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sales of the "old three" frozen foods have declined, the catering market is difficult to take the lead, and sanquan food's "stubborn disease" has not been solved. on august 29, sanquan food released a semi-annual report showing that revenue in the first half of 2024 was 3.665 billion yuan, a year-on-year decrease of 4.91%; net profit was 333 million yuan, a year-on-year decrease of 23.75%. the financial report shows that sanquan food's direct sales model is mainly divided into two types. one is direct sales in large supermarket systems. the company directly signs annual purchase and sales contracts with large supermarkets and regional chain supermarkets across the country every year; the second is to cooperate with major customers. the company provides standardized semi-finished products and personalized prefabricated products to specific customers. supply services. according to financial report data, the operating income of sanquan food's direct sales model in the first half of the year decreased by 5.97% year-on-year.

supermarket sales decline

regarding the decline in performance, sanquan foods explained that during the reporting period, it was affected by the continued sharp decline in customer traffic in the nka (large chain retail) and lka (regional chain channel) systems. at the same time, the company strengthened the risk control of accounts receivable in the direct-operated supermarket system, which led to a decline in the sales scale of the direct-operated supermarket system. the company's retail and innovation market revenue in the first half of the year was about 2.985 billion yuan, a year-on-year decrease of 7.5%. in addition, affected by the relatively severe competition in the first half of the year, the company's channel cost investment increased significantly. at the same time, out of prudence, it made impairment provisions for some machinery and equipment, which led to a year-on-year decline in net profit.

as the leader in quick-frozen food, sanquan food is a little worried about the decline in its quick-frozen business. financial report data shows that quick-frozen noodle and rice products, the largest business of sanquan food, which accounts for 85.7% of its revenue, saw a 5.77% decrease in revenue in the first half of the year. among them, the revenue of the "three quick-frozen products (glutinous rice balls, dumplings, and rice dumplings)" under the quick-frozen noodle and rice category decreased by 7.77% year-on-year, and the gross profit margin decreased by 3.46% year-on-year. in terms of product sales, sanquan food's sales of quick-frozen noodle and rice products increased by 1.54% year-on-year in the first half of the year, while sales of quick-frozen prepared foods and refrigerated and short-shelf-life products decreased by 0.8% and 4.89% year-on-year, respectively.

in the 2023 annual report, sanquan food’s quick-frozen noodle and rice products had an operating income of 5.829 billion yuan, a year-on-year decrease of 9.46%; sales volume was 609,500 tons, a year-on-year decrease of 6.14%. at the time, sanquan food explained that quick-frozen foods have the attribute of hoarding goods. due to the high performance base in the previous year and the relatively weak terminal consumer market, revenue declined. in addition to changes in the consumer end, industry competition has also become more intense, and quick-frozen food companies are in fierce market competition.

before the quick-frozen noodle and rice products exploded due to staying at home, after years of development, this market had matured and has now entered a stage of serious homogeneity in products, channels and promotions. according to a research report released by guosen securities, the growth rate of china's quick-frozen noodle and rice products market has gradually slowed down since 2017, with a growth rate of about 4%-5%. the fading of the epidemic has brought sanquan's long-standing industrial predicament back to reality.

looking to new markets

with traditional businesses declining, sanquan foods is pinning its hopes on the catering market to bring new growth. in its financial report, sanquan foods specifically mentioned that "the company's catering market business has continued to grow steadily, with operating income of 680.4729 million yuan in the first half of the year, an increase of 8.1% year-on-year. in particular, the catering major customer department has launched a series of innovative products that are well-liked by chain catering customers and end consumers through measures such as improving product quality, improving process efficiency, and strengthening customer systematic services, and has achieved gratifying growth in revenue scale."

it is worth noting that although sanquan food stated that the catering market "achieved gratifying growth", beijing business daily reporters noticed that the catering market currently accounts for 18.56% of sanquan food’s total revenue, and the revenue growth rate in the first half of the year was in single digits, and the impact on performance growth is still relatively limited.

sanquan foods is also trying to increase its investment in pre-prepared meals. in an institutional survey in january, sanquan said that the company started with pre-prepared ingredients, and has made plans for meat products and rice and flour products. it has also reserved a number of new pre-prepared dishes. recently, it launched a soup pork tripe and chicken pre-prepared dish product, which has received good market feedback. more pre-prepared dishes will be launched in the future.

however, in recent years, more and more companies have entered the pre-prepared food market. quick-frozen food companies such as anjing food, qianwei central kitchen, and huifa food have all entered the pre-prepared food market. judging from the third quarter report of 2023, pre-prepared food has brought business growth to these companies. in addition, among agricultural and animal husbandry companies, new hope, wen's shares, and shuanghui development have also gradually joined the competition for pre-prepared food.

from the channel perspective, the catering market still consumes a large amount of pre-prepared meals. according to data from the china chain store & franchise association, the largest downstream demand for pre-prepared meals comes from catering companies, accounting for 80%. if sanquan foods wants to gain more growth in this segment, it may have to face more intense market competition.

according to zhu danpeng, a chinese food industry analyst, sanquan foods has problems such as aging brands, aging products, and aging operating systems, which have greatly restricted the company's development. in addition, the pace of innovation, upgrading and iteration is lagging behind, and it has not kept up with the pace of overall consumption changes. although sanquan foods has increased its layout in group meals and catering, the overall effect is not very obvious. as more leading companies enter the industry in the future, sanquan foods' original brand scale effect will gradually weaken.

regarding the above questions, a beijing business daily reporter sent an interview outline to sanquan food’s certification agent’s email address, but no reply was received as of press time.

beijing business daily reporter zhang han

process editor: u072