---
title: "Annual Sales of 2.2 Billion Yuan: How Can a Bag of Noodles Support an IPO?"
description: "In the consumer sector over the past two years, the kitchen has been a common scene, with smart kitchen appliances, condiments trending on social media, and prepared dishes booming all year. In contrast, traditional staples like rice, flour, and oil have been lukewarm, much like their position in young people's kitchens, tucked away in corners. Recently, food company Xiangnian Food filed for an IPO on the Shanghai Stock Exchange. If successful, it will become the second listed noodle company on the A-share market after Kemen Food."
author: "青翎"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-12-02"
language: "en"
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# Annual Sales of 2.2 Billion Yuan: How Can a Bag of Noodles Support an IPO?

> In the consumer sector over the past two years, the kitchen has been a common scene, with smart kitchen appliances, condiments trending on social media, and prepared dishes booming all year. In contrast, traditional staples like rice, flour, and oil have been lukewarm, much like their position in young people's kitchens, tucked away in corners. Recently, food company Xiangnian Food filed for an IPO on the Shanghai Stock Exchange. If successful, it will become the second listed noodle company on the A-share market after Kemen Food.

In the consumer sector over the past two years, the kitchen has been a common scene, first with smart kitchen appliances, then condiments trending on social media due to "technology and ruthless tactics," not to mention the prepared dishes that have been hot all year. In contrast, traditional staples like rice, flour, and oil have been lukewarm, much like their position in young people's kitchens, tucked away in corners and unremarkable. Recently, food company Xiangnian Food filed for an IPO on the Shanghai Stock Exchange. If successful, it will become the second listed noodle company on the A-share market after Kemen Food.

However, from the prospectus, Xiangnian Food's territory is no longer limited to noodles. **China's Granary Produces Another Noodle King** In 1984, Chen Kemin, a Hunan native, gave up his carpentry career after an accident and turned to the noodle industry. From the earliest handmade production to buying noodle machines and building drying rooms, Chen Kemin gradually evolved from a name to a household brand.

In 1998, Chen Kemin's company was awarded the title of "Hunan Province Famous Brand Product." That same year, Sun Jungeng, a Henan native thousands of miles away, spent 2,000 yuan of his own money to contract a local noodle factory that was on the verge of bankruptcy.

One was already taking shape, the other just starting out. Over the next 20-plus years, these two companies chased each other, developing into leaders in China's noodle industry. The former is Kemen Food, the "first noodle stock," and the latter is today's Xiangnian Food.

Like many entrepreneurs who started businesses in that era, Sun Jungeng was full of drive, leading his team in "guerrilla warfare," selling noodles door to door. But he wasn't a born businessman. In the first few years, Xiangnian Food not only failed to stand out in fierce competition but lost over 100,000 yuan, and at one point was so poor that even electricity bills were a problem.

In 2000, at the turn of the century and amid rapid national development, everyone was confident about the future. Sun Jungeng had a sudden idea: to package noodles finely and give them the traditional cultural symbolism of "fortune, prosperity, longevity, and happiness." 2000 was called the "Millennium," so the noodles were named "Millennium Noodles."

**The custom-made product trend popular in today's marketing world was already familiar to Sun Jungeng 20 years ago, and his creativity was recognized by the market.** The auspicious "Millennium Noodles" quickly became a popular gift during the Spring Festival, and Sun Jungeng earned his first pot of gold on his entrepreneurial journey—300,000 yuan.

Time brought scale. In 2006, Xiangnian Food held 70% of the market share in Nanyang, with sales reaching 50 million yuan. Two years later, Henan Xiangnian Food Co., Ltd. was established, and his wife, Xiong Xuhong, joined as vice chairman. Sun Jungeng became the local "Noodle King."

"We have always been seeking an opportunity to overtake on the curve and achieve disruptive transcendence," Sun Jungeng once said. **He soon found the "password" for overtaking: internet e-commerce.** In 2016, Sun Jungeng entered the e-commerce field, and that year, Xiangnian Noodles' revenue growth reached 288 million yuan.

In 2017, Xiangnian Food created multiple viral videos with over 100 million views, becoming the "internet celebrity" in the noodle world. Thanks to the internet effect, that year Xiangnian Food's revenue reached 800 million yuan, nearly tripling from the previous year.

Today, this small flour mill from Nanyang has laid out a full industry chain, with over 400 noodle products and annual revenue exceeding 2 billion yuan.

**Xiangnian Food's achievements are inseparable from Henan's geographical advantages. As "China's granary," Henan alone produces a quarter of China's wheat, with Nanyang's wheat output accounting for more than one-tenth of Henan's total.** Henan has also benefited more than just Xiangnian. In a recent public interview, Zhou Ji, Deputy Secretary of the Henan Provincial Party Committee and Secretary of the Political and Legal Affairs Commission, said, "Half of the ham sausages, one-third of instant noodles, a quarter of steamed buns, three-fifths of tangyuan, and seven-tenths of dumplings in the domestic market are produced in Henan."

Looking across the food sector, among the older enterprises are Muyuan, Shuanghui, Sanquan, and Baixiang; among the new generation are Mixue Bingcheng, Bano Hotpot, and Guoquan Shihui, covering breeding, meat processing, convenient ready-to-eat food, condiments, tea drinks, and catering. **It can be said that half of Chinese people's dining tables are controlled by Henan enterprises.**

**Annual Sales of 270,000 Tons of Noodles, Revenue Exceeding 2.2 Billion Yuan** The prospectus shows that from 2019 to 2021, Xiangnian Food's operating revenue reached 1.348 billion yuan, 1.947 billion yuan, and 2.223 billion yuan, respectively. Despite rising revenue year after year, net profit performance was unstable, with net profit attributable to the parent company at 113 million yuan, 171 million yuan, and 103 million yuan in the same period.

From the revenue structure, Xiangnian Food's products are mainly noodles and flour. During the reporting period, noodle revenue was 1.072 billion yuan, 1.387 billion yuan, and 1.162 billion yuan, accounting for 84.42%, 79.07%, and 61.81% respectively. The flour business has developed rapidly in recent years, with revenue of 197 million yuan, 367 million yuan, and 717 million yuan during the reporting period, with nearly 100% growth for two consecutive years.

Regarding performance changes, **Xiangnian Food stated that the outbreak of COVID-19 in 2020 led to longer time at home for consumers, increasing demand for noodles, flour, and other foods, resulting in increases in both revenue and profit. In 2021, as the pandemic eased, consumers' demand for food storage declined, coupled with rising raw material prices such as wheat, leading to lower profits.**

In terms of gross margin, during the reporting period, Xiangnian Food's gross margin was 21.29%, 19.02%, and 14.19%, showing a downward trend year by year. In the same period, Kemen Food's gross margin was 24.57%, 22.91%, and 15.87%, slightly higher than Xiangnian Food.

**Geographically, Xiangnian Food relies too heavily on the local market.** During the reporting period, Xiangnian Food's revenue share in Nanyang was 41.75%, 37.49%, and 45.49%, and in Henan Province it was 62.21%, 59.08%, and 65.02%. However, the share in provinces outside Henan was relatively small, such as Northwest, South China, North China, Southwest, and Northeast, with revenue shares not exceeding 5%. Data from Zhongjin Qixin International Consulting shows that in 2021, the total output of the top 24 noodle enterprises nationwide reached 4.1992 million tons, with a compound annual growth rate of 8.10%, and the compound annual growth rate of sales revenue for these 24 enterprises was 10.72%.

**While the industry grows, concentration is also intensifying.** Xiangnian Food mentioned in its prospectus that in 2009, there were more than 4,000 noodle enterprises in China, but by 2020, this number was estimated to be just over 200.

For Xiangnian Food itself, although its output ranks third, its actual share is only 4%, while Jinshahe ranks first with 22%, and Kemen Food ranks second with 8%.

Comparing revenue and net profit, Kemen Food's revenue from 2019 to 2021 was 3.034 billion yuan, 3.958 billion yuan, and 4.327 billion yuan, with net profits of 207 million yuan, 293 million yuan, and 67 million yuan. Except for 2021, in other years, Xiangnian Food's revenue and net profit were only half of Kemen Food's.

**The key to catching up with giants lies in grasping trends. Xiangnian Food mentioned in its prospectus that "light cooking" flavored noodles are one of the future development directions of the noodle industry.** In recent years, Xiangnian Food has launched new light-cooking products such as "Tomato Brisket Ramen," "Thai Tom Yum Ramen," "Sichuan Pepper Chicken Ramen," "Chongqing Xiaomian," and "Hot Dry Noodles," as well as functional noodles like buckwheat highland barley noodles and multi-grain noodles suitable for different physiques.

The prospectus shows that in 2021, the sales volume and revenue of the light-cooking series increased by 55.26% and 65.82% year-on-year, respectively, driven by the continuous growth in sales of braised noodles, hot dry noodles, and Chongqing Xiaomian in the light-cooking products.

Regarding this fundraising, Xiangnian Food stated that 60% of the raised funds will be used to expand noodle production capacity, continuously innovate on the existing product system, and vigorously develop products that meet new market trends, such as light-cooking series products and multi-grain series products containing grains and coarse grains.

**How to Break Through the "Red Ocean" of Noodles?** Currently, China's noodle market is still dominated by low-end products, with noodles priced below 5 yuan accounting for 60% of the market share, and noodles priced above 8 yuan only 10%.

Prices are low, but costs are rising. Recently, Kemen Food announced that due to rising wheat prices, it does not rule out another price increase. As early as July this year, Kemen Food had already raised prices across its product lines, with an average increase of about 5%.

Furthermore, from 2012 to 2022, China's noodle sales scale has been lower than production scale for 10 consecutive years. In the view of food industry expert Zhu Danpeng, **in the long run, China's noodle industry needs to enhance product value and transform towards the mid-to-high-end market.** In recent years, many noodle enterprises have successively launched various flavored noodles that balance taste and health, and even launched children's exclusive noodles.

**But more opportunities may not lie in noodles. To impact the capital market, Xiangnian Food and others need to tell new stories.** With the advent of the post-pandemic era, convenient ready-to-eat food has become a household necessity. According to the "2021 Convenient Ready-to-Eat Food Industry Insight Report," the domestic convenient ready-to-eat food market is already about 250 billion yuan. Guosen Securities research indicates that by 2025, the market size of the convenient ready-to-eat food industry can reach 630 billion yuan.

By subcategory, traditional instant noodle sales are declining. Nielsen data shows that in 2021, overall instant noodle sales volume decreased by 4% year-on-year, and sales value decreased by 2.7%.

Guosen Securities pointed out that young women, post-95s, and consumers in lower-tier markets have a stronger preference for trying internet-famous foods and emerging brands. **With demand upgrading, new convenient ready-to-eat foods are constantly emerging, and the proportion of new convenient ready-to-eat foods such as snail noodles, hot dry noodles, and self-heating pots in kitchens has significantly increased.** Related companies like Bago, Mo Xiaoxian, and Self-heating Pot have also repeatedly received financing.

The booming track has also attracted traditional enterprises to bet on it. Xiangnian Food has successively launched various flavors of self-heating hot pot noodles, braised noodles, hot dry noodles, and Chongqing Xiaomian.

Kemen Food also places great emphasis on convenient food. It has publicly stated that compared to noodles and flour, convenient food requires higher brand influence and channel penetration. The new product Wugudaochang Wuhan Hot Dry Noodles saw online sales increase by 429% year-on-year in August.

**Beyond convenient ready-to-eat food, prepared dishes have become another direction.** With the advantages of easy storage and simple operation, prepared dishes have entered more and more family kitchens, allowing the track to grow rapidly. According to iiMedia Research, the scale of China's prepared dish industry in 2021 was 345.9 billion yuan, and it is expected to reach 1.072 trillion yuan by 2026.

Kemen Food is also currently observing the prepared dish track. During a survey, it stated that the future development direction of its noodles and convenient food will include seasoning packets for prepared dishes, and in new product development, the choice of seasoning packets will also lean towards ingredient-based prepared dishes.

**Conclusion:** Noodles have a history of over 4,000 years in China, and the origin of dried noodles can be traced back to the Tang Dynasty. After the 1980s, noodle enterprises emerged one after another, and handmade workshops were gradually replaced by mechanized production. Now, they are moving towards intelligent production.

**But the competitor of noodles is never another pack of noodles, but emerging alternative foods. Years ago, the competitor was instant noodles; now it has become snail noodles and hot and sour noodles; in the future, it may be prepared dishes.** Ultimately, the real competitor has always been consumer demand.

Xiangnian Food is developing rapidly, and Jinshahe, Kemen Food, and others are equally swift. On the other hand, various new brands such as Hefu Noodles, Wuye Bianbian Noodles, and Baoli Food have also received capital favor. Besides offline stores, the optimization of ready-to-eat products is also full of effort.

Demand is changing rapidly, but the unchanging pursuit of deliciousness is both a challenge and an opportunity. After all, the days of relying on a pack of noodles to conquer the world are long gone.


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