---
title: "Earning 400 Million in Six Months During the Pandemic, with Gross Margins Outperforming Haitian Flavoring, Will Wujiang Pickled Mustard Continue to Raise Prices?"
description: "In the pickled mustard industry, Fuling Zhacai holds an absolute leading position. Although there are competitors like Tongqianqiao, Yuquan, and Lameizi, none can shake its industry status. Currently, Fuling Zhacai is the leading enterprise with the highest market share. If the name Fuling is vague, the ubiquitous Wujiang pickled mustard is certainly familiar, once a staple on green trains. Fuling Zhacai primarily engages in the research, production, and sale of convenient foods such as pickled mustard, radish, pickled vegetables, and other side dishes, and is the largest enterprise of its kind in China."
author: "财天作者"
publisher: "New Distribution"
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published: "2020-09-03"
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# Earning 400 Million in Six Months During the Pandemic, with Gross Margins Outperforming Haitian Flavoring, Will Wujiang Pickled Mustard Continue to Raise Prices?

> In the pickled mustard industry, Fuling Zhacai holds an absolute leading position. Although there are competitors like Tongqianqiao, Yuquan, and Lameizi, none can shake its industry status. Currently, Fuling Zhacai is the leading enterprise with the highest market share. If the name Fuling is vague, the ubiquitous Wujiang pickled mustard is certainly familiar, once a staple on green trains. Fuling Zhacai primarily engages in the research, production, and sale of convenient foods such as pickled mustard, radish, pickled vegetables, and other side dishes, and is the largest enterprise of its kind in China.

**In the pickled mustard industry, Fuling Zhacai holds an absolute leading position. Although there are competitors like Tongqianqiao, Yuquan, and Lameizi, none can shake its industry status. Currently, Fuling Zhacai is the leading enterprise with the highest market share.**
If the name Fuling is vague, the ubiquitous Wujiang pickled mustard is certainly familiar, once a staple on green trains.
Fuling Zhacai primarily engages in the research, production, and sale of convenient foods such as pickled mustard, radish, pickled vegetables, and other side dishes, and is the largest enterprise of its kind in China. In the industry, Fuling Zhacai leads in both production and sales, with high market share for its products, and Wujiang pickled mustard is one of its star products.
At the beginning of 2020, due to the sudden outbreak of COVID-19, many companies faced the dilemma of halting production. However, every coin has two sides; while many enterprises were forced to pause, the pandemic also stimulated growth in some industries and companies, with medical devices being the most prominent. Besides the medical device industry, the food processing industry, where Fuling Zhacai operates, also grew during the pandemic.
**The 2020 semi-annual report originally scheduled for the evening of August 19 did not arrive as planned; after a one-day delay, on the evening of the 20th, Fuling Zhacai released its semi-annual results. Just like the demand for daily necessities during the pandemic, Fuling Zhacai's performance in the first half of 2020 continued its growth trend.**
**-01-**
**Small Pickled Mustard, Big Business**
According to the **2020 interim report, Fuling Zhacai achieved operating revenue of 1.198 billion yuan in the first half of 2020, a year-on-year increase of 10.28%; net profit attributable to shareholders of the listed company was 404 million yuan, a year-on-year increase of 28.44%.**
In fact, Fuling Zhacai's performance has been steadily rising.
According to data from Hithink Flush, since 2008, Fuling Zhacai's operating revenue has grown from 422 million yuan to 1.99 billion yuan in 2019; net profit has grown from 33.7776 million yuan to 605.1 million yuan in 2019.
Over the past decade, the gross sales margin, reflecting the company's profitability, has been on an overall upward trend. Among them, in 2017, Fuling Zhacai's gross sales margin had risen to 48.22%; by 2019, it had risen to 58.61%. **Gross margin is an important indicator of corporate profitability. Based solely on gross sales margin, Fuling Zhacai is not inferior to some blue-chip stocks, and even surpasses them.** As shown in the figure below, since 2013, Fuling Zhacai's gross sales margin has consistently been above that of Haitian Flavoring. At the close on August 20, the share price of Haitian Flavoring, the leading soy sauce company, was 164.16 yuan per share, with a total market value of up to 532 billion yuan, surpassing not only big blue chips like Hengrui Medicine and CATL, but also exceeding the oil giant Sinopec with a total market value of 487.9 billion yuan.
As of the close on August 20, 2020, Fuling Zhacai's market value was as high as 32.7 billion yuan. It is worth noting that among the three listed airports in the A-share market, except for Shanghai Airport, both Shenzhen Airport and Xiamen Airport have market values lower than Fuling Zhacai.
**In the pickled mustard industry, Fuling Zhacai holds an absolute leading position. Although there are competitors like Tongqianqiao, Yuquan, and Lameizi, none can shake its industry status. Currently, Fuling Zhacai is the leading enterprise with the highest market share.**
##### **-02-**
##### **Performance Driven by Price Increases**
In 2010, Fuling Zhacai officially entered the capital market. Over the past decade, Fuling Zhacai's operating revenue has grown from 422 million yuan in 2008 to 1.99 billion yuan in 2019, nearly a five-fold increase; net profit has grown from 34 million yuan in 2008 to 605.1 million yuan in 2019, a 17.9-fold increase.
From the data growth rates, it can be seen that **Fuling Zhacai's operating revenue growth is relatively moderate, while net profit growth is significantly faster than revenue growth.** In fact, apart from the "extra" income from other businesses, the growth in both net profit and operating revenue ultimately comes down to increases in unit price, sales volume, and cost control.
In the operating costs of pickled mustard, according to the 2019 annual report, raw material mustard greens account for 74.38%, with the remaining components totaling less than 30%.
**In terms of raw materials, Fuling Zhacai has a clear advantage over other competitors. The Fuling region, covered by the company's base construction, is the largest and most concentrated pickled mustard production area in China, with its unique natural environment suitable for large-scale planting of raw mustard greens.**
Looking back, "price increases" have run through almost the entire process of Fuling Zhacai's revenue growth.
According to the 2010 prospectus, the average selling price of pickled mustard from January to June 2010 increased by 4.77% compared to the average price for the full year of 2009. In the second year after listing, according to Fuling Zhacai's financial reports, the main reason for the increase in operating revenue was a 10.64% year-on-year increase in the average selling price of pickled mustard products, increasing operating revenue by 66.021 million yuan; and a 17.63% year-on-year increase in sales volume, increasing operating revenue by 92.9615 million yuan.
In 2012 and 2013, the company's financial reports also disclosed price increases and adjustments; in addition, in 2016, 2017, and 2018, Fuling Zhacai issued announcements regarding price increases.
In the nine years since listing, prices have been raised almost every year.
However, is this price increase strategy sustainable?
##### **-03-**
##### **Can the Price Increase Strategy Be Sustained?**
**The Financial World Weekly checked the products sold on Fuling Zhacai's official flagship store on JD.com: 5 bags of 80g pickled mustard are priced at 11.9 yuan, averaging less than 3 yuan per bag. At a price below 3 yuan, a price increase seems feasible. But whether it's consumption upgrading or consumption downgrading, when 80g of pickled mustard sells for the price of a bottle of Haitian soy sauce, will consumers still be insensitive to price?
From the perspective of Fuling Zhacai's product structure, exports account for less than 1%, and the domestic market remains the company's main battlefield. Besides raising prices, Fuling Zhacai needs more profit points.
In fact, Fuling Zhacai's 2019 performance also makes one suspect that "price increases are no longer effective."
According to data from Hithink Flush, the company's operating revenue growth rate in 2019 was 3.93%, a sharp decline from 25.92% in 2018; net profit growth fell from 59.78% in 2018 to -8.55%.
In fact, Fuling Zhacai has long been aware of this.
In 2015, Fuling Zhacai acquired 100% equity of Sichuan Huitong Food Co., Ltd., officially entering the pickled vegetable industry. However, as of the end of 2019, pickled mustard products still contributed as much as 86.07% of operating revenue, while pickled vegetable products accounted for only 6.36%. The effect of Fuling Zhacai's external expansion is not yet obvious.
One cannot help but return to that question: if Wujiang pickled mustard raises its price, will you still eat it?
Source: Financial World Weekly (ID: cjtxzk); Author: Feng Yuanyuan
Tips will be paid 400-2000 yuan once adopted.


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