Xiangsong International Holdings Corporation (stock code: NASDAQ: CHSN) successfully listed on the NASDAQ on March 30, 2023. The company is a manufacturer and distributor of various baked goods and beverages in China and the United States. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services for the listing of Xiangsong International Holdings Corporation, and we hereby extend our warmest congratulations on its successful listing.
Xiangsong International Holdings Company (hereinafter referred to as 'Xiangsong International') successfully went public on March 30, 2023, issuing 3,390,000 Class A ordinary shares at an issue price of $4 per share, raising approximately $13.56 million.
During the process of listing in the US, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), facilitating communication with the SEC and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing various feedbacks from the SEC regarding industry issues.
Investment highlights
The company is actively expanding its territory, distributing products through its 29 chain stores in Xinjiang, China and two stores in New York, and plans to open three to five new stores in China and eight new stores in the United States within the next five years. The aim is to produce healthy, nutritious, and ready-to-eat foods with advanced facilities and industry research, while creating a comfortable and unique store environment.
The company collaborates with third-party online mobile application platforms and retail stores to improve the effectiveness of customer expansion;
The company is capable of developing over 150 kinds of baked products, focusing on product innovation and high-capability research and development;
The company owns a bakery product production center factory with an area of about 1,000 square meters, capable of handling the production of large quantities of baked products.
Baking product chain stores and production overview
Baked goods are made from flour, yeast, salt, and water as raw materials, along with sugar, oil, milk, eggs, or additives used to enhance flavor and texture, and are cooked in an oven. Baked products in China and Xinjiang include Western baked goods such as bread, cakes, and biscuits, as well as traditional Chinese baked products such as mooncakes, Chinese pancakes, and pies. With the accelerating pace of life in China, the demand for baked goods is expected to grow steadily, as they are convenient to carry, rich in taste, have additional nutritional value, and come in a variety of types.
Chain stores offer the same type of products and services, which are directly controlled and managed by the headquarters. The establishment of chain stores can reduce or even eliminate dependence on wholesalers and allow direct communication with potential customers. Chain stores usually focus on specific products or services and can adjust market strategies for individual stores according to local consumer needs. Therefore, the direct operation of chain stores may reduce communication discrepancies, decrease dependence on distributors, and thus reduce costs.
There are three different production models for baked products in China. Most manufacturers produce products at a central factory and send the finished goods to chain stores and retail outlets for sale. These manufacturers may enjoy lower manufacturing costs, but their baked products usually have a shorter shelf life (about three to five days). Some manufacturers produce semi-finished products at a central factory and rely on their stores for further processing such as baking, decoration, and packaging. Baked products produced in this way are fresher than those delivered from the central factory because they are ready before being placed on shelves. Finally, some manufacturers set up designated areas within their chain stores or retail outlets for production to provide baked products with the best quality and freshness. However, since producing the same quantity of bread products requires more manpower, the cost of this production model is the highest among the three.
Market scale of Chinese baked goods products
With the rapid economic development and the increase in disposable income of Chinese consumers, baked products are becoming increasingly popular among them. The retail sales of baked products have increased from about $24.3 billion in 2015 to about $31.85 billion in 2020, with a compound annual growth rate (CAGR) of 5.6%. As the Chinese government emphasized optimistic economic prospects in the 'Outline of the 13th Five-Year Plan for National Economic and Social Development of China', as well as the increasing consumption of baked products by Chinese consumers, it is expected that the retail sales of baked products will further grow at a CAGR of 5.7%, reaching about $42.34 billion by the end of 2025.
Market size of baked products (China), calculated by sales value
Forecast 2015 - 2025
Source: Frost & Sullivan report
From 2015 to 2020, the retail sales of baked products in Xinjiang increased by a compound annual rate of 7.1%, from approximately $880 million to approximately $1.24 billion. During this period, the rise in retail sales was mainly due to an increase in disposable income, the influx of Western pastries, and the per capita consumption of baked products in the region. According to Frost & Sullivan estimates, baked products will be more popular among Chinese consumers, with total consumption of baked products further increasing, driving the retail sales of baked products in Xinjiang to reach approximately $1.7 billion by the end of 2025, with a compound annual growth rate of 6.4%. This growth in the retail sales of baked foods will create sufficient space for moderate development of the industry, and market participants may seek opportunities to expand their market position in Xinjiang in the coming years.
Market size of baked products calculated by sales value (Xinjiang, China)
2015 to 2025 (forecast)
Source: Frost & Sullivan report
US baked goods product sales market size
The American baking product market is considered a relatively mature market, as products such as bread, cakes, and pastries have always been one of the staple foods in Western culture. The total retail value of baked products recorded in the United States increased by 4.4% annually from about $27.55 billion in 2015 to about $34.14 billion in 2020. The growth in total retail value was mainly due to the development of high-end baked products and the increase in the unit price of baked products. With the growth in per capita disposable income among Americans, high-end baked products with healthy recipes became more popular, which is expected to stimulate the growth of the retail value of baked products in the United States. It is projected that by the end of 2025, it will reach about $42.30 billion, with an annual compound growth rate of 4.0%.
Market size of baked goods calculated by sales value (United States)
Forecast 2015 - 2025
Source: Frost & Sullivan report
Drivers of the baking product manufacturing market in China and the United States
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Quality of life has improved
In the past five years, the consumption capacity of Chinese residents has been continuously improving. Chinese consumers show a stronger preference for baked products made from better raw materials and higher quality, even at higher prices. According to data from the National Bureau of Statistics of China, the per capita disposable income across the country has increased from about $3,325.7 in 2015 to about $4,873.4 in 2020, with an annual compound growth rate of 7.9%. Therefore, the improvement in living standards has stimulated the consumption of staple foods in China, such as baked products.
Additionally, according to data from the Bureau of Economic Analysis of the US Department of Commerce, per capita disposable personal income in the United States increased from about $42,953 in 2015 to about $53,082 in 2020, with an annual compound growth rate of 4.3%. Due to this increase in per capita disposable personal income, consumers are more willing to pay more for high-quality and healthier baked products, such as low-carbohydrate, gluten-free, and trans-fat-free baked goods, in pursuit of a better lifestyle.
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Expansion of E-commerce Channels
In recent years, the popularization of online and on-demand meal delivery platforms (such as Ele.me and Meituan Waimai) in China has encouraged baking product manufacturers and retailers to adjust their business models to meet consumers' demand for convenient meal delivery. For example, Beijing-based Ebeecake prioritizes e-commerce channels in its sales methods and is committed to providing consumers with unique experiences through its online platform and third-party platforms (such as JD.com). As baking product manufacturers and retailers face more intense competition in China, it is expected that more market participants will expand their e-commerce channels to attract potential consumers.
In the United States, in addition to selling products through traditional physical stores, current baking product manufacturers also use the internet for marketing and sales. For example, the emergence of online food ordering platforms such as Seamless, Postmates, and UberEats has provided additional business opportunities for baking product manufacturers and retailers to expand their distribution networks, ultimately increasing their customer base and product sales in New York City and across the United States.
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Changes in marketing strategy
As Chinese consumers' awareness of healthy lifestyles continues to grow, baking product manufacturers and retailers have introduced low-calorie, low-carbohydrate, and vegan products, along with added dietary fiber. They have also carried out extensive marketing campaigns to meet this trend. In addition, they are focusing on the packaging and appearance of baking products to attract consumers and increase the likelihood that their products will be shared through social media platforms. Baking product manufacturers and retailers also conduct advertising activities through their own social media accounts.
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Frost & Sullivan has extensive research experience in the food and beverage industry, assisting well-known enterprises in successfully listing on capital markets. Recent successful listings include: Dazheng Co., Ltd. (1405.HK), Baiyuan Orchard (2411.HK), Zhengwei (2147.HK), Weilong (9985.HK), Shuangcaizhuang (2321.HK), Youran Animal Husbandry (9858.HK), Jiulongwang (1927.HK), Yumart China (9987.HK), Nongfu Spring (9633.HK), Fengxiang Food (9977.HK), Simore (6969.HK), China Feihe (6186.HK), China National Tobacco International (6055.HK), Youpin 360 (2360.HK), Wugu Flour Mill (1837.HK), Baby Tree (1761.HK), Haidilao (6862.HK), Permaculture (8609.HK), Longhui Holdings (1007.HK), Xinyong International (1587.HK), Yiyuan Liquor (8146.HK), Jierong International (2119.HK), Bingshi International (1705.HK), Sainsbury's Food (1475.HK), Asia Grocery (8413.HK), Chow Haidilao (1458.HK), COFCO Meat (1610.HK), Yihai International (1579.HK), Zhongdi Dairy (1492.HK), Dali Foods (3799.HK), Manor Ranch (1533.HK), Wanzhou International (0288.HK), etc.
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*The above order is not sequential and is arranged in reverse chronological order based on listing time.
