Image credit: Visual China

Blue Whale News, November 1st - Recently, Foshan Haitian Flavouring and Food (603288.SH), Jonjee Hi-Tech Industrial and Commercial Holding (600872.SH), Qianhe Condiment and Food (603027.SH), and Jiajia Food Group (002650.SZ) have successively disclosed their third quarter reports for 2024.

Blue Whale News reporters noted that overall, in the first three quarters of 2024, Foshan Haitian Flavouring and Food continued the trend of increasing revenue and net income as shown in the semi-annual report; Jonjee Hi-Tech Industrial and Commercial Holding, although turned losses year-on-year, did not increase revenue; Qianhe Condiment and Food, after the end of the '0-additive' concept bonus period, saw a decrease in revenue and net income in the first three quarters; Jiajia Food Group's losses further expanded, with the lowest net income growth rate.

Apart from Foshan Haitian Flavouring and Food, other soy sauce companies have experienced a decline in revenue, which also reflects the weakness in consumer consumption in the soy sauce terminal market from another perspective. To cope with the challenges, leading companies have not only taken multiple measures to break through but also actively explored new market opportunities.

Out of the 4 'soy sauce stocks', 3 of them saw a decline in revenue.

In the first three quarters of 2024, out of the four listed companies including Foshan Haitian Flavouring and Food, Jonjee Hi-Tech Industrial and Commercial Holding, Qianhe Condiment and Food, and Jiajia Food Group, 3 companies experienced a decline in revenue. Among the three companies with declining performance in soy sauce stocks, Jonjee Hi-Tech Industrial and Commercial Holding had the highest revenue, with revenue of 3.946 billion yuan, a year-on-year decrease of 0.17%; net income was 0.576 billion yuan, a year-on-year increase of 145.28%. Qianhe Condiment and Food followed, with revenue of 2.288 billion yuan, a year-on-year decline of 1.85%; net income was 0.352 billion yuan, a year-on-year decline of 9.19%. Jiajia Food Group's revenue was 1.036 billion yuan, a year-on-year decline of 14.92%; net income was -0.068 billion yuan, a year-on-year decline of 166.58%.

The only company achieving growth was Foshan Haitian Flavouring and Food, with revenue of 20.399 billion yuan in the first three quarters of 2024, a year-on-year increase of 9.38%; net income was 4.815 billion yuan, a year-on-year increase of 11.23%.

As an important consumer product in people's daily diet, traditional condiments such as soy sauce are similar to most consumer product categories, relying heavily on the development of distribution channels.

As of now, Foshan Haitian Flavouring and Food has been one of the enterprises with the most complete offline distribution channel construction in the industry. However, since 2021, the number of dealers of Foshan Haitian Flavouring and Food has been continuously decreasing, from 7,430 at the end of 2021 to 6,591 at the end of 2023. As of the end of September 2024, the total number of dealers of Foshan Haitian Flavouring and Food is 6,722, with a net increase of 131 this year.

Perhaps in order to improve performance, condiment brands are accelerating the layout of dealerships, expanding their market sales through channel empowerment. Financial data shows that as of the end of the third quarter, Qianhe Condiment and Food had 3,424 dealers, a net increase of 174; Jonjee Hi-Tech Industrial and Commercial Holding had 2,395 dealers, a net increase of 311.

In contrast, Jiajia Food Group is moving at a slower pace. Financial reports show that as of 2023, Jiajia had only 1,526 dealers, an increase of only one from 2021, and its main coverage area is still central and southern China.

"Zero Additive" dividend gradually fading away.

It is an industry consensus that mainstream condiments such as soy sauce have entered the stock market, and finding new growth points has become a common challenge for condiment brands.

From a product perspective, soy sauce is still the main source of revenue for the above-mentioned companies. Foshan Haitian Flavouring and Food's soy sauce business accounts for a significant portion of the company's revenue, achieving 10.338 billion yuan, a year-on-year growth of 7.40%. Following closely is edible oil, with current revenue reaching 3.427 billion yuan, a year-on-year growth of 6.38%. Seasoning sauce contributed 2.034 billion yuan in revenue, an increase of 9.01% year-on-year.

In recent years, Foshan Haitian Flavouring and Food has accelerated its diversification process, venturing into many fields such as cereals, oils, rice, noodles, hot pot seasonings, compound seasonings, pre-cooked food, beverages, ice cream, and many more.

Based on the data for the first three quarters of 2024, the revenue share of other business sectors has increased to 16.69%, a year-on-year growth of 19.88% to 3.166 billion yuan, significantly outperforming the single-digit revenue growth rates of the soy sauce, condiment sauce, and oyster sauce sectors.

However, from the perspective of industry competition, the sectors that foshan haitian flavouring and food has entered already have established leading players. For example, in the hot pot base sector, there are haidilao, sichuan teway food group; in the edible oil sector, there are yihai kerry arawana holdings, fujian fengle, and in the purified water field, there are wahaha, nongfu spring, and evian. It is not easy for foshan haitian flavouring and food to compete in these areas.

Industry insiders believe that most of foshan haitian flavouring and food's cross-border products mostly follow the trend by utilizing existing channel resources or supply chain resources. Apart from brand value addition, the competitive advantage is not significant.

After the 'additive' controversy at foshan haitian flavouring and food, enterprises like qianhe condiment and food that focus on 'zero additives' soy sauce briefly took the lead. However, 'zero additives' seems not to be a lifesaver.

In the first three quarters, qianhe condiment and food's two main products soy sauce and vinegar both experienced a decline in revenue. Soy sauce products achieved a revenue of 1.435 billion yuan, a decrease of 2.44% year-on-year; vinegar achieved a revenue of 0.287 billion yuan, a decrease of 10.41% year-on-year.

On the other hand, jiajia food group is also vigorously developing a series of products such as low-salt and zero additives. However, based on jiajia food group's financial report data, the 'zero additives' and 'low salt' halo also seems unable to support high-speed company performance growth.

Furthermore, jonjee hi-tech industrial and commercial holding's soy sauce business also faces challenges, achieving a revenue of 2.299 billion yuan in the first three quarters, a 2.4% year-on-year decrease, accounting for 63.12% of total revenue. Chicken essence, edible oil, and other products achieved revenues of 0.508 billion yuan, 0.345 billion yuan, and 0.489 billion yuan respectively, with year-on-year changes of 4.48%, 1.94%, -12.94%.

Qianhe condiment and food also mentioned in their annual report the fiercely competitive market situation, where 'In 2023, consumers are pursuing value for money more extremely, with market participants further seizing existing consumption demands, leading to intensified competition.' 'The mainstream condiment market competition is fiercer, with enterprises further adjusting product price ranges, increasing discount promotions, and raising promotion frequency.'

Zhan Junhao, the founder of Fujian Huace brand positioning consultancy, stated that with the intensification of market competition and changes in consumer demand, each brand needs to strengthen product differentiation competition, focus on market dynamics and changes in consumer demand, and flexibly adjust marketing strategies.