Thailand: Prices of instant noodles increased

[AyG]

I had to laugh at the "Thai Logic" when I read this. People can't afford at this price, sales go down, so, hey, we'll RAISE the price.

Amazing Thailand.

Not "Thai Logic" or "Amazing Thailand" - just plain old Economics 101.

Production costs include fixed costs. As the volume of production decreases the fixed costs as a proportion of the unit cost increase. Ergo the purchase cost must rise to maintain constant profit.

[Thai at Heart]

increased the prices of their noodles due to slower sales in the instant noodle market.

And there you have it ladies and gentlemen. Thai business strategy and culture in one perfect sentence. He wants more competition. How dangerous is that. We have been privy to 6 years of street protests because some new kid on the block upset the apple cart.

I.would expect open war of someone p*****d on Mamas market.

The response to reduced demand is to put up the price and call for more competition in a regulated market. The logic baffles me.

I do wonder sometimes how they think markets work in this country. They throw around words like competition, and demand or supply without having any clue how it works. Or is it just that Thailand is some weird parallel universe where everything is ass backwards.

[ezzra]

Idiotic Country..sales drop so increase the price ...Duhh!!!!

Same practice when there are 2-3 units left un sold in a project, obviously not the best

of the bunch, what they do? they increase the price of the reject units, go figure.....

[ezzra]

"A slower economy and the increase in the cost of living have prompted the public to spend less of their income on consumer goods — affecting the sales of instant noodles in turn."

Okay, let me get this straight: People currently don't have not as much money to spend on "consumer goods" including instant noodles. So in order to compensate slower sales, the solution of this problem for the economic wizards at the instant noddle company (a.k.a. executives) is to CRANK UP the price?

Sometimes the mind just boggles.

But that logic will make people buy even less on the a count that those noodles cost more

than before....

[KonKorat]

OMG! you drop the price when sales are slow,don't they teach commerce in Thailand

[bigbamboo]

Idiotic Country..sales drop so increase the price ...Duhh!!!!

Bad news for your pocket.....good news for your health.

[harrycallahan]

Imagine the chart of this relationship, as demand falls price rises, eventually demand approaches 0 and the prices soars off to infinity.

Wanna buy a packed of mouldy noodles? $9999999999.

[USNret]

I had to laugh at the "Thai Logic" when I read this. People can't afford at this price, sales go down, so, hey, we'll RAISE the price.

Amazing Thailand.

Not "Thai Logic" or "Amazing Thailand" - just plain old Economics 101.

Production costs include fixed costs. As the volume of production decreases the fixed costs as a proportion of the unit cost increase. Ergo the purchase cost must rise to maintain constant profit.

Sorry, but that shows an amazing lack of understanding of economics. Look up price elasticity or supply-and-demand. As price goes up, demand goes down. By Thai logic, they will continue to increase price until there is no demand left at all. I guess at that point, the government steps in, buys all the noodles, and takes out loans to pay back the noodle factories (which are never paid and end up going bankrupt). The noodles are sold on the world market, and the politicians bank all the profit. I guess it's not so dumb after all.

[Torrens54]

But of course. Thai logic would have it that by increasing the price, everyone will rush out and by more Noodles.

Maybe the price hike is to cover the cost of some of the MUCK they put into these things, like the MSG and other substances that almost any other civilized country would ban.

Edited April 29, 2014 by Torrens54

[harrycallahan]

I had to laugh at the "Thai Logic" when I read this. People can't afford at this price, sales go down, so, hey, we'll RAISE the price.

Amazing Thailand.

Not "Thai Logic" or "Amazing Thailand" - just plain old Economics 101.

Production costs include fixed costs. As the volume of production decreases the fixed costs as a proportion of the unit cost increase. Ergo the purchase cost must rise to maintain constant profit.

An economies of scale argument. It's valid up to a point. The fixed overheads would already be spread pretty thin at multinationals.

[Skywalker69]

Wasn't there just a piece about the price not going up? Those slippery noodle guys!

YES THERE WAS.

It is likely that the rest of the producers will increase their product prices on the back of rising production costs.

It was "Mana Instant Noodles" and they have not yet increased their prices.

[AyG]

Sorry, but that shows an amazing lack of understanding of economics. Look up price elasticity or supply-and-demand. As price goes up, demand goes down. By Thai logic, they will continue to increase price until there is no demand left at all.

"As price goes up, demand goes down" - sometimes true. However, people are prepared to buy Ferrari, Cartier watches and Beluga caviar, and the profit margins on all these products are much higher than on Mama noodles. The demand is also based upon the higher price - not upon the intrinsic value.

As for "by Thai logic" that's just plain insulting to Thai business people. Many of them are extremely astute, and I'm pretty sure that applies to the leaders of Thai President Foods (who have 45% of the dried noodle market here) and since founding in 1978 have lead to the company becoming the 10th largest such company in the world.

[puipuitom]

I import foods from S.E. Asia and China to Europe already since 1994, but I NEVER experienced ONE Thai interested to increase efficiency, do his/her utmost to DEcrease the cost price.

His Ultimate Whisdom, his Superior Knowledge, his Unfailing Magnificence also called, Zhe BOZZ, fix a sales price when he is in the mood, and that’s it. Even when a carton price of 12 cans/crt is the same as of 24 cans/crt, never an ”international marketing and sales manager” comes on the idea even to LOOK at his prices.

When you show them, they are completely out of competition, you do not get a “thanks for the market info”, but an angry response like .. it is forbidden to ask prices from the competition. "You quote me US$ 7,50 / crt, but.. from another Thai source I am quoted US$ 6,15/crt, exactly the same product…and US$ 5,75 from Vietnam / US$ 5,50 China". Do not do so, as you only make them angry.

Their "worldfamous Thai Kitchen; kitchen of the world", so all will starve when they have no longer access to the marvellous Thai foods" seems to be the attitude. No Thai has ever seen a cooking book from other kitchens. I showed my business partners the Spanish, Italian, Greek, Turkish but especially French, and... like I proves there was intelligent Life of Mars....

As another EU trader recently told me: “treat them as trash. This is my target price, and one cent per carton higher, no use to reply “.

[joepattaya1961]

I thought that the sales of the Mama-like crap-food would increase in case of slow economy?

It seems the perfect "food" for students without enough money.

[TinoThailand]

Soon it's a luxeary to become sick by food like products

[Halion]

Typical Thailand, Yesterday a firm assurance that the price would not go up and today a 180. Do not think it is a problem with losing money, more like a problem of insuficient profit to maintain the glamerous lifestyle.

[empireboy]

The sooner the companies with that kind of thinking go broke... the better...

[tingtongteesood]

Sell them at 50 baht a pack then it becomes an 'ammart' luxury item and everybody longs after them and wishes they could have them to show off to their friends....

[mancub]

Rise in the cost of living excuse ? So the increase in the minimum wage was not sufficient to accomodate a 25/50 satang increase in a packet of noodles,then ?

[attrayant]

"As price goes up, demand goes down" - sometimes true. However, people are prepared to buy Ferrari, Cartier watches and Beluga caviar, and the profit margins on all these products are much higher than on Mama noodles. The demand is also based upon the higher price - not upon the intrinsic value.

The demand for those particular labels is not very elastic at all. Whether a Ferrari costs $290,000 or $295,000 the buyer will most likely still buy. But cheap consumables are different. Brand elasticity for things like noodles or cigarettes is very high, meaning that a slight change in price is highly likely to cause buyers to jump to a cheaper brand. This results in something called an oligopoly, where a few large companies dominate the market to keep the prices for all brands uniform. It appears that "some companies" (as quoted by the OP) are trying to break the oligopoly. Basic economics tells us that consumers should respond by abandoning the higher priced item in favor of a lower priced competitor.

So if Mama is not one of the "some companies" mentioned in the OP, and they hold their prices constant, they stand to see an increase in their sales because of this.

[sabaii69]

My thai girlfriend just 'fined' me B500 for going out of town. Hope she spends the money on noodles.

[how241]

Idiotic Country..sales drop so increase the price ...Duhh!!!!

Bars do the same thing when it get slow. RAISE prices to make up for lack of customers. A sure way to get MORE customers. I think not !!!

[Suradit69]

Idiotic Country..sales drop so increase the price ...Duhh!!!!

Ah yes, more economic wisdom from Farang Land, home of the same financial geniuses who brought us:

Duh, indeed.

[AyG]

"As price goes up, demand goes down" - sometimes true. However, people are prepared to buy Ferrari, Cartier watches and Beluga caviar, and the profit margins on all these products are much higher than on Mama noodles. The demand is also based upon the higher price - not upon the intrinsic value.

Brand elasticity for things like noodles or cigarettes is very high, meaning that a slight change in price is highly likely to cause buyers to jump to a cheaper brand.

With instant noodles there isn't an alternative product - it's the cheapest of the cheap. And people will always need to eat something. In difficult times that means instant noodles. Given a certain amount of brand loyalty/brand prestige (and in Thailand Mama is almost synonymous with dried noodles), then a slight price increase is not going to cause a significant shift to fractionally cheaper brands - and it really is fractional because all the brand, even after increases, are at rock bottom prices. In short, the brand elasticity is not very high in this case.

[Thai at Heart]

"As price goes up, demand goes down" - sometimes true. However, people are prepared to buy Ferrari, Cartier watches and Beluga caviar, and the profit margins on all these products are much higher than on Mama noodles. The demand is also based upon the higher price - not upon the intrinsic value.

Brand elasticity for things like noodles or cigarettes is very high, meaning that a slight change in price is highly likely to cause buyers to jump to a cheaper brand.

With instant noodles there isn't an alternative product - it's the cheapest of the cheap. And people will always need to eat something. In difficult times that means instant noodles. Given a certain amount of brand loyalty/brand prestige (and in Thailand Mama is almost synonymous with dried noodles), then a slight price increase is not going to cause a significant shift to fractionally cheaper brands - and it really is fractional because all the brand, even after increases, are at rock bottom prices. In short, the brand elasticity is not very high in this case.

Indeed, the price increase is measured in quarter of satang. However, the stated logic of reduced consumption being a reason to put it up is bizarre.

[fabphil]

prices of every thing gone up here, inflation is rampant...

[madmitch]

Question: Could consumption be shrinking because Thais have realised that instant noodles are actually crap, with minimal nutritional value and flavoured with salt, sugar MSG and chemicals?

Answer: No.

[Mister Fixit]

Here we go again - increase the price because sales have fallen ...

It's called 'economies of scale' you dolts - DROP the price, take a smaller margin and watch sales volumes increase - THEN increase the price ... Duh!

[attrayant]

With instant noodles there isn't an alternative product - it's the cheapest of the cheap.

If I'm reading the article right, there will be an alternative product after the prices of certain brands increase. There will be a cheapest and a slightly less cheap. However finely we split the hair, the reasoning behind it still defies logic.

[Guitar God]

I thought they were already ฿6 a pack, how can they go up if that's the highest allowed price?

The writing in some of these articles leaves a lot to be desired.