Record high revenue of 28.8 billion, so why does Haitan Flavoring and Food still cause concern?

Abstract: The “Soy Sauce Phenomenon” Across Cycles

Source: Chaoyang Capital Theory

Author: No Bad Corn

On the evening of March 26, Haitian Flavor Industry (603288) released its 2025 annual report: operating revenue of 28.873 billion yuan, a year-on-year increase of 7.32%; net profit attributable to shareholders of 7.038 billion yuan, a year-on-year increase of 10.95%. Both core indicators reached record highs.

After the release of this financial report, the company’s A-shares rose by more than 7% the next day.

In a year when the overall consumer market is weak, such figures are indeed eye-catching.

However, looking at the entire condiment industry, 2025 is a typical “year of differentiation”—Tianwei Food’s revenue in 2025 decreased by 0.79%, net profit fell by 8.79%, Fuling Pickled Vegetables increased revenue without increasing profit, with net profit declining by 3.93%, and Qianhe Flavor Industry and Zhongju Gaoxin’s data for the first three quarters also faced pressure.

Against the backdrop of slowing or even declining growth for most peers, Haitian Flavor Industry is currently the only leading enterprise that has achieved double growth in revenue and net profit while maintaining double-digit growth rates.

This counter-cyclical growth “report card” raises the question: is it a testament to its strength across cycles, or a temporary lead under industry differentiation? A close reading of the financial report reveals that the growth logic of this leading condiment company is undergoing subtle changes.

The Foundation of the “Soy Sauce Empire”

Ballast and Cracks

To understand Haitian Flavor Industry’s current position, we first need to clarify what it relies on for its income.

Ultimately, this is a company supported by the “three major items.” In 2025, soy sauce achieved revenue of 14.934 billion yuan, accounting for 51.7% of total revenue, a year-on-year increase of 8.55%; oyster sauce revenue was 4.868 billion yuan, up 5.48% year-on-year; seasoning sauces revenue was 2.917 billion yuan, an increase of 9.29% year-on-year. The three major categories contributed over 82% of the revenue.

From an industry perspective, Haitian Flavor Industry’s leading advantage remains solid. According to a Frost & Sullivan report, in 2024, the company maintained its position as the number one in the Chinese condiment market with a 4.8% market share, where the soy sauce market share was approximately 13.2% and the oyster sauce market share was about 40.2%, both ranking first in the industry, with the two major categories’ sales ranking first globally. The 2025 Hurun Food Industry Top 100 list shows the company valued at 245 billion yuan, firmly at the top of the condiment industry, while the second-ranked Lee Kum Kee is valued at 115 billion yuan.

In terms of application scenarios, Haitian Flavor Industry’s products cover three areas: home kitchens, restaurant back kitchens, and the food industry. The company has seven product series with annual sales exceeding 1 billion yuan and over 30 product series worth over 100 million yuan.

On the channel side, offline channels remain the absolute mainstay, contributing 25.76 billion yuan in revenue in 2025, a year-on-year increase of 7.85%, accounting for 89.2% of total revenue. Although online channels saw a growth rate of 31.87%, they generated only 1.639 billion yuan, accounting for less than 6%.

The financial report also highlights some less noticeable changes worth noting.

Source: Company 2025 Annual Key Operating Data Announcement

In 2025, the company added 923 distributors and reduced 928, resulting in a net decrease of 5, with a total of 6,702 distributors by the end of the reporting period. This marks the third consecutive year of adjustment in the number of distributors.

Although the company explains this as a proactive behavior to “eliminate inefficient distributors and optimize team quality,” an unavoidable question arises: when the channel network begins to shrink, it often means that end sales are not as smooth as before.

The B Side of Growth

How Long Can Cost Benefits Last?

The most striking data in this financial report is the increase in gross margin from the main business, rising from 38.62% to 41.78%, with the net profit margin also rising to 24.40%.

However, to what extent is this improvement in profitability due to operational efficiency, and how much is due to “favorable conditions”?

The answer is that the latter accounts for a significant portion. In 2025, the prices of raw materials such as soybeans, sugar, and packaging generally declined, leading to a decrease in direct material costs, which was the core reason for the rebound in gross margin.

In fact, starting in 2024, Haitian Flavor Industry had already hitched a ride on this round of favorable raw material cycles. The problem is that raw material prices will not remain low indefinitely. Once the cost cycle reverses, whether the gross margin can maintain the 40% line will be the real test.

However, Haitian Flavor Industry is not without its own moat in cost control.

In January 2025, the company’s High-Ming production base was recognized as the world’s first “lighthouse factory” in the soy sauce brewing industry, which is also the only lighthouse factory certification in the global condiment industry. Through technologies such as AI intelligent bean selection, big data fermentation control, and 24-hour online spectral detection, Haitian Flavor Industry’s manufacturing costs and direct labor costs as a percentage of operating costs are better than most peers. This set of digital capabilities is its hard power distinguishing it from small and medium-sized competitors.

At the same time, changes in the expense side are also worth paying attention to.

In 2025, selling expenses increased by 18.7% year-on-year, far exceeding the revenue growth of 7.32%. This indicates that to maintain growth, the company is spending more money on marketing—this is understandable in a competitive environment, but it also reflects that relying solely on brand strength and natural growth of channels is no longer sufficient.

Source: Company 2025 Annual Key Operating Data Announcement

In terms of product structure, the growth rates of the three core categories—soy sauce, oyster sauce, and seasoning sauces—are 8.55%, 5.48%, and 9.29%, respectively. As the second-largest category, oyster sauce’s growth rate has already dropped to single digits, which is a typical signal of sluggish growth for mature categories.

Other categories (vinegar, cooking wine, compound seasonings, etc.) have maintained a growth rate of 14.55%, but with a revenue scale of 4.68 billion yuan, compared to soy sauce’s 14.9 billion yuan, it will be difficult to shoulder the banner of growth in the short term.

The Uncertain Road Ahead

Health Trends and Overseas Challenges

Looking to the future from the present, Haitian Flavor Industry faces two unavoidable variables: one is the trend of health-conscious consumption in the domestic market, and the other is the real progress in internationalization.

First, regarding health trends. In 2025, health-oriented products represented by organic and low-salt items saw a year-on-year revenue growth of 48.3%, far exceeding the company’s overall level, indicating that health-oriented products are becoming a new growth point.

Source: Company 2025 Annual Report

However, this product line also faces policy risks—the state has stipulated that by March 2027, prepackaged foods can no longer use promotional phrases like “zero additives” or “no additives.” Although it can still pivot towards “low salt” and “organic,” without the “zero additives” label, consumer perception and product positioning will need to be recalibrated.

Complicating matters, Haitian Flavor Industry is not the only player in the health sector.

Qianhe Flavor Industry has already established a foothold in the high-end market with its differentiated positioning of “zero additives.” In the first half of 2025, although Qianhe’s overall performance faced pressure, its brand recognition in the health product line remained strong; Lee Kum Kee’s low-salt soy sauce holds over 60% of the market share; and products like Chubang’s 30% reduced-salt premium soy sauce are also accelerating their layout. For Haitian to establish a foothold in this field, product innovation alone is not enough; it must also engage in a renewed brand recognition battle.

Image: Haitian Flavor Industry’s Market Value on the Hong Kong Stock Exchange

On the international front, in June 2025, Haitian Flavor Industry (03288) was listed on the Hong Kong Stock Exchange, raising over HK$9.2 billion, of which about 20% is planned for overseas production capacity and channel development.

According to the plan, the goal is to increase the proportion of overseas revenue to 15% over the next three years. Currently, the company’s production base in Indonesia has begun construction, while bases in other Southeast Asian countries and Europe are still being planned, which will not only fail to contribute profits in the short term but may also increase expenses and dilute ROE.

The challenges in overseas markets go beyond this. It is understood that Lee Kum Kee is collaborating on a chef variety show and upgrading the “Incredible Chinese Flavor” promotion plan to expedite the internationalization of Chinese cuisine. Meanwhile, international giants such as McCormick and Kraft Heinz occupy the top four positions in the global condiment market. For Haitian to penetrate mainstream Western markets, it must overcome multiple barriers, including flavor adaptation, localized operations, and cultural recognition.

Of course, Haitian Flavor Industry is not without cards to play. The world’s only soy sauce brewing “lighthouse factory,” over 1,000 authorized patents, and an annual R&D investment ratio of 3% are all its trump cards.

But the question is, as the industry shifts from growth to saturation, from blue oceans to red oceans, can relying solely on scale and efficiency offset the challenges of stagnating core category growth and the absence of new growth curves?

This annual report indeed presents a commendable report card, but it also lays Haitian’s “mid-life anxiety” bare. For this industry leader, the real test may have only just begun.