Mention Jinmailang, and it's likely familiar to many. The Jinmailang Group, primarily engaged in instant noodles, is a large food enterprise group spanning food, noodles, and beverages, with annual sales exceeding 10 billion yuan. Now, this company is preparing for listing. If Jinmailang successfully goes public, it will not only add a listed company to the instant noodle industry but also bring a formidable competitor.

Focusing on Rural Markets In the early 1990s, instant noodle brands like Master Kong and Uni-President targeted cities, and during that period, they captured a significant share of the first- and second-tier markets. It was then that these brands became known to urban Chinese consumers, who were relatively high spenders at the time. While Master Kong and Uni-President focused all their efforts on cities, neglecting rural areas and townships, Jinmailang's predecessor, Hebei Hualong Noodle Industry Group, saw the huge potential of the rural market and thus focused on the low- and mid-end market. By avoiding direct competition with major brands, Hualong became a highly influential regional brand in rural and township areas over several years, becoming the leader in China's rural and township markets. However, soon after, Master Kong and Uni-President began channel下沉, focusing on rural markets, posing a significant threat to Hualong. As a company primarily offering low- and mid-end products, Hualong had only a price advantage and couldn't compete with these brands. So Hualong realized that to defend its rural market share and enter urban markets, it needed to create a new mid-to-high-end product. Thus, Jinmailang was born.

Among Jinmailang's instant noodle brands, the most familiar is Jinmailang Elastic Noodles. In 2002, Jinmailang Elastic Noodles burst onto the scene with a unique category concept and differentiated marketing, becoming a dark horse in the instant noodle industry. It even broke the monopoly of Master Kong and Uni-President in the high-end noodle market. This was Jinmailang's most successful campaign to enter cities, and the advertisement featuring Hong Kong actor Dicky Cheung made Jinmailang Elastic Noodles a household name overnight.

Many industry insiders were optimistic about the Jinmailang brand, but the subsequent development caught many off guard.

Nissin and Uni-President Sell Jinmailang Shares In 2015, Nissin Foods sold 14.93% of Jinmailang Paper Products for 46.48 million yuan, 14.93% of Jinmailang Food for 241 million yuan, and 14.29% of Jinmailang Noodles for 163 million yuan, totaling 8.6 billion yen. The reason for the sale was that Jinmailang, focusing on rural markets and low- to mid-end products, had strategic differences with Nissin, which had strong advantages in urban areas.

Not only in the noodle business, but in 2016, Jinmailang Beverages also saw its shares sold by Uni-President. In May 2016, Uni-President sold its 47.83% stake in Jinmailang Beverages for 1.291 billion yuan, marking the end of a decade-long partnership. Uni-President responded that it had basically completed its phased strategic goals, while Jinmailang explained that during its move toward the capital market, it was constrained by "horizontal competition" with Uni-President.

After parting ways with Uni-President, Jinmailang chose Affinity Equity Partners, which focuses on the food and beverage industry and can bring global resources and capital market experience to Jinmailang Beverages. The entry of Affinity marked the first successful step for Jinmailang Beverages toward the capital market.

This company, whose shares were once sold by both Uni-President and Nissin Foods, decided to go public on its own.

Jinmailang's Instant Noodle Counterattack In 2016, the instant noodle market was overall weak. According to public data, Jinmailang captured 9.9% of China's instant noodle market share in 2016, ranking third among the top five instant noodle giants. Master Kong took first place with 46.5%, followed by Uni-President with 17.8%, while Baixiang and Nissin ranked fourth and fifth with 7.7% and 2.8% respectively. From the market share perspective, despite the overall weak market in 2016, Jinmailang's situation was not too awkward, indicating that its shift from rural to urban markets was beginning to show results.

In the first half of 2018, the instant noodle industry recovered overall, with sales volume growing 4.5% and sales value growing 8.6%. Currently, the top five instant noodle leaders—Master Kong, Uni-President, Jinmailang, Baixiang, and Nissin—hold over 85% of the market share. Although the overall market is recovering, with consumption upgrading, high-end instant noodles are also gaining consumer attention, testing the innovation capabilities of instant noodle companies. Jinmailang has also made significant efforts in recent years to shed its low-end, low-price label.

The "Four-in-One" Project: A Shot in the Arm for Jinmailang In recent years, Jinmailang has attempted to make continuous changes, from shifting from rural to urban markets, launching new products, building channels, to brand promotion, achieving good results. This is all thanks to the "Four-in-One" project implemented by Jinmailang.

The "Four-in-One" project includes "people, vehicles, machines, and areas." "People" refers to Jinmailang products and dealers' sales staff, "vehicles" refers to vehicles, "machines" refers to mobile clients, and "areas" refers to the sales staff's responsible regions. Initially, the Four-in-One project was mainly implemented in Jinmailang's noodle business division, achieving good results in strengthening terminal control.

Later, Jinmailang introduced the "Four-in-One" project from the noodle division to the beverage division, managing route planning for beverage distributors to achieve periodic and detailed terminal service, integrating people, vehicles, machines, and areas, and achieving stable sales growth through this method.

From an initial pilot with 28 distributors to now over a thousand participating distributors, the Four-in-One project has unleashed increasing power. Distributors implementing the Four-in-One have seen average sales profits surge, producing many instant noodle sales giants with annual profits exceeding one million yuan.

Using vehicles to cover outlets, sales staff to drive sales, and through area contracting, upgrading small workers to partners as a community of shared destiny, and using terminal machines for intelligent management of vehicles/people/contracting, establishing a new management system, Jinmailang's terminal machine is the most powerful brain integrating the entire supply chain process and scenarios of the sales system, including personnel, channels, products, inventory, orders, stores, logistics, finance, and ERP.

The Four-in-One project is undoubtedly a shot in the arm for Jinmailang, laying the foundation for its channel expansion.

Aiming for a 100 Billion Target: Why Enter the Capital Market Jinmailang Chairman Fan Xianguo stated in 2016 that China's economy hit an inflection point in 2016, so Jinmailang aimed to build a large marketing platform to achieve 100 billion yuan in revenue in the future, integrating resources and reducing costs. It was also in that year that Jinmailang decided to enter the capital market.

Two years later, Jinmailang's overall revenue has exceeded 20 billion yuan. Although still far from the 100 billion target, Jinmailang has been consistently profitable during these two years.

Although Jinmailang's market share is currently lower than Master Kong and Uni-President, when the overall Chinese instant noodle market was shrinking, Jinmailang achieved counter-trend growth of 6.4% in sales volume.

Currently, in first- and second-tier markets, the main price points for instant noodles are 2.5 yuan and 3.5 yuan, while the 1.5 yuan market is mainly dominated by Baixiang and Jinmailang. In the 1.5 yuan price band, Jinmailang's Dajinye is favored by consumers. Focus has brought Jinmailang counter-trend growth. In 2014, when the overall instant noodle market declined, Dajinye achieved growth of 39.6% in Q3 and 61.2% in Q4, a performance that continued into the first half of 2015.

The reason Jinmailang is preparing for listing is mainly to raise funds through the IPO to invest in products, channels, and R&D. Facing competitors like Uni-President and Master Kong, Jinmailang urgently needs funds to develop high-end products to compete for urban market share. Additionally, Jinmailang wants to break out of its low-end product framework and enhance brand influence through listing.

As is well known, Baixiang Instant Noodles also prepared for listing a few years ago, although it ultimately failed. Baixiang, which initially relied on one-yuan bagged noodles to quickly seize the first pot of gold in instant noodle upgrades, later launched Dagu Noodles with a unique nutritional concept, making it a new regional power under the two giants Master Kong and Uni-President. Perhaps Jinmailang wants to go public before Baixiang.

Continuous Innovation: The Foundation of Jinmailang's Sustained Profitability In addition to focus, Jinmailang also continuously innovates, not only in quality but also by adopting new technologies to change consumers' perception that instant noodles are unhealthy. Meanwhile, to adapt to market diversification, Jinmailang has launched different products targeting different consumer groups, adopting different marketing strategies, and upgrading products comprehensively. In 2015, Jinmailang used freeze-drying technology from the aerospace field for instant noodle development, launching "Dad's Kitchen: One Dish One Noodle." The launch of this high-end product drove double-digit sales growth for Jinmailang.

In 2017, Jinmailang's instant noodle business continued its counterattack, with growth exceeding 20%. Among them, high- and mid-end and low-end products grew by 20% and 10% respectively, achieving dual growth in sales volume and per-unit value. In 2017, Jinmailang's overall revenue was around 20 billion yuan, with its beverage business growing by about 30%.

Innovation is the foundation for long-term development. Although products only play a supporting role in the innovation process, in the instant noodle market, new products emerge every year, but very few succeed, with major single products accounting for less than 0.2%. Every industry has competition, so to be an industry leader, you must truly be different from others.

Looking at Jinmailang's Listing Path from Competitors' Financial Reports Given the current situation, Jinmailang already meets the basic conditions for listing. So, given the current instant noodle market environment, is it suitable for Jinmailang to go public?

In September 2018, Master Kong released its 2018 interim financial report. According to the report, during the reporting period, Master Kong Group achieved revenue of 30.996 billion yuan, up 8.5% year-on-year; gross profit of 9.68 billion yuan, up 16.44% year-on-year; and net profit attributable to shareholders of 1.306 billion yuan, up 86.59% year-on-year.

Master Kong's instant noodle business achieved revenue of 11.134 billion yuan during the reporting period, up 8.4% year-on-year. Looking at Q2 2018 alone, the instant noodle business achieved revenue of 4.827 billion yuan, up 8.2% year-on-year.

Notably, in 2018, China's instant noodle market continued to recover, with overall sales volume growing 5.9% year-on-year and sales value growing 10.1%. In this environment, Master Kong's instant noodle business achieved 11.134 billion yuan in the first half, with container noodles achieving 5.57 billion yuan, high-priced bagged noodles achieving 4.313 billion yuan, mid-priced bagged noodles achieving 1.148 billion yuan, and crispy noodles and others achieving 103 million yuan. Compared to the same period last year, only container noodles and high-priced bagged noodles saw revenue growth, while mid-priced bagged noodles and crispy noodles saw revenue decline.

In response, Master Kong stated that in the first half of 2018, its instant noodle division continued to promote a multi-price-band product strategy, consolidating high-priced noodles and developing high-end noodles to align with consumption upgrades and consumers' health needs, and meeting different consumption scenarios through multiple specifications. Among them, high-priced noodles continued to consolidate core products, and the price adjustment initiated at the end of last year was smoothly accepted by channels. High-end noodles, with the simmered broth series combined with sports marketing and media placements, continued their healthy trend.

In August 2018, Uni-President released its interim report. As of June 30, 2018, Uni-President's first-half revenue was 11.224 billion yuan, up 6% year-on-year; net profit (profit attributable to equity holders) was 714.3 million yuan, up 25.4% year-on-year; operating profit was 933 million yuan, up 18.2% year-on-year; earnings per share were 16.54 cents. Uni-President noted in the report that the increase in revenue and gross profit was mainly due to the recovery in instant noodle and beverage sales, as well as market adjustments to sales channel profits.

Data shows that in the first half of 2018, Uni-President's instant noodle business revenue was 4.152 billion yuan, up 8.0% year-on-year. In the first half, Uni-President continued to focus on operating strong products, improving product structure, and enhancing profitability.

The annual report highlighted Tang Daren, stating that Tang Daren, positioned as the mainstay of mid-to-high-priced lifestyle noodles, maintained double-digit high growth in the first half of 2018, driving the transformation of the instant noodle product structure.

From the 2018 interim reports of Master Kong and Uni-President, both saw growth in their instant noodle businesses, especially in the high-end category. This also sends two important signals: first, China's instant noodle market is gradually recovering; second, the high-end instant noodle category continues to grow.

For Jinmailang, this is also a problem to solve in the future. To enter the national market, the first thing is to see whether the company has major single products and high-end products suitable for the national market. Only with such major products can the company grow rapidly on the national path; high-end products can enhance profitability. Secondly, whether the company's product structure is complete is also important. In addition to technical R&D to meet different consumer needs, it is more important to fully leverage the advantages of regional distributors. Jinmailang has previously established a complete set of experience and methods for third- and fourth-tier markets, but it still has shortcomings in modern channels and high-end products, and will rapidly advance this work in the future.

With innovative thinking and capabilities, Jinmailang, through innovative products, has endowed the company with sustained profitability. Jinmailang already has the ability to go public. Perhaps soon, with the help of capital, a successfully listed Jinmailang will have even more surprising performance!

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