Author | Source of Purity | New Harvest Business Review (ID: xinzhainews) Recently, QIANHE Food Co., Ltd. (hereinafter referred to as "QIANHE") has attracted widespread consumer attention due to allegations that its "QIANHE 0" trademark does not represent zero additives. According to an investigation by Consumer Reports, among 13 soy sauces claiming to have zero additives tested by a third-party authoritative testing agency, 12 were found to contain cadmium, and 7 were found to contain total arsenic. The QIANHE Yucang Benniang 380-day soy sauce was detected with 0.0110mg/kg of cadmium.

Since cadmium is a non-essential and toxic element for the human body, which may pose carcinogenic and mutagenic risks, the release of these test results has sparked heated discussions among consumers. A representative viewpoint is that the QIANHE Yucang Benniang 380-day soy sauce, as a zero-additive soy sauce, should not have detectable cadmium; others believe that this soy sauce is not truly zero-additive but merely carries the "QIANHE 0" trademark, misleading consumers into thinking it is a zero-additive product.

Regardless of which statement is true, this incident has already brought negative impacts to QIANHE. As of March 21, QIANHE's stock price has fallen for four consecutive days, with a cumulative decline of 7.3%, resulting in a market value evaporation of approximately 950 million yuan.

It is worth noting that this is not the first time a condiment company has faced questions regarding additives. At the end of 2022, the soy sauce giant Haitian Flavoring & Food Co., Ltd. was exposed for selling soy sauce containing food additives in China, while the soy sauce sold in Japan was "zero additives." Consumers believed this was discriminatory treatment of Chinese users. Since then, Haitian's market value has continued to decline, currently standing at 223.369 billion yuan, down from over 400 billion yuan at its peak. For consumers, the additive incident is worth long-term attention.

QIANHE Apologizes Late at Night: "Cadmium" Comes from Raw Materials, Complies with National Standards

On the night of March 20, QIANHE issued a statement titled "Communication with Consumers Regarding Media Reports of Cadmium Detection in Soy Sauce Products and the Relationship Between 'QIANHE 0' and Zero Additives." QIANHE emphasized two points in the statement.

First, the ingredients of QIANHE Yucang Benniang 380-day soy sauce, as reported by the media, are water, non-GMO soybeans, wheat, and edible salt, with no external food additives or other chemicals added. The presence of "cadmium" in water, soil, and various agricultural products means that the trace "cadmium" detected in soy sauce products comes from the raw materials. Secondly, according to GB2762 "National Food Safety Standard for Contaminant Limits in Food," the limit for "cadmium" in the main raw materials of soy sauce is: soybeans ≤0.2mg/kg, wheat ≤0.1mg/kg, edible salt ≤0.5mg/kg. This means that while QIANHE Yucang Benniang 380-day soy sauce does contain cadmium, the source of cadmium is not from additives as consumers might think, but from the raw materials themselves. At the same time, the cadmium content in QIANHE Yucang Benniang 380-day soy sauce complies with national requirements.

Looking at these two points alone, this incident does not have much impact on consumers. However, regarding whether the use of "QIANHE 0" implies that the product has "zero additives" characteristics, QIANHE denied this, stating that this series of products does not engage in behavior that confuses the concept of zero additives for hype, and that "QIANHE 0" is merely a trademark established to distinguish zero-additive products To facilitate the purchase for a wide range of consumers, there is no behavior that misleads consumers. However, QIANHE's statement seems somewhat untenable. On the packaging, most of QIANHE's products use "QIANHE 0," and it is enlarged several times, covering the entire bottle, especially the "0" label, which is particularly eye-catching. This is why some netizens believe that QIANHE is deliberately misleading consumers.

More importantly, consumers have actually reported this issue long ago, but QIANHE has not taken any action until this incident caused a huge uproar, prompting them to apologize. In 2024, some netizens questioned online that the "QIANHE 0" series is just a trademark name and not zero additives. Some netizens also uncovered that QIANHE had attempted to register multiple "zero additives" trademarks, which were rejected.

In addition, "Consumer Reports" also publicly released the CCR comprehensive evaluation results of 13 zero-additive soy sauces, showing that Lao Heng He, Hai Tian, Jia Jia, and QIANHE scored above 8 points, while Ba Zhen scored below 7 points. Jin Long Yu, Dong Gu, Wei Shi Da, Zhong Ba, Xin He, Lian Hua, Wan Zi, and Zhu Jiang Qiao scored between 7 and 8 points. Among them, Ba Zhen's raw soy sauce had the lowest scores for microorganisms, amino acid nitrogen, total nitrogen, and sodium, with scores of only 7.6, 5.8, 5.6, and 6; Xin He's June Fresh zero-additive premium soy sauce (brewed soy sauce) had the lowest heavy metal score, with only 7.3 points.

"0 Additives" is a new trend in the soy sauce industry, and also a savior for Hai Tian and others

It is not difficult to see that QIANHE places great importance on "0 additives." In fact, "0 additives" is the latest development direction in the soy sauce industry. In addition to QIANHE, the previously mentioned Hai Tian Food Industry (referred to as Hai Tian) is also involved, both hoping to stimulate product sales by meeting consumers' health requirements.

Among them, Hai Tian's influence on consumers is likely much greater than that of QIANHE. According to the prospectus submitted by Hai Tian to the Hong Kong Stock Exchange and data from Tianyancha, based on 2023 revenue, Hai Tian ranks first in China's condiment market, with a market share more than twice that of the second place. In terms of sales volume, Hai Tian has been the largest condiment company in China for 27 consecutive years, with soy sauce and oyster sauce products ranking first in the Chinese condiment market for many years, and seasoning sauces, vinegar, and cooking wine also ranking among the top in the Chinese market. Among the 13 products sent for inspection, there are also Hai Tian's products, including Hai Tian 0 Gold Label raw soy sauce (brewed soy sauce), which contains cadmium and total arsenic. Total arsenic refers to an indicator that measures the total amount of arsenic in food, water, soil, and other samples, including both inorganic and organic arsenic forms. Inorganic arsenic poses significant health risks, especially long-term intake, which can lead to tumors and other diseases.

The collective embrace of "0 additives" by Hai Tian and others is due to changing demands, as consumers need healthier soy sauce products. The "2023 China Consumer Food Additive Awareness Survey Report" released by the China Center for Food and Health Information shows that among the 5,284 consumers surveyed, 71.59% believe that long-term intake of various food additives from food is harmful to health. Therefore, Hai Tian and others chose "0 additives." From the performance feedback, "0 additives" has indeed driven the growth of Haitian.

Haitian has four main businesses: soy sauce, oyster sauce, seasoning sauces, and specialty seasonings and others. Among these, soy sauce and oyster sauce are the main contributors to Haitian's revenue. Since 2022, Haitian has entered a low period. In 2022, Haitian's revenue continued to grow steadily, but net profit experienced its first decline since going public, with a year-on-year decrease of 480 million yuan. At that time, the market believed this was just a short-term fluctuation.

However, Haitian's performance in 2023 surprised everyone. It can be said that 2023 was the darkest moment for Haitian since its listing, with both revenue and profit declining, down by 1.05 billion yuan and 560 million yuan respectively. This was the first time such a situation occurred since its listing, mainly due to the decline in oyster sauce business. In 2024, Haitian's performance rebounded, with revenue of 1.519 billion yuan, a year-on-year increase of 18.95%, and net profit attributable to the parent company of 305 million yuan, a year-on-year increase of 25.97%.

Looking at Haitian's strategy from 2022 to the present, its ability to rebound from the bottom is attributed to two strategies. First is the layout of health-oriented products, such as 0 additives, organic, low-salt, and low-sodium products. As consumers pay more attention to health, these products have achieved rapid development in 2024. Second is the increased focus on offline channel layout, which is the main sales channel in the seasoning industry. Haitian has currently achieved nearly 100% coverage in prefecture-level cities and nearly 90% coverage in county-level cities. This brings two benefits to Haitian: first, it contributes 96% of its revenue; second, it establishes consumer awareness in the minds of consumers.

Overall, Haitian's leading position provides a solid foundation for its rebound, and it seems that it can finally take a breath. Other companies have also benefited from the health trend, such as QIANHE and Zhongju Gaoxin mentioned earlier. Especially QIANHE, which focuses on "zero additive soy sauce" products, saw its revenue and profit increase by 31.62% and 54.22% year-on-year in 2023. For Haitian, it is not yet time to relax.

How to Recreate a Haitian?

"Recreating an XX" is an unavoidable topic for all companies, especially listed companies, and Haitian is no exception. After experiencing a low period, this topic has become even more important. On one hand, this is a necessary path for a company to move from excellence to greatness; on the other hand, the low period Haitian encountered has actually sounded the alarm for it.

As mentioned earlier, Haitian's low period is reflected in two aspects: one is a significant decline in market value, and the other is a continuous decline in performance for two consecutive years. We must understand the reasons behind this so that we can know who Haitian's enemies are. Simply put, the public opinion incident was just a direct trigger for Haitian's market value collapse, while the real culprits behind the decline in both market value and performance are the changes occurring in the seasoning industry.

The seasoning industry has never lacked competition, and Haitian's main competitors are Zhongju Gaoxin and QIANHE, both of which have a history of over 20 years. All three have a deep foundation and have had past encounters In recent years, the competition in the condiment industry has undergone new changes. Firstly, the number of entrants has increased. In addition to the two old rivals in the industry, Hai Tian also faces competition from cross-industry raiders. For example, Jinlongyu and Luhua in the grain and oil industry, and Shuanghui Development in the meat products industry have announced plans to increase their investment in the condiment sector. Restaurant companies like Haidilao and Xiaobuxiang have also entered the condiment industry through hot pot base ingredients and seasonings. Pang Kang, chairman of Hai Tian Flavouring & Food Co., Ltd., has openly stated that many companies have entered the condiment sector in recent years, and condiment companies of a certain scale are also accelerating production expansion. The condiment industry is currently showing an unprecedented development trend, and the intensification of industry competition is inevitable.

Secondly, the rise of live-streaming e-commerce has led to a value reconstruction of online channels, while Hai Tian has not placed much emphasis on online channels. For example, in 2023, the revenue from its online channels accounted for only 3.9% of total revenue. If Hai Tian continues to neglect online channels, it will inevitably miss out on the benefits.

Cheng Xue, vice chairman of Hai Tian Flavouring & Food Co., Ltd., mentioned the changes in channels when summarizing the challenges faced by Hai Tian. She stated that Hai Tian's advantageous channels are still concentrated in traditional channels, such as wholesale markets, agricultural trade, and supermarkets, which are visible channels. However, consumers now have access to over 100 different ports for condiments. If these (emerging) channels are not carefully addressed one by one, they will gradually erode Hai Tian's traditional channels. Cheng Xue was later promoted to chairman of Hai Tian in September 2024, and her views can represent Hai Tian's development direction.

From Hai Tian's actions over the past five years, its strategy can be summarized in three words: diversification. This is reflected in various aspects such as channels and products, and these three words carry the mission of recreating a new Hai Tian.

First, let's look at channels. Hai Tian has increased its layout in online channels, with the revenue from online channels rising to 4.6% of total revenue in the first half of 2024. Since QIANHE and Zhongju Gaoxin did not disclose the revenue proportion from online channels in their 2024 semi-annual reports, we can compare the situation in 2023. In 2023, QIANHE's online channel revenue accounted for as much as 19.9%, while Zhongju Gaoxin was at 1.9%, indicating that Hai Tian's performance is far inferior to QIANHE.

The diversification of products can be divided into two points. The first is the health-oriented products mentioned earlier, focusing on no additives. Currently, all of Hai Tian's main products have launched no-additive versions. The second is new condiments, such as cooking wine, vinegar, seasoning sauces, and ketchup. This part is classified in the financial report under specialty condiments and other businesses, and it has become Hai Tian's fastest-growing business. In 2023, this business grew by 19.35% year-on-year, and in the first half of 2024, it grew by 22.31%, accounting for 14.3% and 15.1% of total revenue, respectively.

From a broader perspective, although specialty condiments and other businesses can already support part of the revenue, there is still a long way to go to recreate a new Hai Tian. If we also consider that Zhongju Gaoxin, QIANHE, and other competitors are adopting diversified strategies in their products, this path becomes even more challenging.

It is worth noting that Hai Tian's diversification layout also includes an overseas expansion aspect. In January of this year, Hai Tian submitted a prospectus to the Hong Kong Stock Exchange. If it can successfully list in Hong Kong, it will be able to use Hong Kong as a springboard to enter the East Asian and South Asian markets Zhongju Gaoxin and QIANHE have also chosen a diversification strategy. Specifically, QIANHE's base is in the west, which has always been its largest revenue source region. In response to this situation, QIANHE is conducting a national layout, with the revenue from the western region decreasing from 40.7% of its total revenue in 2022 to 37.7% in 2023. Regarding online channels, QIANHE performs the best among the three. In 2023, QIANHE's online channel revenue accounted for 25.87% of its total revenue, while Zhongju Gaoxin's performance was the worst among the three, with only 2.05%. This indicates that expanding online channels will become one of the trends in the condiment industry in the future.

In addition, the condiment industry is also showing a trend of diversification in products, which can be summarized as health-oriented and composite. Health-oriented, as the name suggests, corresponds to the convenience needs of consumers. Cheng Xue previously stated that there is a strong demand for composite condiments in the channels, "In the past, chefs might scoop various seasonings one spoon at a time, but now it's a standardized output with a single seasoning packet. Today's post-00s generation is unwilling to spend half an hour making a dish with one spoon of soy sauce, one spoon of oyster sauce, and one spoon of vinegar." Previously, both Haitian and QIANHE mainly focused on basic condiments, and Cheng Xue indicated that Haitian is accelerating the development of composite condiments.

Going overseas is another trend in the condiment industry, and currently, only Haitian has proposed clear ideas in this regard. However, Chinese condiment companies are basically in a blank state regarding going overseas. Taking Haitian as an example, it established subsidiaries in Hainan and Hong Kong in 2023 and 2424, laying the groundwork for entering overseas markets, but has not yet separately listed overseas market sales in its financial reports.

Previously, when Cheng Xue mentioned the current challenges faced by Haitian, he summarized it with a sentence: the most difficult problem is to race against time to iterate, amplify, upgrade, and transform the advantages accumulated over many years. For Haitian, the brand, channel, and product advantages accumulated over the years have helped it ascend to the industry's leading position, but in the current situation where demand is changing, it needs to find a breakthrough point to connect these advantages and open up its own channels to continue to maintain its leading position.

This article is reproduced from Xinzhai Business Review (ID: xinzhainews) with authorization. All rights reserved by Xinzhai Business Review. No translation or reproduction is allowed without permission.

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