Source | Zebra Consumption ID | banmaxiaofe Author | Chen Xiaojing The nearly 700 billion yuan condiment market is experiencing a new wave of mergers and acquisitions. Leading this wave are the newly emerging local condiment companies. On one hand, the accelerated pace of life and the growth of the lazy economy have increased demand for condiments; on the other hand, the rising rate of restaurant chain operations has created enormous market opportunities. Over the past 30 years, China's condiment industry has roughly gone through three major stages: the foreign-led M&A wave, the collective listing wave of local companies, and the ongoing new M&A wave led and deepened by local enterprises. Next, which companies will take the lead, and which products will evolve to become the new market favorites? What new stories will unfold in the entire condiment industry? Foreign Mega-Mergers In the past, the condiment industry was characterized by small scale, fragmentation, and disorder. More than 30 years ago, the production of condiments was mostly limited to small workshops and small factories. In the early 1980s, Rong Yaozhong, a descendant of the Rong family of Wuxi, used local chicken resources in Nanle County, Henan, to extract chicken essence. It not only allowed people to experience the freshness of chicken soup but also enabled deep processing of high-quality local chickens. Thus, Chinese chicken essence, alongside Eastern European beef bouillon cubes and Japanese bonito flakes, stood as one of the world's three major seasonings, winning numerous awards. Rong Yaozhong also became the recognized inventor of Chinese chicken essence. In 1988, Rong Yaozhong returned to Shanghai and founded the Totole brand, vowing to bring this umami flavor to billions of consumers nationwide. Through standardized production and market expansion, Totole chicken essence entered kitchens across the country, becoming a member of the Chinese condiment family. In 2002, Rong Yaozhong led the formulation of China's chicken essence industry standard, which was implemented two years later. Since then, chicken essence has become a formal category in condiments and developed into a vast new industry. During the same period, Yan Junbo, who was supporting the border area in Liangshan, Sichuan, also used local chicken resources to develop chicken essence products, which later became Haoji chicken essence, dominating the southwest region. Unexpectedly, the two major Chinese chicken essence brands would successively fall into the arms of the same foreign company. In August 1999, during the hot Swiss summer, Totole and Nestlé signed an agreement to transfer 80% of its equity, allowing Nestlé to start its condiment business in China. Nestlé had long been ambitious about the Chinese condiment market. In 1994, it launched Maggi chicken powder tailored to Chinese tastes through its seasoning brand Maggi, but the response was lukewarm. After acquiring Totole, Nestlé continued to target local Chinese brands. In 2001, Nestlé acquired 60% of Haoji Chicken Essence. In 2016, it bought the remaining 20% of Totole from Rong Yaozhong, achieving full control. Through continuous acquisitions, Nestlé completed its Chinese condiment business puzzle. Beyond chicken essence, it now had sauces, soy sauce, Sichuan-style seasonings, and more. One year before Nestlé took over Totole, Unilever, which was based on washing and personal care products, also began to venture into condiments. In 1998, Unilever acquired Shanghai Laocai Soy Sauce, but capital did not help Laocai rise; it, along with Jinghua Tea, which also fell into foreign hands, disappeared from the market. Since then, foreign acquisitions of local condiment brands have hardly ceased. In 2002, U.S.-based Heinz, which started with baby nutrition rice cereal, acquired Guangzhou Meiyuan Food, a leading domestic flavor and fragrance company, and two years later acquired Longfeng Food; in 2006, Japan's Ajinomoto invested HK$1.845 billion to acquire Shanghai Taoda Food. In 2010, Heinz shocked the condiment industry again by acquiring Weishida, a first-tier soy sauce brand, for $165 million. Gathering in the Capital Market During the decade or more of foreign-led acquisitions, China's condiment industry gradually awakened, moving from barbarism to maturity, and the market began to quietly reverse. Before 2010, most condiment companies had not completed capitalization, with only Zhongju High-tech and Hengshun Vinegar listed in 1995 and 2001, respectively. It wasn't until January 2012 that the capital market welcomed the "first soy sauce stock," Jiajia Food. Many may not know that the common pull-ring bottle cap on soy sauce bottles is a creation of Jiajia Food. This small invention sparked a packaging revolution in the soy sauce industry. Moreover, Jiajia Food was the first to classify soy sauce into two categories: light soy sauce and dark soy sauce, a second innovation for the industry. Subsequently, the company launched Noodle Fresh Soy Sauce, pioneering category development for niche markets and inspiring scenario-based product development in the soy sauce industry. When Jiajia Food went public, Foshan-based Haitian Flavoring was gearing up for the capital market, and a wealth-creation myth was about to unfold. On February 11, 2014, Haitian Flavoring's market value approached 50 billion yuan on its listing day, and more than 30 shareholders who had followed founder Pang Kang for years became billionaires together. A month before the "soy sauce leader" went public, the "cooking wine king" also connected with the capital market, as Laohenghe Brewing (02226.HK) successfully listed on the Hong Kong Stock Exchange. Subsequently, Anji Food, Dongsuo Food (a NEEQ-listed company and supplier to Totole), Yihai International, and Qianhe Flavoring successively went public. In 2019, Tianwei Food, a representative of the Chinese compound seasoning industry, finally listed on the A-share market after a seven-year battle. At this point, local condiment companies completed their assembly in the capital market. A New Wave of M&A With the support of the capital market, local condiment companies have begun a new wave of mergers and acquisitions, with them as the protagonists, ushering the industry into a new phase. In the year Jiajia Food went public, it completed the acquisition of Sichuan Langzhong Wangzhongwang, a time-honored brand mainly producing soy sauce and vinegar, making it a strategic foothold for the company's expansion into Sichuan and even the southwest market. Afterwards, listed condiment companies became more ambitious, and acquisition battles followed one after another. In June 2015, Haitian Flavoring (603288.SH) acquired Guangzhonghuang, a company mainly producing fermented bean curd; in January 2017, it moved north to acquire 70% of Zhenjiang Danhe Vinegar; on December 31, 2019, it announced the acquisition of 67% of Hefei Yanzhuang, a sesame oil manufacturer. Through acquisitions, Haitian Flavoring expanded beyond its three main products—soy sauce, oyster sauce, and seasoning sauce—into new categories, leveraging its vast sales channels for greater returns. Qianhe Flavoring (603027.SH), which rose to prominence with zero-additive products, also joined the fray. In 2019, the company acquired Zhenjiang Hengkang Sauce and Vinegar at the doorstep of Hengshun Vinegar (600305.SH) for 150 million yuan, becoming an important chess piece in the East China region. In recent years, the most aggressive acquirer in the industry has been Tianwei Food (603317.SH). Although it listed relatively late, it has not lagged behind its predecessors. Originally, the company focused mainly on hot pot seasonings and Chinese dish seasonings, but in recent years, its style has changed dramatically, sparing no expense to connect the upstream and downstream. In 2022, it invested heavily in chain restaurant company Tianweimei (which operates the Lixiang Daxia chain), group meal operators Maijindi and Qianxih, as well as Mobiyouchuang, the parent company of Malubianbian Chuanchuanxiang and Laojie Chenpan Mala Tang. It also invested in beef tallow supplier Sichuan Hangjia and bone broth supplier Dufengxuan. Additionally, it took a stake in machinery manufacturer Chengdu Haike. In 2023, it invested in Sichuan Shicui Food, a leading company in online small and medium B-end compound seasonings, thereby gaining control of the three brands "Shicuifang," "Mianzhida," and "Xiangjiejia." Last November, it took control of the compound seasoning company Jiadian Ziwei, strengthening its drive in the C-end market. After a series of acquisitions, Tianwei Food has penetrated deeply into the three major areas of catering, prepared dishes, and compound seasonings, further consolidating its industry position. After 2022, condiment companies actively responded to changes in the market landscape. Richen Food "married" Xiabuxiabu, Meihua Bio acquired Kyowa Hakko, and Yihai Kerry and Luhua joined the condiment battle. Local condiment companies have been compensating for their shortcomings through acquisitions. They know that building a second growth curve in the short term requires not only courage and ability but also luck.