Good News on Listing | Frost & Sullivan Assists Rongye Food Holdings Group Co., Ltd. in Successfully Going Public in the US (NASDAQ: WYHG)

Rongye Food Holdings Group Co., Ltd. (Stock Code: NASDAQ: WYHG) officially went public on the US NASDAQ exchange on November 26, 2024. The company is a key agricultural leading enterprise in Guangdong Province, mainly engaged in the production and sales of meat processing products, and has formed three major product matrices including traditional cured meats, snack foods, and frozen foods. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for the listing of Rongye Food Holdings Group Co., Ltd., and hereby warmly congratulate them on their successful listing.

Investment highlights

Overview of the cured and marinated meat products market in Mainland China

●Definition and Classification of Pickled and Smoked Products

Pickled and cured meat products refer to non-perishable meat products made from fresh or frozen livestock meat, with the addition of auxiliary materials and seasonings such as salt, sugar, and alcohol. These products are processed through techniques such as pickling, drying (or sun-drying or air-drying), and smoking. According to the definition by the Ministry of Agriculture of the People's Republic of China, pickled and cured meat products include smoked meat (including smoked sausages), ham, non-perishable sausages, and bacon.

Lard products can be classified according to the main ingredients, mainly including cured sausage, cured meat, cured poultry, and cured fish. In terms of taste, cured products can be divided into Cantonese-style (flavorful), Sichuan-style (spicy), Hunan-style (spicier and spicy), Zhejiang-style (light), and other types.

●Mainland China cured meat industry chain

The industrial chain of the cured and marinated meat products market in Mainland China (excluding Hong Kong, Macao and Taiwan regions) includes upstream raw material suppliers, midstream manufacturing, processing and distribution of cured and marinated meat products, as well as downstream customers. In the cured and marinated meat products market, using distributors and sub-distributors is a common practice to cover a wider consumer base.

●Market scale of cured and marinated products in Mainland China

According to a report by Frost & Sullivan, the mainland Chinese cured meat market experienced stable development from 2018 to 2022, with retail sales increasing from 368 billion yuan to 529 billion yuan, a compound annual growth rate of 9.5%. In the future, with rising prices and an expanding consumer base, it is expected that by 2027, the retail sales of cured meat products will reach 739 billion yuan.

As part of the cured meat market, retail sales accounted for 18.5% of the total cured meat market value in 2022. In the cured meat market, the annual compound growth rate of the cured meat segment from 2018 to 2022 was the highest. Due to its diverse applications in various catering options and cooking methods, as well as the growing consumer demand for flavorful cuisine, the market size of cured meat is expected to maintain an annual compound growth rate of 8.5% from 2022 to 2027. Cantonese cured meat occupies the main share of the cured meat market in Mainland China, with a retail market share exceeding 50% in 2022. According to Frost & Sullivan's forecast, in the future, with the growth of per capita disposable income and purchasing power, the popularity of diverse leisure meat products, the expansion of the catering service market, and the trend towards Cantonese-flavored cuisine such as cured meat pot pies, retail sales of the cured meat market are expected to reach 147 billion yuan by 2027.

Market Size of Pickled and cured Meat Products in Mainland China from 2018 to 2027

Driving factors of the cured and marinated products market in Mainland China

● The enhancement of purchasing power and the stable development of the catering service market

Pickled and cured products, as one of the indispensable food ingredients, usually appear in Chinese cuisine. Despite being affected by COVID-19 in 2020, the total revenue of the catering service market increased from 427.16 billion yuan in 2018 to 4394.1 billion yuan in 2022, with an annual compound growth rate of 0.7%. The stable development of the catering service market reflects consumers' continuous demand for dishes. In addition, the increase in per capita disposable income has enhanced consumers' purchasing power, promoted consumption upgrading, and driven the development of the pickled and cured products market.

● Rapid growth in online shopping

Thanks to the development of e-commerce and live streaming markets, online sales are growing rapidly in addition to traditional sales channels (such as large retailers and specialty channels). At the same time, the popularization of mobile payment has made purchasing food through e-commerce platforms and mobile live streaming platforms mainstream. Thanks to the rapid development of online shopping, the market for cured and marinated products has experienced significant growth in recent years.

Raw material prices in the cured and marinated meat products market on the Chinese mainland

Pork is the main raw material for producing cured and marinated products, with cured sausages accounting for the largest share of these products. The price of pork is mainly determined by the price of live pigs, which fluctuates due to supply and demand differences. In 2019, due to a sharp decline in live pig production caused by African swine fever, the average price of pork quickly rose. In 2019, the average price of pork reached 31.4 yuan per kilogram. Entering 2020, the average price of pork fluctuated at a high level, with an average price of 47.9 yuan per kilogram. From January to December 2021, due to sufficient live pig supply, the average price of pork dropped from 51.4 yuan per kilogram to 25.7 yuan per kilogram, benefiting downstream manufacturers. Starting from 2022, the monthly average live pig price recovered and increased to 30.2 yuan per kilogram in December 2022. It is expected that the demand for live pigs in the Chinese mainland will continue in the future, with live pig supply stabilizing at normal levels. As the impact of African swine fever weakens, it is expected that the average market price of pork will show greater stability than in previous years.

Average market price of pork in Mainland China from January 2018 to December 2022

Development Trend of Pickled and cured Meat Products Market in Mainland China

●Food safety enhancement

In recent years, China has introduced a series of laws and regulations to strengthen food safety supervision and regulate the healthy development of the food industry on the Chinese mainland, covering aspects such as raw material composition, food production and processing, and distribution channels. The pickled and cured meat products industry as a whole has the responsibility to accelerate the implementation of industry standards and improve product quality and safety by establishing stricter production and processing quality control standards.

●Develop innovative and healthy products

Due to consumption upgrading, consumers have higher demands for pickled and cured products in terms of various flavors and cooking methods. In addition to innovation, consumers also place greater emphasis on the quality of raw materials and the healthiness of pickled and cured products. In the future, pickle manufacturers may offer innovative products with new flavors and packaging, and reduce the use of unhealthy additives.

●Continuous brand building

In the highly competitive market for cured and marinated products, brand building is key to maintaining product sales and profit growth. Many well-known brands of cured and marinated products tend to invest capital and resources in brand building and promotion to gain recognition among a new generation of consumers.

Market competition pattern of cured meat products in the Chinese mainland

In 2022, there were approximately hundreds of cured meat products processors in the Chinese mainland. The cured meat products market in the Chinese mainland is highly concentrated, with the top five processors accounting for 36.7% of the market share by retail sales in 2022. Rongye Food ranked second in the cured meat products market by retail sales, with a market share of 9.2% in 2022.

2022 Ranking and Market Share of Sausage Products in Mainland China

●Competition landscape of Cantonese cured meat products

Guangdong-style cured meat products accounted for more than half of the retail sales of cured meat products in Mainland China in 2022. The Guangdong-style cured meat products market is relatively concentrated, with the top five processors accounting for 55.4% of the market share by retail sales in 2022. The company ranked second in the retail sales-based Guangdong-style cured meat products market, with a market share of 17.9% in 2022.

2022 Ranking and Market Share of Cantonese Sausage Products in Mainland China

Overview of the Leisure Meat Products Market in Mainland China

●Definition and Classification of Leisure Meat Products

Snack foods refer to packaged foods that are typically consumed and eaten between meals, mainly including: (i) Crispy snacks, (ii) Candies, chocolates, and jams, (iii) Cakes, (iv) Bread, cakes, and pastries, (v) Roasted snacks and nuts, (vi) Condiment pasta products, (vii) Snack meats and aquatic products, (viii) Vegetable snacks, (ix) Dried bean curd snacks, and (x) Jams and other snacks.

Convenience meat products are portable meat snacks made from pork, beef, and poultry, including ready-to-eat sausages, slices, jerky, and floss. Given the high protein content and ease of preservation of convenience meat products, they have become an emerging niche market in the convenience food market.

Ready-to-eat chicken products, as a subcategory of casual meat products, are rich in protein and nutrition, with low fat content, making them suitable for consumers' fitness needs. Some manufacturers specialize in producing low-fat and low-sodium ready-to-eat chicken products, which are popular among health-conscious individuals.

Market scale of leisure meat products in Mainland China

With the growth of consumer purchasing power in China, the retail sales of leisure food in the Chinese mainland increased from 714.7 billion yuan in 2018 to 843.7 billion yuan in 2022, with an annual compound growth rate of 4.2%.

Affected by COVID-19 in the first quarter of 2020, the growth rate slowed down to 1.9% in 2020. Benefiting from strict control and preventive measures implemented by the government, the market recovered at the end of 2020. It is expected that the retail sales of the convenience food market will grow at an annual compound rate of 7.6% from 2022 to 2027.

Market Scale of Leisure Food in Mainland China from 2018 to 2027

Due to the ease of preservation and adaptability to various consumption scenarios (such as travel, outdoor activities, fitness, etc.), leisure meat products have been popular among consumers for several years. The retail sales of the leisure meat product market increased from 553 billion yuan in 2018 to 685 billion yuan in 2022, with an annual compound growth rate of 5.5%. In 2022, the leisure meat product market accounted for about 8.1% of the total leisure food market. With the increasing popularity of leisure meat products and food innovation and upgrading, the retail sales of the leisure meat product market are expected to grow at an annual compound rate of 8.3% between 2022 and 2027, reaching 1019 billion yuan by 2027.

Market Size of Leisure Meat Products in Mainland China from 2018 to 2027

Driving factors of the leisure meat products market in Mainland China

●Population growth and an increase in per capita disposable annual income

From 2018 to 2022, the total population of Mainland China increased from 1.39 billion to 1.41 billion, with an annual compound growth rate of 0.3%. The per capita disposable income also experienced rapid growth during this period from 2018 to 2022. From 2022 to 2027, it is expected that per capita disposable income will grow at an annual compound rate of about 6.3%, reaching 50,141 yuan by 2027. The increase in population and disposable income will enhance residents' consumption capacity and further drive the rapid growth of the leisure meat products and ready-to-eat chicken snack industries.

●Expansion of consumption scenarios and consumption upgrading

Recreational meat products and ready-to-eat chicken snacks can meet the needs of different consumption scenarios such as travel, outdoor activities, and fitness, with a wide range of consumption settings. In addition, consumers are shifting towards higher-end consumption, encouraging individuals to seek food with better quality, taste, and attractiveness. This demand for consumption upgrading helps drive the development of recreational meat products and ready-to-eat chicken snacks.

●The development of new retail

The development of new retail has promoted the further growth of casual meat products and ready-to-eat chicken snacks. Retail stores and large supermarkets are the main traditional channels for the sale of casual meat products. With the development of online consumption, new models such as live streaming and social e-commerce are meeting consumers' needs. The integration of online and offline channels has facilitated the transformation of casual meat products and ready-to-eat chicken snacks from traditional sales channels to new retail, which is one of the main market drivers for future industry development.