This is an English adaptation of a FoodBud historical article originally published on August 31, 2021.
Photo location in source: Mount Emei, Sichuan.
Haidilao’s first-half 2021 recovery helped lift Yihai International, the seasoning and convenience-food company that grew out of the Haidilao ecosystem. But the picture was mixed: Yihai’s hot pot seasoning business benefited from restaurant demand, while its convenience ready-meal growth slowed to 12%.
Haidilao reported first-half 2021 revenue of RMB20.09 billion, up 105.9% year on year, but net profit was only RMB96.5 million. Its market value also fell by more than HKD20 billion after the interim results.
Yihai International, by contrast, reported first-half revenue of RMB2.631 billion, net profit of RMB392 million, and operating profit of RMB520 million.
For the six months ended June 30, 2021, Yihai added 9 Chinese compound seasoning products and 8 convenience ready-meal products. Its portfolio totaled:
First-half revenue by category was:
Hot pot seasoning revenue was RMB1.5 billion, up 24.2% year on year. Sales of hot pot seasoning products to related parties, mainly Haidilao and Shuhai, rose 74.1%. Sales to third parties fell 7.2% from the same period in 2020, mainly because at-home consumption demand had normalized after China’s domestic pandemic situation was brought under effective control in the comparable period.
Chinese compound seasoning revenue was RMB320 million, up 7.5%. Sales to related parties rose 62.7%, while third-party sales rose 4.4%.
Convenience ready-meal revenue was RMB700 million, up 12% year on year. The original article noted that this growth looked modest given that Zihaiguo’s 2020 revenue exceeded RMB1 billion, while Yihai was still likely the largest player in the convenience ready-meal track.
Sales to related parties, mainly Haidilao and Shuhai, reached RMB900 million in the first half, up 79.0% year on year.
Sales to distributors were RMB1.55 billion, broadly flat versus the same period in 2020.
Yihai continued adding regional logistics warehouses to improve delivery efficiency, distributor satisfaction, and the rollout of “zero inventory” at retail outlets. It had 10 regional warehouses at the time. The company said the model could shorten delivery cycles, reduce channel inventory, protect product freshness, and support healthier channel development.
Distribution expenses rose 54.7%, from RMB210 million in the six months ended June 30, 2020 to RMB330 million in the same period of 2021. Distribution expenses increased from 9.5% of revenue to 12.4%, mainly due to advertising for the Kuaishou Xiaochu brand and higher warehouse freight and storage costs.
As of June 30, 2021, Yihai’s distributors covered 31 provincial-level regions in mainland China, Hong Kong, Macau and Taiwan, and 49 overseas countries and regions.
E-commerce revenue was RMB180 million, up 11.4%. For the six months ended June 30, 2021, Yihai operated 5 flagship stores on platforms including Tmall and JD.com.
Yihai’s revenue rose 18.6% year on year in the first half of 2021, while cost of sales, including raw materials, employee benefit expenses, depreciation, amortization, and energy costs, rose 32.2%.
The increase was mainly driven by higher sales volume and rising oil prices among raw materials.
Overall gross margin fell from 39.7% in the first half of 2020 to 32.7% in the first half of 2021. Gross margins by category were:
The company attributed the margin decline to three factors:
Inventory included raw materials, work in progress, and finished goods. As of June 30, 2021, inventory was about RMB320 million, down from RMB410 million on December 31, 2020. Inventory turnover days declined from 38.7 days for the year ended December 31, 2020 to 37 days for the six months ended June 30, 2021, mainly because Yihai improved inventory efficiency.
Trade receivables were about RMB170 million as of June 30, 2021, down from RMB190 million on December 31, 2020. The change was mainly because e-commerce platforms shifted from distributor credit sales to advance-payment arrangements after distributors took over operations. Trade receivables turnover days fell from 15.4 days to 12.4 days.
Trade payables were about RMB230 million as of June 30, 2021, down from RMB280 million on December 31, 2020, affected by seasonal production, sales, and procurement cycles. Trade payables turnover days declined from 26.8 days to 26 days.
Yihai continued expanding and optimizing supply capacity in the first half of 2021.
The Bazhou, Hebei production base began operating a convenience ready-meal assembly line in the first half. The Kaifeng, Henan Yihai factory officially started production in June 2021. The Luohe production base began construction in March 2020 and was expected to start production in August 2021. The Zhaoqing, Guangdong factory project entered the construction-planning stage in the second half of 2020, with its first-phase workshop expected to start production by the end of 2021.
Specific capacity projects included:
Yihai said it would continue to look for potential strategic investment opportunities and high-quality targets that could create synergies in product R&D, product mix, channel expansion, or cost control.
As of June 30, 2021, Yihai’s cash and cash equivalents, mainly in renminbi, Hong Kong dollars, and US dollars, were about RMB1.22 billion, down from RMB1.99 billion on December 31, 2020.
Note: Forward-looking capacity timelines, investment plans, market-cap figures, and financial figures are historical as reported in 2021.