Dragon fruit instant noodles maker gets $1 mln investment on TV show

Caty Food JSC, a maker of dragon fruit instant noodles, has received a $1 million investment from "shark" Nguyen Hoa Binh, chairman of NextTech Group, in exchange for 10% equity.

The transaction was finalized Monday on television show "Shark Tank Vietnam - Billion Dollar Deal" season 7.

Caty Food general director and co-founder, Phan Thi Na, revealed that the company had initially sought $1 million for 5% of its shares, valuing the company at $20 million.

Nguyen Hoa Binh explained his decision to invest $1 million in Caty Food for 10% of the shares by highlighting trends in the food processing industry.

He noted that in the U.S., publicly traded food companies typically have a price-to-earnings (P/E) ratio of around 15. In contrast, startups like Caty Food are often valued at a maximum of 10 times of its earnings.

With this year’s profit at VND20 billion ($787,700), Caty Food's valuation stood at approximately VND200 billion ($7.87 million). Based on this valuation, Binh initially offered $1 million for 11.1% of the shares.

After further discussions, the Caty Food team agreed to the deal of $1 million for 10% equity, successfully closing the funding round.

Niche market targets

Despite fierce competition in the instant noodle market, Caty Food aimed to capture 5% of the total market share by 2026, co-founder Na said.

She said that over 8 billion noodle packages were consumed in the country last year. While established players dominated the market, 27% remained in the hands of smaller companies, presenting a significant opportunity for Caty Food.

Notably, in the niche market of fruit-infused instant noodles, dragon fruit noodles face no direct competition and have substantial growth potential, she added.

The product was launched in December 2023 with a short clip titled "For the first time, dragon fruit is in instant noodles."

The campaign quickly topped social media trends in November and December 2023, garnering hundreds of millions of views and extensive organic reach on social platforms.

Caty's innovative marketing strategy led to rapid brand recognition. The demand for dragon fruit instant noodles surged, with the manufacturer struggling to keep up. Other brands also joined in, capitalizing on the trending "first time" theme.

Na said more than 3 million packages of dragon fruit noodles were sold following the campaign's success. The company has since expanded its distribution reach to over 10,000 retail points, earning revenues of VND46 billion ($1.81 billion) in 2023 with an after-tax profit margin of 8%.

For 2024, Caty Food has targeted revenues of VND250 billion ($9.85 million).

It has planned expansion to over 50,000 retail points by 2025, and set a long-term revenue goal of VND2,000 billion ($78.8 million) by 2026.

Currently, the company supplies about 1 million packages a day with a factory price of VND7,000 ($0.28) per package.

The founders have emphasized that they are not competing with traditional noodles brands; instead, they aim to innovate within the fruit-infused instant noodles segment.

‘Positive crisis’

Sharing insights on the campaign’s success, marketing director Tran Danh said the company's young marketing team was well-versed in popular culture and trends. Initially, they anticipated moderate virality, but the actual response exceeded expectations, creating a "positive crisis."

Danh said the team was already planning another major campaign for late 2024.

As a member of the Binh Thuan Dragon Fruit Association, Caty Food was also dedicated to finding markets for the fruit locally and nationally, he added.

The product was developed using nanotechnology after two years of collaboration with the University of Industry and Trade and the Saigon Institute of Economic Sciences.

The instant noodles, which contain 12% dragon fruit, have been certified as the product of a science and technology enterprise in Binh Thuan province.

This product represented a breakthrough, being the first time in the world that the dragon fruit was successfully incorporated into noodles, giving its makers a unique competitive edge.

The company has said that the addition of fresh dragon fruit reduces starch content, enhancing digestibility while imparting a delicious flavor.

Caty Food holds a technology patent registered in the U.S., China and several other countries.

Dragon fruit instant noodles have been exported to the U.S., China, Russia, Indonesia, Australia and other markets.

Caty Food has secured contracts with two major partners in the U.S. and China for supplying five and seven containers of the product, respectively.

Negotiations are underway for the supply of 10 containers to Russia and eight to Indonesia. Each container is valued at approximately VND700-800 million ($27,570-31,500).