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In the Chinese sauce and vinegar world, Haitian Flavouring & Food and Hengshun Vinegar Industry are like Shaolin and Wudang in the martial arts world, standing at the top with their unique skills.

Haitian dominates with soy sauce, while Hengshun leads the vinegar sector with its famous Zhenjiang aromatic vinegar. They were unrelated, but recently something happened: Haitian, the soy sauce giant, seems restless and is ready to make waves on Hengshun's turf!

Not only Hengshun is trembling, but also the 70% of small workshops scattered across the country!

Haitian Invests 40 Million in Edible Vinegar Throughout history, events that stir up the grand scheme of things are often seemingly insignificant. This time, the butterfly effect shaking China's vinegar world may stem from Haitian's recent acquisition.

On January 23, Haitian Flavouring & Food announced that its subsidiary, Foshan Haitian (Jiangsu) Flavouring & Food Co., Ltd. ("Jiangsu Haitian"), plans to acquire 70% equity of Zhenjiang Danhe Vinegar Industry Co., Ltd. for 40.271 million yuan, based on operational development needs.

Haitian's acquisition of the Zhenjiang vinegar factory is part of its multi-category development strategy. The reasons may be: first, the Zhenjiang factory has advantages in vinegar production and processing; second, vinegar has regional attributes, and only vinegar produced in Zhenjiang can be sold under the name "Zhenjiang Aromatic Vinegar."

Currently, Haitian's vinegar business has reached 700-800 million yuan in scale. After the acquisition, it can add about 20,000 tons of vinegar production capacity, further advancing its multi-category strategy. Vinegar is expected to become the fourth major category after soy sauce, oyster sauce, and seasoning paste, solidifying its position as a comprehensive condiment giant.

Haitian continues to refine its distribution channels, focusing on penetrating weak rural markets and improving its sales network. In branding, it has intensified promotion, with five sponsored variety show ads airing successively, continuously enhancing its influence. Haitian has long been known for its heavy investment in brand promotion and advertising, becoming the first brand in the industry to advertise on CCTV in 2001. With the evolution of domestic communication ecology and consumption upgrades, its consistent mainstream communication approach has set a brand benchmark in the industry.

Why Is Haitian Coming? Just as there is no love without reason, Haitian's "expedition" to Jiangsu, leveraging Danhe Vinegar to consolidate its vinegar segment, is naturally "for profit."

So, what gives Haitian the courage to wield a big knife in front of Hengshun's stronghold?

Let's look at the current landscape of China's vinegar industry.

According to the "2015-2020 China Vinegar Market Supply and Demand and Future Development Trend Report" released by China Industry Information Network: The vinegar industry is highly fragmented, with the top five brands holding less than 15% market share, the lowest concentration among condiment sub-sectors, and huge room for industry consolidation.

Meanwhile, according to the China Condiment Industry Association, small workshop-style enterprises account for up to 70% of the vinegar industry. Even the industry leader Hengshun had revenue of 1.2 billion yuan in 2014, with a market share of less than 5% of the total 25 billion yuan industry. Compared to Haitian's 15%-20% share in soy sauce, there is still significant room for improvement. At the same time, Haitian's vinegar business has quietly risen to fifth place in the industry with a 1.6% market share.

Does Haitian Have the Strength to Challenge Hengshun? With a "let's watch the fun" attitude, since Haitian has come knocking, does it have the strength to challenge Hengshun?

The editor can responsibly tell you: It's about the same! Let me explain why.

In recent years, under its diversification strategy, Haitian's vinegar segment has formed a production pattern of white vinegar and mature vinegar. The acquired Danhe Vinegar also has the capability to produce aromatic vinegar and rose vinegar. Compared to Hengshun, Haitian's vinegar segment only lacks bran vinegar, but for Haitian, which aspires to challenge Hengshun in vinegar, this issue can be resolved through a simple merger and acquisition.

Haitian's Specialty Vinegar Series Products

In other words, just from this small acquisition of Danhe Vinegar, Haitian's vinegar segment already has the foundation to compete with Hengshun in terms of product categories.

Looking at production capacity, according to Hengshun's public data, Hengshun has an annual capacity of 300,000 tons. After acquiring Danhe Vinegar, Haitian's vinegar segment will have: Jiangsu Suqian subsidiary with 150,000 tons, the newly acquired Danhe with 20,000 tons, plus Guangdong subsidiary's capacity, totaling over 200,000 tons.

In terms of output value, according to data from Xueqiu, the price of vinegar is about 5,000 yuan per ton. Thus, Haitian's vinegar output value exceeding 1 billion yuan should not be difficult. In comparison, Hengshun's sauce and vinegar condiment revenue in 2015 was 1.138 billion yuan.

Is there an insurmountable gap between 1.138 billion and 1 billion? The answer is obvious.

When Gods Fight, Mortals Suffer Despite Haitian's aggressive moves, will there be a battle between Haitian and Hengshun in the vinegar world?

The editor believes that in a small-category market, competition between the two is inevitable.

But don't forget, China's vinegar industry is a 25 billion yuan market. More likely, a duopoly will form, with the two giants joining forces to conquer the market.

Although the current landscape shows regional brands like Tianjin Tianli Duli, Beijing Longmen, Hebei Zhenji, Shanghai Baoding, and Qingdao Lighthouse each dominating their regions and eyeing national expansion, and rising stars like Shanxi Zilin and Shanxi Laifuyi not willing to be outdone, the market competition is intensifying.

But with Haitian's continuous investment, the "two giants standing tall" situation in the vinegar world is about to form. As for other vinegar companies, do you remember the story of Wang Laoji and JDB fighting in the herbal tea market, dragging down Heqizheng? The 70% of small workshop-style enterprises in the vinegar industry face an uncertain future in this contest.

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