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Noodle Maker Holds Appeal for Lawyer

CEO Victor Sim left a prominent firm to try to turn around ramen producer Union Foods.

October 11, 2006|David Colker | Times Staff Writer

On a production line at Union Foods, Chief Executive Victor Sim watches blocks of twisted ramen noodles careen down a chute like mini-toboggans.

Since 1974, the Irvine company has been making such packets, which take three minutes to turn boiling water into a primary food group for college students. But high costs and other problems sent Union Foods on its own steep plunge in recent years.

Sim, 40, left the partnership track with a prominent international firm last year to try his hand at staging a turnaround.

"When I first saw the financials of the business," Sim said over the noise of a production line turning out the company's signature Snack Noodles packets, "I thought, 'This is horrible. Why would anyone want to get into this?' "

But Sim had been looking for a business to run and when he visited Union Foods and saw how hard the factory employees were working, he thought it might be manageable.

Since then he has slashed costs and reined in distribution to get the company, now called Union Foods Newcorp., to the break-even point.

But there is a long road ahead if the relatively small company is to thrive in the competitive ramen industry, dominated by two Japanese makers, Maruchan and Nissin.

Sim seems less an executive than a political candidate stumping for votes on a recent day in the factory as he works the line, shaking hands, giving thumbs up, slapping backs and hugging one of the truck drivers.

The factory floor is far removed from the world of corporate law, where Sim worked on scores of deals for high-tech ventures in the Silicon Valley and Los Angeles.

Most recently, Sim was at Sonnenschein Nath & Rosenthal, where novelist Scott Turow practices law.

Last year, Sim brought in a team of investors to buy Union Foods from Korean investors for an amount he declined to divulge. The company was losing about $2.5 million annually.

"I was bored," Sim said. "I could have kept doing those deals for another 40 years and never be in contact with a normal person. There was something lacking."

Unlike Turow, who continues to turn out thrillers, Sim didn't keep his day job. It's consuming to run a ramen factory, especially at a time of steadily declining prices. Ramen packages that a decade ago cost 40 cents each now can be found for as little as a dime.

The International Ramen Manufacturers Assn. said Americans bought 39 million packages of ramen noodles last year, up 30% from the 30 million sold in 2001.

But the value of U.S. ramen sales declined to $326 million, down 10% from the $361 million sold in 2001, according to Mintel International Group, which surveyed major retail outlets (with the exception of Wal-Mart Stores Inc., which wouldn't share sales figures).

"People had come to think of ramen just as dorm food," Mintel spokeswoman Chanda Rowen said. "They weren't moving beyond that."

Before tackling ramen's image, however, Sim had to stop the company from hemorrhaging money. The task was so daunting that he named Union's parent company Solafide, after the Latin phrase for "by faith alone."

He changed the weekly production schedule from five eight-hour days to four 10-hour days.

"Every time we start up the production line, we use up time just getting everything prepared," Sim said. "Going to a longer workday, without having to restart, increases productivity."

He signed long-term, volume discount contracts with suppliers and shifted the administrative offices into the factory building to lease out the freed-up space next door.

Two new policies cut sales.

Sim stopped supplying customers on the East Coast. "Because of fuel costs, we were losing money on every order to them," he said.

Secondly, Sim slightly raised wholesale pricing by nearly a penny a package to boost margins that had gotten razor thin in the face of competition from far larger rivals.

The cut in overall revenue was severe. Union Foods will reap about $20 million in sales this year, down from about $30 million in 2005.

The company will break even, Sim said, as a result of lower costs and increased productivity.

It's a leaner company too, with staffing cut to 90 full-time employees from 120 since Sim took over. This was done by eliminating workers who were not U.S. citizens or legally in the country. The savings were offset by salary increases of about 20% for production-line workers and providing health insurance for all full-time employees, he said.

With Union Foods on the road to being stabilized, Sim began exploring new products designed to attract older customers. The first of these, Snack Noodles Gourmet Soup, is scheduled to hit 7-Eleven stores this month.

Retailing for about $1.50, the soup will provide a larger quantity of food than the company's other products and will come with higher-quality noodles.

The word ramen won't even appear on the package.

Wanting to develop an even more grown-up product for discriminating buyers, the company sent one of its newest hires, Diana Hom, 22, to look over the offerings at upscale markets such as Whole Foods.

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