Cost reductions and channel optimization are the primary drivers behind strong performance among listed condiment companies. Despite the absence of significant demand growth in the industry, structural growth areas persist, combined with channel optimization, market penetration, and resolution of historical issues, enabling related companies to maintain impressive performance.

Based on recently released interim reports, listed condiment companies demonstrated solid performance. In the first half of 2025, HAITIAN FLAV achieved operating revenue of 15.23 billion yuan, up 7.59% year-on-year, with net profit of 3.914 billion yuan, increasing 13.35% year-on-year. Angel Yeast recorded operating revenue of 7.899 billion yuan, up 10.1% year-on-year, with net profit of 799 million yuan, rising 15.66% year-on-year, and adjusted net profit of 742 million yuan, surging 24.49% year-on-year. Lotus Holdings achieved operating revenue of 1.621 billion yuan, up 32.68% year-on-year, with net profit of 161 million yuan, jumping 60.1% year-on-year.

The strong performance of listed condiment companies stems from declining raw material prices boosting gross margins and successful channel expansion. Although the industry hasn't witnessed significant demand growth, structural growth areas remain, coupled with channel optimization and market penetration, enabling companies to maintain stellar performance.

**Performance Improvement**

Compared to previous periods, these companies showed marked improvement in growth rates. From 2022-2024, HAITIAN FLAV's revenue growth rates were 2.42%, -4.1%, and 9.53% respectively, with 7.59% in the first half of 2025. Net profit growth rates were -7.09%, -9.21%, and 12.75% respectively, reaching 13.35% in the first half of 2025. Angel Yeast's net profit growth rates from 2022-2024 were 0.97%, -3.67%, and 4.07% respectively, accelerating to 15.66% in the first half of 2025. Lotus Holdings has experienced rapid adjusted net profit growth in recent years, with growth rates of 37.82%, 89.12%, and 72.36% from 2022-2024, and 58.54% in the first half of 2025.

The profitability improvement of these companies primarily stems from declining raw material costs boosting gross margins and successful channel expansion.

From profitability metrics, all companies showed significant gross margin improvements. HAITIAN FLAV's gross margin reached 40.12% in the first half of 2025, up 3.3 percentage points year-on-year, mainly due to declining costs of soybeans, PET packaging materials, and other raw materials, while the company continuously optimized production, R&D, and management processes, steadily improving internal efficiency. Angel Yeast's gross margin increased 1.8 percentage points year-on-year, primarily due to stabilizing raw material prices and cost reductions from scaled and localized production. Lotus Holdings' gross margin reached 25.81% in Q2 2025, up 3.56 percentage points year-on-year.

Angel Yeast benefits mainly from declining raw material prices, and with high market share and strong pricing power, it retains significant profit elasticity for the future. HAITIAN FLAV focuses on maintaining large distributors, extending to B2B customers, offering personalized customization services, optimizing channel profits and inventory management, providing more incentive policies to distributors, and leveraging channel advantages. Lotus Holdings expands modern new retail and food service channels, continuously penetrating lower-tier markets. Both HAITIAN FLAV and Lotus are entering high-value, high-margin new product segments, which will enhance future profitability.

**Channel Optimization**

Since 2020, various factors including pandemic disruptions, declining supermarket traffic, rising raw material prices, and community group-buying impacts have increased industry pressure. HAITIAN FLAV achieved growth through distributor restructuring and price increases, but entered operational adjustment in the second half of 2022.

The underlying issue was excessive channel burden and unreasonable profit distribution along the value chain, causing channel profit damage. Continuous leverage on distributors, combined with price inversions from increases and community group-buying impacts, severely damaged channel profits. Continued distributor fragmentation harmed traditional distributor interests, reducing enthusiasm. Additionally, continuous downstream inventory pushing, despite increased expenses to drive terminal sales, failed to achieve good turnover under weak demand.

Furthermore, since 2021, supermarket traffic declined while food service compound seasoning penetration increased, along with new flavors and products emerging. Traditional advantageous products and channels faced diversion, while HAITIAN FLAV's slow and conservative adjustments led to market share decline.

Subsequently, HAITIAN FLAV began implementing reforms, achieving high growth in 2024 through channel recovery and new product growth. In channels, the company focuses on maintaining large distributors, increasing expenses and staffing, optimizing channel profits and inventory management, providing more distributor incentives, and leveraging channels. In marketing, the company provides more expense support, focusing on terminal competitor replacement, matching large customer needs, offering personalized customization services, and extending to B2B customers through partnerships with large distributors.

Lotus Holdings achieved performance growth through accelerated coverage of blank channels and non-base markets, implementing refined and penetrated channel strategies. Previously affected by overseas negative publicity, Lotus Holdings' MSG product image was damaged, combined with various factors leading to years of poor performance and gross margins once falling below 10%. In recent years, through brand revival strategy execution, the company significantly improved performance. In 2023-2024, Lotus MSG revenue increased 26.38% and 18.91% year-on-year to 1.623 billion yuan and 1.93 billion yuan respectively, with gross margins improving to 18.54% and 26.98%, reaching parity with Meihua Bio.

Despite the overall lackluster food service industry, Lotus Holdings' MSG business revenue maintained high double-digit growth, mainly due to channel optimization. Before 2022, the company had high agricultural market channel concentration, but is now actively expanding modern new retail (supermarkets and online) and food service channels. The company has dedicated supermarket and new retail teams, actively expanding chain supermarkets and food service enterprises, universities, government, and other group catering customers. In 2024, the company added over 2,000 new supermarket outlets with approximately 4,000 existing ones, switching products from low-priced MSG to high-value, high-margin new products like Pine Mushroom Fresh. In 2024, offline channel revenue increased 20.72% year-on-year, online sales surged 165.68% year-on-year, with continuously improving market share.

In Q1 2024, Lotus Holdings' MSG market share in hypermarkets, supermarkets, small supermarkets, and convenience stores increased 5.1, 5.9, 5.6, and 3.9 percentage points year-on-year respectively.

For the industry, while offline supermarket traffic has declined in retail channels in recent years, online channels are emerging but remain low in proportion as supplementary channels. Food service channels have slowed, but the industry still has new variables, with pre-prepared dishes and meal kits bringing new incremental growth to food service and food industry channels.

Currently, compound seasonings are in a growth phase. Seasonings are divided into basic and compound seasonings. Basic seasonings, as the industry foundation, grew from 322.4 billion yuan in 2019 to 371.6 billion yuan in 2024, but growth significantly slowed, reflecting market penetration saturation. Growth relies on premium upgrades like zero-additive soy sauce and organic vinegar, and scenario innovation like pre-prepared dish-specific seasonings, but homogeneous competition and cost pressures constrain profit margins, with the industry entering stock optimization phase.

However, compound seasonings represented by hot pot base and pre-prepared dish seasonings jumped from 85.7 billion yuan in 2019 to 126.5 billion yuan in 2024, with compound annual growth rate of 10.2%, 2.5 times that of basic seasonings, contributing 62% of industry incremental growth. Solid seasoning packets dominate, driving food service industrialization and "de-chef-ization," while functional (low-sodium sauces) and regional innovations will activate C-end demand.

Moreover, continuous chain restaurant expansion has catalyzed demand for compound seasonings. According to preliminary estimates from China Condiment Association Big Data Information Center, the customized seasoning market was less than 10 billion yuan in 2015, exceeded 40 billion yuan in 2021, and is expected to reach over 100 billion yuan in 2025, developing rapidly at over 20% annual growth. Currently, companies like HAITIAN FLAV are expanding into this field.

**Profit Elasticity Expected**

Angel Yeast benefits from overseas channel expansion. By region, Angel Yeast's domestic business achieved revenue of 4.404 billion yuan in the first half of 2025, up 2.1% year-on-year, while overseas markets, benefiting from channel expansion and capacity release, achieved revenue of 3.462 billion yuan, up 22.6% year-on-year. Since 2022, the company's overseas revenue growth has far exceeded domestic growth.

The domestic yeast market has entered maturity, with revenue growth mainly driven by derivative product growth. Growth was pressured by weak domestic demand in 2023, marginally recovered in 2024, and could accelerate if demand improves. In recent years, Angel has continuously expanded markets, with construction in progress and fixed asset growth peaking in 2021 and 2022 respectively, with depreciation pressure most significant in 2023 and declining in 2024.

In 2024, total yeast fermentation production reached 415,400 tons, up 10.21% year-on-year. Entering the late production cycle in 2025, depreciation pressure is declining.

Reviewing Angel Yeast's profit cycles, net margin increased 10.7 percentage points from 2015-2017. The company entered the late intensive production phase, with depreciation pressure easing under capacity saturation, active price increases under strong demand, combined with falling molasses costs, continuously releasing profits.

The current situation resembles early 2015. From 2021-2024, the company experienced a major down cycle of weakening demand, surging molasses costs, and intensive capacity investment increasing depreciation pressure, fully releasing profit pressure, similar to 2010-2014.

Due to recent raw material molasses supply expansion, weak downstream demand, and sustained significant corn price declines (substitutes), molasses prices are in a downward cycle. In January 2025, some molasses tender floor prices in Chongzuo, Guangxi, fell significantly to 1,000-1,100 yuan/ton.

Costs have significantly declined with profits gradually materializing; capacity investment has entered later stages with reduced new capacity additions and decreased depreciation pressure. From demand perspective, domestic demand is stabilizing upward while overseas maintains high growth. Regarding pricing, historically the company has actively increased prices under cost pressure, strong demand, and capacity saturation. If future demand recovery combines with capacity saturation, price increases are possible, and with significant cost dividends, profit elasticity is substantial.