Text | Watching the tide of new consumption Wang San
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The people take food as the sky, the way of tasting food, and taste first.
The pursuit of color and flavor in Chinese food has given birth to a number of 100-billion-level markets, from chain restaurants to prefabricated dishes, from Chinese baking to casual snacks, the sweet and sour of the new "food" generation has left enough room for condiments. According to iiMedia Consulting data, the market size of China's condiment industry will reach 513.3 billion yuan in 2022 and is expected to reach 1,002.8 billion yuan in 2027.
Haitian's soy sauce, Hengshun's vinegar, Totole's chicken essence, and Wang Shouyi's thirteen incense are all well-known products that have entered thousands of households. From the perspective of revenue scale, in the first half of 2023, the revenue of Meihua Bio, which ranks first, will be 13.59 billion yuan, and Fufeng Group will rank second with a revenue of 13.58 billion yuan, followed by Haitian Flavor Industry with a revenue of 12.96 billion yuan, which is the only three companies with a revenue of more than 10 billion yuan.
In 2023, the condiment industry will turn to the rising channel of zero addition, and the rise of the national tide will inject potential energy into the popularity of Lotus MSG. When consumers spontaneously joined the army of "rehabilitation" of MSG, looking back at the old MSG companies that silently adhered to it, they found that Meihua Bio, one of the first generation of "MSG kings" and won the top revenue list of the condiment track, more than half of the revenue source was not MSG.
The lotus and plum blossoms that used to be the double flowers of the MSG market have long been driven to different tracks.
A hundred flowers are blooming, and rumors are rife
Flowers, heavy flowers, chrysanthemums, rhombus flowers, sensitive flowers, Teng flowers, flavor flowers, national flowers, holy flowers, emperor flowers, sea flowers, redbuds, Lingxiao flowers...... These "flowers" have one and only one thing in common – they are all the names of MSG brands.
Monosodium glutamate, the chemical composition is monosodium glutamate, one of the amino acids, is an umami seasoning, soluble in water, its aqueous solution has a strong umami taste, can ease alkali, acid, bitterness, and salt when the taste is fresher, is a common freshness product in the domestic market.
MSG is usually fermented from wheat, corn and other food crops, and can also be made from starch or pyroglutamic acid contained in beet molasses, and can also be synthesized chemically. Monosodium glutamate participates in the normal metabolism of protein in the human body, promotes the oxidation process, has a certain health care effect on the cranial nerves and liver, and is recognized as a safe food by the Food and Agriculture Organization of the United Nations and the World Health Organization. There is no limit to the amount of food that can be consumed by adults, but it is not suitable for infants.
As the preferred condiment for enhancing freshness and flavor, monosodium glutamate has a history of more than 100 years, and as an industry in the new era, the monosodium glutamate industry has also had a golden period of development in the mainland.
According to public information, from 1950 to 1980, there were about 80 monosodium glutamate manufacturers in the country; since the 80s of the 20th century, the production of monosodium glutamate in mainland China has entered a stage of rapid development, and the characteristics of industry technology tends to be mature, low cost and large market have attracted many enterprises to enter the game.
In 1992, the mainland became the world's largest producer of monosodium glutamate, and since then, the output has ranked first in the world. From 2002 to 2010, the average annual compound growth rate of monosodium glutamate production in mainland China reached 11.1%, and there were more than 200 monosodium glutamate production enterprises in the country, with an annual production capacity of 2.56 million tons.
Before the monosodium glutamate industry was mired in "carcinogenic suspicions", the mainland monosodium glutamate industry showed a situation of a hundred "flowers" blooming, and there were dozens of monosodium glutamate brands in the name of flowers. The grapevine says that flowers are easier to become "fine" than grass, but the truth actually hides a "yang conspiracy", as Jiang Baoan, chairman of Shandong Linghua Group, once said: "A new product must move closer to the industry benchmark, so as to be recognized, and it is better to use 'flowers' than to use others." ”
The industry benchmark, naturally refers to the first generation of "monosodium glutamate king" Lotus monosodium glutamate, the rise in the 20th century in the 90s of the monosodium glutamate enterprise was the strongest representative of this category, is a household name condiment leader, even the way of naming has made peers scramble to follow suit, is the real "I flowers after the flowers are killed".
However, since 2004, Lotus MSG has successively fallen into operational difficulties, declining efficiency and other difficulties, and has changed hands several times, becoming a pedal for new condiments to impact the traditional MSG market, and its nearly 20 years of struggle can be seen from a report in the Beijing News: According to Li Mingyuan, an employee of the Lotus Health Branch, around 2017, the Lotus MSG General Factory was changed to a "sub-packaging company", purchasing MSG from other enterprises, and then pulling it to the factory for finished product packaging.
The company that silently supplied the first generation of "MSG King" is another "MSG King", and the "2023 National Tide Brand Top 100 Listed Companies" enterprise - Meihua MSG.
Before the formation of a new "Big Three" pattern in the MSG industry, the MSG industry has experienced multiple rounds of elimination. For example, the Ministry of Industry and Information Technology has released the 2013 19 industrial industries to eliminate backward production capacity targets, the monosodium glutamate industry target task increased the most, an increase of 142,000 tons. After several rounds of integration, all monosodium glutamate production enterprises with a production capacity of less than 50,000 tons have been eliminated, and the industry concentration has increased rapidly.
Euromonitor International survey data shows that from 2013 to 2018, the mainland's MSG consumption dropped from 1.146 million tons to 890,000 tons. It is expected that in 2023, domestic MSG consumption will decline to 770,000 tons.
What dealt a critical blow to the MSG industry was a rumor about MSG - "Flavor Cancer". Until the veracity of this rumor is tested, MSG products are directly demonized, behind which is the growing demand for healthy diets and the consumption mentality of "believing what you have".
For enterprises that stick to the MSG business, spreading rumors with one mouth and refuting rumors breaks their legs. The rumor of "delicate cancer" has been floating for too long, and the speed and strength of the rumor are far from catching up with the degree of fermentation of the rumor, making the rumor itself more like "cancer".
The World Health Organization's International Agency for Research on Cancer (IARC) has not published any conclusions about MSG. As early as 1987, the Joint Expert Group on Food Additives (JECFA) of the Food and Agriculture Organization of the United Nations and the World Health Organization classified MSG as the "safest" food additive, believing that there was no need to limit the daily intake.
In fact, the origin of the global MSG panic was in 1868, when the New England Journal of Medicine published a letter from a reader, claiming that after 15-20 minutes of eating Chinese food, the back of the neck began to numb, and spread to the arms and back, generally lasting about two hours.
The impact of this incident quickly spread to the European and American markets, and was summarized as CRS, Chinese restaurant syndrome, that is, Chinese restaurant syndrome. In the years that followed, CRS became a weapon of exclusion for Chinese restaurants, and many American restaurants even used "no MSG" as a selling point.
A rumor intended to target Chinese restaurants going overseas has blocked an industry in the Chinese market.
On the other hand, new condiments quickly fill the market gap left by monosodium glutamate, chicken essence, mushroom essence and other new products are more in line with market demand, in recent years, the accelerated rise of compound condiments has also squeezed the living space of traditional condiment enterprises, and many monosodium glutamate enterprises have lost their way in the process of developing new business.
Combined with the financial report information, in 2022, the top three in the domestic monosodium glutamate industry are Fufeng Group, Meihua Biotechnology, and Ningxia Yipin, and since 2010, Lotus Health has deducted non-net profit losses for 10 consecutive years, although it is still the most familiar "monosodium glutamate king" in many people's impressions, but it has reached the point of bankruptcy and reorganization at the business level.
Compared with the overall downward trend of the industry and the multiple reorganizations of Lotus Health, Meihua monosodium glutamate has been on a stable road. In 2022, Meihua Bio's operating income reached 27.94 billion yuan, a year-on-year increase of 21.1%, and its net profit was 4.41 billion yuan, a year-on-year increase of 83.4%, both of which hit a record high.
Different from the typical transformation ideas such as hot pot base and pre-made dish seasoning, Meihua MSG, which has been a household name since the 90s, has cut into a seemingly unreachable market and become the absolute leader across the two categories.
Resigned and went to sea, backdoor listing
In 1972, 24-year-old Meng Qingshan entered the Langfang Commercial Bureau after transferring from the army, and held the "iron rice bowl" for ten years. Among the units closest to the market in the system, it coincided with the period when the domestic market economy was accelerating, Meng Qingshan accumulated knowledge of business development and market operation, so he resigned in 1982 and went to sea, joined Langfang Donggu Port Timber Company as a manager, and started his own business in 1989 and became self-employed.
This is not the career route favored by Hebei people, but in Langfang, known as the "Pearl of the Beijing-Tianjin Corridor", it seems a little less deviant, but logical.
In 1999, Meng Qingshan focused on the MSG industry as an entrepreneur. At that time, the annual output of monosodium glutamate in mainland China ranked first in the world and was also the world's largest exporter of monosodium glutamate.
Because of the lag behind the Lotus monosodium glutamate era, when Meihua monosodium glutamate entered the game, the C-end consumer goods market has gathered a number of old monosodium glutamate enterprises, so Meng Qingshan expanded the sales scope, in addition to the fast-moving consumer goods market, but also the layout of raw material exports and B-end large customer market. Compared with the consumer goods market, the requirements for branding in the field of export and large customer supply are relatively low, which is not afraid of deep alleys for this plum blossom that has just bloomed.
At the beginning of the century, Meihua also fell into an existential crisis brought about by rumors. However, Meng Qingshan believes that crises, dangers and opportunities coexist. He joined the army of MSG science popularization, and repeatedly emphasized that MSG is harmless on TV, radio, outdoor, newspapers and other media platforms.
In 2006, Meihua won the title of "China's well-known trademark" and "the most competitive brand"; in 2007, Meihua reached cooperation with CCTV's "Daily Diet" column at a price of up to 10 million yuan; in 2008, Meihua signed Ni Ping as the spokesperson of the product image. Through a series of brand building actions, the industry status of "MSG King" has been formally established.
In addition to the creation of brand image, Meng Qingshan has also established a unique sales system for Meihua, and through the establishment of cooperative relations with well-known brands, MSG as an industrial product has firmly occupied the domestic food industry customer base, which is in line with the strategy of anchoring the B-end market at the beginning of its establishment.
After years of development, Meihua Group has become a supplier of well-known brands such as Unilever, Totole Chicken Essence, Haoji Chicken Essence, Master Kong Instant Noodles, Qiaqia Melon Seeds, Guizhou Lao Gan Ma, etc., and the sales volume of large customers and high-quality customers accounts for 70% of the total sales of monosodium glutamate, export products account for 20%, and terminal products account for only 10%.
Deeply bound to large customers, rooted in large and medium-sized cities and overseas markets, helped Meihua Group successfully pass the knockout of the domestic monosodium glutamate market, and became an invisible giant in the invisible market.
In terms of production, according to the official website of Meihua Group, in 2006, Meihua became one of the world's largest producers with an annual output of 400,000 tons of monosodium glutamate. In 2008, Meihua introduced two strategic investors, Xintianyu and CDH, began to cut into the field of high value-added amino acids, glutamine, threonine products were put into production during the year, and in 2009, Meihua Group R&D center was completed and opened, followed by the production of new amino acids such as isoleucine, tryptophan, proline.
In 2010, Meihua Biotechnology successfully entered the A-share market through the backdoor Wuzhou Pearl;In April 2014, Meihua's company securities abbreviation was officially changed to "Meihua Bio", and positioned as a full-chain synthetic biology company mainly engaged in amino acid products.
After the successful listing, Meihua accelerated the pace of research and development and factory construction. At present, Meihua has four production bases in Langfang, Hebei, Tongliao, Inner Mongolia, Wujiaqu, Xinjiang, and Baicheng, Jilin, and its business segments are animal nutrition amino acids, human medical amino acids, and food taste trait optimization products, and the above businesses will contribute operating income of 14.91 billion yuan, 550 million yuan and 10.10 billion yuan respectively to the company in 2022.
In January 2017, Meng Qingshan resigned as chairman of Meihua Biotechnology and was replaced by Wang Aijun. According to public information, Wang Aijun is the eldest daughter of Meng Qingshan, who studied accounting and management at Beijing International Business College and Peking University Senior Management Seminar, and was the general manager of Meihua monosodium glutamate, the former director and general manager of Meihua Group, and the current director and general manager of Meihua Group.
Across categories, absolute leader
In the 2022 annual report, Meihua Biotechnology said that after years of development and precipitation, the company has formed a business structure with animal nutrition amino acids, umami products and human medical amino acids, colloidal polysaccharides and other advantageous products as the core, focusing on amino acids and taking into account the development of multiple categories.
After dismantling the revenue structure, it is found that animal nutrition amino acids are the highest proportion of Meihua biological revenue category, which is a general term for the amino acids used in animal nutrition feed additives, and Meihua biological main lysine and threonine products, is the basic unit of protein, but also an essential amino acid for livestock and poultry growth. This kind of protein "animal health products" that must be supplemented by the outside world is also nicknamed "the protein powder of the second senior brother".
In 2022, animal nutrition amino acids accounted for 53% of Meihua Bio's total revenue, and with a growth rate of 26.2%, it became the company's fastest-growing business segment. So far, the second curve has become the mainstay of the group's revenue, and Meihua Biotechnology has also completed the transformation from the first generation of "monosodium glutamate king" to "animal health products giant".
The vigorous development of amino acids in animal nutrition also has its own industry opportunities.
In the development of the mainland aquaculture industry, soybean meal has been added to the feed for a long time to achieve the goal of supplementing threonine and lysine. According to the National Bureau of Statistics, the import volume of soybeans in the country in 2022 is nearly five times that of domestic production, and there is a large gap between production and demand. In addition, in recent years, the price of bulk consumer goods in the international market has fluctuated greatly, and soybean meal, as a by-product of soybeans, is facing risks such as insufficient supply and high comprehensive cost.
Based on this, the implementation of low-protein and low-soybean meal diversified diets, reducing soybean meal consumption, and then reducing soybean imports has become an important proposition to ensure the healthy development of the aquaculture industry and ensure national food security in recent years. From 2021 to 2023, the Ministry of Agriculture and Rural Affairs successively issued the "Technical Plan for the Reduction and Substitution of Corn and Soybean Meal for Pig and Chicken Feed" and the "Three-year Action Plan for the Reduction and Substitution of Soybean Meal for Feed", etc., which have gradually deepened the spirit of the instructions for the reduction of soybean meal.
Among them, the "three-year action plan for the reduction and substitution of soybean meal for feed" puts forward the action goal of "one reduction and two increases", that is, the proportion of soybean meal consumption continues to decline, the development and utilization capacity of protein feed resources continues to increase, and the supply of high-quality forage continues to increase, requiring the proportion of soybean meal in feed to decrease by 0.5% per year, from 14.5% in 2023 to 13% in 2025.
The trend of soybean meal reduction has made threonine and lysine an incremental market, which has also become the background of Meihua Biology's stable growth in recent years and maintaining growth momentum in the future.
According to Baichuan Yingfu data, in 2023, the production capacity of threonine and lysine in mainland China will be 1.27 million tons and 4 million tons respectively, and the two production capacities of Meihua Biotechnology will be 300,000 tons and 1 million tons respectively, both of which are the first in China and firmly in the lead.
In the monosodium glutamate business field with traditional advantages, Meihua Biology, Fufeng Group and Ningxia Yipin occupy the head of the industry. The concentration of monosodium glutamate market is higher than that of animal amino acids, Baichuan Yingfu data shows that in 2023, the CR3 market share of the domestic monosodium glutamate industry will be as high as 88%, and the monosodium glutamate production capacity of Meihua Biotechnology will be about 1 million tons, ranking second in the industry.
What's more, although MSG has been confirmed to be a healthy condiment, and Lotus MSG will become popular in 2023, MSG is still listed as a "highly polluting product". Lotus monosodium glutamate is almost the only variable that is expected to break the "big three" pattern, and as the "supplier" of Lotus monosodium glutamate, the head position of plum blossom monosodium glutamate is also relatively stable.
However, after maintaining a high growth rate for two consecutive years, Meihua Biotechnology will encounter the problem of declining performance in 2023. According to the financial report, in the first half of 2023, Meihua Biotech achieved revenue of 13.59 billion yuan, a year-on-year decrease of 4.4%, and a net profit of 1.41 billion yuan, a year-on-year decrease of 44.4%.
Meihua Biotech once mentioned in the 2023 semi-annual report that the decrease in revenue and net profit was mainly due to the decline in product prices. The sales volume of lysine and threonine of fist products increased by 9.7% and 4.0% year-on-year respectively, but the sales price decreased by 23.0% and 24.8% year-on-year respectively, and the decrease in selling price led to a decrease in main business income and profit, and the gross profit margin of feed amino acid products decreased by about 20% year-on-year in the first half of the year.
In terms of monosodium glutamate products, the price peak in 2023 will appear in January, according to Zhuochuang information data, the average price of domestic monosodium glutamate closed at 8666.7 yuan/ton at the end of June, down 11.6% from January. In the first half of 2023, the revenue of Meihua Bio's umami products (monosodium glutamate) decreased by 4.1% year-on-year.
In summary, the profit margins of the two mainstream products of animal amino acids and monosodium glutamate have declined, resulting in a decline in the company's profitability. In order to cope with the declining trend, Meihua Biotechnology urgently needs to adjust the revenue structure and accelerate the layout of new businesses with high gross profit such as medical amino acids, so as to improve the company's comprehensive profitability.
(Source: Meihua Bio's 2022 financial report)
As Meihua Biotech showed in the financial report, after the new production line of xanthan gum was put into operation, the sales volume in the first half of 2023 increased by 19.3% year-on-year, and the average price increased by 28.0% year-on-year, so the revenue increased by 52.9% year-on-year, and the gross profit margin increased by 5.9% year-on-year. When the average price and gross profit margin of the main products declined, star products such as xanthan gum and pharmaceutical amino acids ensured the relative stability of income.
Or affected by this, the two core profit indicators of Meihua Bio's revenue and net profit attributable to the parent company in the first three quarters of 2023 have narrowed compared with the first half of the year.
The market trend is ever-changing, from the "monosodium glutamate king" to the "animal health products giant", Meihua is still looking for a new growth curve.