---
title: "Haitian Stumbles, Qianhe Feasts"
description: "Qianhe Flavoring's profit forecast of over 500 million yuan, up more than 50%, excited its 70,000 shareholders, who called for Zhongju High-tech to give up its second-place position. By January 31, the market cap gap between the two had narrowed to 2.876 billion yuan. As a latecomer in the soy sauce industry, Qianhe's strong performance is linked to the stumble of industry leader Haitian Flavoring, whose sales declined due to the 'double standard' controversy, while Qianhe, focusing on 'zero-additive' products, caught the windfall."
author: "让商业更具价值"
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published: "2024-02-01"
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# Haitian Stumbles, Qianhe Feasts

> Qianhe Flavoring's profit forecast of over 500 million yuan, up more than 50%, excited its 70,000 shareholders, who called for Zhongju High-tech to give up its second-place position. By January 31, the market cap gap between the two had narrowed to 2.876 billion yuan. As a latecomer in the soy sauce industry, Qianhe's strong performance is linked to the stumble of industry leader Haitian Flavoring, whose sales declined due to the 'double standard' controversy, while Qianhe, focusing on 'zero-additive' products, caught the windfall.

Net profit exceeding 500 million yuan, an increase of over 50% – Qianhe Flavoring's performance forecast excited its 70,000 shareholders, who called for Zhongju High-tech to give up its second-place position. By January 31, the market cap gap between the two had narrowed to 2.876 billion yuan. As a latecomer in the soy sauce industry, Qianhe's strong performance is linked to the stumble of industry leader Haitian Flavoring, whose sales declined due to the 'double standard' controversy, while Qianhe, focusing on 'zero-additive' products, caught the windfall.
### **The 'Soy Sauce Little Brother' Caught the Windfall**
Since the soy sauce leader Haitian Flavoring encountered the 'double standard' controversy, Qianhe Flavoring, as the 'little brother' in soy sauce, has caught the windfall with its 'zero-additive' focus.
Recently, Qianhe Flavoring released a performance forecast, expecting net profit attributable to shareholders of 509 million to 578 million yuan for 2023, an increase of 48%-68% compared to the same period last year; and net profit after deducting non-recurring gains and losses attributable to shareholders of 508 million to 575 million yuan, an increase of 50%-70% year-on-year.
The net profit attributable to shareholders and the net profit after deducting non-recurring gains and losses are almost the same, and both increased significantly by similar margins, indicating that the more than 500 million yuan Qianhe Flavoring earned in 2023 is solid, and also reflecting the good actual operating conditions of the company's main business.
The core reason is that Qianhe Flavoring's soy sauce is selling well.
Qianhe Flavoring stated that in 2023, the company strengthened product quality, actively expanded the market, optimized marketing channels, enhanced market competitiveness, and expanded sales scale; packaging material purchase prices decreased year-on-year, and product freight rates decreased, leading to an increase in gross margin; sales scale expanded, and the input-output ratio of sales expenses improved, leading to an increase in net margin.
In contrast, as the former 'soy sauce Mao' (a term for a high-flying stock), Haitian Flavoring's performance is quite the opposite of Qianhe Flavoring's.
In October 2022, Haitian Flavoring was exposed for having 'double standards' in the ingredient lists of soy sauce products sold domestically and internationally. Suddenly, terms like 'technology and ruthlessness' and 'Hex technology' became hot words and also became labels for Haitian.
The year 2022, which suffered the 'double standard' controversy, became a turning point for Haitian Flavoring.
In its 2022 annual report, Haitian Flavoring mentioned 'public opinion impact' three times, such as 'In 2022, we encountered an unprecedented public opinion impact...' and 'The aftermath of the unexpected public opinion impact has not yet subsided...' It can be seen that this indeed had a significant impact on Haitian.
In 2022, Haitian Flavoring's revenue growth slowed, and its net profit attributable to shareholders declined for the first time since listing.
While Haitian Flavoring was impacted, many consumers turned their attention to Qianhe Flavoring, which uses 'zero-additive' as its main marketing selling point. Previously, Qianhe Flavoring's 'zero-additive' products also appeared in the Oriental Selection live stream.
Since then, the performance growth trends of the two have been completely different.
The largest business of both Qianhe Flavoring and Haitian Flavoring is soy sauce, which has a significant impact on their performance. In 2022, Qianhe Flavoring's soy sauce business accounted for about 62% of revenue, while Haitian Flavoring's soy sauce business accounted for about 54%.
In 2022, Haitian Flavoring's soy sauce business revenue was 13.861 billion yuan, a year-on-year decrease of 2.3%; while Qianhe Flavoring's soy sauce business revenue was 1.513 billion yuan, a year-on-year increase of 28.01%. During the same period, Qianhe Flavoring's soy sauce sales volume was 336,000 tons, a year-on-year increase of 27.49%; while Haitian Flavoring's soy sauce sales volume was 2.5027 million tons, a year-on-year decrease of nearly 6%.
Before 2022, Haitian Flavoring's soy sauce business revenue and sales volume had been growing continuously for years. In 2021, both sales volume and revenue grew by more than 8%.
From 2023, the two continued their opposite trends.
In the first three quarters of 2023, Qianhe Flavoring's soy sauce business revenue was 1.471 billion yuan, a year-on-year increase of 58.73%; Haitian Flavoring's soy sauce business revenue was 9.626 billion yuan, a year-on-year decrease of 7.47%.
One was greatly affected by the 'additive double standard' controversy, while the other grew rapidly with its 'zero-additive' focus. In comparison, it indeed seems like 'Haitian stumbles, Qianhe feasts.'
Although the scale gap between the two is large, the changes in growth rates also reflect market attitudes.
In 2023, Haitian Flavoring's stock price fell by more than 52%, while Qianhe Flavoring's fell by 22%. On January 31, Haitian Flavoring closed at 33.93 yuan per share, with a total market value of 188.6 billion yuan; Qianhe Flavoring closed at 13.99 yuan per share, with a total market value of 14.3 billion yuan.
Pang Kang, the actual controller of Haitian Flavoring, had a wealth of 80 billion yuan on the 2023 Hurun Rich List, ranking 40th. In 2022, he ranked 21st with 130 billion yuan. On the same list, Wu Chaoqun, the actual controller of Qianhe Flavoring, had a wealth of 8.5 billion yuan in 2023, compared to 5.5 billion yuan in 2022.
### **Started with Additives**
### **But Became Famous for 'Zero-Additive'**
Qianhe Flavoring, located in Meishan, Sichuan, is a very interesting condiment company. Although its main feature is 'zero-additive,' it started with food additives.
In 1996, brothers Wu Xueming and Wu Chaoqun jointly founded the predecessor of Qianhe Flavoring, Hengtai Industrial, using the unique geographical environment of the southwest to do caramel color business.
Caramel color is a food additive, a substance (pigment) formed by the caramelization reaction or Maillard reaction of white sugar, glucose, etc., at high temperatures until they brown. This coloring agent is widely used in soy sauce, vinegar, cooking wine, oyster sauce, candy, yellow wine, carbonated drinks, and other foods.
Qianhe Flavoring was once the largest caramel color producer in China. Haitian, Lee Kum Kee, and Meiweixian had all cooperated with Qianhe Flavoring, and even ranked among the top five customers of Qianhe Flavoring's caramel color business.
In 2001, the two brothers began to venture into the downstream condiment industry. In 2007, they proposed the concept of 'zero-additive' soy sauce and launched corresponding products the following year.
Compared with Haitian, Lee Kum Kee, Zhongju High-tech, Jiajia, etc., Qianhe Flavoring can only be considered a junior in the soy sauce market.
Haitian's history can be traced back to the ancient sauce garden in Foshan in the mid-Qing Dynasty, with a history of more than 300 years. In the 1990s, under the leadership of Pang Kang, Haitian introduced advanced foreign production lines, built large-scale production bases, continuously expanded production, and its advertisements also appeared during prime time on CCTV.
When the Wu brothers launched 'zero-additive' soy sauce, Haitian's sales were already approaching 5 billion yuan.
Lee Kum Kee is also a century-old enterprise. Oyster sauce was invented by the founder of Lee Kum Kee, who started with it and expanded widely in the condiment field, entering the soy sauce industry early.
Zhongju High-tech was originally a park development and industrial investment company. In 1999, it acquired Zhongshan Meiweixian Food General Factory, which produced sauces and condiments. At that time, the factory was very profitable. In 2012, Zhongju High-tech adjusted its business approach and established a development direction focusing on Meiweixian and Chubang.
As the 'first soy sauce stock' on the A-share market, Jiajia Food was born in 1996, founded by Yang Zhen, a former Chinese teacher. In 2002, he bet all the profits accumulated by Jiajia Food, winning the 'bid king' for two months of prime time advertising on CCTV with 48 million yuan. Jiajia Food's market share once surpassed Lee Kum Kee, second only to Haitian Flavoring and Meiweixian.
Brands such as Haitian, Lee Kum Kee, Zhongju High-tech, and Jiajia had already risen strongly and gradually expanded to the national market. The fledgling Qianhe Flavoring chose to avoid their edge, proposed the 'zero-additive' concept, positioned itself in the mid-to-high end, and formed a differentiated competition.
In 2015, the sales revenue of the soy sauce business exceeded that of the caramel color business, and Qianhe Flavoring's core business completed its replacement. In March 2016, Qianhe Flavoring was listed on the Shanghai Stock Exchange, with annual revenue of 771 million yuan that year.
In recent years, competitors represented by Haitian no longer want to contribute revenue to Qianhe Flavoring and have started producing caramel color themselves, directly leading to a continuous decline in Qianhe Flavoring's caramel color business revenue.
Since 2020, Qianhe Flavoring has stopped disclosing caramel color revenue in its main business statistics.
With caramel color no longer reliable, Qianhe Flavoring began to increase efforts in the vinegar business.
In August 2019, Qianhe Flavoring spent 150 million yuan to acquire 100% equity of Zhenjiang Hengkang Sauce and Vinegar Co., Ltd., continuing to expand its vinegar business. Its vinegar business had been laid out early but had been lukewarm. After completing this acquisition in 2019, the revenue of the vinegar business exceeded that of the caramel color business, and later expanded production.
The vinegar products also focus on 'zero-additive' and have become Qianhe Flavoring's second-largest business in recent years.
In the first three quarters of 2023, Qianhe Flavoring's largest business, soy sauce, saw revenue increase by nearly 59%, while vinegar, the second-largest business (accounting for 15.5% of revenue in 2022), contributed to performance with a growth rate of 21.62%.
In previous years, with consumption upgrading, 'zero-additive' attracted increasing attention, and Qianhe Flavoring vigorously promoted; in the past two years, encountering Haitian Flavoring's 'double standard' controversy, Qianhe Flavoring has been running fast.
### **'Zero-Additive' Cannot Be a Moat**
The story of Haitian Flavoring and Qianhe Flavoring in the soy sauce and condiment market is not simply a one-minus-one-plus story. 'Zero-additive' cannot be a moat for Qianhe Flavoring either.
Although Qianhe Flavoring is growing fast, in terms of scale, Haitian Flavoring is still the big brother, with a strong product lineup, and Qianhe Flavoring is not on the same level.
In the first three quarters of 2023, Haitian Flavoring's revenue and net profit attributable to shareholders were 18.65 billion yuan and 4.33 billion yuan, respectively; while Qianhe Flavoring's revenue and net profit attributable to shareholders were 2.33 billion yuan and 387 million yuan.
In the short term, Qianhe Flavoring has occupied the minds of some consumers with 'zero-additive.' But in the long run, as condiments and FMCG, the competition still depends on the comprehensive momentum of channels, brands, and products.
Moreover, 'zero-additive' itself does not have deep technical barriers in the soy sauce and condiment industry.
In recent years, almost all major brands in the soy sauce industry have launched 'zero-additive' products, and there are many 'zero-additive' soy sauce products on the market. However, 'zero-additive' is mainly a corporate behavior, which also leads to inconsistent definitions of 'zero-additive' among brands, mainly used for marketing offense and defense, and no one wants to fall behind.
After being 'impacted,' Haitian Flavoring has also made great efforts to work on ingredient lists.
Haitian Flavoring, which quickly defended and counterattacked, has tilted its strategic focus toward 'zero-additive.' Data from the big data analysis company for the FMCG industry, Mashangying, shows that in the first three quarters of 2022, Haitian Flavoring had only 19 'zero-additive' soy sauce SKUs, but by the first three quarters of 2023, it had reached 42, and the distribution rate also increased from 25% to 39%.
Image source: Haitian official website
The soy sauce and condiment market has a competitive pattern of 'one super, many strong.' The 'one super' is Haitian Flavoring.
In terms of channels, as of the end of the third quarter of 2023, Haitian Flavoring had 6,775 distributors nationwide, with products distributed in major chain supermarkets, wholesale farmers' markets at all levels, urban and rural convenience stores, and small retail shops; while Qianhe Flavoring has been expanding its distributor team in recent years, reaching 3,063 at the end of the third quarter, with a net increase of 833 in the first nine months of 2023 alone.
Haitian Flavoring achieved nationalization long ago, 'where there are people, there is Haitian.' Qianhe Flavoring, which started in Sichuan, began to step out of the southwest region in 2013 and officially launched its nationalization strategy in 2015. By 2018, the southwest region accounted for 53.44% of revenue.
Since 2019, Qianhe Flavoring has changed its regional statistics method, from the original seven major regional markets such as southwest, east China, and south China, to five regional markets such as western, southern, and central regions.
Although Qianhe Flavoring took advantage of Haitian's 'injury' to vigorously expand distributors, channels, and promotions for nationalization, by the first three quarters of 2023, the western region, including Sichuan, was still its core revenue market, accounting for about 40%.
Mashangying's analysis of the 2023 'zero-additive' soy sauce market stated that in terms of the proportion of brand sales in the overall sales of 'zero-additive' soy sauce, Haitian and Qianhe were evenly matched. In other words, the two formed a 'zero-additive' duopoly pattern.
The condiment industry is already highly competitive, and in the past two years, brands in the industry have all boarded the 'zero-additive' train, so a price war has begun again. Even edible oil giants like Yihai Kerry and Luhua have crossed over to lay out 'zero-additive' soy sauce and other condiments.
In September 2023, Qianhe Flavoring stated that the company's main products currently include soy sauce, vinegar, cooking wine, and oyster sauce, and in the future, it will form a product category pattern with these products as the mainstay and other products as supplements.
These categories are surrounded by giants. In the strongly differentiated condiment industry, Qianhe Flavoring's future situation will depend on its comprehensive strength.
Competition within the industry is fierce, which is what consumers want to see. However, for Qianhe Flavoring, although it has taken the lead with its own efforts and caught the windfall, in the long run, it is not easy to be a perennial winner.
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