Oh soy! China condiment giant Foshan Haitian bullish over FY20 performance despite COVID-19 impact

The company’s main products are soy sauce, oyster sauce, and sauces. Other products it manufactures include vinegar, chicken essence, MSG, and cooking wine. In FY19, its soy sauce category grew 13%, oyster sauce by 22% and sauces by 9.5%.

The company is gearing up for its third five-year plan, as it seeks to increase scale and profit.

In its previous five-year plan, the company’s net profit rose from RMB 1.6 billion to 4.1 billion (USD227-582 million) from 2013 to 2018.

Increase production and sales channels​

The company is accelerating its production capacity with its Gaoming factory adding 400,000 tonnes to its annual capacity of 1.5 million tonnes of output.

Its factory in Jiangsu is currently undergoing phase two of construction to increase capacity by another 200,000 tons.

In terms of sales channels, apart from a presence in hypermarkets, Haitian is expanding its business online. In FY19, sales from e-commerce grew 42% compared to FY18. The company also cited increasing demand from international markets.

China’s condiment and sauce industry​

According to Chinese brokerage, China Galaxy International​ (CGI), China’s condiment market grew at 7.2% CAGR between 2013 to 2017, reaching RMB332 billion (US$47bn) in retail sales.

They forecast a growth of 9.2% CAGR from 2018 to 2021, mostly driven by the rapid development of China’s catering service market due to increasing urbanisation and changes in consumer eating habits.

The China Condiment Industrial Associates reported that 45% of China’s condiment consumption comes from the catering industry, 30% from individual consumers, and 25% from the food processing industry.

CGI also anticipates more demand for compound condiments products as consumers look for premiumisation and diversification. A compound condiment consists of two or more single condiments.

In terms of market position, CGI reported that Haitian held the most market share in China’s soy sauce market, at 15.6% in 2017. Lee Kum Kee was second (5.1%), and Jonjee third (4.1%).

For China’s overall condiment market, Haitian held a share of 6.6%, followed by Lee Kum Kee (4%), Laoganma (3.6%), and Jonjee (3.3%).

In recent years, firms have been launching more soy sauces products with specific features, such as light, zero addition, and versions for children appearing in the retail market.

“We think Haitian will lead the next cycle of upgrades, for example, making more condiment products for health-conscious consumers, such as lite, zero additive and organic products, which we expect to dominate the mass market in the long run​,” added CGI.

CGI also noted that an economic slowdown in the wake of COVID-19 might hit sales of more premium products.

“Individuals might choose condiment products with less premium price. The individual consumption upgrade would take longer than expected​.”