---
title: "How Can Sichuan Seasonings Expand Beyond Sichuan and Chongqing?"
description: "The seasoning business, especially in Sichuan, has always attracted capital, with a market of 450 billion yuan. Despite the rise of Sichuan seasoning companies, few have achieved the scale of leading enterprises like Haitian, and the industry faces challenges in standardization and national expansion."
author: "湃动研究院"
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published: "2023-01-17"
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# How Can Sichuan Seasonings Expand Beyond Sichuan and Chongqing?

> The seasoning business, especially in Sichuan, has always attracted capital, with a market of 450 billion yuan. Despite the rise of Sichuan seasoning companies, few have achieved the scale of leading enterprises like Haitian, and the industry faces challenges in standardization and national expansion.

The seasoning business, as studied by PaiDong Research Institute, has always been prone to stirring the hearts of capital. After all, it concerns the dining tables of the entire nation, backed by a market of 450 billion yuan. Whether it's Haitian soy sauce, which recently faced a public relations crisis, or Laoganma, which has been controversial over its revenue, their peak sales have been admired. In the southwestern region of China, a batch of Sichuan seasoning enterprises specializing in spicy flavors has quietly emerged. For instance, Fuling Zhacai and Tianwei Food have already gone public, and Dandan Pixian Doubanjiang is in the process of an IPO. They all attempt to carve out a share of the seasoning market. Some say that in the next decade, Sichuan seasonings (hereinafter referred to as "Chuantiao") will have a market of hundreds of billions and will become a trend in the entire seasoning industry. Interestingly, even after going public, there are only a handful of Chuantiao enterprises with total revenue exceeding 1 billion yuan in the Sichuan-Chongqing region. Why hasn't Chuantiao produced a leading enterprise like Haitian? What kind of business is it? Where are the future opportunities? This article will attempt to answer these three questions.

Why Chuantiao Can Debut in the C Position

We are in a great era of new category explosions; the more intense the competition in the track, the more segmented the categories. In the past decade, when we said seasonings, we generally referred to basic seasonings like soy sauce, vinegar, and salt. But now, for example, soy sauce has evolved from the initial dark soy sauce and light soy sauce to flavored soy sauce, and then to functional seasoning sauces. The categories of seasonings have continuously iterated from single to multiple, forming a large market for compound seasonings (containing at least two or more seasonings), which is currently the biggest trend in the seasoning industry. According to data, the Chinese seasoning market is around 450 billion yuan, of which compound seasonings account for 158.8 billion yuan, and Chuantiao is the largest category in compound seasonings, with a market of nearly 80 billion yuan. The rise of Chuantiao is inseparable from its own advantages and the blessing of the times.

1) Natural match with the compound seasoning track

Sichuan indeed has inherent advantages in making compound seasonings. On the one hand, the Sichuan-Chongqing region is rich in spices such as chili, Sichuan pepper, and pepper; on the other hand, it is located in a basin with a humid climate, which is conducive to lactic acid bacteria fermentation and convenient for pickling sauces. At the same time, the suitable environment allows Sichuan to produce vegetables all year round. Therefore, Sichuan seasonings are mainly sauces and pickled vegetables, with a unique flavor of "numbing, spicy, and fragrant." Specifically, they can be divided into eight sub-categories: hot pot base, pickled vegetables and mustard, table sauces, Sichuan cuisine seasonings, doubanjiang, dipping sauces, seasoning oils, and customized catering seasonings.

2) Leveraging Sichuan cuisine to go nationwide

If Sichuan's genes laid the foundation for Chuantiao, the popularity of Sichuan cuisine in recent years has officially added wings to the takeoff of Chuantiao. According to the "2021 Meituan Catering Industry Report," in 2020, among the number of stores for major specialty cuisines, Sichuan cuisine and hot pot ranked first with a share of 28.8%. The popularity of Sichuan cuisine nationwide, besides the addictive spiciness, is mainly due to two points: First, the large flow of Sichuan population supports the nationwide expansion of Sichuan cuisine. According to the seventh national census data, Sichuan has exported about 10 million people, and with population mobility, Sichuan-Chongqing cuisine has been brought to various regions across the country. Second, the standardization of commercial processes has accelerated the expansion of Sichuan cuisine. Most commercially successful categories have the characteristic of being scalable and replicable. Among the eight major cuisines, Sichuan cuisine is the easiest to achieve standardized processing because its snacks, braised foods, and hot pot-like dishes (hot pot, chuanchuan, maocai, malatang, etc.) are all heavy-flavored foods dominated by chili. Even if the quality of ingredients is average, spiciness can help cover it up. This also lowers the requirements for cooking skills; even those who are not good at cooking can become chefs with a pack of hot pot base. Therefore, Sichuan cuisine has gradually occupied the dining tables of people nationwide, and spiciness has stimulated consumers' taste buds, thereby driving the growth of demand for Chuantiao.

The Chuantiao track has become fiercely competitive

The popularity of the Chuantiao track has led enterprises to compete in a state of co-prosperity, with intense market battles. Industry competition has brought extreme involution, such as the fastest-growing category in Chuantiao—hot pot base—which is a "disaster area" of homogenization. A search on Qichacha shows that there are thousands of enterprises (active or surviving) related to "hot pot base," among which the most representative are the listed companies "Yihai International" and "Tianwei Food." Below, we take the competitive breakthroughs of Yihai and Tianwei as examples to try to find clues as to why Chuantiao enterprises have struggled to grow in the past.

Battle for the top spot in hot pot base: Yihai International vs. Tianwei Food

1) Product strength: finding innovation under homogenization

Yihai International has a special identity: it is the exclusive supplier of hot pot base for Haidilao, benefiting from the shade of a big tree. Therefore, in terms of products, hot pot base is its main source of income. After the single product matures, it builds a product matrix, such as the Haidilao self-heating hot pot and self-heating rice launched in recent years, as well as the "Kuai Shou Xiao Chu" series of Sichuan cuisine seasonings like mapo tofu and pickled fish seasoning. Tianwei Food, on the other hand, is a hidden champion in the Chuantiao track, starting with a dual-line approach from the beginning. Half is hot pot base from series like "Da Hong Pao," and the other half is Sichuan cuisine seasonings from the "Hao Ren Jia" series. Moreover, unlike Yihai's innovative tomato, mushroom, and other new hot pot bases, Tianwei is better at traditional numbing and spicy flavors, which is the core competitiveness of its products.

2) Brand strength: seizing consumer mindshare

In a crowded track, brand strength often allows enterprises to stand out first. Leading enterprises in the industry have adopted a high-profile approach, investing in expenses. Chuantiao is in the early stages of development, with no absolute dominant leader yet, and due to homogenization, ambitious seasoning enterprises must invest a lot of resources in the early stage to build brand image and channels, and after having a certain influence in consumers' minds, they can scale up to achieve profitability. Yihai was previously tied to "Haidilao," rising together and quickly occupying a high ground in the consumer market. In recent years, as Haidilao's revenue has declined, Yihai has also increased marketing expenses to expand the market. Tianwei, since its listing, has undergone a brand rejuvenation strategic transformation, mainly through celebrity endorsements, sponsoring variety shows, and cooperating with mainstream media to build its brand strength. For example, in 2020, the "Hao Ren Jia" brand exclusively sponsored Jiangsu TV's "If You Are the One"; in 2021, "Hao Ren Jia" became an industry sponsor for the variety show "Singing with Legends" and a partner for Dragon TV's three Spring Festival Galas.

3) Channel strength: intersecting to seize market share

If brand strength influences consumer decisions, then channel strength determines product exposure and convenience. From the channel perspective, the downstream of compound seasonings can be divided into B and C categories. Depending on the consumer group, enterprise strategies differ. First, looking at the B-end: In recent years, there has been a common phenomenon in the catering industry: To B enterprises are growing rapidly, with annual growth rates of 50-60% or even higher. This is because B-end channels have stronger stickiness; customers are mainly catering chains, food processing companies, and enterprises with OEM and ODM needs, with strong and large demand for Chuantiao, and they are unlikely to easily switch seasoning suppliers (a change in taste may lead to customer loss). Yihai International's main business is providing seasonings to Haidilao, with channels mainly To B, giving it a natural advantage in expansion. Now looking at the C-end: The end customers of the C-end are individual consumers. Enterprises sell products to consumers through channels such as supermarkets, e-commerce, and distributors. Brands with a clear position in consumers' minds will first form a stable consumer group. However, the problem is that the Chuantiao industry is not like basic seasonings that are essential in every household; everyone has different tastes, and product choices vary, making it difficult to create compound seasonings that suit national tastes in a short time. Tianwei's channels are mainly To C, as mentioned in brand strength, and in recent years, it has been increasing marketing expenses to occupy consumer mindshare. However, we have noticed that in the past two years, industry involution has intensified, with B-end penetrating into C-end and C-end penetrating into B-end. For example, Yihai International has been rapidly expanding across the country, with over 3,000 distributors by 2020. Tianwei is not far behind, adding 1,350 distributors in 9 months, all to seize more blank channels and develop nationwide.

The Difficulty of National Expansion

In the past, the conventional approach for most Chinese brands was two steps: The first step is category strategy. A brand must first find a clear position for itself so that consumers feel the product is distinctive, making it easy to form a big single product and occupy category mindshare. The second step is the "large-scale, channel penetration" strategy. By distributing products in various channels such as supermarkets and retail, increasing exposure in front of consumers, and occupying a place in the market, it can also increase repurchase rates. But now, under the new era of consumption upgrade, consumers are no longer satisfied with product functions but pay more attention to spiritual pursuits. Moreover, with the development of the internet, the decentralization and fragmentation of traffic have become the norm, making it difficult to achieve large-scale platform penetration. So, combining the examples of Yihai and Tianwei, I believe the reasons why Chuantiao has not yet produced a big single product like soy sauce, nor a clearly dominant leading enterprise, also lie in two aspects:

On the one hand, Chuantiao categories are fragmented, and products relatively lack standardization. In the past, basic seasonings like soy sauce had typical big single product attributes; a single product could meet the needs of thousands of households, and channels could be deeply penetrated. But in the new era, personalized and diversified consumer demands have forced many enterprises to transform, engaging in multi-variety, small-batch, and even customized production. Chuantiao is a typical case of diversified demand and diversified supply. Chuantiao follows the cuisine; the more mature Sichuan cuisine is, the higher the degree of nationalization, and the larger the Chuantiao market. Therefore, the largest category of Chuantiao is currently hot pot base, followed by pickled fish seasoning. Hot pot base has the potential to become a basic seasoning, but if other Chuantiao products only target a specific cuisine, their application scenarios will be limited, and the category will be difficult to concentrate. Secondly, industry development often requires standards first. For example, soy sauce is divided into grades such as first, second, third, and special grade, while current Chuantiao standards are relatively crude, with many low-priced and complex products on the market, making it difficult to form large-scale categories and brands.

On the other hand, under new retail, enterprises are establishing omni-channel markets under market impact, but the traditional distribution model remains the main force. In the homogenized seasoning industry, channel operation is more important than product. The traditional business model in the consumer goods industry relies on distributors to conquer the market, and under the impact of the internet, various tracks have begun to transform. However, the channels for seasonings mainly rely on To B, with high customer stickiness and relatively stable growth, resulting in slower industry awakening. At the same time, compared to the leading industries in basic seasonings, Chuantiao's competitiveness in channels is relatively weak. Furthermore, most founders of Chuantiao enterprises come from grassroots backgrounds, lacking capital advantages for branding and professional talent for online operations. However, with continuous capital injection, in the past two years, a batch of brand enterprises with internet genes has emerged in Chuantiao, and they have begun omni-channel expansion. For example, in 2021, "Chaotianmen Wharf" received a Pre-A round of financing of 100 million yuan, "Add Some Flavor" received nearly 100 million yuan in Series A financing, and "Chuanwaizi Food" completed nearly 300 million yuan in Series A financing. The influx of capital has allowed these enterprises to gradually compete at a higher level.

Finding the Next "Haitian"

So, is there an opportunity for Chuantiao to produce a national single product like Haitian? The growth logic of Chuantiao in China cannot be separated from the reference of overseas compound seasoning development experience. China's eating habits are relatively close to those of Japan and South Korea, but the development of compound seasonings in Japan and South Korea is already in the middle to late stages, having gone through the process of category education to replacing basic seasonings.

First, look at Japan's compound seasoning development, where the trend is continuous category expansion: For example, miso is the most popular compound seasoning single product in Japanese households. The development of miso is based on different origins and raw materials, making finer distinctions in color and taste. Leading Japanese miso companies have 150-200 single products, while tail players focus more on local specialties, with 10-20 single products, and the categories are relatively dispersed. In contrast to Japan, South Korea's compound seasonings are a typical example of high concentration: South Korean compound seasoning brands are either dominated by one company or a duopoly, with very high concentration, and local enterprises have prominent advantages. Taking gochujang (chili paste) as an example, as South Korea's "national sauce," the product is deeply bound to the cuisine. For instance, in mainstream Korean dishes such as army stew, bibimbap, fried chicken, and barbecue, doenjang (soybean paste) and gochujang have to some extent replaced basic seasonings like salt and soy sauce. Therefore, channels are relatively concentrated, and brands can easily expand the market. At the same time, South Korea's chaebol economic system and the public opinion education of social enterprises have, to some extent, protected local brands. For example, for gochujang, the state designates "traditional chili paste making process inheritors," and enterprises also focus on promoting "continuing Korean traditional craftsmanship/the taste of home."

Back to China, the compound seasoning industry, represented by Chuantiao, is still in its early stages of development. Industry competition usually relies on two core strategies: one is overall cost leadership, and the other is differentiation. In fact, few enterprises can truly achieve overall cost leadership and surpass homogenization; more often, they rely on differentiated innovation to solve consumer pain points and focus on segmented tracks. However, seasoning sauces themselves are highly regional, and the more the category extends, the lower the concentration. Leading enterprises find it difficult to fully meet the fragmented needs of consumers. Japanese miso is a typical example, as its extension in acidity, spiciness, saltiness, and even ingredients makes its market structure worse than other local categories. Therefore, referring to Korean gochujang and Japanese miso, the category with the greatest opportunity for Chuantiao in China is likely also in the seasoning sauce field. If a product can replace basic seasonings, there is still an opportunity to break through, which is probably one of the reasons why the capital market is optimistic about Pixian Doubanjiang. However, how to go beyond homogenization and expand beyond Sichuan and Chongqing is the next common challenge for Chuantiao enterprises.

References:
- Compound seasoning industry special report series: From overseas review, look at the path to the endgame | Huachuang Securities
- Food and beverage industry tracking report: Catering standardization solutions and feedback from the big consumption forum, Chuantiao is hot with the east wind, smart restaurants are sprouting | Huachuang Securities
- Compound seasoning leader stabilizes and repairs, reform momentum gradually releases | Guojin Securities
- Compound seasoning industry special report: Pattern improvement, management upward, compound seasoning track is expected to usher in an inflection point | Tianfeng Securities
- Bai Yan: Start with the end in mind, uphold integrity and innovate | China Seasoning Association


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