Konjac noodles went viral, but Yizhi Konjac didn't.
Zebra Consumer Shen Tuo
No one expected that the humble konjac would one day become a popular snack. Konjac shreds, konjac snacks, vegetarian tripe, and konjac crystal balls, the variety is endless.
This niche ingredient from the southwest, cultivated by the 'King of Spicy Strips' Weilong, has become a trending sensation.
Following Weilong, snack companies like Yanjin Shop, Jinzai Food, and even Mixue Ice City have jumped into the heated konjac snack battlefield.
The 'Konjac King' and 'China's First Konjac Stock,' Yizhi Konjac, as a konjac raw material supplier, should have had stronger market sensitivity. However, the company was slow to react and missed the konjac snack trend. It could only rely on the 'Bobo Crisp' topping in new tea drinks to regain some ground.
Targeting Konjac Snacks
Konjac, also known as jǔ ruò, mainly grows in China's southwest region and is a niche ingredient. For a long time, its primary consumption was in the form of roughly processed konjac tofu.
In the 1990s, Chongqing Sanjiu Hot Pot Base Factory launched Zhou Junji hot pot base alongside hot pot konjac snacks.
Years later, konjac appeared in the snack market in small packaged forms, inspired by hot pot dining.
In 2009, Weilong Delicious (09985.HK) R&D staff discovered konjac tofu's chewy texture after boiling in hot pot in Sichuan. Could konjac be made into snacks?
Turning slippery konjac blocks into small packaged snacks wasn't easy. It required dehydration, flash freezing, steaming, and other complex processes to achieve the crispy and chewy texture of konjac snacks.
In July 2014, Weilong Delicious launched konjac snacks and received a pioneer certificate from Frost & Sullivan. At the time, overshadowed by the popularity of spicy strips, konjac snacks had little presence.
The real turning point for the konjac industry came in 2020. That year, China's konjac market exceeded 40 billion yuan, with a compound annual growth rate of about 26% from 2010 to 2020.
In 2020, another milestone was the introduction of the instant konjac food group standard, elevating konjac snacks from a single product to a category.
Konjac's popularity soared. The list of brands jumping into the konjac snack market is long, including Weilong Delicious, Three Squirrels, Liangpin Shop, Laiyifen, and Baicaowei. Even 'Snow King' Mixue Ice City launched similar products.
In October 2023, konjac snacks gained even more traction. Weilong upgraded its 'Little Witch' vegetarian tripe; days later, Yanjin Shop launched 'Big Devil' konjac vegetarian tripe; Taste King followed with 'Magic Master' vegetarian tripe, sparking intense competition.
As the 'Konjac King,' Yizhi Konjac (839273.BJ) finally caught on and began producing its own branded konjac snacks beyond its main konjac flour business. However, Yizhi Konjac's snacks remain largely unknown outside its home base, Yichang.
Yizhi Konjac Joins the Fray
In 2007, Yizhi Konjac entered the konjac cultivation and deep processing sector. Before its IPO, the company spun off its cultivation business by transferring shares in Hubei Zhili Konjac Seed Industry, focusing on konjac deep processing.
The deep processing business mainly produces konjac flour. In its early years, the company profited handsomely from exporting konjac flour. At its peak in 2015, exports accounted for 56.43% of total revenue.
Seeking higher product value, Yizhi Konjac expanded into food and cosmetics in 2018. Its konjac food business showed notable growth.
The company's konjac food products include snacks, instant foods, dietary fiber, pre-made dishes, and tea drink toppings. Revenue from this segment grew from 16.988 million yuan in 2018 to 105 million yuan in 2023, increasing its share of total revenue from 5.67% to 21.92%, becoming the second-largest business after konjac flour.
Recently, the boom in new tea drinks opened another door for Yizhi Konjac. The company developed konjac crystal balls—translucent and chewy—known as 'Bobo Crisp' in many tea drinks.
Brands like Auntie Shanghai and Mixue Ice City source their Bobo Crisp from Yizhi Konjac. The company is now ramping up production for an 80,000-ton annual konjac crystal ball project.
In 2023, konjac food revenue surged 71.96%, driven by strong sales of konjac crystal balls in chain retail channels.
Molge Stays Local
Weilong popularized konjac snacks, and in recent years, major brands have fiercely competed in this category. From konjac shreds and snacks to slices and vegetarian tendon, and now vegetarian tripe mimicking real tripe, the products keep evolving. The variety of flavored konjac snacks has been humorously dubbed 'human cat treats.'
Not just Weilong, many snack companies have found new growth through konjac snacks.
In 2023, Yanjin Shop's konjac snack revenue hit 476 million yuan, up 84.95% year-on-year, contributing 11.57% to total revenue.
In its annual report, Jinzai Food (003000.SZ) revealed konjac snacks had become a 100-million-yuan product. Sales in its vegetable products segment (including konjac) soared 87.91% to 2,539.26 tons, with production skyrocketing 11,802.28%.
Weilong Delicious's vegetable products (including konjac snacks, Little Witch, and seaweed snacks) generated 2.119 billion yuan in 2023, accounting for 43.5% of revenue, up 25.16% year-on-year. According to Securities Times, as early as 2021, Weilong's konjac snack revenue exceeded 500 million yuan annually.
Yizhi Konjac wasn't as fortunate. In January, during a meeting with Dongbei Securities and Huachuang Food, the company admitted its Molge brand mainly sells in local circulation channels, e-commerce, and tourism in Hubei. It set up a Wuhan office to expand fast-moving consumer goods channels within the province.
This aligns with its business model. In a February meeting, the company stated its revenue primarily comes from B2B sales, while its B2C strategy balances branded products and OEM services, using OEM to refine technology and improve branded product quality.
As a raw material supplier, Yizhi Konjac lags in branding and FMCG channels. Even amid the konjac snack boom, it struggles to capitalize fully, leading to stagnant performance.
After surpassing 500 million yuan in revenue in 2021, growth stalled, and net profit declined for two consecutive years. In 2023, revenue reached 479 million yuan, up 7.03%, while net profit fell 19.23% to 53 million yuan.
After immense effort, Yizhi Konjac finally listed on the Beijing Stock Exchange last year. However, its post-IPO stock performance has been disappointing, with a current market cap just over 700 million yuan.
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