Declining average transaction values and massive store closures - why are braised foods losing momentum?
Recently, four major chain braised food companies - Ziyan Foods Group Co.,Ltd. (603057.SH), ZHOU HEI YA (1458.HK), Jiangxi Huangshanghuang Group Food Co.,Ltd. (002695.SZ), and Juewei Food Co.,Ltd. (603517.SH) - released their interim results for 2025. Combined, the four companies generated approximately 6.5 billion yuan in revenue for the first half of the year, representing a calculated year-on-year decline of over 10%. Their combined net profit attributable to shareholders totaled approximately 465 million yuan, a calculated year-on-year drop of over 20%. Only Jiangxi Huangshanghuang Group Food Co.,Ltd. and ZHOU HEI YA achieved positive growth in profitability.
Jiangxi Huangshanghuang Group Food Co.,Ltd. is the first listed braised food company, founded in 1993 with headquarters in Nanchang, Jiangxi, and listed on the Shenzhen Stock Exchange in 2012. Juewei Food Co.,Ltd. was established in 2005 with headquarters in Changsha and listed on the Shanghai Stock Exchange in 2017. The "ZHOU HEI YA" flavor took initial shape in 1994, with ZHOU HEI YA listing on the Hong Kong Stock Exchange in 2016. Ziyan Foods Group Co.,Ltd. was registered and established its headquarters in Shanghai in 2000, going public on the Shanghai Stock Exchange main board in 2022.
As of the September 9 close, Jiangxi Huangshanghuang Group Food Co.,Ltd. (002695.SZ) has risen nearly 60% year-to-date, ZHOU HEI YA (1458.HK) has gained over 40%, Ziyan Foods Group Co.,Ltd. (603057.SH) has increased nearly 20%, and Juewei Food Co.,Ltd. (603517.SH) has risen 0.67%.
**Performance Divergence: ZHOU HEI YA Net Profit Triples, Ziyan and Juewei Drop 40%**
In terms of revenue scale, Juewei Food Co.,Ltd. led the four companies in the first half with 2.82 billion yuan in revenue, but it also had the highest revenue decline at 15.57%. Ziyan Foods Group Co.,Ltd. recorded revenue of 1.473 billion yuan, down 11.46% year-on-year. ZHOU HEI YA achieved revenue of 1.223 billion yuan, slightly down 2.9% year-on-year, while Jiangxi Huangshanghuang Group Food Co.,Ltd. generated revenue of 984 million yuan, down 7.19% year-on-year.
The differences in profitability levels were even more pronounced. In the first half, ZHOU HEI YA achieved net profit of 108 million yuan, an increase of over 200% year-on-year. Jiangxi Huangshanghuang Group Food Co.,Ltd. recorded net profit of 77 million yuan, up over 20%. In stark contrast, despite Juewei Food Co.,Ltd. leading with 175 million yuan in net profit, this represented a decline of over 40% year-on-year. Ziyan Foods Group Co.,Ltd. achieved net profit of 105 million yuan, down over 47% year-on-year.
Regarding gross margins, only ZHOU HEI YA achieved year-on-year growth in gross margin in the first half, and had the highest gross margin among the four companies. Financial reports show that ZHOU HEI YA's gross margin increased 3.2 percentage points year-on-year to 58.6%, while net margin increased 6.2 percentage points year-on-year to 8.6%. The company clearly stated in its financial report that declining raw material costs were a key factor driving the gross margin increase.
The other three companies all experienced varying degrees of gross margin decline. According to research reports, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s gross margin was 31.96% in the first half, down 0.47 percentage points year-on-year. Juewei Food Co.,Ltd.'s gross margin declined 0.37 percentage points year-on-year to 29.92%, primarily due to discount promotions, with net margin falling 2.66 percentage points year-on-year to 5.85%. Ziyan Foods Group Co.,Ltd.'s gross margin declined 2.55 percentage points year-on-year to 22.24%, with net margin falling 4.60 percentage points year-on-year to 7.35%.
From a longitudinal perspective, Ziyan Foods Group Co.,Ltd. experienced declines in both revenue and net profit in the first half of this year, with net profit declining for the first time in four years. According to financial report analysis, the performance decline in the first half led to reduced revenue, while rising labor costs resulted in significant gross margin decline.
Additionally, Ziyan Foods Group Co.,Ltd.'s financial expenses increased over four times in the first half. The financial report analysis attributed this to three factors: increased interest expenses due to higher short-term borrowings, foreign exchange gains and losses due to exchange rate fluctuations, and reduced deposit interest income. Net cash flow from financing activities increased from -3.01 million yuan in the same period last year to 195 million yuan in the first half of this year, primarily due to large external investment and engineering/equipment investment needs that increased short-term borrowings.
On the investment front, Ziyan Foods Group Co.,Ltd.'s net cash flow from investment activities decreased from -98.47 million yuan in the same period last year to -245 million yuan in the first half of this year, mainly due to new investments in Green Tea Group and increased trading financial assets. Investment performance showed a loss of 2.2665 million yuan for the period. In late April this year, Ziyan Foods Group Co.,Ltd. announced that its wholly-owned subsidiary Wuxi Zixian would invest no more than $35 million as a cornerstone investor to subscribe for Green Tea Group's shares in its Hong Kong Stock Exchange IPO.
For ZHOU HEI YA, its first-half revenue has declined for two consecutive years, while net profit has fluctuated significantly in recent years. Notably, in June 2024, Zhang Yuchen resigned as CEO and executive director of ZHOU HEI YA, with founder Zhou Fuyu returning to lead the company.
ZHOU HEI YA achieved over 200% net profit growth in the first half of this year, with a net margin of 8.8%, up 6.2 percentage points year-on-year. In its previously released interim performance guidance, ZHOU HEI YA indicated that performance growth was mainly due to the group's optimization of store structure and focus on improving store operational quality, with effective improvement in average single-store sales during the reporting period. Meanwhile, declining raw material costs drove gross margin increases, combined with lean management optimizing sales expense ratios, comprehensively enhancing the group's overall profitability.
Juewei Food Co.,Ltd.'s net profit declined for the first time in four years, with the last significant decline occurring in 2022. While Jiangxi Huangshanghuang Group Food Co.,Ltd.'s revenue has declined for three consecutive years, despite achieving year-on-year net profit growth in the first half of this year, there remains a significant gap compared to historical highs.
Regarding the first-half performance fluctuations, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s financial report pointed to three factors: changes in consumption scenarios leading to continued year-on-year declines in single-store revenue for established braised meat processing stores, while store expansion fell short of expectations with negative growth in store numbers, resulting in disappointing revenue achievement; continued low prices for related duck by-product raw materials in the first half, with the company increasing procurement efforts during low periods to gradually reduce weighted average costs of major raw materials, leading to steady improvement in comprehensive gross margins for braised meat products, up 2.23 percentage points year-on-year; and significant reductions in sales expenses including labor costs and online/offline promotional expenses compared to the same period last year, with sales expenses declining 27.38% year-on-year, enabling net profit growth.
Other income-wise, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s investment income was 944,900 yuan in the first half, representing 0.99% of total profit.
**Closing 1,000 Stores Annually: Braised Food Companies Significantly Reduce Store Count**
Against the backdrop of performance pressure, all four braised food companies continued to reduce store numbers.
Financial reports show that as of the end of the first half of this year, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s meat processing business had 2,898 specialty stores, a calculated year-on-year decrease of 1,154 stores, down nearly 30%. This included 194 directly-operated stores in the first half, down 34 year-on-year, and 2,704 franchise stores, down 1,120 year-on-year.
As of the end of the first half of this year, ZHOU HEI YA had 2,864 stores, a year-on-year decrease of nearly 600 stores, representing a 17% decline in store count. Self-operated store revenue share increased from 55.3% in the same period last year to 58.3%, while franchise channel revenue share decreased from 26% last year to 21.8%. Notably, revenue from delivery services as a share of self-operated store revenue increased from 21% in the same period last year to 23% in the first half.
Regarding first-half store strategy, ZHOU HEI YA mentioned in its financial report deepening delivery cooperation, with delivery terminal sales of approximately 380 million yuan in the first half; utilizing local lifestyle platforms for content marketing to drive traffic, with store staff handling conversions, achieving over 80 million yuan in public domain to offline store terminal sales (Douyin + Meituan) in the first half.
While Ziyan Foods Group Co.,Ltd. and Juewei Food Co.,Ltd. did not disclose store numbers in their financial reports, third-party platform data provides insights. According to "Narrow Door Restaurant Eye" data, as of September 8, Ziyan Baiwei Chicken had approximately 5,407 stores, while official Ziyan Foods Group Co.,Ltd. data showed 6,205 stores at the end of 2023, meaning a net closure of nearly 800 stores over about a year and a half. Juewei Duck Neck saw even larger store reductions, with approximately 10,838 stores as of September 8, compared to nearly 16,000 at the end of 2023, representing a net closure of over 5,000 stores in about a year and a half.
**Raw Material Price Declines Don't Drive Significant Retail Price Cuts; ZHOU HEI YA Customer Spending Continues Declining**
Financial reports show that both ZHOU HEI YA and Jiangxi Huangshanghuang Group Food Co.,Ltd. mentioned declining raw material costs in the first half, providing some support for the profitability growth of these two companies.
Jiangxi Huangshanghuang Group Food Co.,Ltd.'s financial report indicated that major raw materials including duck necks, duck wings, and frozen new ducks remained at low price levels in the first half. Specifically, average procurement prices for duck necks and chicken wing tips both declined over 30%, while duck wings saw average procurement price declines of over 20%.
ZHOU HEI YA's financial report also noted that declining raw material costs drove gross margin increases. Duck and duck by-product revenue share increased to over 80% in the first half. Jiangxi Huangshanghuang Group Food Co.,Ltd. noted that raw material costs account for about 77% of operating costs, with major raw materials including meat ducks, duck feet, duck wings, duck necks, duck collar bones, and beef accounting for about half of main business costs, so major raw material price fluctuations significantly impact the company's gross margins and profitability.
However, it's important to note that despite cost reductions, product pricing has not been significantly lowered.
Jiangxi Huangshanghuang Group Food Co.,Ltd.'s interim report indicated that "main product sales prices accounting for over 10% of current operating revenue with price changes exceeding 30% compared to the previous reporting period" was not applicable. Ziyan Foods Group Co.,Ltd. also mentioned in its financial report that due to raw material price fluctuations in 2023 and 2024, the company maintained basically stable ex-factory prices to maintain market stability.
Under current consumption conditions, braised food customer spending is also declining. Using ZHOU HEI YA's financial report as an example, total sales volume in the first half was 143,800 tons, down 1.6% year-on-year. Average consumption per purchase order was 53.56 yuan, compared to 55.57 yuan in the same period last year.
Analysis of ZHOU HEI YA's average consumption per purchase order over the past five years shows amounts of 60.1 yuan, 57.8 yuan, 57.9 yuan, 56.9 yuan, and 54.39 yuan from 2021 to 2024 respectively, showing an almost yearly declining trend.
Faced with raw material price fluctuations, braised food companies increasingly choose to increase procurement efforts to reduce "future" costs.
Regarding raw material price fluctuation risks, Juewei Food Co.,Ltd.'s interim report mentioned that the company will smooth short-term fluctuations through diversified procurement layouts and strategic raw material reserves. Jiangxi Huangshanghuang Group Food Co.,Ltd.'s financial report noted continued implementation of strategic reserve management for major raw materials, increasing strategic reserves when raw material prices are low to gradually reduce product production costs, enhance product profit margins, and maximize avoidance of raw material price fluctuation risks to improve gross margin levels and sustainable profitability. In explaining first-half performance changes, Jiangxi Huangshanghuang Group Food Co.,Ltd. also mentioned increasing procurement efforts during low periods to gradually reduce weighted average costs of major raw materials.
Consequently, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s meat processing and rice processing businesses both saw sales and production volumes decline over 10% in the first half, while inventory volumes both increased over 20%.
**Seeking New Growth Curves: Channel Expansion, Accelerated Overseas Expansion, Cross-Industry Layouts**
Facing intensified competition in the braised food market and the industry entering a stock competition phase, the four braised food giants are all exploring new development paths, attempting to create second growth curves through channel expansion, accelerated overseas expansion, and cross-industry M&A.
Jiangxi Huangshanghuang Group Food Co.,Ltd.'s financial report noted in its industry analysis that the braised products industry's market scale growth has continued slowing in recent years, with the sector entering a development bottleneck period. Leading companies face pressures including revenue declines and store contractions, with the industry entering a stock competition phase. Facing these changes, leading companies are gradually shifting from purely pursuing rapid store expansion to refined store operations, responding to market pressures through optimizing store models and improving single-store revenue.
Regarding channels, ZHOU HEI YA noted that it has built professional teams and optimized channel strategies in the first half, collaborating with Sam's Club to develop customized ZHOU HEI YA classic braising sauce packets and flavored duck meat sauce, and reaching strategic cooperation with Yonghui and Pangdonglai to provide vacuum-packed and bulk products. The second half will focus on breakthrough key strategic channels, continuously refining products and improving systems to extract replicable channel operation models. Ziyan Foods Group Co.,Ltd. noted first-half development of special channels, using "university towns + large factory cafeterias" as breakthrough scenarios. The company has entered cafeterias of multiple internet and high-tech companies in various locations, maximizing single-store efficiency. In the future, the company plans to replicate this model to technology parks, industrial parks, and large enterprise cafeterias nationwide, creating new "workplace dining" benchmarks.
Juewei Food Co.,Ltd. also noted in its financial report that facing dual challenges of macroeconomic consumption pressure and intensified industry competition, the first half implemented a strategy of "focusing on the braised food sector, deeply cultivating segmented demands," emphasizing scenario-based innovation and lean operations, continuously exploring feasible paths for segmented demand response mechanisms, seeking more breakthrough opportunities for braised food business development.
Overseas expansion has become an important direction for braised food companies to expand markets. Ziyan Foods Group Co.,Ltd.'s global strategy advanced significantly in the first half, adopting a combined strategy of Chinese supermarket penetration and direct store development in the North American market. Additionally, the Nepal production and processing base launched in April and is expected to become a key link in the company's international industrial chain, providing sustainable raw material support for addressing trade barriers and ensuring stable global market supply. ZHOU HEI YA entered Malaysia and Singapore markets in the first half and will continue expanding into Southeast Asia and other countries and regions.
Cross-industry layouts are also important attempts by companies seeking new growth, though whether they can become new growth curves remains to be seen.
ZHOU HEI YA mentioned in its financial report focusing on expanding distribution channels, overseas market layouts, and exploring the compound seasoning sector to build new growth curves. This includes establishing a joint venture with Sichuan Shentang Industrial Group, leveraging "ZHOU HEI YA flavor" to jointly develop "Gaga Xiang" series compound seasonings and convenient fast food products, comprehensively enhancing brand penetration. In the future, it will actively invest in upgrading vacuum-packed products, building diversified product matrices suitable for multi-channel layouts, establishing differentiated brand competitive advantages, and creating new revenue increments.
In 2025, Jiangxi Huangshanghuang Group Food Co.,Ltd. acquired a 51% stake in freeze-dried food company Lixing Foods for 495 million yuan, entering the freeze-dried food sector. Management recently responded to investor questions, stating the company will fully utilize the listed company capital platform, actively seeking quality target companies and M&A projects to comprehensively enhance core competitiveness. Management also mentioned applying Lixing Foods' advanced freeze-drying technology to braised product preservation and other development areas, enriching the company's product forms.
Regarding annual outlook, at the previous 2024 annual performance presentation, Jiangxi Huangshanghuang Group Food Co.,Ltd. management indicated that in 2025, the company will accelerate implementation of "Thousand Cities, Ten Thousand Stores" and other strategic development goals for the next five years. The company plans to achieve operating revenue of 2.1 billion yuan and net profit of 145 million yuan in 2025, realizing double growth in operating revenue and net profit.
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