The Zhitong Finance App learned that in the medium term, Guotai Junan released a research report saying that in the medium term, the condiment industry will gradually pick up; in the long run, considering that the composite and zero-additive sub-tracks are in line with China's catering development and demographic changes, the future will be structurally prosperous, while focusing on the general trend. Therefore, it is recommended to increase holdings: Qianhe Food (603027.SH), which actively lays out a zero-additive racetrack; Baoli Foods (), which are deeply involved in the compound seasoning industry, will gradually pick up haitian 603170.SH 603317.SH The flavor industry (603288.SH) and Zhonghu Hi-Tech (600872.SH), Fuling Mustard (002507.SZ), and Hengshun Vinegar Industry (600305.SH) gradually released their dynamic energy after shareholders/management changes.

The core ideas are as follows

Cycle review: back and forth, continuous structural upgrades. From 2001 to 2023, with the marginal decline in the restaurant boom and the continuous deepening of product structure upgrades, the overall growth driver of the industry gradually changed from “volume increase” to “price increase”. Combined with the three-cycle factor model, the three cycle factors of macroeconomics, cost, and channel inventory in 2016-2019 met positively, thus shaping the “golden four years” of sharp rise in volume and price and increased profitability in the condiment industry; the three-cycle factors in 2020-2023 resonated negatively, and the industry showed the characteristics of “price increment reduction” and downward revenue/profit. Meanwhile, the continuous upgrading of the product side has gone through cycle fluctuations. As demand for food shifts from “eat enough” to “eat well,” umami condiments gradually replaced salty condiments, and as the share of high-end condiments continued to increase, the overall tonnage price CAGR of the industry reached 3.5% from 2001 to 2023.

Looking forward to the future: steady recovery in the medium term, and structural prosperity of segmented tracks over the long term. Looking at the medium term, in the context of increased macro-control, consumption power is stabilizing, compounded by declining costs and channel inventories. We believe that the condiment industry will gradually pick up; in the long term, considering that compound seasonings will gradually meet the demand for reduced costs and efficiency gains in the context of increased food chains and changes in family structure and the demand for increased efficiency at the C-side, zero addition complies with the health demands brought about by the continued deepening rate of urbanization and population aging. We judge that these two segmented tracks will show the characteristics of structural prosperity in the future. At the same time, in the context of structural upgrading, considering that our own consumers are less sensitive to condiment prices, we believe that the industry's tonnage price increase logic will continue.

Competitive landscape: Head concentration is the general trend. Overall, the increase in the restaurant chain rate will drive the gradual fragmentation of demand for condiments, and the test of the comprehensive strength of market participants will increase, so market share will accelerate to concentrate on leading companies that continue to expand their competitive advantage on the product/development/channel side; the two major subdivision tracks will also show a concentrated trend: in terms of polymodulation, as the management efficiency of leading players continues to improve, hot pot bases/Chinese polymodulation will gradually move from scattered to concentrated, and the pattern of Western-style customized meals will show the characteristics of domestic substitution, and the oligopoly pattern will become increasingly clear; In terms of zero additives, along with the strength of the Qianhe brand and Channel power continues to increase. We are optimistic that in the future, Qianhe will continue to squeeze competitors and achieve an increase in market share. Therefore, the future industry pattern will gradually move from double oligopoly to single oligopoly.

Risk factors: Continued weakness in consumption power affects demand for complex and zero-additive products; price wars break out in the industry and fall into vicious competition at low prices and low quality; food safety risks, etc.