Condiment Industry Deep Dive Report

Click to read the original text for details Tip: This article is about 17,350 words and takes 44 minutes to read. I. Business Essence: Taste Memory Builds Long-term Success, Dietary Differences Create High Moats The condiment sector and leading companies command a significant valuation premium compared to other food and beverage sub-sectors. This is because condiments are daily necessities, and the strong consumption stickiness from taste memory forms the cornerstone of the industry's sustainable development. Additionally, dietary differences between China and the West create high barriers for domestic players. Meanwhile, regional advantages from production resources and the scale advantages of leading enterprises make it difficult for new entrants to disrupt the existing competitive landscape, favoring the growth of quality leaders. Over the past five years, listed condiment companies have achieved average ROE and net margins second only to the baijiu industry, with high stability. The differences are: Volume growth potential: With the development of the foodservice industry and innovation in compound condiments, there is still significant room for condiment consumption to increase, whereas most traditional foods (e.g., baijiu, pork, beer) have seen stagnant total consumption. Price increase foundation: Strong consumption stickiness allows the industry to withstand inflation, and product differentiation and rising consumer expectations provide a basis for leading companies to continuously raise prices and upgrade products. Leading companies can build high barriers: Similar to baijiu, the condiment industry is less affected by foreign brands; industry leaders can establish high moats through brand, scale, and technology advantages. 1.1 The Cornerstone of Long-term Success: Taste Memory + Daily Necessity Among large enterprises that have survived over 100 years, about 13% of those with ROE exceeding 15% in the last five years are in food and beverage. These companies generally fall into several categories: Those with addictive properties, such as tobacco and alcohol; Those with distinct taste memory, including cola, chocolate, canned soup, and condiments; Basic food and beverage products like grains and dairy. The condiment industry meets the latter two conditions: distinct taste memory and daily necessity. On one hand, condiments are basic consumer goods used in daily meals. On the other hand, unlike rice, cooking oil, and other necessities, different condiments leave different taste memories due to flavor differences. Once a delicious memory is formed, consumers enter a repeat purchase mode, which is the cornerstone for leading companies' steady growth. McCormick is a typical example of an international condiment leader, focusing on Western kitchens and home dining, with products including compound seasonings, flavored sauces, and spices. 1.2 Dietary Differences Create High External Barriers First, due to differences between Chinese and Western dietary cultures, foreign condiments find it relatively difficult to develop in the domestic market. Chinese cuisine emphasizes seasoning and complex preparation, requiring high-quality condiments; in contrast, Western cuisine focuses on preserving nutrients with simple cooking methods, and its condiments are not well-suited to Chinese cooking habits. For example, olive oil, often touted as a healthy oil, has struggled to achieve large-scale sales in China because it is not suitable for the Chinese preference for heavy-oil stir-frying. Japanese soy sauce is more suitable for dipping; even with Kikkoman's investment in a local factory, sales remain modest. Second, within the domestic environment, new entrants have limited impact on the existing competitive landscape. On one hand, leading companies possess technical or regional advantages. Most condiment production processes are complex, especially in soy sauce and vinegar. For instance, Cantonese-style soy sauce has become the mainstream, with richer flavors, represented by brands like Haitian, Chubang, and Lee Kum Kee. These products often require natural fermentation methods like sun exposure in southern regions, and industrial production demands high control over factors like koji mold, giving incumbents a technical edge. For example, Fuling Zhacai is located in Chongqing, one of the mustard tuber growing areas. On the other hand, leading companies have formed scale and first-mover advantages. Brands like Haitian follow a mass-market, affordable strategy, leveraging accumulated low-cost advantages and high channel turnover with low-price differentials to offer the most cost-effective products, thereby blocking competitors within their price range. Due to significant product differences and the high cost of building new categories, condiment companies often prefer M&A to expand categories, gaining brands and production processes, rather than building from scratch. Examples include Haitian's acquisition of Danjiang Vinegar Factory and Fuling Zhacai's acquisition of Huitong Pickles. 1.3 Horizontal Comparison: Condiments Excel in Sustained High Profitability, with Premiums for the Sector and Leaders Compared to other food and beverage sub-sectors, considering future growth space, industry barriers, competitive landscape, and operational performance, the condiment industry ranks among the top in comprehensive operational performance. Moreover, condiment sector valuations are very high, with leading companies commanding significant premiums. First, the condiment industry sees growth in both volume and price, and as a necessity, it is less affected by economic fluctuations and has strong sustainability. Industry concentration is lower than in baijiu, dairy, and other sub-sectors, offering greater room for leading companies to expand. Second, in terms of operational performance, whether ROE or profitability, the condiment sector sits between baijiu and dairy, far ahead of other sub-sectors. Historically, the condiment sector has shown less cyclical volatility and greater stability; for example, baijiu experienced a cyclical adjustment due to restrictions on official consumption. Large space + high barriers + strong certainty lead to consistently high valuations in the condiment industry. Especially with the relatively good competitive position of leading companies, Haitian Weiye has maintained a valuation higher than Kweichow Moutai and Yili since its listing in 2014. Generally, its valuation is 1-1.5 times that of Moutai and 1.5-2 times that of Yili. II. Industry Overview: Multiple Categories Converge into a Large Market, Many Sub-segments Await Development Condiments hold a pivotal position in China's food industry. In 2017, companies above designated size achieved combined revenue of 322 billion yuan, up 8.1% year-on-year, accounting for 13.9% of the entire food manufacturing industry, second only to convenience foods, dairy, and baked goods. Condiments have numerous sub-categories, including soy sauce, vinegar, oyster sauce, sauces, fermented bean curd, cooking wine, compound seasonings, and spices. Downstream consumers like households and foodservice use multiple categories simultaneously, and sales channels are similar. This attribute of multiple categories and small varieties converging into a large market has become the foundation and driving force for companies to expand their product lines. By taste, salty and umami are the most basic seasonings. Therefore, soy sauce, which combines saltiness and umami, is the largest category and its share is increasing, with annual production exceeding 10 million tons and growth of 5%-10%, leaving ample room for product structure upgrades. MSG consumption is declining. From 2008 to 2015, the proportion of soy sauce, vinegar, and similar products in total sales rose from 27% to 35%, while MSG fell from 30% to 20%. Meanwhile, categories like oyster sauce are in a rapid growth phase and are expected to become another major product after soy sauce. Currently, only Haitian and Lee Kum Kee are leading, and the category is still in its fast-growth stage. Additionally, vinegar, cooking wine, and sauces lack national leading companies, and the competitive landscape is yet to be reshaped. Specifically: Soy sauce: National brands have emerged, forming scale production clusters and brand effects. Besides Haitian, Meiweixian and Lee Kum Kee are industry leaders, but their market shares are only around 3-4%. Vinegar: Regional strong players have emerged, but national development has not yet formed. Due to significant taste differences and slow expansion by existing companies, the industry is still in the early stages of branding. The leading company, Hengshun Vinegar, holds only about 10% market share. Oyster sauce: Leading companies drive industry development, with high concentration. Since Haitian Weiye pioneered national promotion of oyster sauce, few competitors have followed, and CR5 is as high as 80%. Sauces: There are many varieties, and the industry is highly fragmented. Due to differences in raw materials, processes, and regional tastes, different regions have different sauce products, some with high local visibility, but few national brands. Laoganma has annual revenue exceeding 4 billion yuan, the largest; among listed companies, Haitian Weiye's sauce products exceed 2 billion yuan, ranking among the top. Cooking wine: The industry is still in a cultivation phase, with relatively small enterprises. Cooking wine has deodorizing properties, but there are substitutes like huangjiu and baijiu. Although cooking wine is more convenient and applicable, consumer education is needed. In 2017, Laohenghe and Hengshun Vinegar had cooking wine revenues of 600 million yuan and 150 million yuan respectively, showing clear regional development. Pickled vegetables: Pickled vegetables are also a type of condiment side dish, with only one listed company—Fuling Zhacai. The domestic pickled vegetable market is transitioning from bulk to small-packaged branded products. Fuling Zhacai holds the largest domestic market share, exceeding 20% of the packaged pickled vegetable market, far ahead of competitors. 2.1 Soy Sauce: Largest Sub-segment with Significant Structural Upgrade Potential Soy sauce is the largest sub-segment in the condiment industry and the fastest to nationalize. It is the second most important salty seasoning after salt, pairing with almost all ingredients like meat, seafood, vegetables, rice, noodles, and eggs, and is suitable for various cooking methods, making it essential for many famous dishes. Its roles include flavor setting, umami enhancement, aroma enhancement, coloring, blending, and deodorizing. Soy sauce can be used for dipping, mixing, steaming, braising, stewing, simmering, stir-frying, pickling, and marinating. According to statistics bureau data, in 2017, soy sauce production by enterprises above designated size reached nearly 10 million tons, with the scale of soy sauce, vinegar, and similar products exceeding 100 billion yuan, and growth rates maintained at 5%-10% in recent years. Soy sauce can be broadly classified into pure brewed and blended soy sauce. Pure brewed soy sauce can be further divided into high-salt dilute-state fermented and low-salt solid-state fermented. Among these, Cantonese-style soy sauce better suits Chinese cuisine flavors, so it holds a higher market share domestically. Amino acid content is a key quality indicator and the main basis for grading soy sauce; higher content means richer flavor components. Accordingly, soy sauce is classified into four grades: special, first, second, and third. According to the China Condiment Industry Association, special-grade and third-grade soy sauce are the most used, accounting for 42% and 43% respectively. If the sample is expanded to include more small and medium enterprises, we estimate third-grade usage would be even higher. Third-grade soy sauce is mostly concentrated in third-tier cities, remote counties, and rural markets. As consumer spending and nutritional awareness rise, the share of higher-grade, more distinctive soy sauce will continue to expand. Soy sauce has two main functions: enhancing umami and flavor, and coloring. Accordingly, it is divided into light soy sauce (shengchou) and dark soy sauce (laochou). Light soy sauce has a light brown, clear appearance and prominent umami, mainly used to enhance freshness in cooking, and is effective in dipping and cold dishes. Dark soy sauce has a rich red-brown color and thick consistency, used to color ingredients in dishes like braised meats, giving them a glossy red appearance. Light soy sauce usage far exceeds dark soy sauce, and low-end products dominate, leaving ample room for upgrades. Dark soy sauce is more common in East China. Industry concentration is low, and production is regionally concentrated. In terms of enterprise distribution, well-known brands like Haitian, Chubang, and Lee Kum Kee have emerged, but the industry remains fragmented. East China has the most soy sauce enterprises, followed by South China. However, South China has the largest production, accounting for 36% of national output (2014 data). Nationally, Haitian, Meiweixian, and Lee Kum Kee account for 24% of production, indicating low concentration. 2.2 Vinegar: Significant Regional Differences in Production and Taste, Lacking National Leading Enterprises Vinegar is an acidic seasoning or food made from starchy or sugary materials or alcohol, fermented by microorganisms or blended with edible acetic acid. Vinegar can be divided into brewed and blended vinegar. Brewed vinegar is further divided into solid-state and liquid-state fermented vinegar. Vinegar has obvious regional development characteristics, including production and taste differences, but lacks leading enterprises to guide industry development. China has four famous vinegars: Shanxi Old Mature Vinegar, Zhenjiang Aromatic Vinegar, Fujian Yongchun Red Vinegar, and Sichuan Baoning Vinegar. Major companies include Hengshun Vinegar, Zilin Vinegar, and Shuita Vinegar. However, production processes and raw materials differ by region. Shanxi vinegar uses sorghum as the main raw material, while Zhenjiang vinegar uses glutinous rice. These product differences lead to varying consumption patterns across regions. Additionally, regional differences create taste variations. From dietary habits, few regions in China prefer sour foods, and few dishes require frequent vinegar use, so overall vinegar consumption cannot compare to soy sauce, and tastes vary. For example, Guangzhou and Fujian prefer low-acidity vinegar, while Shanxi prefers stronger vinegar with acidity above 6 degrees. According to the China Condiment Industry Association, in 2015, the vinegar industry (top 50/100 companies) achieved sales revenue of 5.5 billion yuan, with production around 1.65 million tons. The scale of enterprises is expanding, and the industry is showing a trend toward concentration. The largest company, Hengshun Vinegar, had condiment revenue of 1.19 billion yuan and production of 140,000 tons last year, with a disclosed market share of only about 10%. 2.3 Oyster Sauce: Lowest Market Penetration, in Early Rapid Growth Phase Oyster sauce, also known as oyster oil, is made from oysters, boiled, juiced, concentrated, and refined with auxiliary ingredients. Originating in Guangdong, it has high nutritional value and delicious taste, similar to light soy sauce in use. Its flavor is popular nationwide, making it easy to nationalize. With the lowest market penetration, it is in the early stage of rapid volume growth and has the potential to become a major product used as frequently as soy sauce. Currently, only Haitian Weiye and Lee Kum Kee have achieved significant scale in the oyster sauce market. In 1888, Lee Kum Kee founder Lee Kum Sheung began producing oyster sauce and founded the company. Through generations of family effort, they successfully introduced oyster sauce to foreign markets, holding an 88% share in the US and second place in Japan. In the domestic market, Haitian Weiye, as the industry leader, had revenue of 2.27 billion yuan last year, 6-7 times that of the second-place company, with prices 15-20% lower, rapidly leading the oyster sauce market. The company established an oyster sauce division this year and aims to build it into a 10-billion-yuan major product in the coming years. The slowdown in Haitian's oyster sauce growth in 2016 was mainly due to the launch of new products in 2015, with excessive sales in that month affecting the next year's growth. 2.4 Sauces: Numerous Varieties, Laoganma Proves National Development is Possible Sauce products are highly diverse, with different regional representative flavors. The industry's branding and nationalization levels are very low, but there is potential for more national brands to emerge. Seasoning sauces are paste-like condiments used to coordinate the flavors of various foods to meet consumer requirements. They can be classified by process into fermented and non-fermented; by function into spreading sauces, cold dish sauces, dipping sauces, cooking sauces, and soup sauces; and by raw material into tomato sauce, garlic sauce, chili sauce, seafood sauce, vegetable sauce, bean sauce, and mushroom sauce. Sauces are widely distributed geographically, with each region having its own specialty products. In Western markets, there are as many sauce products as there are dishes or dietary styles. According to the China Condiment Industry Association, in 2015, the top 100 sauce enterprises produced a total of 800,000 tons, up 6.8% year-on-year. Among them, Haitian Weiye's soybean paste had the largest volume (210,000 tons in 2015), possibly second only to Laoganma, with revenues of 2.04 billion yuan and over 4 billion yuan respectively. Referring to the development of companies like Laoganma and Pixian Douban, we believe the sauce category has full potential for nationalization and branding. In fact, we observe that Haitian Weiye's sauce is mainly soybean paste, which has encountered bottlenecks this year. Laoganma is renowned globally, and although Pixian Douban has not produced a large enterprise, this regional brand has a solid consumption base nationwide. In comparison, we believe the underlying reason lies in product design and consumer guidance and cultivation. Laoganma and Douban have relatively strong flavors, widely used in spicy dishes, popular in both foodservice and home kitchens. In contrast, soybean paste has a lighter taste and its own market, but consumers are unclear about its function—how to add it in general cooking. Therefore, future enterprise development can follow two models: first, starting from high-usage areas like Douban, create one or several national brands; second, develop targeted products, cultivate mass consumption habits, and establish leadership. III. On Channels: Foodservice is Large and Stable, Hard to Attack but Easy to Defend; Household Emphasizes Marketing, Easy to Attack but Hard to Defend From a channel distribution perspective, foodservice is the largest sales channel for condiment companies, accounting for 45% of total sales, while household consumption and food processing channels account for 30% and 25% respectively. The industrial channel has a small share, with relatively simple product requirements and high price sensitivity, so it is not a primary focus for branded condiment companies. Due to the large and stable nature of the foodservice channel, companies like Haitian Weiye and Lee Kum Kee, which developed foodservice early, will continue to benefit. For later entrants like Zhongju Hi-Tech and Hengshun, this is an unavoidable step to grow, and it may take a relatively long time. They often prioritize supermarket channels and household consumption to gradually strengthen brand and sales networks, a path especially evident in the early stages of new brand expansion. 3.1 Foodservice Channel: High Stickiness, Large and Stable Volume, Clear First-Mover Advantage The foodservice channel has high stickiness and is easy to defend but hard to attack. Once successfully penetrated, it can provide substantial stable sales, and early entrants have a clear first-mover advantage. This is mainly because foodservice sales are extensive and influenced primarily by chefs and purchasing staff. On one hand, chefs are relatively professional, prioritizing quality and taste, and the repetition of cooking methods makes demand very stable. On the other hand, purchasing staff prioritize cost, and this price sensitivity decreases with the level of the restaurant. Accordingly, condiment companies often adopt several strategies: Chef stickiness cultivation: Sponsoring culinary schools to form the strongest taste memory during chefs' development, a common practice for Lee Kum Kee and Haitian Weiye, proven effective; or sponsoring chef competitions to foster product interaction, as done by later entrants like Chubang. Cost-performance route: Using price as a breakthrough, offering high cost-performance. First, large-pack products target foodservice; second, increase promotions, discounts, and favorable policies for distributors with foodservice resources to penetrate the channel. 3.2 Household Channel: Emphasis on Brand and Marketing, Prone to Change Unlike the foodservice channel, household consumption of condiments shows relatively high sensitivity to brand and promotions, with impulsive buying characteristics. This is mainly because ordinary consumers, compared to chefs, lack strong product discernment and often obtain product information through brand promotional activities. Furthermore, with weaker product recognition, household consumers become more price-sensitive, so promotions often help significantly. Because of these consumption characteristics, condiment companies continuously invest in advertising or ground promotions. New products and brands often target household consumers in the first stage. However, in the long run, home cooks gradually form their own cooking and condiment usage habits, so the core remains capturing consumer mindshare and building long-term brand loyalty. IV. Japan's Development Insights: Foodservice Share Continues to Rise, Compound Seasonings Are Mainstream, Condiment Functions Increasingly Subdivided Japan's dietary habits are relatively similar to China's, and its condiment market is mature, dominated by compound seasonings. Historically, per capita household soy sauce consumption in Japan has declined year by year, while unit prices have risen significantly. Correspondingly, foodservice channel consumption has continued to rise, and soy sauce derivatives have clearly substituted for regular soy sauce. Industry concentration is high, with leading company Kikkoman holding a 33.5% share of the soy sauce market. It expanded overseas early, breaking through the limits of its domestic market, and achieved significant scale effects. In 2014, Japan's food processing industry had total revenue of 22.29 trillion yen (approximately 1.38 trillion RMB), of which seasoning-related industries had total revenue of 1.84 trillion yen (approximately 114.22 billion RMB). Condiments accounted for 8.3% of the food processing industry's total revenue. Among condiments, compound seasonings had the largest share, with revenue of 68.15 billion RMB, accounting for 60%. Next were pickled vegetables and kimchi, with an industry scale of 15.23 billion RMB. Soy sauce and edible amino acids, and miso had revenues of 9.25 billion and 14.66 billion RMB respectively. Japan has been influenced by both Chinese and Western dietary cultures, so many compound seasonings combine Japanese and Western elements, resulting in a wide variety. Although compound seasonings are the largest category, soy sauce still holds the most important position in Japan's condiment market because many compound seasonings use soy sauce as a base. Soy sauce is widely used in Japanese cuisine; a Japanese proverb says, "Japanese food begins and ends with soy sauce," meaning soy sauce is indispensable throughout a Japanese meal. Japan has over 300 varieties of soy sauce in five main types. Ordered from lightest to darkest: white soy sauce, usukuchi (light) soy sauce, koikuchi (dark) soy sauce, saishikomi (re-fermented) soy sauce, and tamari soy sauce. Koikuchi accounts for about 84% of the market, followed by usukuchi at about 15%. Each type has unique uses: koikuchi for general cooking; usukuchi to highlight the original flavor of ingredients; tamari for sashimi; saishikomi, with rich color and flavor, is best for cold dishes; white soy sauce, a specialty of Aichi Prefecture, is lighter and sweeter, often used in soups, steamed eggs, and okonomiyaki. Japan's soy sauce industry has matured, with about 1,400 producers, only about a quarter of the 6,000 in 1955. Domestic production has been slowly declining since 1985. Per capita purchase volume and spending are also decreasing. The share of high-end pure brewed (honjozo) soy sauce rose from about 67% in 1977 to about 87% in 2016. Although household soy sauce purchases have declined, foodservice and compound seasoning volumes continue to rise. 1) The foodservice share is increasing: From packaging changes, products over 2L began to rise rapidly in the 1990s, mainly for foodservice use. Meanwhile, products under 1L have also developed well, indicating increasing foodservice channels and declining household demand, corresponding to the trend of smaller households in Japan. 2) The trend of soy sauce derivatives is increasingly evident; a household may prepare multiple soy sauce derivative products. Derivatives include soy sauce with added sugar, dashi, and other seasonings, used in different dishes, such as sukiyaki broth soy sauce and yakiniku soy sauce. Specifically, after 2000, the share of foodservice packaging (over 2L) rose from 43% to 56%. In 2017, the scale of soy sauce derivatives was over 50% higher than in 1992. Japan's soy sauce industry is relatively concentrated. In 2017, Kikkoman's Manji and Higeta brands together held a 33.5% share, the top five companies held 59.4%, and the top 14 held 76.3%. In recent years, small brands have exited, and concentration has improved significantly. 4.1 Kikkoman: Pioneering Overseas Expansion, Breaking Regional Limits, with Clear Scale Effects Kikkoman, a leading Japanese soy sauce brand, has promoted Japanese dietary culture since the Edo period. Since its incorporation in 1917, it has a history of nearly a century. Besides soy sauce, the company produces compound seasonings, tomato seasonings, mirin, sake, and soy milk beverages. The company has seven overseas factories in the US, Asia, Europe, and exports to over 100 countries. Kikkoman also engages in wholesale distribution, spreading Japanese food culture worldwide while introducing excellent global food cultures to Japan. As is well known, Western countries had no soy sauce consumption base. But Kikkoman innovatively repositioned soy sauce as a global condiment, not just for traditional Japanese cuisine. As early as 1957, Kikkoman entered the US market, offering different soy sauce flavors tailored to regional tastes, such as meat-dipping sauce for Western diets, low-salt soy sauce for the US, and sweetened soy sauce for Europe, helping establish advantages locally. In the US, Kikkoman maintains a market share above 55%, making kikkoman synonymous with soy sauce. In 2017, Kikkoman's domestic sales reached 181.4 billion yen (11.2 billion RMB), with soy sauce sales of 50.1 billion yen (3.1 billion RMB). Overseas sales were 252.1 billion yen (15.6 billion RMB), with soy sauce revenue of 71.8 billion yen (4.4 billion RMB). Overseas soy sauce revenue even exceeded domestic. Selling seasonings is also selling food culture; Kikkoman's Toyo Foods wholesale distribution business contributes significantly, offering everything from soy sauce to rice, agricultural products, seafood, processed foods, alcoholic beverages, ice cream, and frozen foods, making great efforts to popularize Japanese food. Early overseas expansion brought new market demand, and Kikkoman improved technology, using temperature control to simulate the traditional "sun-drying and night-dewing" brewing method, ensuring quality and yield, and enabling overseas factory replication. Since Japan imports most soybeans, Kikkoman's US factory allowed bulk procurement advantages, reducing costs and helping steadily increase domestic market share. From Kikkoman's product structure changes, its development aligns with the industry trends mentioned earlier: large packaging (>2L) for foodservice and ultra-small packaging (<1L) for smaller households. These shares rose from 31.2% and 8.6% in 1998 to 54.3% and 20.4% in 2017. Financially, since 1974, the company's revenue has grown at an average annual rate of 7.6%, very steady. (Note: In 2009, the company changed its consolidation scope, so financial data are not directly comparable.) In the last five years, revenue has grown an average of 7.5% annually, with profit growth of 16.7%. Net margin, though not high at 5.5% in 2017, has been steadily improving. V. Industry Outlook: Foodservice Growth and Consumption Upgrades Drive Steady Growth, Expected Annual Growth of 5-10% We believe the condiment industry will maintain overall growth of 5-10% in the coming years. On one hand, urbanization drives the continuous expansion of the foodservice industry, and condiment usage in foodservice is 1.6 times that of home cooking, contributing over 5 percentage points to annual volume growth. On the other hand, price increases and product structure upgrades contribute about 2 percentage points to price elasticity annually. 5.1 Foodservice Industry: Rising Out-of-Home Dining Rates and Recovery Boost Growth As the main sales channel for condiments, the steady expansion of the foodservice industry is an inexhaustible driving force for long-term condiment development. With the foodservice industry maintaining double-digit growth, the share of the foodservice channel, where condiment consumption is higher, will rise rapidly, becoming the primary source of volume growth. Condiment development is closely linked to the foodservice industry's fortunes; historically, their growth rates have been roughly synchronized. The foodservice industry experienced a downturn in 2013 due to anti-corruption measures, with above-scale restaurants seeing a cliff-like decline. However, the gradual rise of mass consumption has driven steady recovery, with the industry maintaining double-digit growth in recent years, expected to continue. In 2017, China's foodservice industry retail sales reached 3.9644 trillion yuan, up 10.7%, and maintained 9.9% growth in the first half of this year. Meanwhile, above-scale foodservice saw a significant slowdown in 2013 due to reduced demand from anti-corruption, but has recovered to about 7% growth with the rise of mass consumption. In comparison, condiment usage in foodservice is 1.6 times that of home cooking, so the shift from household to foodservice consumption will drive steady volume growth. According to statistics, urban residents eat out 2-3 times more often per week than rural residents. Over the past decade, urbanization has increased by 1-2 percentage points annually, correspondingly boosting out-of-home dining rates. 5.2 Companies Have Pricing Power; Condiment Prices Rise Faster Than Costs Pricing power stems from two aspects: First, condiment spending accounts for a very low proportion of household consumption, only 0.35% in 2012. Second, purchase frequency is low, typically once every 1-2 months for soy sauce and vinegar, so price memory is weak. These attributes make price increases theoretically feasible. Generally, categories like soy sauce see a relatively large price increase every 2-3 years, and with product upgrades, the annual price contribution is about 2 percentage points. Historical data confirm that condiment price increases are fully viable and help companies cover cost increases. From 1995 to 2015, the condiment CPI exceeded the overall CPI in most periods, indicating condiment prices rose faster than general products. Since early 2017, many condiment companies have started a new round of price increases. In soy sauce, leaders Haitian and Zhongju Hi-Tech's Chubang series raised prices by about 4-5% in early 2017. Fuling Zhacai announced price increases twice, in July 2016 and February 2017, raising prices on multiple main products by as much as 15-17%. In June 2016, Hengshun Vinegar announced a price increase of about 9% on its classic vinegar series. Overall, these increases generally cover cost rises and improve gross margins. For example, Haitian Weiye's soy sauce ton price rose from 4,249 yuan/ton in 2010 to 5,400 yuan/ton in 2017, an average annual increase of 3.5%. 5.3 Product Structure Upgrades: Mid-to-High-End and Functional Condiments Lead the Trend Across the FMCG industry, consumption upgrades are pushing overall price levels upward. With rising living standards and increased brand and health awareness, the premiumization trend is evident. Nielsen data show that in the top 30 FMCG categories, the market share of value-priced products surpassed that of economy products for the first time in the second half of 2015, and premium products exceeded 50% last year. Referring to Japan's concentration process and domestic consumption trends, China's condiment structure upgrade is also evident: First, rising per capita income and health awareness make well-reviewed, high-quality branded products the first choice. Regional small enterprises, due to insufficient investment, cannot break regional barriers and become targets for national brands. Second, the foodservice industry is moving toward standardization and health, forcing upstream ingredient providers to change. For example, the gutter oil scandal exposed years ago prompted restaurants to reflect and pay more attention to ingredient sourcing; condiments, as key seasoning components, are particularly important. Additionally, compound functional condiments are highly sought after. Accordingly, we are optimistic about the upgrade to mid-to-high-end condiments and the development opportunities for compound functional condiments. Beyond well-known soy sauce and vinegar, functional condiments like oyster sauce and sauces have relatively low penetration. Looking at purchases by residents in small and medium cities, soy sauce and chicken essence have the highest purchase volumes, while oyster sauce has the lowest. Due to the small domestic oyster sauce market and few scale enterprises, the growth of leader Haitian Weiye's oyster sauce basically represents the industry. From 2009 to 2017, its compound annual growth rate was as high as 22%, significantly higher than other categories like soy sauce and chicken essence. In addition to inter-category upgrades, there is also a clear upgrade trend within the large traditional soy sauce and vinegar products. For example, in 2012, spending on high-end soy sauce grew 37 percentage points faster than the overall soy sauce market; high-end soy sauce penetration increased 29 percentage points more than the overall market. According to Kantar analysis, in 2012, 25% of condiment price increases came from product structure upgrades, while 34% of soy sauce price increases came from product upgrades, indicating that soy sauce's premiumization trend is already very clear. VI. Enterprise Growth Path: Under Increasing Concentration, Category Expansion + M&A + Foodservice Layout Currently, China's condiment industry is highly fragmented. The leading company, Haitian Weiye, holds only about 15% of the soy sauce market. Based on Japan's experience and domestic consumption upgrade trends, industry concentration will continue to rise, following the path of branding, nationalization, and platformization. In this context, we believe the growth paths of quality leading companies may show the following characteristics: First, continuous category enrichment, gradually extending from mass-taste products like soy sauce and oyster sauce to more differentiated products like vinegar and sauces, with M&A as an effective means. Second, foodservice is the main channel for future development, making current layout particularly important. 6.1 Landscape Evolution: From Fragmentation to Concentration, Following Branding, Nationalization, and Platformization Throughout the condiment industry, concentration is very low. As consumers pursue higher quality of life, concentration will increasingly shift toward branded companies. Quality leading companies will continue to pursue national development in various sub-segments, allowing them to outpace industry growth. Haitian Weiye, as the largest domestic condiment company, focuses on soy sauce and oyster sauce. In 2016, its sales accounted for 4% of the entire condiment industry, and even when using soy sauce, vinegar, and similar products as the statistical base, its share was only about 14%. As the largest category, soy sauce, enterprises above designated size produced 9.91 million tons in 2016, with the largest company, Haitian, accounting for only 15%. Looking ahead, quality leading condiment companies will be platform companies capable of category expansion, synergy between new and old products, and management output. Before reaching this stage, companies must have nationalization and branding capabilities. Specifically: Branding: First, technological innovation to win consumers with better products, e.g., crispy pickled vegetables; second, marketing innovation to resonate with consumers, e.g., "soy sauce sun-dried for 180 days"; third, scale advantages to offer the best products at the same price. Nationalization: First, deep cultivation of existing widely consumed categories; second, taste dissemination to drive broader product adoption, e.g., the rise of Sichuan and Hunan cuisine boosting demand for chili sauce; third, cultural promotion to gain consumer recognition of corporate culture. From current development, we believe Haitian Weiye is the leading company with the strongest platformization capability, followed by Fuling Zhacai and Zhongju Hi-Tech. Fuling Zhacai has a national network, extending from pickled vegetables to pickles, but its branding capability in new areas remains to be verified. Zhongju Hi-Tech has strong brand advantages built from soy sauce, with strong expansion capability into other condiment categories like oyster sauce, but its nationalization is limited and requires active expansion. 6.2 Path Analysis: Gradual Category Expansion, M&A Will Be Common, Foodservice Layout Crucial Looking at domestic and international companies, we believe that during the concentration process, leading companies must develop along two dimensions: Category: Rely on major products to continuously expand scale, then gradually develop other categories. Channel: National layout and entry into foodservice channels are urgent; this will be the key factor for future success. Category expansion is essential for condiment companies to grow, but due to taste differences and production characteristics, the expansion space and difficulty vary. On one hand, the order of taste differentiation from high to low is vinegar, sauces, soy sauce, cooking wine, oyster sauce, pickled vegetables, and salt. Products with low taste differentiation are relatively easier for scale production and higher efficiency; conversely, products like vinegar require different products for different regions, with poor uniformity. Therefore, for national development, soy sauce and oyster sauce are easier than vinegar. Additionally, compound seasonings are a future direction, and the domestic market is still in the cultivation stage, so companies can actively position themselves. On the other hand, production resources have regional characteristics, as discussed in Part I. Companies that control core resources become breakthroughs for outward expansion, such as Haitian Weiye, Zhongju Hi-Tech, and Fuling Zhacai; alternatively, acquiring these resource-based companies and leveraging large enterprise platforms for promotion. In the category expansion process, we are optimistic about the continued M&A by leading companies. For small regional condiment companies, relying on their own strength to expand outward is increasingly difficult. As first-generation founders age and competition intensifies, their historically stable profit bases will gradually weaken, making development harder. Meanwhile, large leading companies have clear brand and channel advantages, making grafting existing market categories the best choice. Therefore, the choices of both sides will increasingly converge, and we expect more acquisitions in the industry. Furthermore, the continuous expansion of downstream foodservice channels is evident in both Japan and China, and domestic leading companies will inevitably prioritize foodservice channel development. Currently, Lee Kum Kee and Haitian Weiye have relatively high foodservice revenue shares; Lee Kum Kee's soy sauce sales in China rank after Haitian and Chubang. Zhongju Hi-Tech's foodservice revenue share is about 25%, and its foodservice investment is increasing. We predict that large-pack products suitable for foodservice will continue to increase. In the medium to long term, household channel volume may hit a bottleneck, but unit prices will likely rise steadily, and companies can address household channel development through product upgrades. VII. Company Comparison: Haitian Weiye Leads, Zhongju Hi-Tech Has Significant Improvement Potential In the above research, we have discussed the industry's future trends and growth paths for leading companies. Among listed condiment companies, we believe Haitian Weiye, as the industry benchmark, has comprehensive advantages in production, operations, and channel promotion. Its development in recent years has been steady and fast, with a trend of accelerating relative to peers. In the medium to long term, Haitian Weiye will continue to outpace industry growth, solidifying its leadership. Meanwhile, Zhongju Hi-Tech's influence in soy sauce is second only to Haitian, with strong brand and product strength, but there is significant room for improvement in production and operations, and it may narrow the gap with the leader in the future. 7.1 Growth: Leader Haitian and Zhongju Hi-Tech Grow at Similar Rates, Standing Out As representatives of southern-style soy sauce, Haitian Weiye and Zhongju Hi-Tech rank first and second in the condiment industry. They successfully raised prices last year and achieved similar growth rates. Historically, despite their large scale, their growth rates are not inferior to competitors; even high-end representative Qianhe Weiye has begun to lag in the first half of this year. The reasons for the faster growth of Haitian and Zhongju include: Rooted in the mass consumer market, with the largest consumption volume and price points, and room for upgrades; As southern-style exemplars, their brands and product quality are recognized by consumers. However, Haitian Weiye and Zhongju Hi-Tech had revenues of 14.58 billion yuan and 3.45 billion yuan (condiment business) last year, with similar growth rates in recent years. In terms of category layout, after soy sauce, Haitian's oyster sauce is rapidly advancing toward a 10-billion-yuan scale, while Zhongju is slower, affected by its own institutional constraints. 7.2 Production: Haitian Has the Highest Production Efficiency, Zhongju Hi-Tech Is Catching Up Comparing production efficiency among listed condiment companies, gross margins rank as follows: Haitian Weiye, Qianhe Weiye, Zhongju Hi-Tech, and Jiajia Food. Cost analysis shows that Haitian's cost advantages are mainly in two areas: first, its main raw material is soybean meal, which is cheaper than soybeans; second, Haitian has high automation and low unit energy consumption, with significantly lower manufacturing and direct labor costs than typical condiment companies. Additionally, microbial fermentation and technical control affect soy sauce yield. Comparing Qianhe Weiye and Haitian Weiye, both high-gross-margin companies, their costs and ton prices are similar, but Qianhe's manufacturing and direct labor costs as a proportion of operating costs are much higher than Haitian's, which depends on production efficiency. Comparing Haitian and Zhongju, we estimate the ton cost difference is due to two reasons: Chubang uses more Northeast soybeans, while Haitian mainly uses soybean meal. In 2012, Zhongju's raw materials accounted for 56.9% of soy sauce costs, with soybeans at 27.3%, while Haitian's raw materials were 53.1%, with soybeans at 18.9%. Additionally, Zhongju's automation is lower than Haitian's, resulting in lower efficiency. In recent years, with the commissioning of the more efficient Yangxi base, Zhongju's profitability has been rising. Its condiment operating entity, Meiweixian, saw gross margin increase by 8.8 percentage points and net margin by 5.3 percentage points from 2013 to 2017, with the gross margin improvement basically corresponding to the rapid capacity release of the Yangxi base. The Yangxi base, operated by Yangxi Chubang, reached near full capacity last year, with a net margin of 20.5%, significantly higher than the original Zhongshan base. 7.3 Operations: Leading Companies Show Clear Scale Effects in Market Investment, High Sales Staff Salaries Yield High Returns In organizational operations, Haitian Weiye's advantage lies in its large revenue base, which can support relatively high market expenses, with clear scale effects and high output per expense. Additionally, among listed companies, high sales staff salaries generally correspond to higher per capita output. Haitian's period expense ratio is lower than the average of listed companies, and its expense-output ratio is much higher than Zhongju and Qianhe. In terms of expense structure, Haitian mainly invests in sales expenses, while Zhongju has a relatively high administrative expense ratio. Qianhe, as a very small company in rapid regional expansion, has relatively high sales expenses. Additionally, condiments are a cost-plus industry, and Haitian and Zhongju have relatively low channel costs, with first-tier distributor gross margins typically between 10-15%. In sales promotion, leading companies have strong scale effects in expense investment, especially in brand promotion and product promotions, which many other companies cannot match. From the sales expense allocation, Haitian's sales expenses are mainly concentrated in freight, advertising, promotion, and labor costs. In contrast, Zhongju's employee compensation as a share of revenue is slightly higher. This shows that Haitian's expenses are relatively more focused on terminal markets and brand investment. From sales staff compensation and per capita output, higher pay often matches higher per capita sales. Among listed condiment companies, sales staff compensation from high to low is Haitian Weiye, Jiajia Food, Zhongju Hi-Tech, Hengshun Vinegar, and Qianhe Weiye; per capita sales revenue contribution follows the same order. For example, in 2017, Haitian and Zhongju had total employees of 4,591 and 4,495 respectively, nearly the same, with sales staff of 1,804 and 1,120. Haitian's sales staff compensation is about twice that of Zhongju, and per capita sales revenue contribution is 2.5 times, suggesting that higher pay may provide stronger motivation for market development. 7.4 Channels: Haitian and Zhongju Have Relatively Low Channel Costs, but the Former Has More Balanced Market Development For distributors, Haitian and Chubang (Zhongju) are both good businesses in the condiment field, with advantages over competitors in brand foundation, volume potential, fast channel turnover, and high capital returns. Comparing the two, Haitian excels in overall marketing organization capability, with strong brand investment support and continuous channel expense support. In terms of market investment intensity and coverage, this is difficult for current competitors to match. In 2017, Haitian and Zhongju had 3,600 and 800 first-tier distributors respectively, with average revenue per distributor of 4.05 million yuan and 4.32 million yuan. In comparison, Haitian's national development is relatively balanced, while Zhongju's regional development is evident. In all regions, Haitian products can form a good consumption atmosphere, providing a more suitable environment for distributor market development. Therefore, most Haitian distributors can achieve good sales scale, with estimated annualized capital returns of about 25%. Haitian's strong sales also provide relatively generous profits, whereas small brands typically need sufficient sales scale to offer similar distributor profits. VIII. Haitian and Zhacai Show Category Expansion; Zhongju and Hengshun Await Mechanism Optimization Among the main A-share listed condiment companies, Haitian Weiye, Fuling Zhacai, Zhongju Hi-Tech, and Hengshun Vinegar are relatively better positioned and will be the biggest beneficiaries of future industry concentration. Strong recommendations include: Haitian Weiye, with clear oyster sauce volume growth and category extension opening more growth space; Fuling Zhacai, with clear volume and price increases in pickled vegetables and new categories like pickles sharing channels, worth expecting; Zhongju Hi-Tech, with Baoneng's accelerated entry and potential internal mechanism optimization to drive growth. Additionally, Hengshun Vinegar, as the first brand in vinegar with low market share, has future prospects in internal mechanism reform after state-owned enterprise reform. Qianhe Weiye, focusing on high-end products with a differentiated development route, still needs observation for national expansion. 8.1 Haitian Weiye: Flexible Mechanism, Clear Leading Advantages, Rich Categories Continuously Open Growth Space As the world's largest condiment production and marketing enterprise, Haitian Weiye has a history of several hundred years. It is a highly market-oriented private enterprise, with a current market value of about 150 billion yuan. Its products cover soy sauce, sauces, oyster sauce, chicken essence, chicken powder, and seasoning liquids, with soy sauce, sauces, and oyster sauce as its main products. In recent years, the company has maintained relatively stable revenue growth and continuously improved profitability. In 2017, revenue was 14.6 billion yuan, up 17% year-on-year; net profit was 3.5 billion yuan, up 24%. Last year, the company raised product prices again and increased marketing investment, successfully passing on price increases, while channel profits increased, squeezing competitors. In terms of profitability, gross margin and net margin reached 45.7% and 24.2% respectively, both record highs. Additionally, the company was actually in a non-saturated sales state last year; this year, in some mature regions, it has implemented volume control and price support for key products, increasing channel profit space. This healthy operation lays a solid foundation for steady growth in the coming years. As an industry leader, the company has maintained stable revenue and profit growth over the years, with high dividends, a payout ratio of 65%. Moreover, management holds a majority of shares and has implemented equity incentives for core management, aligning management and shareholder interests. 8.2 Zhongju Hi-Tech: Leading Brand and Products, Mechanism Optimization Dawns Although Zhongju Hi-Tech is a state-owned enterprise, with Zhongshan Torch Group under the SASAC holding 10.7%, the largest shareholder is Qianhai Life, which entered through stake purchases, holding 24.93% through concerted action. On September 7, these shares were transferred to Zhongshan Runtian, a subsidiary of Baoneng, allowing entry as a non-insurance entity to avoid CIRC restrictions, potentially accelerating board reshuffling and facilitating subsequent mechanism optimization. The company primarily produces and sells soy sauce, chicken essence and powder, sauces, and other condiments, with total production capacity exceeding 400,000 tons per year. Its main brands are "Chubang" and "Meiweixian." In recent years, it has launched new products like cooking oil, canned food, cooking wine, rice vinegar, and sauces, aiming to gradually develop from condiments to healthy foods. Additionally, since 2010, it has been involved in real estate development, owning about 1,600 mu of commercial and residential land north of Zhongshan City Rail Station. From the condiment business perspective, we believe the company's brand and product strength are very strong, with a deep consumption base. The reason growth has not accelerated is insufficient outward expansion motivation, fundamentally due to inadequate incentive mechanisms. With Qianhai's accelerated entry, we believe this issue may be resolved. In recent years, revenue growth has been steady, but net profit growth has accelerated significantly. The condiment business accounts for over 90% of revenue and gross profit, making it the core business, with revenue of 3.5 billion yuan in 2017, still very small. We expect it to move toward national development through foodservice channel expansion and regional development. In 2017, the condiment business accelerated mainly due to rising industry prosperity and faster growth from post-price-increase promotional investment. In terms of profitability, net margin has improved significantly in the past two years, reaching 14% in 2017, a record high. On one hand, the condiment business share has expanded, focusing on core business. On the other hand, product structure upgrades, combined with the more efficient Yangxi capacity with profitability over 6 percentage points higher than the original Zhongshan base, led to Meiweixian's net margin reaching 16% last year. With new capacity release, overall profitability will continue to hit new highs. 8.3 Fuling Zhacai: First Brand in Domestic Appetizer Side Dishes, Small Wujiang Moving Toward Big Wujiang Chongqing Fuling Zhacai Group Co., Ltd. is an agricultural industrialization enterprise group rooted in pickled vegetables, rapidly developing in the appetizer side dish field. The company has over 1,200 loyal first-tier distributors, with a sales network covering 34 provinces, municipalities, and autonomous regions, and 264 prefecture-level markets, with products exported to the EU, US, Japan, Hong Kong, and other countries and regions. After a century of changes, the company has become the undisputed leader in the domestic pickled vegetable industry, with the "Wujiang" brand holding the highest market share and brand awareness. Besides pickled vegetables, the company also has potential blockbuster products like pickles and radish. Additionally, it continues to pursue external M&A to expand product lines. In 2014, affected by the macroeconomic environment, sales of main pickled vegetable products were weak, and excessive investment in new products like kelp shreds and dried radish led to a decline in performance. In 2015, the company cleared inventory of new products like kelp shreds. In 2016, the key promotion of crispy pickled vegetables was well received, presented in a healthier, more delicious form. In 2017, after taking the lead in raising prices, sales actually grew faster, showing a trend of both volume and price increases. In terms of profitability, the company's net margin has gradually risen to about 27% last year over the past decade. On one hand, product structure upgrades and faster price increases than costs brought gross margin to a record 48.2%. On the other hand, scale effects have emerged, expense ratios have declined, and profitability has hit new highs. This year, due to disguised price increases and cost declines, net margin is expected to exceed 30%. 8.4 Hengshun Vinegar: Brand Heritage, Vinegar Leader's Potential Awaits Activation Located in Zhenjiang, Jiangsu, with a state-owned background, the company is the largest vinegar producer in China, one of the four famous vinegars, with products including aromatic vinegar, white vinegar, cooking wine, soy sauce, and pickled vegetables. Its brand has enduring appeal, with representative product aromatic vinegar having strong influence in core regions like East China. However, outward expansion trends are not obvious, market potential needs further activation, and mechanism reform is the strongest catalyst. Currently, the company uses 30 offices under its marketing center to lay out nationally, with 600,000 distribution points covering various regions. Its leading product, vinegar, has led national sales for 20 consecutive years, with the representative brand "Hengshun." Additionally, the company has some real estate and other businesses, with a shrinking share. In recent years, the company has gradually focused on vinegar and other condiment businesses, maintaining steady growth. In 2017, condiment business revenue was nearly 1.2 billion yuan, declining year-on-year, mainly due to high base from long stocking periods after price increases in the second half of last year, requiring a digestion period. As the company focuses on condiment business and improves product structure, profitability has steadily improved. The gross margin of the condiment business has risen from 32% in 2008 to 42% in 2017, driving overall gross margin from 27% to 41%. In the past two years, net margin has also improved significantly; the higher net margin in 2015 was largely due to non-recurring gains. Disclaimer: This article represents only the author's views and does not constitute any investment advice. On October 23-24, during the Autumn Sugar and Wine Fair, New Distribution will host the "2018 FMCG City Distribution Logistics Conference." We will invite industry experts, FMCG warehousing and distribution specialists, and distributors transforming to unified warehousing and distribution platforms to discuss and answer questions about future trends in FMCG city distribution logistics and practical cases of distributor transformation, hoping to bring you different insights and inspiration! The specific agenda is as follows: List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Services (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuanang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Liquor Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Commercial Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshankoufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express City Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Liquor Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chaoan Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhiru Trading Co., Ltd. Guizhou Meiweiguoguo Network Technology Co., Ltd. Hubei Anjie Logistics Co., Ltd. Hubei Kuaixiao Internet Technology Development Co., Ltd. ...... Distributor Transformation Representatives (Proposed) In no particular order Rong Jun, Chairman of Jiangsu Huashang City Distribution Network Co., Ltd. Wang Bo, Chairman of Hubei Yijiaren Logistics Co., Ltd. Jiang Shuming, General Manager of Sichuan Chengdu Xingrenxing Trading Co., Ltd. Liu Jichen, Chairman of Shandong Yunbang Warehousing and Logistics Co., Ltd. Tu Mingyu, Chairman of Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Yang Su, Chairman of Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Yuan Xia, Chairman of Sichuan Bajie Supply Chain Management Co., Ltd. Li Qiangyun, Co-founder of Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Zhang Jianyong, Chairman of Henan Xuchang Jiulegou E-commerce Co., Ltd. Ma Haichao, Founder of Hebei Changyi Logistics Co., Ltd. Meng Yucun, General Manager of Hebei (Chengde) Wulian Yuncang Co., Ltd. Zhang Xun, Chairman of Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Zhang Hailing, Chairman of Jilin Sanxing Lian'gou Qiang Huitao, Founder of Hebei Dunjie Supply Chain Management Co., Ltd. Liao Lei, General Manager of Hunan Damei Supply Chain Management Co., Ltd. ...... -END-