At the end of 2024, multiple A-share listed companies initiated Hong Kong listings, sparking an 'A+H' trend. Foshan Haitian Flavouring and Food Company (hereinafter 'Haitian Flavoring'), known as the 'soy sauce Maotai,' was among the most proactive. On December 12, 2024, Haitian disclosed plans to issue H-shares and list on the Hong Kong Stock Exchange, and a month later, it submitted its listing application. On one hand, under new leadership, Haitian is undergoing top-down changes, maintaining its domestic leadership while competing with global giants; on the other hand, its Hong Kong listing clearly signals a strategic focus on the global market. More crucially, in its Hong Kong listing prospectus, Haitian explicitly outlined its overseas expansion path—'localized operation.' For a long time, domestic condiment companies have looked to Japan as a model, with Kikkoman being a benchmark. Now, as Haitian leverages the Hong Kong stock market to go global, can it break the barrier of relying on overseas Chinese communities? The 'Soy Sauce Maotai' Status As an A-share listed company, Haitian is relatively transparent. However, compared to periodic financial reports, its listing documents submitted to the Hong Kong Stock Exchange are more detailed. Image source: Haitian official website (screenshot) In terms of products, Haitian has over 1,300 SKUs, including soy sauce, oyster sauce, seasoning sauces, vinegar, cooking wine, chicken essence and powder, tomato sauce, chili sauce, etc., nearly 'monopolizing' kitchen condiment needs. Among them, there are 7 product series with annual revenue exceeding 1 billion yuan, and 25 products with annual revenue exceeding 100 million yuan... In 2023, products above 100 million yuan accounted for 75.1% of Haitian's annual revenue. As of September 30, 2024, Haitian had 243 soy sauce SKUs, 124 seasoning sauce SKUs, 68 oyster sauce SKUs, and 875 other category SKUs. Image source: Haitian prospectus (Hong Kong) According to a Frost & Sullivan report cited by Haitian, based on 2023 revenue, Haitian is the absolute leader in China's condiment industry and ranks among the top five globally. Haitian ranks first in China's condiment market with a market share more than double that of the second-place company. By sales volume, it has been China's largest condiment company for 27 consecutive years. Among its 'three pillars,' soy sauce revenue ranks first globally and in China, with a domestic market share of 12.6%, more than three times that of the second-place company, and has been the sales leader in China for 27 consecutive years; oyster sauce revenue ranks first globally and in China, with a domestic market share of 39.4%, more than three times that of the second-place company, and has been the sales leader in China for 11 consecutive years; seasoning sauce revenue ranks first in China's basic seasoning sauce market. Additionally, Haitian's vinegar revenue ranks second domestically, only behind Hengshun Vinegar; cooking wine revenue is also first domestically... It is worth mentioning that besides leading in multiple categories, Haitian is also unique in its channel coverage. Currently, Haitian covers 100% of prefecture-level cities and 90% of county-level markets, making it the most widely distributed condiment company nationwide. Over the past decade (2013-2023), Haitian's cumulative R&D investment reached 5.4 billion yuan (RMB, same below). As of September 30, 2024, Haitian had obtained over 1,000 patents in product R&D, strain cultivation, and big data fermentation. As of 2023, Haitian had a production capacity of 4.69 million tons of condiments, with a capacity utilization rate of 84%. The 'King' Also Has Troubles Despite this, Haitian has its own troubles. For a long time, domestic condiment companies have been rooted in the domestic market; even if they have some overseas sales, except for raw material companies, the proportion of overseas revenue is generally not high. According to the 'Condiment Development Status and Future Trends - 2022 Data Report of China's Top 100 Famous Condiment Brands' released by the China Condiment Industry Association, only 11 companies had export/sales revenue ratios exceeding 10%, of which 7 exceeded 20%, but most of these were raw material companies such as Meihua Bio, Angel Yeast, Lee Kum Kee, Jinzhou Baihe, etc. More companies had ratios below 5%. Image source: China Condiment Industry Association As the domestic condiment leader, Haitian's export/sales revenue ratio was only 1%. In 2022, Haitian's revenue hit a record high of 25.61 billion yuan. Subsequently, Haitian experienced a slowdown in performance due to the 'double standard' incident. Pang Kang, then at the helm, publicly stated that it would take five years to return Haitian to normal growth. Although Pang Kang later handed over to Cheng Xue, and Haitian returned to growth, with revenue of 20.399 billion yuan in the first three quarters of 2024, a year-on-year increase of 9.38%, and net profit attributable to shareholders of 4.815 billion yuan, up 11.23%, the overall growth rate still lags behind its peak. Image source: @Haitian Flavoring Although according to Frost & Sullivan data cited by Haitian, the Chinese condiment market was valued at 479.3 billion yuan in 2023, expected to grow to 677 billion yuan by 2028, with a CAGR of 7.2% from 2023 to 2028, the industry concentration of Haitian's main categories is increasing, leading to more intense competition. Although Haitian maintains the top share in multiple areas, according to the aforementioned report, among the top 100 companies, the CR3 for soy sauce reached 66%, oyster sauce 97%, sauces 50%, vinegar 48%, cooking wine 71%, and MSG and chicken essence 94% and 70% respectively... In the domestic market, with the disappearance of demographic dividends and the overall trend of consumption downgrading, the profit space for domestic condiments is shrinking. For example, from 2018 to 2023, Haitian's gross margin for soy sauce fell from 50.55% to 42.63%, seasoning sauce from 47.75% to 35.49%, and oyster sauce from 40.92% to 29%... Therefore, finding the next incremental market, which means competing with global traditional condiment giants, is particularly important for Haitian. Giants Set Sail 'Going Global' Whether it's the 'dual circulation' strategy or the 'going global' of Chinese food, the overall trend is to encourage Chinese food companies to expand overseas, and condiments are no exception. In fact, compared to brands like Lee Kum Kee and Pearl River Bridge, Haitian's 'going global' seems somewhat lagging; for example, Lee Kum Kee's export/sales revenue ratio has reached 21%. To adapt to the new era, Haitian has proposed a new development strategy of 'upward, downward, inward, and outward': upward to seize technological high ground, achieve full extension of the industrial chain, and enhance supply chain added value; downward to deepen channel penetration, strengthen user reach, and build strong channel network barriers; inward to focus on quality and efficiency, build leading product strength, and continuously iterate organizational capabilities; outward to implement localized operation strategies to achieve advantageous overseas expansion and explore the global market. Image source: @Haitian Flavoring According to data disclosed by Haitian, the US, Europe, and China are the three largest condiment markets globally, with market sizes of 525.7 billion yuan, 514.2 billion yuan, and 479.3 billion yuan in 2023, respectively. From 2023 to 2028, Southeast Asia and Latin America are expected to be the fastest-growing major markets, with CAGRs of 9.2% and 8.6%, respectively. Clearly, the Southeast Asian market will be Haitian's first 'battlefield' for going global. Looking at the paths of other condiment brands going global, most have expanded within overseas Chinese communities, and Southeast Asia is one of the regions with the densest Chinese population. However, for a long time, Chinese condiments have not fully broken out of the overseas Chinese circle; 'breaking the circle' is a severe market challenge at present. Regarding the global market, Haitian stated: 'We will select overseas markets with good consumption foundations and strong condiment demand, implement localized operation strategies, bring Haitian flavors to the world, and integrate global flavors into Haitian. We plan to accelerate the construction of localized channels and marketing teams to enhance brand influence in international markets.' Moreover, in the use of IPO proceeds, one item is 'to build our global brand image, expand sales channels, and enhance overseas supply chain capabilities.' This includes setting up local sales offices and localized supply chains, expanding overseas distribution channels; building brand image in overseas markets, including in-depth understanding of local market dynamics, customizing strategies based on local taste preferences, conducting media activities and in-store promotions in major markets, and selectively acquiring local brands. This makes Haitian the only Chinese condiment company to disclose its overseas market 'playbook.' Under its globalization strategy, Haitian will establish overseas teams, layout overseas supply chains, and acquire overseas brands, potentially rewriting the brand image and status of Chinese condiments in the global market. Whether Haitian can 'wrestle' with giants in the global market remains to be seen. [New Order · Symbiosis] The 10th China FMCG Innovation Conference Date: March 17-19, 2025 Location: Chengdu, China