The sales volume of quick-frozen noodles and rice declined, and the revenue of Sanquan Foods fell for the first time since its listing

Quick-frozen noodles and rice products lagged behind, and the net profit of Sanquan Foods both declined. Recently, the 2023 financial report released by Sanquan Foods showed that the operating income was 7.056 billion yuan, a year-on-year decrease of 5.09%, and the net profit was 749 million yuan, a year-on-year decrease of 6.55%. This is the first decline in revenue of Sanquan Foods since its listing in 2008, and this may be related to the decline in revenue and sales of traditional quick-frozen noodles and rice products, which are the main sources of revenue. As the growth rate of the market size of quick-frozen noodles and rice products continues to slow down, Sanquan Foods needs to find new growth points.

The decline in the performance of Sanquan Foods is related to the decline in the revenue of quick-frozen noodles and rice in the traditional business.

Quick-frozen noodles and rice products are the main business of Sanquan Foods, and the traditional three kinds (dumplings, glutinous rice balls, and zongzi) have always been the main source of its revenue. In the business structure of Sanquan Foods, the operating income of quick-frozen noodles and rice products accounts for more than 80% of the total operating income. However, in 2023, the operating income of quick-frozen noodles and rice products will be 5.829 billion yuan, a year-on-year decrease of 9.46%, and the sales volume will be 609,500 tons, a year-on-year decrease of 6.14%, accounting for 82.62% of the total revenue, a year-on-year decrease of about 4%.

This is the lowest revenue contribution from Sanquan Foods' quick-frozen noodles and rice products in four years. From 2020 to 2022, the revenue of this business segment will be 6.231 billion, 6.032 billion and 6.438 billion yuan respectively, with a year-on-year growth rate of 12.98%, -3.19% and 6.73% respectively.

Regarding issues such as performance and product income, a reporter from Beijing Business Daily sent a letter to contact Sanquan Foods, but did not receive a reply as of press time. The secretary of the board of directors of Sanquan Foods publicly explained that 2023 is a year of pressure on the growth of the company's traditional business, and quick-frozen food has the attribute of hoarding, due to the high performance base in 2022 and the relatively weak end consumer market in 2023, resulting in a decline in revenue. In addition to the changes in the consumer side, the competition in the industry is also more intense, and quick-frozen food companies are in fierce market competition.

The fierce competition in the market is also written in the financial report of Sanquan Foods. Sanquan Foods said in the financial report that the consumption side showed a weak recovery trend during the reporting period, especially in the fourth quarter of 2023, the competition of dumpling products is fierce, and there is a certain correlation between the sales of stuffed products such as dumplings and pork prices, and the long-term sluggishness of pork prices has a negative impact on the sales of such products. At the same time, due to the festive attributes of some products and the fluctuation of economic recovery, the recovery differences between different quarters are obvious.

According to the data, the current quick-frozen dumpling industry has formed a pattern of Sanquan Food, Synear Food, and Wan Chai Wharf as the "Big Three", and several leading enterprises such as Haibawang and Anjing Food compete for hegemony, and CR10 (the market share of the top ten enterprises in the industry) is as high as 73.3%.

However, in recent years, the overall sales of quick-frozen dumplings have declined. According to the data of the offline retail monitoring network, in 2022 and 2023, the market share of quick-frozen dumplings will decline by 1.26% and 3.21% respectively. During the Spring Festival in 2024, the sales of quick-frozen dumplings in offline channels nationwide decreased by 19.26% year-on-year.

Wu Daiqi, CEO of Shenzhen Siqisheng Company, said that the decline in sales of quick-frozen food may be related to the increasingly rich choice of other categories such as pre-made dishes and self-heating foods. When there are more and more convenient categories such as pre-made dishes, consumers are more and more selective, which affects the decline in sales of quick-frozen foods to a certain extent.

When the market tends to be saturated, the competition will naturally become more and more fierce, and whoever can seize the market more will have more competitive advantages. Judging from the financial report, the performance of Anjing Food, Qianwei Central Kitchen, which is also mainly engaged in quick-frozen food, has increased.

According to the financial report data, in 2023, Anjing Food will achieve operating income of about 14.045 billion yuan, a year-on-year increase of 15.29%, and net profit attributable to shareholders of listed companies will be about 1.478 billion yuan, a year-on-year increase of 34.24%, of which the revenue of quick-frozen rice and flour products will increase by 5.4% year-on-year. Qianwei Central Kitchen's operating income last year was 1.901 billion yuan, a year-on-year increase of 27.69%, and the net profit attributable to shareholders of listed companies was 134 million yuan, a year-on-year increase of 31.43%, of which the revenue of quick-frozen food increased by 27.68%.

As the market for quick-frozen noodles and rice products tends to be saturated, finding new growth points has become an important task for many brands. Anjing Food bluntly said in the financial report that quick-frozen noodles and rice products are in the mature stage of the industry, among which the traditional three are currently in the late stage of maturity, and prefabricated dishes are a sunrise track with strong certainty. In 2023, the company's revenue from quick-frozen dish products will be about 3.927 billion yuan, a year-on-year increase of 29.84%, accounting for 27.96% of total revenue, and the production, sales and inventory of quick-frozen dish products will increase by 29.52%, 32.71% and 61.12% year-on-year respectively.

Since Synear Food has not yet been listed, there is no specific performance data announced. However, from the sales of "persimmon Ruyi" glutinous rice balls that are popular on the whole network during this year's Lantern Festival, we can see that enterprises are also making efforts to differentiate the track. Synear Food said that due to the serious homogenization of quick-frozen products themselves, it is difficult for categories such as tangyuan to create breakthrough differentiated selling points, so it has developed and launched 3D tangyuan, and used social channels such as Xiaohongshu to break the circle to promote. This new persimmon Ruyi glutinous rice ball, which was only launched in October last year, has sold more than 100 million yuan within a few months of its launch, and quickly became the top 1 in the Xiaohongshu glutinous rice ball category.

Sanquan Foods is no exception, judging from the financial report, group meals, catering and other businesses are becoming the new business of Sanquan Foods. For a long time, the competition of quick-frozen noodles and rice products enterprises is mainly concentrated in the C-end market, and a fully competitive market pattern has been formed, but with the increasing demand for semi-finished ingredients in the catering industry, the demand potential for quick-frozen noodles and rice products at the catering end has increased, and the catering end has become a new blue ocean in the quick-frozen noodles and rice industry.

Sanquan Foods said in its financial report that the company adjusted the business strategy of chain catering channels last year and attached importance to the development of customized products. Sanquan Foods has launched brands such as "Sanquan Green Label" and "Quick Kitchen" for catering channels, and has carried out product development and production around the catering market. According to the financial report, in 2023, the company's catering market will achieve revenue of 1.430 billion yuan, a year-on-year increase of 17.9%, and a year-on-year increase of 4.02% in gross profit margin.

However, from the perspective of revenue proportion, the catering market accounts for only 20.27%, which has not yet been able to better support the performance of Sanquan Foods. From the perspective of the market, in addition to Sanquan Foods, many companies in the industry have begun to pay attention to the B-end catering market, and the competition has gradually increased. For example, at the end of 2018, Anjing Food adjusted its business strategy and launched a sub-brand "Mr. Frozen Food", which is specifically positioned in the catering ingredients category and cut into the catering channel;

According to Zhu Danpeng, an analyst in China's food industry, Sanquan Foods has problems such as brand aging, product aging, and operating system aging, which has caused great constraints on the company's development, and the speed of innovation and upgrading has lagged behind, and it has not kept up with the rhythm of the entire consumption change. Although Sanquan Foods has increased its layout in group meals and catering, the current effect is not obvious on the whole, and with the entry of more leading enterprises in the industry in the future, the original brand scale effect of Sanquan Foods will gradually weaken.

Jiang Han, a senior researcher at Pangu Think Tank, suggested that Sanquan Foods should pay attention to the changes in consumer demand and the development of market trends, adjust its product structure and business strategy in a timely manner, and increase R&D and innovation, such as launching healthier and more delicious quick-frozen foods for young consumers, or developing quick-frozen noodles and rice products with local characteristics. At the same time, it strengthens advertising, carries out online and offline promotional activities, enhances brand image, and establishes close cooperative relations with e-commerce platforms, supermarket chains and other partners, broadens sales channels and improves market coverage.

Beijing Business Daily reporter | Guo Xiujuan Zhang Han

Edited by Topol