---
title: "After Breaking Through in the Delivery Scene, How Can Hubang Chili Sauce Break Out Again?"
description: "Using a diversification approach based on category relevance and leveraging industry trends for strategic positioning can help companies explore emerging markets. In 2021, Lao Gan Ma's revenue declined by 1.2 billion yuan, dropping to 11th place on Guizhou's top 100 private enterprises list. Despite steady growth in the chili sauce market, Lao Gan Ma has been on a downward trend since 2016, reflecting the impact of emerging chili sauce brands. With Lao Gan Ma's brand aging, flavor fixation, and declining catering channels, can emerging brands like Hubang seize the opportunity to replace it?"
author: "李相如"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-01-07"
language: "en"
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# After Breaking Through in the Delivery Scene, How Can Hubang Chili Sauce Break Out Again?

> Using a diversification approach based on category relevance and leveraging industry trends for strategic positioning can help companies explore emerging markets. In 2021, Lao Gan Ma's revenue declined by 1.2 billion yuan, dropping to 11th place on Guizhou's top 100 private enterprises list. Despite steady growth in the chili sauce market, Lao Gan Ma has been on a downward trend since 2016, reflecting the impact of emerging chili sauce brands. With Lao Gan Ma's brand aging, flavor fixation, and declining catering channels, can emerging brands like Hubang seize the opportunity to replace it?

**Introduction: Using a diversification approach based on category relevance and leveraging industry trends for strategic positioning can help companies explore emerging markets.**

In 2021, Lao Gan Ma's revenue declined by 1.2 billion yuan, dropping to 11th place on Guizhou's top 100 private enterprises list. Despite steady growth in the chili sauce market, Lao Gan Ma has been on a downward trend since 2016, reflecting the impact of emerging chili sauce brands.

With Lao Gan Ma's brand aging, flavor fixation, and declining catering channels, can emerging chili sauce brands like Hubang seize the opportunity to replace it?

**Direct Challenges Are Hard to Change**

**The "One Superpower, Many Weaklings" Situation**

**1. Price and channels are Lao Gan Ma's two winning weapons**

According to a report by China Commercial Industry Research Institute, in 2021, Lao Gan Ma led the market with a 20.5% share. The combined share of second and third place, Lee Kum Kee and La Mei Zi, barely matched Lao Gan Ma, while other brands were grouped under "others."

Why has Lao Gan Ma maintained its dominance in the chili sauce market for years? It's related to price and, more importantly, channels!

From a price perspective, there's an unwritten rule in the chili sauce industry: Lao Gan Ma is the price benchmark. Brands priced lower struggle to profit, while those priced higher struggle to sell. This is similar to how Coca-Cola uses its 3-yuan price point to choke domestic soda brands. Without sufficient differentiation for off-position competition, they are suppressed.

Lao Gan Ma's structural cost advantage comes from its agency model. By using a first-level agency model, it eliminates the management costs and profit margins of multi-level distribution. Combined with not going public and not advertising, it perfectly executes Michael Porter's low-cost leadership strategy.

From a channel perspective, the saying "Where there are Chinese people, there is Lao Gan Ma" illustrates its offline channel control. According to a report by Shengshi Research, Lao Gan Ma's market coverage across the country exceeds 90%, with its products visible in offline supermarkets, convenience stores, small shops, and wholesale markets.

A county with 7 million in sales can be activated with less than 200,000 yuan in expenses. Lao Gan Ma's operational level has firmly sealed the offline channels for chili sauce. Except for Haitian and Lee Kum Kee, which can leverage brand advantages to stock supermarkets, and La Mei Zi, which can use years of accumulated advantages to stock wholesale markets, emerging chili sauce brands can only break through online.

**2. The four new challengers' tactics have not hit Lao Gan Ma's weak spot**

The tactics of emerging chili sauce brands can be roughly divided into four categories: old brand extension, new product differentiation, IP traffic, and delivery breakout.

The old brand extension method is represented by Haitian, Lee Kum Kee, Ji Xiang Ju, and Fan Sao Guang, which extend from pickled vegetables and rice sauce to chili sauce using their accumulated brand awareness. Ji Xiang Ju even partnered with "Bao Zou Man Hua" (a popular comic IP) to gain popularity among young people with monthly sales of 80,000 units.

However, since the extension area is not the core business of these brands, they often let it develop freely without injecting strategic resources, making it difficult to compete with expert brands in niche areas.

The second category, new product differentiation, is represented by Zhongjing Food and Chuan Wa Zi, which differentiate through raw materials, breaking through with mushroom sauce and roasted pepper sauce, respectively.

Chuan Wa Zi's chili sauce uses fresh peppers, offering a spicier taste and a fresh texture different from dried peppers, gaining popularity after being favored by Li Jiaqi's mother. Previously, Hubang also claimed to be fresh and spicy with better taste, but without significant results. The core reason is that in low-attention categories like chili sauce, slight differentiation is hard to attract consumer attention.

The third category, IP traffic, is represented by Fan Ye and Li Ziqi, using celebrity fame and fan effects for online breakthroughs. Fan Ye's signature products include truffle oil and king oyster mushroom sauce and beef with mushroom sauce, positioning in the high-end market in opposition to Lao Gan Ma. Zhongjing and Fan Ye's high-end flanking allows them to carve out a niche, but since they deviate from the mainstream market, they struggle to pose a direct threat to Lao Gan Ma.

The fourth category, delivery breakout, is represented by Hubang and Zuo Da Shi, bypassing Lao Gan Ma's traditional distribution channels by changing bottles to premium strip packs and small cans, entering the delivery scene as a delivery companion and achieving rapid growth.

Recently, Hubang repositioned itself as "meat chili sauce," aiming to differentiate by labeling Lao Gan Ma as "vegetarian chili sauce," continuing to target the rice accompaniment scene beyond delivery. However, leaders often have a second strategic opportunity to block innovation through follow-up imitation.

Gree and Midea used dual advantages in channels and brands to quickly chase Haier's inverter air conditioners; Kangshifu quickly launched Laotan sauerkraut beef noodles to maintain pressure on Master Kong. Currently, in Lao Gan Ma's Tmall store, 134 products are basically chili sauces, including bestsellers like "Dried Fried Shredded Pork Chili Oil," "Fine Beef Mince with Douchi Chili," and "Shredded Pork with Douchi Chili Oil."

**Without Understanding McCormick, It's Hard to Beat Lao Gan Ma**

In 2020, McCormick's chili sauce brand revenue reached 35.7 billion yuan, more than six times Lao Gan Ma's revenue that year, making it the true hidden champion in the domestic chili sauce market. McCormick's 30-year journey can be summarized in one sentence: Strong channels create strong brands.

After acquiring an American spice company, McCormick entered the chili sauce field. Through sweet and spicy differentiated flavors, it quickly penetrated Western fast-food channels like KFC and McDonald's, and through related diversification with ketchup and salad dressing, it firmly occupied the kitchens of five-star hotels, high-end Western restaurants, Western casual dining, pastry kitchens, and fast-food restaurants.

Then, through compound seasoning hot pot bases, it opened the industrial seasoning channel. With two super channels—catering and food industry—it surrounded and surpassed Lao Gan Ma, which focuses on household consumption, becoming a seasoning solution expert in the catering field.

Among the three major seasoning channels, household consumption uses far less seasoning than catering and food industry channels. Hubang's pursuit of the meal accompaniment scene beyond delivery is essentially still within the household consumption scene, facing the same product follow-up problem from Lao Gan Ma. A head-on confrontation with Lao Gan Ma would become a time-consuming and laborious tug-of-war.

**Strategic Recommendations Different from Hubang's Meat Chili Sauce**

**1. Meat chili sauce needs to define a new consumption scenario**

Hubang's early consumption scenario was as a delivery artifact, using refreshing chili sauce to solve the problem of some delivery food being unpalatable. But moving from delivery to daily meals' rice mixing scene, Hubang's value will be significantly reduced.

Hubang's meat chili sauce has begun to try new products, such as crayfish chili sauce and abalone chili sauce, but it needs to clarify what consumption scenario it targets and what consumer problems it solves.

At this point, Hubang's meat chili sauce could try to open the noodle mixing consumption scene. No matter how delicious the noodles you cook are or how complete the seasonings are, the lack of meat sauce is always a pain point. Hubang's meat chili sauce can provide new consumption choices for noodle lovers through convenience and small portions.

**2. Use the compound seasoning trend for strategic detour**

Launching an attack in channels where competitors have strong defenses often requires several times the personnel and promotion costs, being time-consuming and laborious with little effect. A strategic detour, avoiding competitors' fortified channels and flanking from their rear, is more effective.

Hubang can leverage the industry trend of compound seasonings, using the category relevance between chili sauce and compound spicy seasonings to extend and open the doors to catering and food industry channels.

Compound seasonings, with advantages of standardization and convenience, are gradually replacing single seasonings like salt, chicken essence, soy sauce, and cooking wine. Especially with the trend of weak cooking skills among the post-90s generation and cost reduction in restaurant kitchens, compound seasonings grew rapidly from 65.4 billion yuan in 2014 to 158.8 billion yuan in 2021, with a compound annual growth rate of nearly 10%.

For example, Lee Kum Kee seized the compound seasoning trend, using steamed fish soy sauce to partially replace salt, chicken essence, and cooking wine, creating bestsellers for steamed fish and clear stir-fried dishes. Then, Lee Kum Kee continued in the "one sauce makes a dish" direction, launching products like spicy hot pot sauce, sweet and sour sauce, and sour and refreshing golden soup sauce under the "One Move Wins" series.

Haitian and Ajisen have also developed in sour and spicy fish sauce and braised sauce. When other seasoning brands focus on hot pot base, functional soy sauce, and braised sauce, Hubang can use doubanjiang (fermented bean paste) as a breakthrough, upgrading it to a spicy compound braised sauce, thereby engaging in differentiated off-position competition and embracing a larger consumer market.

**3. How to ignite the spicy compound braised sauce market**

**(1) Open the consumer market with classic dishes**

The consumption scenario for compound seasonings is classic dishes. Associating with classic dishes helps reduce market education costs. Lee Kum Kee's steamed fish soy sauce was early associated with chopped pepper fish head and steamed fish, quickly forming a perception in consumers' minds that it can remove fishy smell and enhance freshness, and quickly entered the catering channel. Hubang's spicy braised sauce also needs to actively associate with classic Sichuan and Hunan dishes like pepper fried pork, boiled pork slices, and braised fish, to establish an expert brand perception for spicy compound braised sauce.

**(2) Use celebrity chef endorsements for cuisine extension**

From steamed fish to the eight major cuisines, each time steamed fish soy sauce penetrated a cuisine, it invited national banquet masters of that cuisine to endorse. Through these masters, the fit between the compound seasoning and the cuisine was clarified, and innovative preparations were made on classic dishes.

**(3) Be the first to define the preparation methods of classic dishes**

Whoever defines the category standard first holds the initiative in the market. Robam Appliances was the first to define the national standard for high suction in range hoods, once causing Siemens and Bosch's range hoods to face delisting. The leading brand of Shanxi aged vinegar promoted the establishment of the new national standard GB/T19777, using standards like high acidity, zero additives, and no shelf life to make "aged vinegar" and "old vinegar" brands that fish in troubled waters miserable. Qianhe Soy Sauce promoted the market consumption of zero additives, overtaking Haitian in the high-end soy sauce segment.

Hubang needs to build on celebrity chef endorsements, strategically cooperate with the Xiachufang app and New Oriental Culinary School, redefine the preparation methods of classic dishes from various cuisines at the source, and use the app's high guidance and high downloads to penetrate from chefs to families. Let Hubang be deeply bound with authentic cooking methods, becoming the first choice in both catering and household channels. At that point, carrying high sales and strong brand awareness to launch bottled chili sauce will be as unstoppable as rolling a round stone down a thousand-ren mountain.

**Conclusion**

Long-term focus on a single category can easily lead to a strategic perception of "category limitation." But in the process of growing from a small and medium-sized enterprise to a large enterprise, category limitation will cause the enterprise to encounter development bottlenecks. Using a diversification approach based on category relevance and leveraging industry trends for strategic positioning can help companies explore emerging markets and make original competitors irrelevant on new tracks.

The flanking development of the delivery channel created the early Hubang chili sauce. Hubang's new strategic development opportunity might be to consider related diversification with spicy braised sauce, using catering and food industry channels to flank and counterattack the household channel, creating greater brand possibilities with minimal investment.

Li Xiangru, Senior Consultant at Best Management Consulting, senior brand strategy expert, with 12 years of brand strategy positioning experience, serving Fangtai Appliances, Jinmailang, Foton Pickup, Yihai Kerry, and other multi-billion-yuan enterprises, with consulting experience spanning FMCG, industrial goods, seasonings, and catering. Upgraded positioning theory and brand image theory, and created the meaning-based brand strategy methodology.


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