---
title: "A 30-Year Brief History of the Condiment Industry: Why Has This Low-Key Market Produced Giants with Trillion-Yuan Market Value?"
description: "This article explores the history, classification, key success factors, and investment opportunities in China's condiment industry, highlighting its resilience, high barriers to entry, and potential for growth despite its low-key nature."
author: "龙猫君"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-15"
language: "en"
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# A 30-Year Brief History of the Condiment Industry: Why Has This Low-Key Market Produced Giants with Trillion-Yuan Market Value?

> This article explores the history, classification, key success factors, and investment opportunities in China's condiment industry, highlighting its resilience, high barriers to entry, and potential for growth despite its low-key nature.

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[Introduction] If we were to find a country in the world that has the deepest research on eating, I think China would definitely be one of them. We don't need to look into complex data or analyze statistically how much Chinese people love eating; we can simply look at traditional proverbs to understand the significance of eating to Chinese people. For example, losing a job is not called losing a job, but 'stir-fried squid.' Having a stable job is not called a job, but an 'iron rice bowl.' Chinese food emphasizes the harmony of five flavors. Besides the taste of the ingredients themselves, various important condiments are also key elements. So today, Longmao Jun is here to talk about this industry closely related to eating, an industry that seems to consist of small products but is actually a big industry. **This industry contains many big opportunities that investors in consumer goods have previously overlooked.
**1 How is China's condiment industry classified?**
Before discussing the definition and classification of the condiment industry, let's first look at its history.
The history of Chinese people using condiments can be traced back thousands of years. Compared to the complex variety of condiments today, the most important two in the past were soy sauce and vinegar. Let's look at the history of these two products separately.
Chinese food emphasizes the harmony of five flavors: sour, sweet, bitter, spicy, and salty. These are used to describe both the five tastes and the state of Chinese people's fate.
Vinegar, as one of the main sources of sour taste, holds a pivotal position in the history of Chinese condiments.
Historical records do not document the specific invention process of vinegar, but in unofficial historical legends, vinegar was invented by Heita, the son of Du Kang, the famous inventor of wine (why such a strange name?).
It is said that after Du Kang invented wine, his son Heita worked in the workshop, carrying water and moving jars, gradually learning the art of brewing.
During this process, Heita, who had a good sense of thrift, felt it was a pity to discard the grain residue from brewing, so he stored it and soaked it in a jar.
On the 21st day at the hour of You (5-7 PM), when he opened the jar, an unprecedented aroma wafted out. Tempted by the rich fragrance, Heita tasted it; it was both sour and sweet, delicious, so he stored it as a 'seasoning paste.'
What was this seasoning paste called? Heita named it 'vinegar' (cu) by combining the character for 21st day (廿一) with the character for You (酉).
Of course, this is just a legend. In fact, China is the earliest country in the world to brew vinegar from grains, with written records dating back to the 8th century BC. During the Spring and Autumn and Warring States periods, there were already specialized vinegar workshops.
By the Han Dynasty, vinegar production became widespread. During the Northern and Southern Dynasties, the production and sales of vinegar were already significant. The famous work 'Qimin Yaoshu' systematically summarized the experience and achievements of vinegar making from ancient times to the Northern Wei period.
The book recorded 22 methods of vinegar making, which is the earliest record of grain-based vinegar in existing Chinese historical materials.
In modern times, many vinegar varieties with regional characteristics have gradually formed. **For example, Shanxi Old Mature Vinegar, which is considered the northern vinegar system; Zhenjiang vinegar, which is in the south but classified as northern in brewing technique; Sichuan Baoning vinegar; Beijing Longmen vinegar; and Tianjin Duliu vinegar.**
Among these, one important city must be mentioned: Zhenjiang. Just as eating crayfish inevitably brings up Xuyi and Qianjiang, from Nanjing, the capital of six dynasties, a 20-minute high-speed train ride takes you to Zhenjiang.
This city, called 'the best landscape under heaven' by Sun Quan in the Romance of the Three Kingdoms, is famous not only for Jinshan Temple and Liu Bei's marriage, but most importantly, it is a city renowned in China for vinegar. Longmao Jun once strolled through the Zhenjiang Vinegar Culture Museum in the city, experiencing the vinegar culture of Zhenjiang.
After discussing vinegar, let's look at soy sauce. Soy sauce is equally important in condiments, and its origin is closely related to another condiment: paste (jiang).
According to public information, soy sauce is a seasoning with a history of thousands of years of brewing in China. It is a liquid condiment brewed from beans, wheat, and bran, evolved from paste. The earliest form was made from pickled fresh meat.
Obviously, early Chinese laborers could not use scarce meat to brew soy sauce, so after fully utilizing their wisdom, they invented a method using soybeans, which are more common and cheaper, to make soy sauce. From then on, the use of soy sauce became widespread.
After discussing the two important brothers in condiments, let's now formally and solemnly explain what the condiment industry is.
In official terms, the condiment industry refers to products widely used in cooking, culinary arts, and food processing to harmonize flavors and aromas, and to remove fishy or gamey smells, enhance fragrance, and increase freshness.
According to data from the China Condiment Industry Association, the annual turnover of condiments in China accounts for about 10% of the food industry's output, making it a typical case of 'small products, big market.'
**In the last 10 years, China's condiment industry has grown at an average annual rate of over 15%, with total industry output exceeding 140 billion yuan and total production exceeding 10 million tons.**
This large market is subdivided into many vertical fields. Overall, condiments have completely different classifications depending on the classification method.
**First, we classify by end product category:**
**Soy sauce is the largest category.** Generally, soy sauce can be divided into brewed soy sauce, blended soy sauce, fish sauce, and shrimp oil.
Here, we need to focus on brewed soy sauce, which can be further subdivided into high-salt dilute-state fermented soy sauce and low-salt solid-state fermented soy sauce.
**Let me explain what high-salt dilute-state fermented soy sauce is.** It is made from soybeans or defatted soybeans and wheat, using a higher concentration (usually 18.5%-20.5%) of saltwater (2-2.5 times the total raw materials), and fermented at low temperature for 3-6 months in a flowing state.
**Low-salt solid-state fermented soy sauce is made from defatted soybeans, bran, and wheat flour, steamed, cultured with koji, and fermented at high temperature using a lower salt concentration (about 6-8%) in a solid-state method.** This type of soy sauce has a higher fermentation temperature and a shorter production cycle, with the finished product ready within one month.
From the simple comparison above, the former fermentation method takes longer and results in higher quality soy sauce than the latter.
Similarly, vinegar, an important category in condiments, is divided into brewed vinegar and blended vinegar. Brewed vinegar can be further divided into solid-state fermented vinegar and liquid-state fermented vinegar. These vinegars can be further subdivided into bran vinegar, aromatic vinegar, aged vinegar, and smoked vinegar.
**Next is the third category: pastes, which we almost come into contact with every day.** These pastes can also be divided into two types: brewed pastes and blended pastes. The classification here is a bit complex, so Longmao Jun will explain it in detail.
**First, brewed pastes are divided into three categories: flour paste, fermented black beans, and soybean paste.**
**Blended pastes mainly have three categories: yellow soybean paste, broad bean paste, and mixed bean paste. Yellow soybean paste is further subdivided into big paste, yellow paste, and doubanjiang (chili bean paste).**
**The next major category is fermented bean curd (furu).** This is what we commonly call stinky tofu. According to classification, stinky tofu can be divided into green, red, white, and paste types of fermented bean curd.
**After the fermented bean curd category, we need to talk about chicken essence, which Chinese people prefer.** We collectively call this type of condiment compound seasonings.
This field has many well-known brands, such as the famous Totole chicken essence. Compound seasonings mainly have three types: solid, liquid, and semi-solid.
**Next is the cooking wine category.** It is also divided into two types: brewed cooking wine (yellow wine, sake, and wine-based cooking wine) and blended cooking wine.
**Finally, let's talk about spices and flavor enhancers.** Spices are easy to understand; the main categories are pepper and dried chili.
Flavor enhancers are mainly represented by monosodium glutamate (MSG). Of course, besides the above classification methods, the industry also commonly uses the following classification methods:
According to taste system, it can be subdivided into: salty, sweet, umami, sour, and spicy.
According to product form, it can be divided into paste, soy sauce, liquid, powder, and solid.
According to flavor, it can also be divided into: Sichuan style, Cantonese style, and Western style.
In short, China's condiment market has many types and diverse classification methods.
**2 What are the key elements of the condiment industry?**
To truly understand an industry, besides understanding the context, it is more important to understand the core and most critical elements. Below, Longmao Jun will list the key elements of the condiment industry one by one.
**Key Point 1: Why is the condiment industry a good industry?**
For anyone who wants to start paying attention to and enter an industry, the first question that lingers in their mind is: Is this a good industry, an industry worth investing in? How should I judge this industry?
The first method you learn is, of course, looking at the industry growth rate, which is almost a common practice.
So, from data comparison, is the condiment industry a good industry?
Let's first look at a set of data, and then compare it with the data of the industry leaders. Through the comparison of these two sets of data, we might be able to draw some conclusions.
**First, let's look at growth. In the last 10 years, China's condiment industry has grown at an average annual rate of over 15%, with total industry output exceeding 150 billion yuan.** From the perspective of growth and market size, it is an industry on the rise.
Especially with the wave of consumption upgrade among the new generation of consumers, there is no problem from the big market perspective.
Next, let's look at the leader in this industry, the famous Haitian Flavoring & Food Company.
Currently, its A-share market value is 104.736 billion yuan. In 2013, 2014, and 2015, the company's revenue growth rates were 18.84%, 16.85%, and 15.05% respectively, and net profit growth rates were 33.03%, 30.12%, and 20.06%. It can be said that it has achieved rapid growth.
Through traditional data indicators, we can find that this industry is still a rapidly growing market, and a giant leading enterprise has already emerged.
**Now, let's talk about why this is a good industry from a second perspective.**
A good industry not only needs to meet high-speed growth, but also another important point is to be minimally affected by cyclicality.
Consumer goods, being closely related to people's lives, are greatly influenced by economic levels and cycles. For example, large consumer goods like automobiles and jewelry are affected by economic cycles.
But condiments are not. On one hand, condiments account for a relatively small portion of residents' disposable income; on the other hand, condiments are a rigid demand in consumer behavior, so they are minimally affected by cyclicality.
They are even not related to seasonal changes, and regional restrictions are also relatively small. Therefore, the condiment industry is highly insensitive to cyclicality.
**This ensures that a condiment brand will not be greatly affected by external environment. Once it stabilizes a specific market, unless it encounters black swan events like food safety issues, its revenue scale will not suddenly decline.
**Finally, this industry is a high-profit industry.** Why can a few-yuan condiment achieve such high profits? Longmao Jun believes this is determined by the industry's characteristics.
Unlike general daily chemical consumer goods that require large advertising investments, the condiment industry derives a significant portion of its sales revenue from special channels, namely the catering channel.
This channel is less affected by advertising, so the channel costs are much lower than those for general consumer goods.
**Key Point 2: Relationship with upstream and downstream industries**
Since the condiment industry relies on deep processing of agricultural and sideline products, from the perspective of upstream and downstream relationships, its upstream is the agricultural industry, and its downstream includes catering, food processing, and circulation industries such as supermarkets.
From the upstream direction, the biggest impact is that agricultural product prices are greatly influenced by supply and demand, so upstream agricultural product prices have a significant impact on condiments. If agricultural product prices rise, it will directly affect the prices in this industry.
Next, the downstream has an even greater impact on the condiment industry. For example, the catering industry, as a direct sales channel, has a greater impact. If the catering industry grows in scale, the condiment industry will also rise accordingly.
**From this strong correlation, we ultimately find a pattern: the strong correlation between catering and the condiment industry is positive.**
**Key Point 3: Why is this a high-barrier industry?**
You might currently think that this industry is a low-barrier industry, and that it would be difficult to establish industry barriers if you enter it. However, the opposite is true.
**This industry has very high barriers, and most importantly, it is a capital-intensive industry.**
Here, let's briefly talk about the three stages of a consumer goods industry, using the condiment industry as an example.
**Generally, the first stage of a consumer goods industry is a single-brand strategy. At the initial stage of entering the market, due to relatively small capital, it is crucial to capture a hit product to occupy consumers' minds, become the first in a single category, and even form a mental monopoly.**
This strategy is very obvious in the condiment industry. Some companies even rely on a single product to thrive for many years.
Let's look at Wang Shouyi 13 Spices. A low-priced product can sell over 1 billion yuan in scale, which is a miracle. Moreover, it never diversifies, insisting on selling a single product to the extreme. Another example is Laoganma, which also sells a hit product for a long time.
Longmao Jun has mentioned in many previous articles the benefits of sticking to a single product: it can form mental barriers and scale barriers, and provide significant advantages in raw material procurement.
Of course, many companies will then enter the second stage, using brand dividends and channel advantages to quickly develop more SKUs around similar categories to occupy shelves.
At this stage, due to strong brand momentum, the brand begins to harvest brand dividends, manifested as continuous and substantial profits, reaching the peak of the brand value curve.
Finally, brands generally naturally enter the third stage, which is the resource integration stage. This stage is characterized by extending the value chain through investment and mergers and acquisitions.
At this point, two approaches emerge: vertical integration and horizontal integration.
All consumer goods basically go through these three cycles. Currently, companies in the condiment industry are basically in the second stage, that is, the brand is at its peak.
**At this stage, the biggest barriers to entering this industry are:**
**Capital barrier.** The condiment industry is definitely a capital-intensive industry. Whether it is the construction of factories or later brand and promotion, heavy investment is required. Small entrepreneurs have limited opportunities to enter.
**Technical barrier.** The brewing and fermentation technologies in the soy sauce and vinegar industries are relatively complex, not as easy as imagined.
**Channel barrier.** This industry absolutely relies heavily on channels. Currently, e-commerce sales account for a relatively small proportion of distribution.
People mainly rely on catering channels and large distribution models for sales, so building such channels takes a long time.
**3 What are the opportunities in this field?**
The first two parts briefly introduced the competitive advantages and barriers of this industry. Finally, let's talk about some new opportunities under consumption upgrades and the hidden champions in this field.
As a highly competitive and high-barrier industry with many giants, most players in the condiment industry have decades of history. It is not easy to break through their markets, but there are still some capital-level opportunities:
**The integration opportunity for regional leaders is a historic opportunity.** Although there are giants like Haitian with a market value of over 100 billion yuan, there are many regional integration opportunities in markets such as Sichuan.
Moreover, the asset value of these brands is undervalued, and from an investment logic perspective, there are plenty of investment opportunities now.
**The high-end soy sauce and high-end condiment market is still in a blue ocean period.** This market is recognized as the one with the most growth potential in the future. Although there are brands like June Fresh and some Japanese soy sauce brands in this market, there is still a lack of high-end brands. Especially with the rise of the new generation of consumers, the demand for personalized condiments is stronger.
**Brand condiments based on specific populations.** Besides seasoning, the more important aspect of condiments is nutritional value. Children and the elderly have different needs for nutritional value.
Products specifically for children and the elderly are still not sufficiently segmented, so from this dimension, there is still considerable development space in this field.
**Investment opportunities in channel sinking.** Chinese brand condiments have not penetrated the vast rural market enough, and there are huge investment opportunities in between.
**There are opportunities for product brands to emerge in certain categories.** For example, in the dried chili and chili sauce fields, there are opportunities for product upgrades and replacements.
Although product brands like Fanye have emerged in recent years, it is still not enough. This market has not seen a new hit product for a long time, and the condiment field actually has such new opportunities.
**Opportunities to provide condiment products for specific catering categories.** For example, developing new brands for specific products like hot pot and Western food also presents opportunities.
In short, by investing and seeking targets around these needs, there are still significant investment opportunities in this field.
**Source: New Consumption Insider (ID: cychuangye)**
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