Kemeng Foods Commits RMB50 Million to Juewei-Backed Sichuan 415 Fund

This is an English adaptation of a FoodBud historical article originally published on December 9, 2021.

On December 9, Juewei Food announced that the committed capital of Sichuan Chengdu Xinjin 415 Equity Investment Fund Partnership (Limited Partnership), or Sichuan 415 Fund, would increase from RMB1.1 billion to RMB1.15 billion. The additional RMB50 million commitment will be subscribed by Kemeng Foods.

The fund’s investor base includes Shenzhen Wangju Capital, with a RMB644 million commitment and a 56% contribution ratio; Qiaqia Food, with RMB60 million and a 5.21% ratio; and Aofei, with RMB20 million.

What the fund has backed

FoodBud previously reviewed Juewei’s broader investment playbook across supply chain, franchising and external investments. At that time, Sichuan 415 Fund had invested in only one company: Lujiangnan. Based on Shenzhen Wangju information, Lujiangnan was valued at RMB910 million.

The fund has recently added two more portfolio companies: Laotanzi Intangible-Heritage Pickles and Guilin Sanyang.

Laotanzi: pickles and seasoning

Sichuan 415 Fund holds 14.3% of Laotanzi.

Earlier reporting estimated Laotanzi’s 2019 annual sales at RMB170 million, supporting 350 local jobs. The company’s 2018 sales were RMB110 million, and its 2020 target was to exceed RMB200 million.

Sichuan Laotanzi Food Co., Ltd. is based in Meishan, known in China as a major pickle-producing region. Founded in 2010, the company covers 20,000 square meters and has more than 2,000 dedicated ceramic fermentation jars. It develops and produces higher-end pickled vegetables and seasonings.

A key feature of the business is using its own fermented raw materials to develop seasoning products. The company has a professional R&D team of dozens of people, including experienced pickle product developers and seasoning-application specialists, and develops different seasonings for different customers.

Guilin Sanyang: fresh wet rice noodles and functional staples

Sichuan 415 Fund holds 5.4% of Guilin Sanyang.

In July 2021, another Juewei fund and Kemeng Foods had already invested in Guilin Sanyang, with Kemeng holding close to 3%. Kemeng’s participation in Sichuan 415 Fund therefore follows an existing relationship. In November 2021, Juewei made another investment in Guilin Sanyang through Sichuan 415 Fund.

Guilin has five companies with preservation technology for fresh wet rice noodles; Sanyang is one of them.

Founded in June 2010, Guilin Sanyang focuses on R&D and production of eco-health foods and staple foods designed for people with diabetes. The company had one national invention patent for food for people with type 2 diabetes, five utility-model patents covering production processes and equipment, and nine pending national invention patents: one for therapeutic healthy staples and eight for healthy instant rice noodles.

Earlier financial projections for Guilin Sanyang stated that 2017 output value would reach or exceed RMB120 million, 2018 planned output value would reach RMB300 million, and 2021 planned output value would reach RMB1 billion.

According to local media, by the end of 2020 Guilin had more than 6,000 enterprises and individual businesses producing and selling rice noodles, about 106 production and processing companies, and 31 prepackaged rice-noodle companies. The industry’s annual total output value or sales was close to RMB10 billion. Prepackaged rice-noodle producers represented by Sanyang, Mifen Gufen, Nissin and Fenba had annual production capacity of about 200 million boxes and generated nearly RMB1 billion in sales.

Why Kemeng Foods is participating

Kemeng Foods had a market capitalization of about RMB4 billion at the time, down materially from a peak of around RMB7 billion.

In 2012, founder Chen Keming, then 60, said the company aimed to reach RMB10 billion in sales within 10 years, and later set 2020 as the target year. Chen, born in Hunan and formerly a carpenter, built Kemeng’s dried-noodle business into an industry leader. But the RMB10 billion sales goal was not achieved: Kemeng Foods’ 2020 revenue was RMB4 billion.

To pursue that target, Kemeng had expanded through acquisitions, including Yanjin Keming Flour and COFCO Wugudaochang Food, but those acquisitions did not meet expectations.

By joining Juewei’s fund, Kemeng Foods said it hoped to use professional institutional capabilities to focus on business areas it may want to expand into, and at suitable times consider extending its value chain through methods including external M&A. The company indicated it would not be limited to its current business scope in the future.

Note: valuation, investment, M&A and forward target figures above are historical as of the original December 9, 2021 article.