Rev: Aug, 2012 POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http :// posmit.postech.

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

2. Contents

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. 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• Selling price: 1,000 won (The highest Ramen price at that time) • Required refrigerated distribution • Failed and withdrawn from the market after one year • SaengGaduekSaeng-Ramen (2005) • Customers’ increased interest in non-fried Ramen • Improving the flavor of Ramen and launching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. Development Process of Nature is Delicious (1/6) Opportunity Identification • Recognizing problems of existing non-fried Ramen Productsuch as short shelf life and requirement for refrigerated storage Concept Development • Healthful, Delicious, Non-fried, Low-calorie, Using good ingredients • Non-fried Ramen as a new ‘category’ Product Design • Delicious non-fried Ramen using good ingredients and which can be stored at room temperature Process Design • Triple rollers, air dry, and foaming technologies Commercial Production • Targeting health/nutrition oriented customers • Emphasizing differences from the existing fried Ramen products • Implementing various customized marketing strategies Development Process of Nature is Delicious

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. 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. 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. 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 • PulmuoneSaeng-Ramen = Healthful Ramen vs. Fried Ramen = Unhealthful Ramen • Not “Points of Parity” strategy, but “Points of Difference” strategy

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

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?