group was long enough in toiletries industry, supported by solid marketing team and a wide range of distribution network, Indofood still believed that food business needed special expertise. And Indofood, indeed, did not think that Wingsfood had that. Indofood was not seriously counter the aggressive marketing activities done by Mie Sedaap. It could be said without any obstacles Mie Sedaap glided to the market.
Slowly Indofood‟s Indomie domination broke down. Its market share fell. Their 90% market share in 1999 declined to only 70% in 2003. The national instant noodle market itself was worth 8 trillion rupiahs, thus Indofood‟s sales decline disturbed the plan to increase their sales in the country.
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What super strategies did Wingsfood use with its Mie Sedaap to overpower Indomie‟s domination in instant noodle market? What effort and attempt did Indofood take to regain and restore their lost market? How were the consumers‟ perceptions after of this noodle war?
Instant Noodle Market in Indonesia
Instant noodle was one of the fastest growing food industries in the world, especially in Asian countries. It was estimated that 50% of world market worth US$ 85 billion dollars was dominated by China1. Indonesia alone contributed to 14%. The potential market to grab more consumers in Indonesia was still huge. Its per capita consumption was still low in comparison to neighboring countries.
Warta Ekonomi, 5 Juli 2006 “Mi Instan Mulai Mengganti Bahan Pangan Pokok”
Amalia E. Maulana, and Yanita, Research Assistant and Robert AB, Coordinator case study program, BINUS Case Center prepared this case from published sources. BBS cases are developed solely as the basis for class for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2007 BINUS Case Center. To order copies and request permission to reproduce materials, call 62-21-720-2222 or go to http://research.wherebusinessisreal.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission of BINUS Case Center.
Table 1. Instant Noodle Market Size in Asia
In Indonesia, the growth of instant noodle market was reflected by increasing production volume and per capita consumption. In year 2004, production volume was 975.000 tons, increased 30% to 1,272,000 ton in year 20053. The increase of this product was caused by the increased number of player. There were 57 companies in year 2001 and 84 in 2005 (Exhibit 1).
From consumption point of view, this growth also showed some significant increase; in year 2000, 3.7 kilograms of instant noodle per capita (equivalent to 53 packages) was consumed. The number reached 5 kilogram by year 2005 4 (See Exhibit 2).
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This was caused by two reasons: (1) A decrease in buying power from middle to low consumer group who considered instant noodle as alternative food. (2) The penetration from middle to high group who looked upon instant noodle as preferred side dish. Instant noodle became favorite food among people because it‟s delicious taste, easy to prepare, affordable price and availability in almost all stores. Although its popularity, instant noodles was perceived as innutritious and unhealthy food. It contained high carbohydrate and MSG but low in fibbers. It was recommended to be consumed rarely5. For more than 30 years, many companies tried and experimented new flavors to expand their instant noodle products and market range. However, from all choices and variants of flavors, consumer‟s choice was instant fried noodle, instant chicken curry noodles, instant chicken onion noodle and the instant noodle with chicken soto flavor. These came from Indofood products.
Competition in instant noodle product was between Indomie (Indofood) as market leader and Mie Sedaap (Wingsfood), as challenger. Other brands were also participated in the market like Mie Kare (Orang tua group) and Mie ABC (ABC Group).
The last two brands mentioned was welcomed by the consumers because their communication activities in some media. Detailed information about Mie Kare and Mie ABC was in Exhibit 3. Exhibit 4 described the division among brands: 70% market was consisted of 3 brands from Indofood: Indomie, Supermie and Sarimie; 20% from Mie Sedaap and remaining 10% from smaller brands, including Mie Kare and Mie ABC.
Domination of Indofood Sukses Makmur
In Indonesia, the first instant noodle was launched in year 1969, Supermi brand produced by the pioneer, PT Supermi Indonesia. In year 1979, wheat flour division PT Sarimi Asli Jaya from Salim Group released Sarimi. From that time, instant noodle industry in Indonesia started to flourish.
Salim Group through PT Sanmaru Food Manufacturers exchanged shares with Jangkar Jati Group and made Indomie became more popular. The domination of Salim Group in noodles industry started when PT Supermi Indonesia was acquired on 1986. Now Salim Group owned big three noodle brands: Indomie, Supermi and Sarimi. In year 1999, market share Indomie reached 44%, 28% from Sarimi Sales and 18% from Supermi. This situation made Indomie grew and continued to dominate in noodle market. A finding from consumer‟s behavior said that in year 1970-1980 people recognized generic name of noodle was „Supermi‟, and 10 years later was „Indomie‟. PT Pangan Jaya Inti Kusuma, subsidiary from Salim Group, established in 1990, changed its name in 1994 to PT Indofood Sukses Makmur. The company consisted of 18 other companies from merger activity. Indofood quickly became the biggest food company in Indonesia. Indofood Group had 4 Strategic Business Groups, Consumer Branded Products (CBP), Bogasari Flour Mills Factory, Cooking Oil and Fat Vegetation and Distribution. Indofood aimed to be total solution in food area and food stuff supplier for long term.
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The vertical integration strategy was disputed from competitors, as it led to some kind of „hidden monopoly‟. Competitors said that Indofood could be price taker and destroy their business. It was not a perfect competition after all. One of the reasons of this practice was the closeness of Salim Group owner to government in Orde Baru Regime. Furthermore, there were government policies supported the activities of business group. By the end of Order Baru regime in year 1998, looked like Indofood lost its shelter and faced perfect competition in the market. Even tough with such strong domination in market share reached 80%, it was difficult for competitor to beat Indofood. It was not hard for Indofood to enter various market segments starting from low income, middle and upper class consumers. Packaging also was a center of innovative development. One of the innovative packaging products was Pop Mie, instant noodles in the Styrofoam cup. This variant of Supermie was designed for outdoor consumption. People just added hot water and Pop Mie was ready to eat. Exhibit 5 showed lots of variance of noodles.
Indofood distributed its products not only locally but also go globally. It exported to 30 countries like Saudi Arabia, Brunei, Nigeria, Australia, Hong Kong, and some European countries. In 1999, Indofood earned net sales of Rp. 4,315 billion Rupiahs and net profit of Rp 892 billion6 from instant noodles product.
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Indomie’s Domination Started to Fall Apart
Mie Sedaap Surprising Movements Were Coldly Judged
Until year 2003, instant noodle market was stagnant. The marketing activities focused on trade promotional activities in the market and shops but tended to bored consumers.
This kind of stagnant and boring situation of instant noodles, Wings group under division Wingsfood stepped into the market with Mie Sedaap. Formerly, Wings group was famous toiletries sector (soap, detergent, body treatment products).
With the follower strategy, the toiletries product shared the market with Unilever brands, some of the product were head-to-head; i.e detergent product So Klin (Wings) with Rinso (Unilever), toothpaste product Ciptadent (Wings) with Pepsodent, and soap Giv (Wings) with Lux (Unilever).
Wings‟ strategy was offering the same benefit with Unilever but with more affordable price. This influenced a lot the price sensitive consumers. Another key strategy was Wings‟ effective marketing communication and wide distribution.
The success in toiletries sector inspired Wings to enter another industry, which was food industry. The food industry they would enter was instant noodle market. The entry strategy was not as a market follower as usual, but as a market challenger. As a market challenger, they concentrated all resources and energy to develop and prepare for Mie Sedaap launching.
Wingsfood conducted this launch carefully. The marketing executed an integrated system (Integrated Marketing Communication / IMC), the product innovation, effective marketing and communication, and an even product distribution. During less than 1 year, Mie Sedaap succeeded to grab 12% of instant noodle market.
A survey conducted by PT Roy Morgan Research from October to March 2007 using 27,000 respondents as sample from 68 million buyers from modern outlets showed that number of Mie Sedaap buyers from modern outlets increased. This was shown in Figure 1 about instant noodle market size projection.
Eventually, this move was not predicted by Indofood as dominant noodle players. Indofood might see this was not a threat, because the reaction was quiet even when the reality 12% of the market was captured by Mie Sedaap. A possible reason was Indofood might think that Wingsfood did have track record or experience in handling instant noodles market like them.
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Product Innovation
Wingsfood started from the consumer insight as the most important element to develop Mie Sedaap. The company tasted the consumer taste and food texture, perceived and observed directly from consumer‟s daily life. The feedback from consumer was tested carefully in Wingsfood along with its quality and levels of acceptance by consumers7. An example of a consumer insight was the idea to develop instant noodles with additional coconut or koya seasoning. This Koya was a unique ingredient from traditional soto sold by Mr. Sadi, the famous soto seller in Surabaya. Soto itself was a traditional Indonesian soup with chicken or beef slices meat inside. Another innovation was traditional fried onions. Different with former Indomie instant noodle and other brand, fried onion in Mie Sedaap fried noodles was crispier and bigger. These fried onions resulted sound effect of „kriuk‟ in the mouth. This „kriuk‟ then used as their communication themes. It took them at least two years before Wingsfood was confident to launch Mie Sedaap to the market. At the beginning, Wingsfood focused on 3 variants of noodles: Mie Sedaap ‟goreng‟ (fried noodle), Mie Sedaap ‟ayam bawang‟ (chicken-onion noodles).
These following quotes described two different comments from two types of consumers. The first part came from Mie Sedaap eaters, and the second part was from Indomie loyalist.
“Very delicious. The smell is so good. I told my wife to cook Mie Sedaap soto flavor, the taste was delicious, really super, especially if add with lemon leaves…wooowwww realllyyy yummyyy…Since then I addict to Mie Sedaap soto flavor”- (Iron_75, Mie Sedaap consumer)
“How could it not be, Mie Sedaap with the fried noodle flavor has the perfect texture. Its noodle expands so that its flavor absorbs perfectly when added to the noodle. By adding fried onions that are crunchy and tasty adds an even bigger image to the noodle that are favorite among our nation. Other than that, what else but its delicious (sedaap) taste..oww yeahh” (Renjifuruya, Mie Sedaap consumer).
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”Hmm, always Indomie…..actually Mie Sedaap is not that bad, but.. for me, after tasting so many noodles, I would rather have Indomie. Maybe because I have consumed Indomie since I was little, the taste in my tounge)…… (b4kp4u, kafegaul.com, Indomie loyalist).
”There is only one choice for me. Once Indomie, it has to be Indomie, forever…. For the fans of Mie Sedaap, sorry, I don‟t like your noodle….” (Mangudel, kaskus community, Indomie loyalist).
Integrated Marketing Communications
The biggest challenge Wingsfood when launching Mie Sedaap was marketing communication. How the marketing would communicate and convince the market that Mie Sedaap was better than Indomie, when the consumer‟s perception was so closely tied to the former brand?
Mie Sedaap‟s marketing goal was to reach all segments in the markets, a wider target market as possible. That was why the communication must be massive. The message had to be sharp, easy to understand and remember. To optimize the advertising budget and guarantee the success, Wings Food assigned Bintang Pratama as its advertising agency. Bintang Pratama had a long successful record in creating and developing FMCGs‟ brands in the market. Various type of Mie Sedaap TVC created by this advertising agency was summarized in Exhibit 7.
In the year 2006, Mie Sedaap advertisement was starred by music star PADI group band, depicted that Mie Sedaap became PADI band group‟s choice as well as the choice of general public with green rural natural background. Exhibit 10 showed key parts of this ad.
Effective communications started from selecting the name of noodle product. The brand name selected was ‘Mie Sedaap’. The word ‘sedap’ meant delicious. But according to legal trademark registration, the adjective could not be used as a brand. The word was also used as a common language so it belonged to public. Then Wingsfood added one letter „a‟ in the word „Sedaap‟ so they could obtain legal trade mark but also easy to remember for consumer.
The breakthrough also came from packaging design. The design of Mie Sedaap looked like Indomie package. Although it would confuse consumer, from Wingsfood side it was wide open opportunity. In the store, consumer would perceive this as Indomie product with cheaper price. Instead they purchased Mie Sedaap. This was no longer a follower strategy but already innovative brand strategy.
The beginning of Mie Sedaap campaign strategy was using teaser ads (to bring up curiosity of audience).
The teaser advertisement appeared earlier, followed by other ads that were also interesting as first. Teaser advertisement in electronic medias was opened with mysterious message like “Begitu nyoba, langsung suka, semua orang langsung suka” (Once try, you will love it, everybody will love it).
This campaign also appeared at outdoor billboard advertisements [which were carefully placed in strategic places, with the message “Sebentar lagi, nantikan yang satu ini….” (Wait for this one!) Made many people curious and wanted to know what would be the next. Thematic advertisement about ‘kriuk sound’ caused by fried onions in Mie Sedaap was also created. People testimonials about delicious taste of Mie Sedaap also dominated printed media (see Exhibit 8).
Mie Sedaap advertisements ran in almost every prime time show. Wingsfood took this advertising launch of Mie Sedaap very seriously. According to AC Nielsen, spending of TV advertisement in first year of Mie Sedaap reached Rp 56,17 billion9.
It appeared that the message of Mie Sedaap was very clear: delicious & tasty product that had a different taste from existed instant noodle ( „regular‟ taste).
This message was consistently delivered in every communication elements. It increased the trust level of costumer because the brand activation was continuously conducted both in small scale as direct meeting with costumer, and in bigger event. One of the big event was held in celebration of Moslem big day „Idul Fitri‟ by consuming Mie Sedaap in a big group at the biggest mosque in Jakarta. Other biggest event was “Gema Nusa”, starred by PADI group. The event has got appreciation from the Indonesian Museum of Records (MURI) Exhibit 9. The effect of the Public Relations (PR) of this event was multiplied and benefited well by Mie Sedap.
The strength of Mie Sedaap marketing activities was combination of brand image development and brand activation. Brand activation was delivered by free tasting Mie Sedaap in travel spots and campuses. Wingsfood aimed at students as target market. A combination of various communications between mass media and brand activation in year 2005 reached Rp 140 billion.
Distribution
Even though this product was launched on May 2003 and distributed to Java and Bali, but its name has started to become the hottest talk in both levels of consumers the direct buyers (consumers) and sellers (merchants).
Mie Sedaap succeeded to create a momentum. And by the time the product was available in the market, consumers were rushing to buy them. This generated an enthusiastic response from merchants that wanted to participate and directly ordered for their stores. One of the key success factors of FMCG products (Fast Moving Consumer Goods) besides effective communications is a wide spread distribution, by focusing first to certain segment and certain area. Mie Sedaap initially only distributed to Java and Bali. From the outlet type, they selected the modern outlets (mini markets, supermarkets, hypermarkets).
After a wide spread distribution of this market type, then Mie Sedaap was distributed to traditional outlet as well as groceries and wholesalers. Nowadays, the product distribution is made sure to be widely and evenly spread from the highest levels such as wholesalers till the lowest level such as motor teams that explore and spread to small booths and kiosks or better known as our traditional warungs. For modern outlets the strategies included renting special striking displays to exhibit their products. For new products, these displays are important to remind the consumer on its existence at that outlet. The display strategy differs in traditional outlets, they chose a method of direct promotions with prizes so that tradesmen in those smaller outlets will enthusiastically choose to display their products where it can be directly seen by the buyers. Presents that are given are like glasses, cups or plates for the purchase of certain quantity of that product. Although these gifts may seem less impressive, Mie Sedaap has experienced that those types of gifts are most effective to draw consumers‟ attention of their product in traditional outlets.
Mie Sedaap also provides to merchant and groceries buying in large quantities, by giving special discounts and competitive prices which is below the Indomie prices. WingsFood also provides flexible payment methods which can be installed from 30 to 60 days10, these barriers to continue selling and marketing Mie Sedaap products have been reinforced and applied to the maximum.
Indomie’s Revenge
Indofood‟s reaction toward aggressive Mie Sedaap market penetration in 2003 was very different with reaction toward Mie&Mie and Tara Nasiku from Unilever in 1999. At that moment, the company focused its energy to block the competitors. And Indofood succeeded to win battle. Comparing to the effort facing Mie&Mie and Tara Nasiku, Indofood‟s reaction towards Mie Sedaap considered less intense and less strategic. Indeed Indofood launched counter attack.
Sporadic Attack in Year 2003 – 2005
1. Launching of new instant noodle named Mie Sayaaap. Mie Sayaap was made so similar with Mie Sedaap.
2. Launching for new Supermie brand as Supermie Sedaaap. Not only the package was similar to Mie Sedaap, but also the name „Sedaap‟ was very similar to Mie Sedaap. Because of this, Indofood‟s business ethics were questioned and debated. This caused more and more publication on Mie Sedaap‟s side.
3. Adding extra fried onion in Sarimi, and named it Extra Sarimi. In this context, Indofood conducted benchmarking strategy with WingsFood, with similar benefit focus.
4. Indomie provided gimmick like glass and bowl (see Exhibit 11).
5. Indomie gave more discounts to the merchants.
6. In year 2004, Indomie released new variant Fried Indomie Bean. The market did not accept this product well because it was not followed by effective support communication.
Serious Counter Attack Just Begun in Early 2006
Quoting better late than never, by the end of 2005 Indofood seriously prepared counter attack to Mie Sedaap. Indofood asked Matari Advertising Agency, to create and communicate Indomie superior products like Indomie Goreng Kriuk (IGK) or Fried Indomie Kriuk (see Exhibit 12).
Fried Indomie Kriuk intended to be tastier, crispier topping and larger portion.
Fried Indomie Kriuk launching in early 2006 starred by Three Diva (3-Diva), famous Indonesian Divas: Titi DJ, Krisdayanti and Ruth Sahanaya. The 3 Diva appearances were expected to grab the market stolen from Mie Sedaap and to jack up the consumer being enthusiasm. Along the thematic advertisement (see Exhibit 13), concerts were performed by electronic media where 3-Diva showed their preference to Fried Indomie Kriuk. This ad followed by 3-Diva kid‟s version with target audience Indonesian children (see Exhibit 14).
It was no doubt that the attraction from 3-Diva ad was quite high in the beginning. But Indofood did not follow this to second and third marketing communication effort. That was why the consumers were not thrilled with the product as spectacular as the image projected in the advertisement. Indofood did not realize that consumer benchmarked the wrong target product. They compared IGK with the original Indomie ‟goreng‟, and not directly compared it to the competitor, Mie Sedaap.
“Nothing special with Fried Indomie kriuk taste, in fact it seemed rather burned. The regular fried Indomie‟s spices are tastier.”
“The spices are too tasty.”
Consumer Perception: After Encounter
Repeated and intensively marketing communication launched by Mie Sedaap resulted friction in consumer‟s mind about instant noodle in general. Mie Sedaap tried to redefine instant noodle by definition of delicious and tasty, which shifted the former customer‟s understanding they got from Indomie. And they did that with success. The following table was the result of perception map survey from 160 students‟ university respondents in Jakarta11. The survey selected student because of assumption that students highly consumed instant noodles. The table comprised of 6 attributes towards selecting brands like Indomie, Mie Sedaap, Mie Kare, and Mie ABC. The attributes comprised of delicious taste, reasonable price, various flavors availability, easy to get, additional topping, and healthy MSG contents.
ADDITIONAL TOPPINGS
HEALTHY MSG CONTENT
Indomie‟s perception was still better than Mie Sedaap. It appeared that these 2 brands overpowered Mie Kare and Mie ABC. It meant that Mie Sedaap as a new comer beat Mie Kare and Mie ABC in term of flavor. It still took time to defeat Indomie in flavor aspect, but Mie Sedaap target as a challenger was successful indeed.
In price aspect, Indomie and Mie Sedaap got the same value. From distribution and various flavors Mie Sedaap was still below Indomie. In additional toppings Mie Sedaap was better than Indomie. It was possible that this perception was formed because crispy fried onion of Mie Sedaap was very well communicated.
Attributes healthy MSG content was almost the same for all brands. It meant that people already aware that instant noodle contained MSG. Polar diagram (Figure 2) showed the attributes map for consumer perception.
Figure 2. Polar Diagram of Consumer Perceptions of Instant Noodle
Another qualitative study was conducted to capture the consumer perception between various instant noodles; post the noodle war12 (see Figure 3 and 4).
The perceptual map indicated that taste and MSG content was in-line with the earlier quantitative study. At the quadrant of „taste is just right‟, confirmed that the position of Indomie was threatened by Mie Sedaap. Figure 4 depicted perceptual map about how instant noodle consumers perceived each brand as an imagery person.
CLOSING
Emulation was commonplace in marketing. Market without emulation would make a company stop innovating. Indofood should face this degradation positively. Launching any kinds of products aimed to dictate the market was not working anymore. Consumers were required to be approached and translated by the consumer insights, to synchronize the consumer‟s desire with innovative product. Mie Sedaap, on the other hand, proved the strength of consumer oriented approach followed by effective marketing communications, produced a big hit in instant noodles market.
Mie Kare was launched by Orang Tua Group (OTG) which have been established for more than half of century. Through research and innovation, OTG have come up with unique products that win the competition. OTG products have enjoyed a special place in the hearts of customers, thanks to the investment in brand building. Just mention OTG popular brands such as FORMULA, TANGO, OOPS, VITACHARM, KIRANTI or KARE, and you‟ll know what these brands mean. They have become everyday household names. OTG‟s portfolio of products, from toothpaste and toothbrush to health food and drinks, is already a part of the daily activities of the Indonesian people.
The commitment to quality and innovation has enabled OTG to stand firm and grow over the past half a century into a leading local consumer goods producer, ready to compete with other world-class companies in the field.
So thick, so authentic! Kare, instant noodle specially made with a powerful taste of special, thick and authentic curry mix. Currently, it is available in a range of noodle soups with three genuine flavours for those curry lovers.
PT. ABC President was established in September 1991 by a joint venture agreement between PT. ABC Central Food of Indonesia and Uni-President Enterprises Corporation of Taiwan, as research and development, technology and innovations department of ABC Group. ABC Group also produce food and beverage products such as Mi Remes, Mi ABC, NÜ Green Tea, NÜ orange, and NÜ Apple.
Most people know the “ABC” Brand as the market leader in food and beverages in Indonesia. Guided by the principle of satisfying customer needs, it has steadily expanded its business to other foods i.e instant noodle. Now “ABC” is a famous household brand name, known for its quality. At first, Mi ABC has 3 different flavours such as “rasa ayam bawang, rasa soto, and rasa baso sapi” which is categorized as Mi ABC Lapis Bumbu. But the most flavourable and has unique taste from other instant noodle is Mi ABC Selera Pedas. “Mi ABC Selera Pedas, rasa pedasnya mantap” and become the first spicy instant noodle in Indonesia.
