Young people no longer enjoy nibbling on duck necks? A new round of changes is also unfolding in the braised food sector. The snack braised food segment, which was rapidly matured by capital in the early years, has suddenly shown signs of growth fatigue. Weak consumer spending and a return to rational consumption are gradually bringing braised food back to its original role as a meal accompaniment. This shift in consumption scenarios is both an opportunity for snack braised food companies to transform and a critical period for a major reshuffle in the meal-accompaniment braised food market. At this stage, meal-accompaniment braised food companies are generally small and weak, and no true national brand has yet emerged. Perhaps another great era for braised food is on the horizon.
Declining Revenues Across the Board In China's braised food market, Juewei Food has the largest store network and the widest coverage, with stable profitability, but even it cannot withstand the pressure of weak consumption. On the last day of August, the company disclosed its first-half 2024 results, with operating revenue of 3.34 billion yuan, a year-on-year decrease of 9.73%. If the "King of Duck Necks" performs like this, Huang Shang Huang, Zhou Hei Ya, and Zi Yan Food are not doing much better. In the first half of the year, revenues of Huang Shang Huang, Zhou Hei Ya, and Zi Yan Food fell by 7.63%, 10.97%, and 4.59% year-on-year, respectively; in terms of net profit attributable to shareholders, Huang Shang Huang and Zhou Hei Ya saw sharp declines of 25.59% and 67.65%, respectively. This year, a major positive for the braised food industry is the decline in raw material costs. Huang Shang Huang disclosed in its semi-annual report that purchase prices for all 15 meat raw materials fell across the board. For example, the average purchase price of duck necks fell by 55.58%, and duck heads by 31.18%. Given such conditions, the collapse in performance of related companies deserves careful review and analysis. Products not selling well is a common pain point. In its semi-annual report, Juewei Food specifically noted that declining sales volume was an important reason for the revenue drop; Huang Shang Huang disclosed that sales volumes of its meat products and rice products fell by 14.57% and 13.41% year-on-year, respectively. In the first six months of this year, Zhou Hei Ya's total product sales volume was 14,618 tons, down 7.43% year-on-year, selling 1,173 tons less than the same period last year, while the average transaction value also dropped by 6.44 yuan. At this time, founder Zhou Fuyu returned to the front line, adjusting products and implementing a "fresh-lock & bulk-braised dual-mode" strategy, aiming to return to the classics.
Slowing Expansion In the early 21st century, Chinese braised food brands were gradually established, opening stores and expanding markets, with business models gradually taking shape. Riding the wave of catering capitalization, multiple braised food brands successfully listed on the capital market, ushering in a new stage of development. In 2005, Dai Wenjun, former marketing manager of Qianjin Pharmaceutical, founded the Juewei brand and opened its first store at Nanmenkou in Changsha, focusing on duck neck products. Driven by the franchise model, 14 years later, Juewei's store count exceeded 10,000, leading the industry into the "10,000-store era." In 2020, the total number of braised duck neck stores in China exceeded 100,000, with the top 5 brands holding less than 20% market share. Stimulated by this market backdrop, Juewei continued to accelerate expansion. From 2020 to 2023, its net new stores were 1,445, 1,315, 1,362, and 874, respectively. However, in the first half of this year, the situation changed abruptly, with Juewei's store count falling by 981 from the end of last year to 14,969. Juewei's "retreat" is not an isolated case. At the end of 2023, Huang Shang Huang's total store count was 4,497, which dropped to 4,052 in the first half of this year. Since opening up franchising, Zhou Hei Ya's store count has also rapidly broken through. It increased from 1,755 in 2020 to 3,456 in 2023, of which 2,096 were franchise stores. In the first half of this year, franchise stores decreased by 375, ending the period at 1,721. As the first listed meal-accompaniment braised food company, Zi Yan Food, although its store expansion pace is slowing, is still maintaining growth. From 2020 to 2023, its stores increased from 5,695 to 6,205, and in the first half of this year, further increased to 6,308.
Meal-Accompaniment Segment Rises According to Hongcan Big Data, in 2023, the overall braised food market size reached 300 billion yuan. Weak consumer spending and the return of rational consumption are driving a shift in market demand, with braised food consumption scenarios moving from snack to meal accompaniment. In previous years, the capital that had helped snack braised food has now turned its attention to the meal-accompaniment braised food market. Tiantu Capital invested in Dezhou Braised Chicken, and Hongzhang Capital and Jiayu Capital invested in Zi Yan Food. Frost & Sullivan's "Independent Market Research on China's Braised Food Industry" states that from 2015 to 2019, the market size of China's meal-accompaniment braised food industry grew at a compound annual growth rate of 7.0%, and is expected to reach 11.4% from 2020 to 2025, both exceeding that of snack braised food. Against this market backdrop, Zhou Hei Ya opened up franchising; Huang Shang Huang bet on rice products; Juewei indirectly entered the meal-accompaniment braised food market through investments in Liaoji, Aman, and Lujiangnan. So-called meal-accompaniment braised food refers to whole chickens and ducks sold in portions. Meal-accompaniment braised food stores are mostly located in wet markets and communities, targeting family dining tables. Compared to snack braised food, meal-accompaniment braised food emphasizes value for money and taste, catering to family consumption.
The Great Era of Braised Food In the late 1980s, Zhong Huaijun started by opening a Zhongji Oil-Braised Duck store in Xuzhou, Jiangsu, gradually establishing Zi Yan's current position in the meal-accompaniment braised food market. Besides Zhong Huaijun's Zi Yan Food, various regional meal-accompaniment braised food brands have emerged across the country. Sichuan's Bawanglu, Wuhan's Lengji, Jiangsu's Lurenjia, Fujian's Wuzhichaolu, and other specialty meal-accompaniment braised foods such as Sichuan-style, Chaoshan-style, fermented-rice-style, and spicy-style are gradually rising. Meal-accompaniment braised food has a long history and a deep consumer and cognitive foundation. However, compared to the snack braised food market, the meal-accompaniment braised food market is extremely fragmented. In 2020, the top 5 brands in the meal-accompaniment segment held less than 5% market share, with Zi Yan Food's share at only 2.82%. Currently, meal-accompaniment braised food is still a niche segment dominated by small workshops, with one or even several clustered in wet markets and street communities. A truly national meal-accompaniment braised food brand has not yet emerged. As the industry trend shifts from snack to meal-accompaniment scenarios, the replacement of small workshops by chain brands is an inevitable trend, and the curtain is slowly rising on the era of meal-accompaniment braised food. Major companies are using their signature products to compete. Zi Yan Food's Fuqi Feipian (beef and offal slices) and Baiwei Chicken are two major products; Liaoji Food's Bangbang Chicken and Liufu Duck's signature local duck are also major revenue contributors. Compared to small workshops, braised food companies offer better food safety and product quality, and a wider variety of products. The business model of central factories, cold-chain transportation, and chain store sales determines the potential for growth. Zhou Hei Ya's launch of "two-in-one" community stores this year is an innovative attempt combining its products and supply chain; Juewei's entry into the meal-accompaniment braised food market is through indirect investment. According to public data, most meal-accompaniment braised food companies are currently not very large. The largest, Zi Yan Food, has only over 6,000 stores, while players in the second tier typically have around a thousand or several hundred stores. The changes in the braised food market are both a crisis and an opportunity.