---
title: "Earning 250% More in a Year, Yet Market Value Evaporates 23%: What's Wrong with This Industry Champion?"
description: "Capital doesn't dislike frozen food; it just doesn't like you. As China's largest frozen food company by sales volume, Sanquan Foods seems unpopular. In 2020, it sold 660,000 tons of frozen food, with revenue near 7 billion yuan and net profit of 768 million yuan, a year-on-year growth of nearly 250%. However, in the first five months of 2021, its market value dropped by 23%. Do investors not like frozen tangyuan?"
author: "沐九九"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-05-09"
language: "en"
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# Earning 250% More in a Year, Yet Market Value Evaporates 23%: What's Wrong with This Industry Champion?

> Capital doesn't dislike frozen food; it just doesn't like you. As China's largest frozen food company by sales volume, Sanquan Foods seems unpopular. In 2020, it sold 660,000 tons of frozen food, with revenue near 7 billion yuan and net profit of 768 million yuan, a year-on-year growth of nearly 250%. However, in the first five months of 2021, its market value dropped by 23%. Do investors not like frozen tangyuan?

**Capital doesn't dislike frozen food? No, capital just doesn't like you.**
As China's largest frozen food company by sales volume, Sanquan Foods seems unpopular.
In 2020, the company sold 660,000 tons of frozen food, with revenue close to 7 billion yuan, and net profit reached 768 million yuan, a year-on-year increase of nearly 250%.
But in the capital market, in the five months since 2021, Sanquan Foods' market value has fallen by 23%.
Do investors not like frozen tangyuan?

**-01- Sinnian Attacks, Tangyuan Clash**
The founder of Sanquan Foods is Chen Zemin, a former vice president of a hospital.
After the Third Plenary Session of the 11th Central Committee in 1978, China's market reform and opening up were full of vitality. To earn more money to support his family, Chen Zemin also started a small business.
In 1992, Chen Zemin, drawing on the freezing of northern dumplings, created China's first frozen tangyuan and named it "Sanquan."
The frozen tangyuan business was surprisingly good. According to Chen Zemin's recollection, at that time, Sanquan tangyuan had a daily output of 30 tons, yet supply still fell short of demand. Distributors lined up at Sanquan's door, just to get goods a step ahead of others.
Two years later, Chen Zemin simply resigned from his position as hospital vice president and devoted himself to the tangyuan dream.
Until 1997, a young man who made his fortune selling ice cream saw the tangyuan business and opened a similar frozen tangyuan factory opposite Sanquan's factory. This young man was Li Wei, the chairman of Sinnian, who later came from behind.
But at that time, Sanquan was still the industry leader, while Sinnian was just a fledgling factory. As the Lantern Festival approached, Sanquan's door was bustling, but Sinnian across the street was ignored.
To catch up with Sanquan, Li Wei made two moves.
**The first move was a price war.**
At that time, Sanquan's business was booming, and its prices were relatively high, even requiring cash purchases without credit. To counter this, Sinnian positioned itself as cheaper and allowed credit purchases—through this price war, Li Wei gradually carved out a piece of Sanquan's market territory.
**The second move was rapid imitation.**
In 1998, Sanquan promoted 35g frozen small tangyuan. At this time, Sinnian developed 10g small tangyuan, and the next year launched 3.5g pearl small tangyuan. This small innovation made Sinnian popular, with sales soaring to over 80 million yuan and net profit of 20 million yuan.
**In 1999, Sinnian successfully exceeded 100 million yuan, closely following Sanquan.**
Under pressure from Sinnian in frozen tangyuan, Sanquan did not make further moves in that category but extended to new products like frozen youtiao and dumplings. Unfortunately, whatever Sanquan developed, Sinnian quickly imitated and surpassed.
The entry barrier in this industry is too low; so-called product innovation can only lead by a few months at most. The two companies chased each other, expanding production in multiple categories like tangyuan, dumplings, and youtiao, seeking to suppress each other in market share.
Unfortunately, as time entered the 21st century, more and more latecomers in frozen food emerged, and the markets of the two giants began to be eroded. The problem of overcapacity eventually fell on the industry.
Data shows that in 2003, Sinnian's production capacity surged to over 400,000 tons. To solve the overcapacity problem, Li Wei opened a fast-food restaurant called "Yijiang Liang'an" in Shanghai, hoping to digest his capacity through catering outlets.
Seeing Sinnian's new move, Sanquan refused to lag behind. After the "Yijiang Liang'an" restaurant had been operating for one year, Sanquan quickly opened a "Youzhi Youwei" fast-food restaurant in Zhengzhou in response.
A competition in frozen food began to extend into the catering field.

**-02- Frozen Dumplings Capital Struggle**
One wave after another, Sanquan, which failed to deal with Sinnian in the tangyuan category, also competed with Wanchai Ferry and Longfeng for dumpling business.
As early as 1997, Hong Kong's Wanchai Ferry took the lead in establishing its first dumpling factory in Shanghai and quickly placed its dumplings in every hypermarket, making Shanghai's frozen dumpling market the domain of Wanchai Ferry.
As China's financial center, Shanghai's consumption power is unquestionable. But Sanquan was only focused on bringing southerners' favorite tangyuan to the north, and had not yet thought of bringing the northerners' daily dumplings to the south... This gave Wanchai Ferry a rapid rise opportunity.
In the following two years, Wanchai Ferry's sales reached 500 million yuan, capturing half of the East China market.
During this period, the Shanghai market became the commanding height of frozen food. For Sanquan, taking the Shanghai market could, on one hand, curb Wanchai Ferry's development momentum, and on the other hand, restrain Sinnian in performance. At that time, Chen Zemin waved his hand and adopted a branch company system in Shanghai, increasing efforts to lay out hypermarkets, even willing to cede autonomy to sales managers...
In Chen Zemin's words at the time, "As long as we can enter stores and have channels, Sanquan dumplings can gain a foothold in Shanghai."
But reality was harsh. For Wanchai Ferry, backed by General Mills of the United States, Sanquan was like a grassroots enterprise in the Shanghai market. Hypermarkets did not recognize such grassroots enterprises; instead, they treated Wanchai Ferry with respect.
**In addition, there was another frozen dumpling brand in Shanghai, Longfeng.** This company was also backed by foreign capital, acquired by Heinz, one of the world's largest nutrition food producers.
Bearing channel costs, giving freezers to supermarkets... The confrontation between Longfeng and Wanchai Ferry eventually turned into a capital-burning war, while Sanquan was forced to retreat to Henan in disgrace.
To survive this battle, Sanquan Foods introduced shareholders such as Subir Shimat, Changri Investment, and Dongyi Asia, and eventually became a foreign-invested joint stock company.
In the same period, Longfeng captured Shanghai with a 13.8% market share in 2004, while Wanchai Ferry turned to build the Beijing and Guangzhou markets.
After taking Shanghai, Longfeng, with the help of capital, quickly entered major markets such as Beijing, Tianjin, Chengdu, and Chongqing, and finally aimed at Sanquan's home base of Zhengzhou, planning to attack the Zhengzhou dumpling market.
Facing Longfeng's strong attack, Sanquan had no choice but to launch a new product, the similarly positioned "Xinzhuang" dumplings, to counterattack. It took two months to push Longfeng out of the Longhai line.
In the following years, Sanquan Foods tried to exploit loopholes in the bulk frozen food market to fight back, playing well in the northern secondary markets, while Longfeng, forced to follow, suffered heavy losses due to supply chain failures.
By 2012, the four frozen food companies—Sanquan, Sinnian, Longfeng, and Wanchai Ferry—held over 60% of the market share. Among them, Sanquan Foods had a 27% market share, while the latter three had 20%, 12%, and 11%, respectively.
In 2013, a shocking battle. Sanquan Foods, which had been quietly selling frozen tangyuan and dumplings and had been listed on the A-share market for five years, suddenly announced the acquisition of Longfeng for 200 million yuan.
Thus, the frozen food market, once divided among four, was ended by a capital battle worth 200 million yuan—Sanquan became the absolute number one.

**-03- New Opponents Arrive**
After acquiring Longfeng, Sanquan's market share reached 40%, firmly holding the top position in the industry.
But this may be a superficial result. The acquired Longfeng, in the previous decade of market competition, had been burdened by internal systems, and most of its market share gains came from inefficient internal organization and supply chain consumption.
**In short, Longfeng was just a brand that burned money to grab market share.**
It was for this reason that Heinz hurriedly dumped this hot potato, and Sanquan, eager to restructure the market landscape, was willing to take it over.
After acquiring the Longfeng brand, Sanquan, to offset its performance drag, proposed a fresh food project, hoping to revive the catering segment from the previous struggle with Sinnian.
But the final result is clear. From 2014 to 2016, Sanquan Fresh Food suffered consecutive losses, and by 2018 it completely disappeared from financial reports.
**To make matters worse, Sanquan's industry champion throne was not secure. At this time, a frozen food brand called Anjoy quietly appeared in the freezers of major supermarkets.**
This is not a new brand. This frozen brand, originating from Fujian, initially did B-end business, mainly selling products to catering brands such as Banu Hotpot, Kungfu, Yonghe King, Hanasa, and Xiabuxiabu.
Who would have thought that in 2019, the name "Anjoy" would appear in large supermarkets like Walmart, Carrefour, Renrenle, and Vanguard. Many consumers wanted to buy a youtiao as delicious as Yonghe King's, or ingredients like those in Banu Hotpot... So Anjoy suddenly became the first choice.
**Sanquan Foods, also lying in the freezer, became a foil within a year.**
Anjoy, which laid out the C-end market, saw its stock price rise significantly in 2019, jumping to become a frozen food company with a market value of over 10 billion yuan. Now, Anjoy Foods has a market value exceeding 60 billion yuan, more than 3.8 times that of Sanquan Foods.
Capital doesn't dislike frozen food; it may prefer frozen food that serves both B-end and C-end. In 2020, Sanquan also began to respond to Anjoy's offensive, expanding from C-end to B-end business, and reached cooperation with well-known domestic catering chains such as Haidilao, Xiabuxiabu, and Kungfu, and formed alliances with community group buying platforms like Qian Dama and Miss Fresh.
In August of that year, Sanquan developed a new brand, "Sanquan Shuangkaohui," and started a hot pot and barbecue business. The hot pot and barbecue business was indeed good, generating over 400 million yuan in revenue within four months, but this accounted for less than 5% of total revenue.
Who will win the BC integration game between Sanquan and Anjoy? Only time will tell.
Source: Shenke New Consumption (ID: xinshangye2016)
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