Good News on Listing | Frost & Sullivan Congratulates Shanghai Ziyuan Food Co., Ltd. for Successfully Listing on the Main Board of the Shanghai Stock Exchange (603057.SH)

Shanghai Ziyuan Food Co., Ltd. (hereinafter referred to as 'Ziyuan Food') was successfully listed on September 26, 2022, with an issue of 42,000,000 shares at an issue price of 15.15 yuan per share.

Frost & Sullivan is a domestic large-scale marinated food production enterprise. Its main business includes the research, development, production, and sales of marinated foods. Its main products include couple's lung slices, spicy chicken, vine pepper chicken, etc., which are marinated foods made from poultry and livestock products such as chickens, ducks, beef, and pork, as well as vegetables, aquatic products, and soy products. The application scenarios are mainly for dining consumption with leisure consumption as a supplement. The main brand is 'Ziyuan'. Ziyuan Food is committed to inheriting Chinese food culture. Its product formula inherits Sichuan marinating technique and integrates the flavors of Sichuan, Cantonese, Hunan, and Shandong cuisines. With years of experience accumulation in the marinated food industry and research on consumer data and industry data, Ziyuan Food continuously innovates on the basis of consolidating its existing product advantages, and improves according to the changes in public taste and consumption habits. It has formed hundreds of kinds of marinated foods with high-quality ingredients such as poultry, vegetables, aquatic products, and soy products, covering diverse consumption scenario needs such as catering, leisure enjoyment, and gift giving. Ziyuan Food has developed more than 5,100 stores nationwide, covering more than 150 cities in over 20 provinces, autonomous regions, and municipalities directly under the Central Government. Its business scale ranks among the top in the domestic marinated food industry. Frost & Sullivan has long been paying attention to the global and Chinese food and beverage industries, released a large number of research reports, which are widely cited in the prospectuses of leading A-share listed companies in the industry to help customers accelerate growth.

Marinated foods refer to those made primarily from the meat and internal organs of poultry and livestock, as well as game, some aquatic products, and vegetables. They are seasoned with ginger, garlic, salt, vinegar, chili peppers, and other condiments, as well as spices, and are cooked by boiling them in water. Marinated foods are characterized by 'strong flavors, often spicy, and attractive color, aroma, and taste,' making them an important part of traditional Chinese cuisine.

Thanks to the gradual improvement in people's living standards, per capita disposable income and purchasing power have continued to rise, and residents' consumption of marinated foods has also been continuously increasing. From 2015 to 2019, the market scale of China's marinated food industry in terms of retail sales steadily increased from 167.557 billion yuan to 239.554 billion yuan, with an average annual compound growth rate of 9.35%. Looking ahead, as the variety and flavor of marinated foods become more abundant, marinated food enterprises will continue to expand through chain and branding, develop takeaway and e-commerce platforms, improve food quality and safety levels, and advance cold chain logistics technology. The Chinese marinated food market will further develop, with retail sales reaching approximately 425.385 billion yuan by 2025, and an average annual compound growth rate of 10.92% from 2020 to 2025.

According to product positioning and consumer scenarios, Chinese marinated foods are currently mainly divided into table-side marinated foods and snack-oriented marinated foods. Table-side marinated foods are positioned for accompaniment with alcohol or as side dishes, with the main consumption scenario being at dining tables, targeting family consumers; snack-oriented marinated foods are suitable for leisure time enjoyment, with main consumption scenarios including between meals, social activities, sports events, and travel, served as snacks, with a consumer base concentrated among young people. Due to the rigid demand for table-side marinated foods, which have a high frequency of consumption and a large consumer base, they occupy a significant market share in China's marinated food market. In 2019, the retail sales of table-side marinated foods in China's marinated food industry reached 153.933 billion yuan, accounting for 64.26%; the retail sales of snack-oriented marinated foods reached 85.621 billion yuan, accounting for 35.74%.

With the improvement of residents' living standards and the acceleration of life rhythms, the market for convenient and delicious side dish marinated foods has developed rapidly. Marinated foods originated from dining tables and serve as a daily dietary consumption product with strong rigid demand, leading to relatively stable market development. From 2015 to 2019, the market scale of China's side dish marinated foods industry in terms of retail sales steadily increased from 117.456 billion yuan to 153.933 billion yuan, with an average annual compound growth rate of 7.00%. The types of side dish marinated foods mainly include livestock marinated foods represented by pork, beef, and mutton (47.90%) and poultry marinated foods represented by chicken and duck (37.30%), with the remainder being vegetables (10.30%) and other marinated foods (4.50%). Currently, the Chinese side dish marinated food market is dominated by regional small individual businesses, with an extremely decentralized market and a low degree of branding.

Looking ahead, with the increasing concentration of market brands, the improvement of food hygiene and safety standards, and the development of cold chain logistics, the Chinese snack and marinated food market will further develop in the direction of chain operation, branding, scale, and standardization. The potential for the development of China's dining table economy is enormous, and there is still significant room for growth and penetration in snack and marinated foods. Additionally, as major marinated food enterprises in the market begin or deepen their expansion into lower-tier markets, snack and marinated foods with rigid consumption characteristics are expected to see faster growth in response to the consumption characteristics of third- and fourth-tier cities. The retail sales of China's snack and marinated food market are expected to reach 279.932 billion yuan by 2025, with an average annual compound growth rate of 11.40% between 2020 and 2025.

• Enhanced consumption capacity and upgraded lifestyle

• Franchise model and the rapid development of the lower-tier market

• Product standardized production, packaging technology, and upgrade of logistics system

H halogened meat products and condimentary cold dishes are fast-moving consumer goods, all of which are cooked products. Especially sauce-marinated meat products, which are rich in their own nutrients, can easily breed bacteria when the temperature is suitable, making it difficult to preserve the product fresh. In addition, compared to leisure-style marinated foods, condimentary marinated foods have a richer variety and more complex production techniques, requiring higher standards for product preservation. In the past, due to the lack of reliable preservation technology, food safety incidents caused by product spoilage occurred from time to time.

In recent years, with the popularization of vacuum rapid cooling and pasteurization technology, the preservation level of the marinated food industry has made significant progress, greatly improving product freshness and shelf life. In addition, due to the characteristics of small batch, high frequency, multi-point distribution, and rapid distribution in the logistics of the snack marinated food industry, the distribution of marinated foods requires a complete warehousing logistics system and advanced food preservation technology to support it. The development speed of warehousing logistics and preservation technology directly affects the layout of sales networks and market response speed in the casual marinated food industry. The continuous improvement of the cold chain logistics distribution system nationwide, along with the continuous reduction of logistics distribution costs, and the popularization and application of advanced technologies such as low-temperature preservation and high-pressure preservation have effectively increased the breadth and depth of enterprise network coverage, expanded distribution ranges, improved logistics distribution efficiency, and created favorable conditions for the development of the snack marinated food industry.

• Market concentration is gradually increasing

• Diverse types of side dishes and braised foods

• Increasing emphasis on food safety

In addition, with the continuous improvement of consumer demand and awareness of food safety, hygiene and safety have become important considerations when consumers purchase cooked foods such as side dishes and marinated products. Driven by policy regulation and enhanced consumer safety awareness, Chinese side dish and marinated food manufacturers will pay more attention to product quality levels, and the industry as a whole will become more standardized in the future.

• Cold chain and informatization construction

The market for snack and cooked food industry is relatively fragmented, and to this day, there are still significant market shares shared by small unbranded processing manufacturers. The number of production enterprises above designated size is limited, with a CR5 of less than 5%, featuring a dominant single brand. Except for Ziyuan Food, the market share of other single brands in 2019 was less than 1.00%. The top five brands in the domestic snack and cooked food industry are as follows:

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: Youran Animal Husbandry (9858.HK), Jiulongwang (1927.HK), Yumart (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), Sustain Agriculture (8609.HK), Longhui Holdings (1007.HK), Xinyong International (1587.HK), Yiyuan Liquor (8146.HK), Jierong International (2119.HK), Bins International (1705.HK), Nissin Foods (1475.HK), Asia Grocery (8413.HK), Chowking Duck (1458.HK), COFCO Meat (1610.HK), Yihai International (1579.HK), Zhongdi Dairy (1492.HK), Dali Foods (3799.HK), Manor Ranch (1533.HK), Vientiane International (0288.HK), and others.