---
title: "Price Hikes: A 'Wolf in Sheep's Clothing'"
description: "Every grain of dust in the era falls on each individual like a mountain. The recurring pandemic and the sudden Russia-Ukraine war, seemingly unrelated, affect everyone. For instance, price hikes. In 2021, a wave of price increases began, especially from the second half of the year when condiment giant Haitianwei announced price adjustments from October 25. Other companies followed suit, including Hengshun Vinegar, which announced price increases of 5%-15% from November 20. The trend accelerated with the outbreak of the Russia-Ukraine war."
author: "田静"
publisher: "New Distribution"
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published: "2022-03-12"
language: "en"
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---

# Price Hikes: A 'Wolf in Sheep's Clothing'

> Every grain of dust in the era falls on each individual like a mountain. The recurring pandemic and the sudden Russia-Ukraine war, seemingly unrelated, affect everyone. For instance, price hikes. In 2021, a wave of price increases began, especially from the second half of the year when condiment giant Haitianwei announced price adjustments from October 25. Other companies followed suit, including Hengshun Vinegar, which announced price increases of 5%-15% from November 20. The trend accelerated with the outbreak of the Russia-Ukraine war.

**Every grain of dust in the era falls on each individual like a mountain.**
The recurring pandemic and the sudden Russia-Ukraine war, seemingly unrelated, are closely connected to everyone.
For example, price hikes.
In 2021, a wave of price increases was already emerging.
Especially from the second half of 2021, condiment giant Haitianwei announced price adjustments for some products like soy sauce, oyster sauce, and sauces from October 25.
Within days, other condiment companies followed. Hengshun Vinegar issued an announcement on the evening of November 3 about price adjustments for some products, effective from November 20, with adjustments ranging from 5% to 15%.
Price hike notices from Angel Yeast, Anjoy Foods, Wuhan Pepsi, Lee Kum Kee, and Haixin Foods poured in, covering beverages, snacks, condiments, and ingredients across various sub-sectors.
Many brands were either in the process of implementing price hikes or planning to announce them.
With the outbreak of the Russia-Ukraine war, the pace of price hikes accelerated.

******Lao Gan Ma's Price Hike: How Did It Perform?**
On February 28, Lao Gan Ma issued a "price adjustment letter" to distributors.
The letter stated: "Due to rising raw material costs, labor costs, and freight costs every year, the increasing costs have severely impacted the production and stocking of some products. After careful consideration, the company has decided to adjust the selling prices of some products from March 1, 2022." For years, Lao Gan Ma has been a legendary presence in the industry. Why?
The competitive landscape of the chili sauce industry is like "a towering tree plus many low shrubs," with Lao Gan Ma dominating, leaving other brands far behind. In the soy sauce industry, the top three brands account for 43% of the total market, but in the chili sauce industry, the top three brands only account for 18%, with Lao Gan Ma alone holding 15%.
From this data, although Lao Gan Ma leads the chili sauce industry, the industry concentration is relatively low, presenting a significant opportunity for a second major brand. For example, Hubang Chili Sauce entered through the food delivery channel, offering small packages, and achieved a breakthrough from zero to one in five years. Despite being a chili sauce brand, Hubang's emergence has not shaken Lao Gan Ma's position, as they target different channels, scenarios, and consumer groups.
Lao Gan Ma's long-standing dominance largely stems from its "steadfastness." **First, price stability:** In 2019, Lao Gan Ma faced significant cost increases when the prices of fresh and dried chili peppers in Guizhou rose by about 50%. Lao Gan Ma chose to switch chili suppliers rather than raise prices. However, it faced public pressure over "changed chili, worse taste," and later switched back to Guizhou chilies, still without raising prices. **Second, product stability:** What is Lao Gan Ma's signature product? Fermented black bean chili sauce, a super single product with billions in sales.
Over the years, chili sauce brands have risen and fallen with various flavors. Others suggested Lao Gan Ma adopt innovative marketing and launch trendier flavors, but Lao Gan Ma remained unchanged, thus creating the super single product of fermented black bean chili sauce. Lao Gan Ma has truly registered a classic brand in consumers' minds. This year, Lao Gan Ma announced a price hike. We speculate that first, Lao Gan Ma may genuinely be unable to bear the cost pressure of raw materials; second, it faces competitive pressure from many new brands taking a curve.
In the chili sauce track, a brand lineup has formed, including traditional enterprises like Lao Gan Ma, Lee Kum Kee, La Meizi, Gao Fuji, and Ji Xiangju, as well as new consumer brands like Hubang, Xibao Zhiyan, and Jia Dian Ziwei, and internet celebrity brands represented by Li Ziqi and Fan Ye.
The confrontation between new and old brands in the chili sauce track has formed, impacting Lao Gan Ma. The price hike may be a last resort for Lao Gan Ma. But through the "price hike" event, we can see whether Lao Gan Ma's super single product can continue to withstand market validation. The long-standing unchanged price has kept Lao Gan Ma at the top. Will this year's price hike backfire? Distributors have the most say.
According to a distributor of Lao Gan Ma in a certain province, the goods they are selling now were stocked before the Chinese New Year, and they are not selling well in the local market.
Distributors are not optimistic about this price hike: "We estimate the reason for the price increase is not cost pressure but mainly sales pressure; it's a tactical price hike. Moreover, even if the ex-factory price rises, whether the market price can rise remains to be seen."
It can be seen that for the channel side, price hikes are "hard to swallow" for the time being.
Whether it ultimately improves profits and performance depends on the company's own strength and the effect of price transmission.

**Does a Price Hike Necessarily Lead to a Sales Decline?**
On Zhihu, there is a question: How to raise prices smoothly? Below is a long reply, summarized into two points: **1. Specify the problem:** Answers have limitations and timeliness; only by limiting scope and field can we analyze specific problems. Is selling buns the same as selling lithography machines? **2. Consider objective laws:** A product price increase will inevitably lose some customers at that level; what you need to consider is how to develop higher-level customers. This involves product quality—**price increases must also "increase quality."**
While "increasing quality," we must also analyze specific products, as reply 1 said, "selling buns and selling lithography machines are different." Different products, due to different brand attributes and target groups, can choose different points when appealing. Generally speaking: **Mass products: benefit point > sweet spot > connection point** **High-value products: connection point > sweet spot > benefit point** **Daily necessities: sweet spot > benefit point > connection point**
The benefit point is solving problems, the sweet spot is sensory experience, and the connection point is psychological satisfaction.
For example, high-value products, like Coca-Cola.
For those who drink carbonated beverages, drinking carbonated drinks is a necessity. For those who don't, no matter how low the price, they won't drink. If a bottle of Coca-Cola rises by 30 or 50 cents, those who want carbonated drinks will still buy it even if it rises by one yuan; it doesn't affect their desire to purchase.
Recently, Coca-Cola reported fourth-quarter net revenue growth of 10% to $9.46 billion (approximately RMB 60.141 billion), exceeding market expectations of $8.94 billion; earnings per share were $0.45, higher than the expected $0.41; global single-unit sales grew 9% year-over-year, with Asia-Pacific growing 11%, mainly driven by strong growth in China, India, and the Philippines.
For the full year 2021, the company's revenue was $38.66 billion (approximately RMB 245.777 billion), up 17% year-over-year, exceeding market expectations of $38.08 billion; operating profit was $10.31 billion, up 15%; earnings per share were $2.32, higher than the expected $2.29; global single-unit sales grew 8% year-over-year.
Behind Coca-Cola's results lies the huge growth potential of the carbonated beverage market. With the growing base of the new generation, carbonated beverages are gradually becoming a necessity.
Therefore, the connection point is beyond the product; it represents the product's satisfaction of consumers' psychology and its connection with consumers' emotions and spiritual world.
Another brand with similar confidence is Qiaqia Food. The wholesale price of 108g Qiaqia sunflower seeds in new packaging is now 152 yuan per case (32 packs), previously 135 yuan per case.

**What is the Ultimate Purpose of Price Hikes?**
As mentioned earlier, when brands like Coca-Cola and Qiaqia Food raise prices, they don't cause much sales decline for themselves, but they have a significant market impact.
The market impact here is a positive one.
When the leading brand in an industry does not take the lead in raising prices, other followers remain inactive. Once the leading brand announces a price hike, other brands follow suit and respond.
Under high costs, can brands afford to be so patient? Yes. The consequences of rash price hikes are predictable.
What do companies compete for? It's consumer brand awareness. With awareness comes choice, and with choice comes default purchase. If a brand lacks this advantage, rash price hikes will lead to price wars and traffic wars.
Even distributors and terminal profits are squeezed layer by layer, yet they still have to sell at low prices. After all, short-term price hike pleasure does not bring long-term development.
Followers often have little say.
This creates a dilemma: **raising prices = "killed by others," not raising prices = "self-killing."**
From this perspective, the "price hike wave" led by leading brands promotes a virtuous cycle in the industry, allowing terminals to have profits and companies to survive.
But not many brands have the confidence to raise prices like Coca-Cola and Qiaqia Food, such as snack foods.
Snack foods are optional consumer goods. Currently, consumer demand is not booming. After consumption "downgrading," price hikes will affect sales. Small brands dare not raise prices lightly to maintain market share.
From the beginning of the year to now, according to channel information, sales of gift boxes like nuts have seen slight growth under the stimulus of price increases, but sales volume has slightly declined. By category, sugar and chocolate, and puffed foods have seen good growth, driven by Valentine's Day, February 22, and the upcoming Women's Day on March 8, boosting demand for such foods.
Snack foods have many varieties and scattered manufacturers. Since consumers have stocked up during the Spring Festival, the market will enter a flat sales period, with sales expected to pick up by the end of March or April at the earliest.
In this situation, distributors are even more cautious about raising prices.
Because manufacturer price increases will definitely affect the sales end, and downstream consumers need time to accept. A person in charge of community group buying said: "This year's Spring Festival came earlier than usual. Previously, distributors dared not stock too much, and inventory was generally low."
Due to rising raw material prices, manufacturers' price increases will be passed on to distributors, who passively buy high and sell high. Currently, market demand after the New Year is weakening. Since raw material prices remain unstable, they are more cautious about stocking.
So, regarding price hikes, some are happy, some are worried.
Here are some suggestions: When raw materials remain high, to ensure gross margins, if a brand has supply chain advantages, first reduce costs, continue to penetrate channels, and expand market share by improving cost-performance; if a brand lacks supply chain advantages, consider raising prices for some single products.
Strategically, first, focus on super single products; second, channel sinking; third, omni-channel construction, doing stock market in traditional channels and incremental market in emerging channels.
Make corresponding additions and subtractions based on your own conditions.
The market economy seems fragile, especially prices, which can be interfered with at any time. U.S. sanctions, trade wars, the Russia-Ukraine war, and the pandemic have caused fluctuations in market prices and costs; but the market economy is also strong. Whether from external trade wars or internal market competition, some brands are like "cockroaches that can't be killed," active in the market economy system.
Therefore, whether from the industry side or the consumer side, price hikes are an inevitable law of development.
Like a "wolf in sheep's clothing," it seems fierce but is actually full of goodwill.
First, it promotes a virtuous cycle in the industry; second, it forces industrial upgrading, because only when "value for money" and price match product performance can brands remain evergreen and consumers remain loyal.
Looking at China's development history, the 60s generation ate chaff, the 70s-80s generation ate rice, and the 90s generation has fine food. As quality of life improves, prices also rise, representing rapid economic development and the rise of China.
Today's China has entered a new era, working with the world "toward a shared future." Under the premise of supply-demand balance, price hikes accompany daily life.
"Price hikes" and "development" work together to drive industry and China's development.

 _**-END-**_


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