Noodles revive bored lawyer

Big-time corporate attorney takes on a failing ramen factory at age 40

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November 01, 2006|By David Colker | David Colker,Los Angeles Times

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

Since 1974, the company has been making packets that 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 his position with an internationally prominent 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 cut costs and reined in distribution to get Union Foods to the break-even point. But there is a long road ahead if the 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 shepherded deals for high-tech ventures in the Silicon Valley and Los Angeles.

Most recently, Sim was an attorney at famed international law firm Sonnenschein Nath & Rosenthal LLP, where novelist Scott Turow practices.

Last year, Sim brought in a team of investors to buy Union Foods for an amount he declined to divulge. The South Korean-owned 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 entirely consuming to run a ramen factory, especially since the industry is softening in the United States because 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 Association found that Americans bought 39 million packages of ramen noodles last year, up 30 percent from the 30 million sold in 2001. But the value of U.S. ramen sales declined to $326 million, down 10 percent from the $361 million sold in 2001, according to Mintel International Group, which surveyed major retail outlets.

"People had come to think of ramen just as dorm food," said Mintel spokeswoman Chanda Rowen. "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 meaning "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.

But 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.

He also slightly raised wholesale pricing 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.

Still, 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 from 120 since Sim took over. He eliminated workers who were not U.S. citizens or legally in the country. The savings were offset by salary increases of about 20 percent for production line workers and 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 soon.

Retailing for about $1.50, the soup will provide a larger portion than the company's other products and will come with higher-quality noodles and a dried vegetable garnish.

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

For all the tenuousness of the situation, Sim said he was not looking back, even though his pay will be about a third of what it would have been this year as a lawyer. He declined to say how much that would be, but he does have an equity stake in Union Foods and will prosper if the company does.

There are rewards along the way. Sim takes pride in the fact that a company that might have gone under has begun turning around.

David Colker writes for the Los Angeles Times.

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