---
title: "Falling from Grace: Why Is Pickled Mustard Not Selling?"
description: "Fuling Zhacai, a leading Chinese pickled mustard brand, saw its stock price plummet after a disappointing half-year report, leading to a market value loss of 4.4 billion yuan in four days. The decline is attributed to slowing consumption and the brand's failure to keep up with consumer upgrades, as evidenced by its multiple price hikes and stagnant product innovation."
author: "​闫启"
publisher: "New Distribution"
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published: "2019-08-14"
language: "en"
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# Falling from Grace: Why Is Pickled Mustard Not Selling?

> Fuling Zhacai, a leading Chinese pickled mustard brand, saw its stock price plummet after a disappointing half-year report, leading to a market value loss of 4.4 billion yuan in four days. The decline is attributed to slowing consumption and the brand's failure to keep up with consumer upgrades, as evidenced by its multiple price hikes and stagnant product innovation.

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**As the saying goes, even a clever housewife cannot cook without rice. Coincidentally, because the Fuling Zhacai factory is located along the Yangtze River, it benefited from the Three Gorges relocation project, receiving 140 million yuan in relocation compensation. It was with this money that the history of Fuling Zhacai was rewritten.**
Unexpectedly, pickled mustard suddenly became a hot topic.
This originated from a political talk show in Taiwan. On a Taiwanese talk show called "Critical Moment," a "financial expert" made a bold claim: the recent decline in Fuling Zhacai's stock price indicates an economic downturn, and mainlanders can no longer afford pickled mustard.
This amused mainlanders, who expressed deep sympathy for the "expert's" narrow view. The incident not only made it to the hot search list but also sparked an online "wealth-flaunting" competition with pickled mustard. Even many Taiwanese netizens were embarrassed by the "famous commentator's" ignorant remarks.
But on a serious note, why is pickled mustard not selling? The Taiwanese "financial expert" may not know that in recent years, there has been a term in the mainland—"consumption upgrade"—where people's consumption demands are increasingly diversified and personalized. As netizens summarized, the so-called inability of mainlanders to afford pickled mustard is more likely because pickled mustard products have failed to keep up with the pace of "consumption upgrade," gradually losing consumer interest.
**A wave of online mockery turned eating pickled mustard into a "wealth display"**
In 2013, Taiwanese professor Gao Zhibin claimed that ordinary mainlanders couldn't even afford "tea eggs," which amused mainlanders. But suddenly, pickled mustard became a status symbol for the "rich," and a frenzy of "eating pickled mustard to show off wealth" swept Weibo, with even Admiral Zhang Zhaozhong quickly eating some pickled mustard to defend his reputation.
It turned out that on the Taiwanese talk show "Critical Moment," "financial expert" Huang Shicong said on the show that "the mainland is now in trouble," citing an example. He said, "There is a stock in the mainland called 'Fuling Zhacai' (Huang mispronounced 'fu' as 'pei'), and its pickled mustard is considered a 'instant noodle partner' in the minds of mainlanders. The sales volume and stock price of pickled mustard can reflect the quality of life of mainlanders."
According to his logic: previously, when Fuling Zhacai sales were rising, it showed that people from the middle and lower classes in the mainland could all afford instant noodles with pickled mustard; but recently, the stock price of Fuling Zhacai has been falling, indicating an economic downturn, and mainlanders can no longer afford pickled mustard.
This not only made mainland netizens laugh out loud, but even Taiwanese netizens felt embarrassed and ashamed for the "famous commentator's" level. A Taiwanese venture capital tycoon lamented on his social circle: concluding that mainland compatriots can't afford pickled mustard based on the rise and fall of a stock shows the level of Taiwanese TV commentators. These people who hold the public opinion platform, with a frog-at-the-bottom-of-a-well mentality, refuse to look westward at the mainland's development, nor do they acknowledge or turn a blind eye to the mainland's rise, leading to the jokes about tea eggs and pickled mustard.
Subsequently, the "Critical Moment" program team quickly deleted the segment about "can't afford pickled mustard."
**Pickled mustard not selling, market value evaporated by 4.4 billion yuan in four days**
Why did "financial expert" Huang Shicong think mainlanders can't afford pickled mustard?
On the evening of July 30, Fuling Zhacai released its 2019 semi-annual report. Due to lower-than-expected results, the stock price kept falling, and in just four days, the market value evaporated by 4.4 billion yuan. Media reports used humorous headlines like "Can't even afford pickled mustard" and "explosion."
In response, at the telephone conference on the company's first-half operations, General Manager Zhao Ping responded that Fuling Zhacai is not unsellable, nor is it an "explosion."
The reasons for the slowdown in Fuling Zhacai's semi-annual performance are: first, weak macro consumption, leading to slower revenue growth; second, in the second quarter, the company increased spending on management transformation and channel construction. In the second quarter, Fuling Zhacai not only increased sales expenses by about 30 million yuan for channel construction and management adjustments but also used idle funds to purchase a piece of land, both of which directly led to the decline in profits.
According to the disclosed data, Fuling Zhacai's first-half revenue was 1.086 billion yuan, a year-on-year increase of 2.11%; net profit attributable to shareholders of the listed company was 315 million yuan, a year-on-year increase of 3.14%. Although Fuling Zhacai's first-half performance data still grew, the single-digit growth rate was the lowest since listing.
In contrast, in the semi-annual reports from 2016 to 2018, revenue growth rates were 27.60%, 30.59%, and 34.11% year-on-year, respectively, and net profit growth rates were 27.38%, 48.38%, and 77.52%, respectively. The 2019 first-half "report card" was indeed unsatisfactory.
Over the past few years, the unit price of a pack of pickled mustard has been rising imperceptibly.
In July 2016, Fuling Zhacai raised the landed price of 11 products by 8% to 12%; in February 2017, citing "cost pressure," it raised the landed price of 9 products of 80g and 88g pickled mustard by 15% to 17%.
In the fourth quarter of 2017, Fuling Zhacai reduced the packaging of crispy pickled mustard from 175g to 150g, and the main pickled mustard from 88g to 80g, but kept the price unchanged, effectively raising prices by 10% to 16.7%; in November 2018, Fuling Zhacai raised the landed price of 7 products by about 10%.
Four price increases in three years made Fuling Zhacai a well-known "price increase concept stock" in the market. The price increases directly boosted gross margin, which reached 58.55% in the 2019 interim report, firmly securing its position as the national leader in pickled mustard.
**Rise to prominence: from a nearly bankrupt small factory to the pickled mustard leader**
Fuling Zhacai's semi-annual report falling short of expectations was surprising. After all, Fuling Zhacai has always been considered a "big white horse" stock by investors, and the story of its transformation from a small insolvent factory to the national pickled mustard leader is widely told.
Fuling Zhacai was founded in 1988 by the original Fuling municipal government as a state-owned enterprise. By the end of 1999, the company had liabilities of 175 million yuan, effectively insolvent. At that time, the company had about 4,000 employees, used traditional and backward manual production techniques, and annual sales were less than 100 million yuan.
In 2000, Fuling Zhacai was still in a loss-making state. It was then that Zhou Binquan appeared and turned the company's fortunes around. At the time, Zhou served as chairman, general manager, and party secretary.
As the saying goes, even a clever housewife cannot cook without rice. Coincidentally, because the Fuling Zhacai factory is located along the Yangtze River, it benefited from the Three Gorges relocation project, receiving 140 million yuan in relocation compensation. It was with this money that the history of Fuling Zhacai was rewritten.
At that time, Zhou Binquan overcame objections and introduced an automated pickled mustard production line. In 2001, he purchased a fully automated production line from Germany for 12 million yuan, achieving full automation from cleaning, cutting, screening to sterilization. Of course, the effect was immediate: in 2001, Fuling Zhacai's sales reached 150 million yuan.
In addition to upgrading processing techniques, Fuling Zhacai also invested heavily in advertising. In 2006, when "My Fair Princess" was popular across the country, Fuling Zhacai chose Zhang Tielin as their spokesperson and spent 14 million yuan on four months of CCTV advertising slots. With the effect of CCTV ads and celebrity endorsement, Fuling Zhacai's sales grew at an annual rate of 20% to 30%.
In 2008, Zhou Binquan implemented a "focus" strategy, cutting 80% of the company's more than 100 products, retaining only about 20 products to focus on building. In the same year, the company was restructured into a joint-stock company, and its strength continued to grow.
On November 23, 2010, Fuling Zhacai listed on the A-share market, staging a crazy debut. After opening at 25.6 yuan per share, the stock price soared, was temporarily suspended three times, and finally closed up 191.6%.
**Behind the sluggish sales of pickled mustard and instant noodles: failing to keep up with consumption upgrades, naturally eliminated**
Speaking of pickled mustard, one must mention its companion—instant noodles.
Previously, affected by various factors such as the rise of food delivery, instant noodle sales in China began to decline in 2015, causing FMCG companies like Uni-President and Master Kong to experience a dark period. Data shows that during 2016-2017, Uni-President's mainland workforce was reduced by nearly 4,000 people; Master Kong, which held half of China's instant noodle market, saw continuous profit declines and was even removed from the Hang Seng Index.
But now, instant noodles have revived in the mainland market. A recent report by US consulting firm Ries Consulting stated that in 2018, China's instant noodle sales reached 40.25 billion servings, accounting for 38.85% of global sales, ranking first.
What did Master Kong and Uni-President do?
Starting in 2018, Uni-President launched the Tang Daren series of instant noodles, improving old processes, using slow-cooked broth for seasoning packets, and raising the unit price from 3 yuan to 5 yuan, moving away from the previous low-end intensive competition toward the mid-range. Subsequently, Uni-President launched the Man Han Da Can series priced at nearly 20 yuan, replacing dehydrated vegetables and beef dices with large chunks of beef.
Master Kong, on the other hand, launched the "Black and White Pepper" series, "Golden Soup" series, "Craft Soup" series, and Tonkotsu noodles, and in 2017 launched "Pot Boiled Noodles" and DIY noodle series, all priced above 5 yuan. High-end products like EXPRESS Speed Noodle Restaurant target high-end consumers who pursue quality of life.
High-end instant noodles have become a strong new driver of growth for Uni-President and Master Kong. Financial reports show that Uni-President's Tang Daren sales grew 30% year-on-year in 2018, with revenue exceeding 1.9 billion yuan; Master Kong's high-end instant noodle sales grew 10.6% year-on-year, while sales of cheaper crispy noodles fell 24% year-on-year.
In addition, searching for the keyword "instant noodles" on Taobao reveals that the top results include not only instant noodles but also hot and sour noodles, snail noodles, and Korean imported instant noodles, and the unit prices are not cheap. Especially the currently popular self-heating hot pot, despite a unit price of around 30-40 yuan, still cannot resist consumer enthusiasm.
It can be seen that the consumption level of Chinese people has not declined as the "Taiwanese expert" thought, but is continuously improving. As netizens summarized, the reason Fuling Zhacai is not selling is more likely because pickled mustard products have failed to keep up with the pace of "consumption upgrade."
Source: Investment Circle (ID: pedaily2012)


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