On March 26, Yihai International (01579. HK) released its 2023 annual report, with operating income of 6.148 billion yuan, unchanged from the previous year, and net profit attributable to shareholders of 853 million yuan, a year-on-year increase of 14.9%. Earlier, some listed condiment companies released performance forecasts, plus food (002650. SZ) expects a net profit loss of 160 million to 228 million yuan in 2023, Qianhe Flavor Industry (603027. SH) is expected to increase net profit by 48% to 68% year-on-year, and Zhongju High-tech (600872. SH) expects to turn a profit in 2023...... The performance of condiment companies in 2023 is differentiated.
However, at the site of the 110th National Sugar and Wine Commodity Fair (hereinafter referred to as the "Sugar and Wine Fair") held in Chengdu from March 20 to 22, the condiment exhibition area was a lively scene. On the morning of the first day of the exhibition, Shen Yueren, founder and CEO of Hangzhou Jiadian Taste Technology Co., Ltd., received more than 10 dealers from various channels, and she used "very lively" to describe the day's exchanges. In front of many booths, dealers also lined up in a long line to taste products, understand investment policies, and look for business opportunities.
At the scene of the sugar and wine party, the condiment industry also "blew" three wind directions.
Caption: Sugar and Wine Fair Condiment Exhibition Hall Aru Khan / photo
"0 add" tuyere
In the condiment exhibition hall of the sugar and wine fair, the eye-catching "0" can be seen everywhere. Hengshun Vinegar Industry (600305. SH) booth on a whole wall is placed a unified design of products, the center of the packaging printed red, blue and other different colors of the word "0", on behalf of "0 addition"; in the booth of Shuita Aged Vinegar, aged vinegar is divided into green products, organic products and other different grades, the staff introduced, these are "0 preservatives" and "0 sweeteners" products.
Xu Dai, chief marketing officer of Shanghai Totole Food Co., Ltd., said that in the condiment industry, the product upgrade of basic seasonings has become the mainstream of the industry, and one of the important directions is "zero addition".
The "0 add" trend emerged in 2022. At that time, Haitian Flavor (603288. SH) is alleged to be a "double standard", and the products sold in China contain additives such as flavor enhancers, benzoic acid, and sweeteners, while the products exported to Japan do not contain additives. At the same time, the concept of "zero addition" is also widely recognized by consumers.
Under this trend, condiment companies with "zero additive" products as their main business have also received more attention. Qianhe Flavor introduced in its financial report that the company "focuses on high-quality and healthy condiments such as zero-added brewed soy sauce, vinegar, cooking wine", and its operating income in 2022 will be 2.436 billion yuan, a year-on-year increase of 26.55%, and its net profit will be 344 million yuan, a year-on-year increase of 55.35%.
Shen Yueren also observed that "0 addition" has almost become the industry standard, she introduced, the production of "0 addition" products is a systematic project, and the upstream supply of raw materials should also achieve "0 addition", from the production of products containing additives to the conversion to the "0 addition" track, the iteration speed of the entire industry is 2 to 3 years, which means that more brands will participate in this track in the future. Therefore, some channel dealers asked Shen Yueren: "The market is full of '0 additive' products, who should I choose?"
Destocking and price wars
"The result of product homogenization is that the industry can only fight for price", Xu Zhenghao, head of Kraft Heinz Chinese sauce catering market, also saw the homogeneous competition in the condiment industry, including the "0 additive" subdivision track, the price war in the condiment industry has already begun.
At the booth of the sugar and wine fair, the staff held a bottle of "0 additive" vinegar to introduce, the terminal can be priced at 15 yuan, and various promotions can be finally implemented to about 11 yuan. Another dealer said that in the terminal market, he even saw that the promotional price of white vinegar of the head brand was reduced to 2.5 yuan per bottle.
Qianhe Flavor also mentioned in its 2022 financial report, "During the reporting period, the price of raw materials remained high, the competition on the consumer side intensified, the discount promotion efforts of various enterprises increased, the frequency increased, the cost side and the market side were squeezed in both directions, and the operating pressure of enterprises increased sharply."
Behind the price war is product homogeneous competition on the one hand, and the pressure on channel inventory on the other hand. Due to the impact of the epidemic on terminal catering consumption, the condiment industry will generally face the problem of difficulty in removing channel inventory in 2021 and 2022. Tian Di, a food and beverage researcher at China Merchants Securities Research and Development Center, said that one of the themes of condiment business operations in 2023 is destocking.
Haitian Flavor Industry said at the performance briefing, "The elongation of the consumption recovery cycle and channel inventory are the main reasons affecting the company's performance." Since 2023, Haitian Flavor has focused on adjusting the inventory level of dealers, and the current channel inventory has declined to a certain extent, but it is still facing certain inventory pressure."
According to Tiandi's research, by the end of 2023, the inventory of the industry's leading brands has returned to a relatively reasonable level, and the destocking is basically over. Therefore, this year's Spring Festival dealers to the manufacturers of the enthusiasm has been improved, the second batch of merchants and terminals are also willing to cooperate with the manufacturers to do a good start, in order to achieve new performance goals.
For the inventory forecast for 2024, Tian Di said that this mainly depends on the recovery of small catering stores, "Although the catering industry has a recovery trend last year, it is mainly the head catering and chain catering that have recovered better." If the recovery of small catering outlets can be better this year, it will be a certain boost for the condiment industry."
B-end channel expansion
At the scene of the sugar and wine fair, Shenyue people promoted products and communicated and cooperated with channel merchants from all over the country. Compared with previous years, she felt the changes of channel dealers, "I used to see dealers in large supermarkets, but this year I found that the dealers have diversified, including agricultural distribution channels, fresh food channels, community group buying, BC channels (urban medium-sized supermarkets, convenience stores and other sales channels) dealers, and the business format is more abundant."
Founded in 2020, Hangzhou Jiadian Flavor Technology Co., Ltd., where Shen Yueren is located, is a company focusing on household compound seasonings. Shen Yueren found that offline distributors have a strong thirst for new products and concepts of condiments, and they prefer to choose products that have a certain reputation in online channels and bring them to offline development.
Compound seasonings have also become a "new concept and new product" that dealers pay attention to. The so-called compound seasoning refers to the condiment that the manufacturer has blended various basic condiments according to a certain proportion. The Spice Flavor booth showcased a variety of seasoning products, such as oden seasoning and kimchi soup seasoning, which were easy to use.
"Compound seasoning will continue to grow very well because it meets consumer demand for convenience, and we expect that the overall volume of compound seasoning, whether solid or liquid, will have a very large room for growth. Xu Dai introduced.
In addition to the growing imagination of compound seasonings on the product side, on the channel side, the rise of many prefabricated food processing enterprises also provides space for the expansion of the condiment industry. Xu Dai said: "The expansion of B-end (enterprise users) channels is an important channel that all condiment companies will do. Totole will also cooperate more deeply with such end customers, and the R&D, marketing, and sales departments will go to the customers, whether it is the processing workshop or the back-end kitchen, to better understand their needs for products, so that our products and packaging forms can better meet their needs. ”
Tian Di also believes that the corporate performance and industry focus of condiments in 2024 lies in the development of B-end customers, "leading brands have begun to pay more and more attention to compound condiments, as well as industrial customers such as prefabricated food processing, and customized customers of chain restaurants, so we can also focus on which companies are doing better in customization needs."