1. Rev: Aug, 2012 POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH Pulmuone Nature is Delicious Non-fried Ramen

2. Contents 1Introduction of Pulmuone 2History of Efforts to Develop Non-fried Ramen 3Development Process of Nature is Delicious 4Result of Development

3. 3 Introduction of Pulmuone ■Pulmuone –Food company –Established: 1981 –Major products: Health product, Beverage, Noodle, Tofu, Retort Food, etc. ■Pulmuone at a Glance –Mission: LOHAS (Lifestyle Of Health And Sustainability) Company –Vision: Global DP5 (Defining Pulmuone) – Redefining LOHAS business and achieving sales of 5 trillion Won through international business –Core Vale: TISO (Trust, Integrity, Solidarity, Openness)

4. 4 History of Efforts to Develop Non-fried Ramen ■Motivation of Non-fried Ramen –Ramen: Typical of ordinary foods in Korea –Goal: To make a healthful Ramen  Developing non-fried Ramen ■Saeng-Ramen (1995) –First Non-fried Ramen of Pulmuone –Seafood flavor and Beef flavor –Selling price: 1,000 won (The highest Ramen price at that time) –Required refrigerated distribution –Failed and withdrawn from the market after one year ■Saeng Gaduek Saeng-Ramen (2005) –Customers’ increased interest in non-fried Ramen –Improving the flavor of Ramen and launching the product –Mild flavor and Spicy flavor –Selling price: 1,500 won (About double of the price of other Ramen products) –Expanding SKU (Stock Keeping Unit) by using customized refrigerators –Lowering price to 990 won in December 2008 –Average monthly sales: Around 430 million won (2009)

5. 5 Development Process of Nature is Delicious (1/6) ■Development Process of Nature is Delicious Recognizing problems of existing non-fried Ramen Product such as short shelf life and requirement for refrigerated storage Opportunity Identification Healthful, Delicious, Non-fried, Low-calorie, Using good ingredients Non-fried Ramen as a new ‘category’ Concept Development Delicious non-fried Ramen using good ingredients and which can be stored at room temperature Product Design Triple rollers, air dry, and foaming technologiesProcess Design Targeting health/nutrition oriented customers Emphasizing differences from the existing fried Ramen products Implementing various customized marketing strategies Commercial Production

6. 6 Development Process of Nature is Delicious (2/6) ■Opportunity Identification –Constant communication with customers  Inconvenience caused by the short shelf life and refrigerated storage –Setting a goal to develop non-fried Ramen which can be at room temperature  To develop non-fried Ramen market as a new independent market

7. 7 Development Process of Nature is Delicious (3/6) ■Concept Development –Understanding Ramen market (2009) Market scale: 1,900 billion won Annual production: 3.4 billion packs About 200 Ramen brands Every Korean person averagely consumes 7.5 Ramen packs annually Market share: Nongshim (68%), Samyang (13%), Ottogi (11%), Korea Yakult (7%) Increasing interest in Well-being products –Understanding customers Properties customers consider when buying Ramen: Nutrition, Health, Taste, Trust Properties of Ramen customers actually buy: Habit, Taste  Absence of Ramen customers want Image of ordinary Ramen: Unhealthful food containing much amount of sodium and fat Image of non-fried Ramen: Positive image relative with health and taste –Defining product concept Healthful, Delicious, Non-fried, Low-calorie, Using good ingredients Not ‘another product’ but a new ‘category builder’

8. 8 Development Process of Nature is Delicious (4/6) ■Product Design –Delicious non-fried Ramen using good ingredients Noodle: Non-fried and chewy Soup: Neat and zesty –Using healthful ingredients Not using chemical additives such as chemical seasonings Using natural ingredients such as garlic, white radish, onion, shiitake mushroom for the taste of soup –Making room temperature storage possible ■Process Design –Three major technology for delicious noodle Triple rollers Technology making density noodle texture using three rollers Producing chewy noodle Air dry Drying noodle in a short time without frying it Making noodle more chewy Making preservation at room temperature possible Foaming Giving gaps to noodle texture Making soft noodle texture Making noodle absorb the soup easily

9. 9 Development Process of Nature is Delicious (5/6) ■Commercial Production –Market Segmentation Health/nutrition oriented:520 billion won (31%) Taste oriented: 500 billion won (30%) Low stimulation/safety oriented: 430 billion won (26%) Consumer group concerning it is healthy not to eat Ramen –Target Market Selection Thorough consumer survey and analysis  Selecting Health/nutrition oriented market as the target market –Positioning Constructing competition between non-fried Ramen and existing fried Ramen Natural ingredients vs. Artificial ingredients Non-fried noodle vs. Fried noodle Pulmuone Saeng-Ramen = Healthful Ramen vs. Fried Ramen = Unhealthful Ramen Not “Points of Parity” strategy, but “Points of Difference” strategy

10. 10 Development Process of Nature is Delicious (6/6) ■Commercial Production (Cont’d) –Pricing Price consumers think reasonable for fried Ramen: 680 won (Actual average price: 680 won) Price consumers think reasonable for premium Ramen: 1,200 won  Pricing Nature is Delicious at 1,200 won –Sales Strategies Launching the product at the top 10 percent of supermarkets in capital area  Gradually escalating the sales to other areas Improving brand awareness Continuously exposing the product by displaying the product at a conspicuous place near famous Ramen products Using a slogan to advertise the product concept: “It’s time for non-fried Ramen!” Various promotion events In-store promotion Cross promotion Gift promotion

11. 11 Result of the Development ■Sales –Monthly sales: Around 50,000 packs, 1.3 billion won (June 2011) ■Customer Satisfaction –Relative quality index comparing to other famous Ramen brands: 1.1 –Intention to repurchase: 84% –The most satisfied age group: 30-40 years old shoppers

12. 12 Discussion Questions (1/2) ■What were the key success factors of Pulmuone in developing and selling Nature is Delicious?

13. 13 Discussion Questions (2/2) ■Although Nature is Delicious has succeeded in Ramen market, there are issues to be solved to Pulmuone. To maintain the pioneer advantage in non-fried Ramen market, Pulmuone has to check rival companies and constantly improve its product. What strategies would be helpful for Pulmuone to solve these issues?