This is an English adaptation of a FoodBud historical article originally published on January 1, 2022.
China’s convenience food category appeared close to producing one of its first dedicated listed players.
Sichuan Baijia Food Industry Co., Ltd. (“Baijia Food”) had signed an IPO tutoring agreement with GF Securities and filed the arrangement with the Sichuan securities regulator on September 28, aiming to list on ChiNext.
Baijia Food had started its IPO strategy in 2017 and designated 2018 as the first year of a three-year listing plan. By the time of the article, the company had disclosed its prospectus.
Founded in 2016, Baijia Food focuses on R&D, manufacturing, marketing and brand operation for new-style convenience foods and compound seasonings. It operates two main brands, “Akuan” and “Baijia Chenji,” with nearly 200 SKUs across six series: non-fried instant noodles, boiled noodles, instant glass noodles and rice noodles, self-heating foods, Sichuan-style compound seasonings and ready-to-eat pickles.
According to the prospectus, Baijia Food reported revenue of RMB 417 million, RMB 632 million, RMB 1.122 billion and RMB 605 million in 2018, 2019, 2020 and the first half of 2021, respectively.
Net profit over the same periods was RMB 476,700, RMB 15.9351 million, RMB 69.852 million and RMB 30.3632 million.
In June 2021, the company completed nearly RMB 200 million in Series B financing, led by GL Ventures, with participation from Moutai Jianxin Fund and Yisan Capital. Existing shareholders Cowin Capital and Binfu Fund also added investment. The proceeds were mainly intended for technology R&D, capacity expansion, channel development and brand promotion. Baijia Food had previously raised RMB 110 million in Series A financing in February 2021.
The prospectus showed founder Chen Chaohui holding 52% of Baijia Food, while Hillhouse Capital held 6.2%.
The planned IPO fundraising amount was RMB 665 million, to be used for capacity expansion and R&D strengthening.
Baijia Food was one of the manufacturers promoting the idea of “new-style convenience food.” Akuan Red Oil Mianpi became its flagship product. When launched in 2015, it entered a convenience-food segment that was distinct from the instant noodle market at the time.
From 2018, Baijia Food kept upgrading the product format, packaging and marketing of its Red Oil Mianpi series, turning it into a hit product and helping create a new instant noodle subcategory. In 2020, the series generated about RMB 400 million in annual sales, with cumulative sales exceeding 100 million servings. During the 2020 Double 11 shopping festival alone, online orders reached about 16 million servings.
A Guosen Securities Research Institute report estimated China’s convenience food market at RMB 450 billion in 2019. Based on a 6% compound annual growth rate, it projected the market could reach RMB 630 billion in 2025.
The article grouped companies driving the category into three types:
Baijia Food’s sales model included e-commerce self-operated stores, offline distribution and customized production, including private-label and contract manufacturing for major brands.
Under the self-operated e-commerce model, the company sold through its own stores on platforms including Tmall, JD.com and Pinduoduo.
Direct supply sales included offline supply to large retail chains such as Walmart, Yonghui Superstores, Wumart, RT-Mart, Hongqi Chain, Jiajiayue, Carrefour and China Resources Vanguard, as well as online direct supply to platform-operated channels including JD.com’s first-party retail, Tmall Supermarket and Vipshop.
Under the customized sales model, customers signed annual framework contracts with Baijia Food and placed orders based on market demand. Baijia Food produced to customer specifications, packed under the customer’s brand and shipped to designated locations. During the reporting period, the company provided private-label and contract manufacturing services for customers including Three Squirrels, Be & Cheery, Li Ziqi and NetEase Yanxuan.
Disclosure showed dealer sales were Baijia Food’s largest channel, contributing more than 50% of sales. Direct sales ranked second, followed by self-operated e-commerce.
Baijia Food added many dealers each year, with relatively fast growth. The article cited four drivers:
Among newly added dealers during the reporting period, those purchasing less than RMB 500,000 numbered 448, 472, 605 and 323, accounting for 96.55%, 96.53%, 95.28% and 98.17% of new dealers in the respective periods.
Among reduced dealers, those purchasing less than RMB 500,000 numbered 259, 465, 487 and 45, accounting for 99.23%, 98.31%, 97.60% and 100% of reduced dealers. The main reason was stricter dealer management, higher compliance and performance standards, and the cleanup of smaller dealers or dealers that failed to meet contractual performance terms.
Capacity utilization increased year by year, reaching 104% in the first half of 2021.
In the first half of 2021, instant noodles, instant glass noodles, instant rice noodles and self-heating foods accounted for 65%, 23%, 8.7% and 1.7% of sales, respectively. Instant noodle products were the largest revenue contributor.
By region, Baijia Food’s sales were concentrated mainly in East China and Southwest China. The company also had overseas sales, but they represented a small share of revenue.
Purchasing categories included raw and auxiliary materials, semi-finished products, packaging materials, finished goods and outsourced processing services. The company was facing raw-material price pressure.
In January-June 2021, Baijia Food’s seasoning procurement price rose 11.09% versus 2020, mainly because higher-priced ingredients such as hulake flavoring and chili oil resin increased as a share of purchases. In 2020 and January-June 2021, average oil and fat procurement prices rose 13.64% and 23.85%, respectively, mainly due to rising rapeseed oil and palm oil prices.
The article noted that oils and fats reached 10% of procurement in the first half of 2021, while packaging materials accounted for more than 3% in 2019, 2020 and the first half of 2021.
Accounts receivable in the first half of 2021 were RMB 42.32 million, with bad-debt provision of RMB 2.2 million. Accounts payable were RMB 94.53 million, suggesting the company had more room to use supplier payment terms on the procurement side. The top receivables counterparties included Three Squirrels, Weinian, Walmart and Tmall; the largest payable counterparty was a packaging-material supplier.
For management expenses in the first half of 2021, compensation accounted for 42%, while warehousing and transfer costs accounted for 11.6%.
Baijia Food’s prospectus showed a high-growth convenience-food operator built around a breakout hero SKU, expanding through a dealer-heavy channel model while also serving private-label customers. Its scale was still modest: 2020 revenue was RMB 1.122 billion, while the article noted that Yihai International’s convenience-food business alone had already reached RMB 1.2 billion. The strategic question was how Baijia Food would keep developing new businesses and sustain growth after listing.
Note: IPO, financing, shareholding, market forecast and forward-looking figures above are historical, based on disclosures cited in the January 1, 2022 article.