Local noodle manufacturers lose out to imported products

The country’s first instant noodle manufacturer, KP Noodle, has been shut for over five months now

Local noodles and chips manufacturers are struggling to remain afloat amid stiff competition from imported products that have flooded the market.

The domestic market is in fact saturated with imported instant noodles and chips from India, Thailand, Korea and Japan, among others. And local manufacturers have been finding it next to impossible to penetrate the market. 

KP Foods Private Limited, the first local instant noodle manufacturing company in the country, established in 2016, has been shut for over five months now.

The Nu 6.8mn noodle production project, based in Norbugang, Samtse, is one of the biggest ever funded by the Rural Enterprise Development Corporation Limited (REDCL) under the Revolving Fund I. The total cost of the project is Nu 8.5mn with 20% equity top up from the proprietor.

KP Foods has remained virtually shut since December last year. The company has sent its employees on unpaid leave until the plant is operated.  Two employees have already left the company.

The company is expected to restart only towards May end, that is if everything goes well. “I don’t have hope from the local market but the demands from the Indian market may soar after completing documentation formalities,” said the Proprietor of KP Foods, Amardeep Chhetri.

The company has struggled to repay the loan installment since November last year amounting to Nu 0.46mn. The proprietor has informed REDCL of the situation. “But I am managing to repay with whatever amount I can afford,” said Amardeep Chhetri. 

The company has to pay monthly repayment of Nu 0.8mn for 10 years.

The domestic market is crowded with over 97 different imported noodle brands with multiple varieties of each brand.

The introduction of Goods and Service Tax (GST) in India has also affected local producers. Export has become a challenge due to documentation hassle.

“Although Indian market is very price sensitive market, the initial response was promising. But their new taxation system has affected our sale,” added the proprietor of KP Foods. “Adding 12% GST further shoots up the price.”

Happy Green Cooperative that produced Happy Chips has stalled production for a few years now. A new owner has taken over the business and is planning to revive the chips production.

“The promoters need to work seriously once the product is launched,” said the Founder of the cooperative, Sangay Rinchen aka Farmer Sangay.

Sersang K Bong Food Private Limited, another instant noodle manufacturing company based in Phuentsholing, is yet to test the market. The company is in the process of marketing the product in and outside the country. It has already started production and the product will be launched soon.

The establishment of REDCL, identification of CSI sector as a priority and enhanced access to capital have encouraged business starts-ups.

However, a few business projects have failed to takeoff, primarily due to stiff competition from imported products. Local producers question if there is a need to correct market conditions to favor local businesses.

The economic affairs ministry has prioritized CSI sector in the 12th Plan for import substitution. However, Economic Affairs Minister Loknath Sharma told Business Bhutan that the ministry cannot impose restrictions on import as a means to promote domestic products. And if done so, it would undermine customers’ freedom of choice.

“We are really concerned about the issue but no immediate action can be taken. We are also looking into promoting companies initiating import substitution. We will look into it,” said the Lyonpo.

In the 12th Plan, the government will also concentrate on marketing, packaging, certifying and standardization of domestic products to boost export, added Lyonpo. “The ministry is also working on to prioritize CSI projects where they can get access to enough funds and even attract Foreign Direct Investments.”

Krishna Ghalley from Phuentsholing