Click to read the original text for details The seemingly settled soy sauce 'quality inspection gate' incident continues to ferment, with higher-level agencies stepping forward to 'slap the face' of local testing agencies. Amid the questioning of 'whether it really exists,' the most injured are the companies and distributors. Although all levels say 'no problem,' the question mark seems to remain. 1 The 'Quality Inspection Gate' Storm Recently, an article titled "29 Soy Sauces Fail Standards! Haitian, Lee Kum Kee Both Found with Problems, Some Can't Even Be Called 'Soy Sauce'" has been widely circulated. The article stated that the Jiangsu Provincial Consumer Protection Committee commissioned a third-party testing agency to purchase 120 batches of soy sauce for testing, and reported that 29 soy sauce products did not meet national standards, with 'non-conformities' mainly concentrated in label identification, nutritional ingredient labeling, and quality indicators. Among them, two product samples from Foshan-based Haitian Flavoring & Food Company were mentioned as not meeting standards: first, in terms of Nutrient Reference Values (NRV), the labeled Haitian soy sauce did not meet standard requirements; second, the Ma Ai Bao Bao brewed soy sauce (children's soy sauce) produced by Haitian, apart from iron fortification, showed little difference from regular soy sauce in other indicators. The article also claimed that samples of the 'Jiajia' brand produced by Jiajia Food Group Co., Ltd. had overall indicators even worse than regular soy sauce. Additionally, the Jinzhen light soy sauce under the Lee Kum Kee trademark showed a sodium content of 942mg/15ml on the label, exceeding the limit. Thus, the top three leading enterprises in the soy sauce industry all 'fell from grace,' becoming the target of public criticism. What followed was clarification. Haitian Flavoring & Food Company issued a corresponding announcement; a relevant person in charge even came forward to say that Haitian's quality testing was not problematic, and 'the discrepancy between the labeled indicators and test results is because the label cannot include decimal points; in fact, Haitian's protein content is higher than the standard requirement.' Additionally, 'for the children's soy sauce, experts were invited during the manufacturing process, and many children were invited to taste it, with continuous improvements to suit children's palates.' However, the company's public response triggered more doubts. Netizens almost unanimously criticized Haitian, with some directly saying: 'Haitian has a character problem' and 'If they can't even get labeling right, how can consumers trust the quality?' Lee Kum Kee and Jiajia Food, mentioned in the aforementioned article, chose a 'hard-hitting' response. Lee Kum Kee not only issued an official statement but also 'spoke out' through People's Daily Online—stating that the third-party testing agency used by the Jiangsu Consumer Protection Committee was Far East Zhengda Inspection Group Co., Ltd., and that they did not recognize the initial test results and requested a re-test, which was not approved. Subsequently, they retained samples of the same batch and sent them to what they considered an authoritative third-party testing agency, and the results all showed sodium content was compliant. Jiajia Food, through its official WeChat public account, directly reposted a statement from the China Condiment Association to 'protest.' The statement said that the aforementioned article seriously misled consumers, damaged the reputation of China's soy sauce industry, triggered a crisis of trust in the industry, and hurt companies that genuinely produce good products. The China Condiment Association emphasized that product sampling inspections should be conducted fairly, justly, and transparently on the basis of complying with relevant regulations, and the publication of test results should also be carried out with a rigorous, professional, and responsible attitude to ensure fairness and objectivity. If companies have objections to the sampling results, they have the right to request the testing agency to provide qualification certificates and sample information, and after confirming the authenticity of the samples, they can entrust other authoritative third-party testing agencies for re-testing. Although it is normal for a quality inspection agency to publish relevant test results, the statement from a higher-level agency still added some embarrassment to the Jiangsu Provincial Consumer Protection Committee. Of course, 'As a local agency, even if the Jiangsu Provincial Consumer Protection Committee bears the potential risk of 'destroying' the industry, it does not need to bear much responsibility.' A condiment distributor said. Currently, the Jiangsu Provincial Consumer Protection Committee, which released the comparative test report, has not responded to external concerns such as 'why the test results were published a year later, causing the samples to expire and making re-testing impossible,' and 'why companies were not allowed to re-test or self-test when the 2017 comparative test results came out.' 2 Distributors' 'Panic' Although manufacturers and associations have made timely statements, and the major companies have not yet been significantly affected, with no product recalls in the market, the 'quality inspection gate' incident has become 'known to all,' making it difficult for employees and distributors of these brands to remain calm. 'No impact,' said a Lee Kum Kee staff member. But the official stance was still shared on social media. 'A century of quality, strictly upheld. Conscientious enterprise Lee Kum Kee, reassuring condiments for every household. Our company's response to the Jiangsu Consumer Protection Committee's test data, click for details. Thank you for your continued support of Lee Kum Kee!' A condiment distributor used the above caption twice when reposting Lee Kum Kee's response. Behind this is the 'attention' from soy sauce manufacturers to distributors. Some distributors frankly told FMCG reporters that after the relevant news was disclosed, this group experienced varying degrees of 'panic,' especially among large distributors. 'If the matter blows up, some people may lose their jobs, and some may lose everything.' An industry insider said that the 'quality inspection gate' incident is only a surface factor causing distributor panic. The deeper factor is that the soy sauce industry has not had an easy time in recent years. Evidence for the above statement is that the catering channel, which accounts for a large portion of soy sauce sales, is still growing but at a declining rate. Taking Haitian Flavoring & Food Company as an example, Haitian soy sauce's main end-consumer groups include catering and household consumption. According to grassroots research data from multiple brokerage reports, the catering channel accounts for 60% to 70%. In its 2017 annual report, Haitian Flavoring & Food Company stated: 'Although condiments are a product with strong rigid demand, they are easily affected by factors such as the decline of high-end catering, and the growth rate of mass consumer goods may also face downward risks, but it is also conducive to industry consolidation.' According to data from the National Bureau of Statistics, in the first seven months of 2018, China's catering revenue accumulated to 2.28 trillion yuan, with a year-on-year growth rate of only 4.83%, the lowest since 2011. In the past eight years, this growth rate has only been below 10% once, in July 2013, when it was still 8.91%. 'In a sluggish economic environment, the entire condiment market is also sluggish, and everyone is doing business with a persevering attitude,' the aforementioned distributor said. From the disclosure of the Jiangsu Provincial Consumer Protection Committee's test report, to the responses of major soy sauce leading enterprises, and then to the statement from the China Condiment Association, the 'quality inspection gate' incident has roughly reached a clearer conclusion. But regardless of the truth, the most 'injured' in this storm is Haitian Flavoring & Food Company, which ranks first in the industry. 3 The 'White Horse Stock' Curse On the day 'quality non-compliance' was exposed, Haitian Flavoring & Food Company's stock price immediately fell 6% during trading, and its market value dropped by 8 billion yuan. Before this, Haitian's stock performance after listing was quite impressive, earning it the title of a high-quality 'white horse stock' (a stock with long-term excellent performance, high returns, and high investment value). Its total market value once exceeded 200 billion yuan in July 2018, and at its peak, it was more than three times its IPO price. In the past three years, Haitian's performance growth has also been considerable. Data shows that from 2015 to 2017, Haitian's operating revenue maintained an average annual growth rate of 13.50%; net profit margin growth also remained above 22%. With the optimism of investors and investment institutions, Haitian has also received a very high valuation. As of October 16, 2018, Haitian's static price-to-earnings ratio over the past twelve months reached 54.54, and its dynamic P/E ratio was 42.84. In contrast, Kweichow Moutai, a representative of traditional high-quality 'white horse stocks,' had a static P/E ratio of 'only' 30.95 and a dynamic P/E ratio of 26.58 during the same period. Therefore, some investors joked that 'soy sauce is more valuable than liquor.' But in the quality gate incident, the drop in its market value was also surprising. The reason is that after being pointed out for flaws by an authoritative agency, Haitian only emphasized that 'quality is not a problem.' Zhu Danpeng, a food industry analyst in China, believes that judging from the company's response attitude, Haitian did not pay enough attention to the honor of being 'China's first condiment stock.' In fact, this is not the first time Haitian has 'diverted attention' when facing product flaws. In recent years, Haitian has been involved in multiple incidents of maggots being found in products, and Haitian's responses have almost always pointed the finger at improper storage by consumers. An industry insider said that as a listed company, Haitian's deliberate avoidance and disregard for food safety issues that concern people's livelihoods is a relatively irresponsible performance. For a company that does not pay enough attention to public health, investors need to carefully consider its investment value. It is worth mentioning that this year is a year when consumer 'white horse stocks' have fallen one after another. In April this year, Yili shares opened lower after disclosing its 2017 performance, then continued to decline, hitting the limit down within an hour of trading. Just one day earlier, Gree Electric's stock price approached the limit down due to dashed high-dividend expectations and doubts about diversification, with its market value evaporating nearly 30 billion yuan. Just a few days ago, consumer 'white horse stocks' collectively fell sharply, with Qingdao Haier hitting the limit down at one point, Shuanghui Development falling 7%, and Hengshun Vinegar, SAIC Motor, and Sanquan Food all following the decline. In the wave of 'falling endlessly' consumer stocks, can Haitian, as the 'top student' in the industry, complete its self-redemption? 'Haitian's valuation is high because the market was previously positive, and Haitian is the leader in the brewing industry. After rounds of speculation on consumer white horse stocks, the stock price seriously deviated from intrinsic value. Now that the market is weak and consumption is shrinking, Haitian's high price will inevitably correct significantly,' said Shen Meng, executive director of Chanson Capital. The bad news is that yesterday Haitian continued to accelerate its decline, falling more than 2% within 5 minutes, and by the close, it ultimately fell 2.58%. Perhaps it's time for the 'crazy' Haitian to calm down. Source: FMCG (ID: fbc180) From October 23-24, during the Autumn Sugar and Wine Fair, New Distribution will host the '2018 FMCG City Distribution Logistics Conference.' At that time, New Distribution will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed to unified warehousing and distribution platforms to discuss and answer questions about the future development trends of FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, under the theme 'New Distribution, New City Distribution,' hoping to bring you different inspiration and thinking! The specific meeting agenda is as follows: List of Participating Companies In no particular order Hunan Zonglan Dandian Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Service (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuan'ang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Liquor Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Commercial Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshan Koufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express City Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Liquor Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chao'an Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhi Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. Hubei Anjie Logistics Co., Ltd. Hubei Kuaixiao Internet Technology Development Co., Ltd. ...... Representatives of Distributor Transformation (Tentative) In no particular order Rong Jun, Chairman of Jiangsu Huashang City Distribution Network Co., Ltd. Wang Bo, Chairman of Hubei Yijiaren Logistics Co., Ltd. Jiang Shuming, General Manager of Sichuan Chengdu Xingrenxing Trading Co., Ltd. Liu Jichen, Chairman of Shandong Yunbang Warehousing and Logistics Co., Ltd. Tu Mingyu, Chairman of Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Yang Su, Chairman of Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Yuan Xia, Chairman of Sichuan Bajie Supply Chain Management Co., Ltd. Li Qiangyun, Co-founder of Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Zhang Jianyong, Chairman of Henan Xuchang Jiulegou E-commerce Co., Ltd. Ma Haichao, Founder of Hebei Changyi Logistics Co., Ltd. Meng Yucun, General Manager of Hebei (Chengde) Wulian Yuncang Co., Ltd. Zhang Xun, Chairman of Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Zhang Hailing, Chairman of Jilin San Province Lian'gou Qiang Huitao, Founder of Hebei Dunjie Supply Chain Management Co., Ltd. Liao Lei, General Manager of Hunan Damei Supply Chain Management Co., Ltd. ...... From October 23-24, the 2018 China FMCG City Distribution Logistics Conference, hosted by New Distribution, will be held in Changsha. Many industry experts have sent blessings for the conference; click the video to watch; for more details, see the original text. -END-