On December 19, Beijing Sanyuan Foods Co.,Ltd. announced its plan to transfer a 10% equity stake in Beijing Sanyuan Dehong Real Estate Development Co., Ltd. to Beijing Nanjiao Farm Co., Ltd.

In recent years, Beijing Sanyuan Foods Co.,Ltd. has continuously pursued a "downsizing" strategy, shedding loss-making operations to refocus on its core business. For the first three quarters of this year, the company's net profit surged significantly by 124.84%, indicating an improvement in profitability. However, its operating revenue continues to decline, the number of distributors has decreased by 31% compared to the end of 2024, and sales in its home market of Beijing have also fallen substantially.

Can Beijing Sanyuan Foods Co.,Ltd. achieve growth through downsizing and transformation during this industry downturn?

Beijing Sanyuan Foods Co.,Ltd. is divesting its real estate assets. According to the announcement, the transaction is valued at 26.8515 million yuan. For Beijing Sanyuan Foods Co.,Ltd., this move will complete the剥离 of its real estate business, allowing it to further concentrate on its main operations.

Sanyuan Dehong was established in 2005 as a joint venture between Beijing Sanyuan Foods Co.,Ltd. and a company under its controlling shareholder, Beijing Shounong Food Group Co., Ltd. Prior to this transaction, Beijing Sanyuan Foods Co.,Ltd. held a 10% stake, while Nanjiao Farm, a wholly-owned subsidiary of Shounong Food Group, held the remaining 90%.

Sanyuan Dehong is primarily engaged in real estate project development management. It currently has five ongoing projects, including the Nanjiao Farm shantytown redevelopment project and the Sanhaizi Country Park project.

However, under the persistent pressure of a sluggish real estate market, Sanyuan Dehong has become a burdensome asset. Public information shows that in 2024, Sanyuan Dehong generated operating revenue of 109 million yuan and a net profit of 7.3668 million yuan; for the first three quarters of 2025, its operating revenue was 11.7449 million yuan, with a net loss of 6.5973 million yuan.

It is worth noting that in this valuation assessment, Sanyuan Dehong's net asset impairment rate reached 9.55%. The company's total valuation is approximately 269 million yuan, representing a significant decrease from its valuation of 294 million yuan during a previous equity transfer in 2018.

For a considerable period before this, Beijing Sanyuan Foods Co.,Ltd. was committed to a diversified strategy. Starting around 2015, the company engaged in frequent acquisitions, successively purchasing stakes in Hunan Taiziai, St Hubert, Beijing Ailaifaxi, and Shounong Animal Husbandry, among others. However, this diversification has largely been unsuccessful, with many assets ultimately facing剥离 after acquisition.

In 2017, Beijing Sanyuan Foods Co.,Ltd., in conjunction with Shanghai Fosun, acquired the French food company St Hubert, establishing an SPV (Luxembourg) company focused primarily on spreadable products. From 2018 to 2020, revenue from this business barely grew, declined in 2021, and in 2022, Beijing Sanyuan Foods Co.,Ltd. formally relinquished voting rights in the SPV (Luxembourg), effectively deconsolidating it.

In 2021, Beijing Sanyuan Foods Co.,Ltd. acquired a 46.37% stake in Shounong Animal Husbandry, becoming its controlling shareholder. Post-acquisition, Shounong Animal Husbandry's performance deteriorated sharply, reporting a loss of 15.38 million yuan in 2022 and an increased loss of 60.97 million yuan in the first quarter of 2023, leading Beijing Sanyuan Foods Co.,Ltd. to subsequently剥离 this asset as well.

The acquisition of Ailaifaxi has been relatively more successful. This company, whose main business is ice cream and owns the "Baxi" brand, contributed 22% of Beijing Sanyuan Foods Co.,Ltd.'s revenue in 2024. However, in 2024, both the operating revenue and net profit of Ailaifaxi declined, falling by 16.24% and 4.38% year-on-year, respectively.

The continuous acquisition spree increased Beijing Sanyuan Foods Co.,Ltd.'s debt pressure. To fund the acquisition of St Hubert in 2018, the company took on substantial debt, with long-term borrowings surging from 345 million yuan the previous year to 3.245 billion yuan. Interest-bearing liabilities have remained high ever since. As of the end of the third quarter of 2025, the company's interest-bearing liabilities stood at 2.127 billion yuan, all of which were short-term, concentrating repayment pressure as long-term loans mature. Meanwhile, the cash on the company's books was only 1.142 billion yuan, far from sufficient to cover the short-term debt.

Can downsizing and transformation drive growth during the industry downturn? As a regional dairy company, Beijing Sanyuan Foods Co.,Ltd.'s performance in recent years has been less than satisfactory.

Since 2019, the company's growth has stalled. Revenue peaked at 8.151 billion yuan in 2019 but fell to 7.012 billion yuan in 2024, nearly 14% lower than the 2019 figure. Net profit excluding non-recurring items has fluctuated wildly, experiencing significant declines consecutively in 2022 and 2023, only recovering to 2022 levels in 2024.

Beijing Sanyuan Foods Co.,Ltd.'s lackluster performance is partly due to weak consumer demand in the dairy products industry, an oversupply of raw milk, and continuously falling prices. Another factor is the company's persistently high expense ratio. With a relatively low gross profit margin to begin with, net profit margin has remained at a low level due to expense erosion, reaching a maximum of only 2.81% and a minimum of just 0.24% over the past three years.

In the first three quarters of this year, Beijing Sanyuan Foods Co.,Ltd.'s performance showed signs of recovery. Net profit attributable to shareholders surged by 124.84% to 236 million yuan, while net profit excluding non-recurring items increased by 206.82% to 223 million yuan. The net profit margin rose to 4.62%, a recent high.

The significant improvement in net profit is largely attributed to the company's "downsizing strategy." The剥离 of loss-making non-core assets has lightened Beijing Sanyuan Foods Co.,Ltd.'s burden. Furthermore, the company has made strategic adjustments in non-key regions, phasing out inefficient operations and reducing its expense ratio. Starting in 2024, the company began streamlining its existing SKUs, delisting low-sales-volume, negative-margin, and other inefficient products; nearly 20% of SKUs were delisted throughout 2024.

Beijing is the home base for Beijing Sanyuan Foods Co.,Ltd., where it holds the leading market share for liquid milk and a 56.2% share in the Beijing low-temperature fresh milk market, also ranking first. The company has formulated a strategy to "focus on Beijing and deepen its presence in low-temperature [products]," vigorously promoting low-temperature milk while also opening tea beverage stores to pioneer a new track with an innovative model combining "freshly dispensed milk + freshly made beverages."

However, the company's revenue continues to contract. Operating revenue for the first three quarters decreased by 10.06% to 4.871 billion yuan. Revenue from liquid milk, the core income source, fell by 13.15%, and ice cream revenue declined by 14.33%. Only solid milk recorded growth of 4.14%, but its smaller scale limits its overall impact.

From a channel perspective, the number of distributors saw a net decrease of 1,077, equivalent to a 31% reduction from the end of 2024. In this streamlining, the number of distributors in the Beijing region decreased by nearly 33%, while distributors outside Beijing decreased by nearly 31%. Correspondingly, revenue from the distributor channel plummeted by 26.11%. It is noteworthy that the overall gross profit margin for the first three quarters was 22.69%, a decrease of 1.17 percentage points year-on-year.

The retreat in its home market of Beijing, coupled with the ongoing decline in revenue from liquid milk and ice cream businesses, casts a shadow over the recovery in Beijing Sanyuan Foods Co.,Ltd.'s net profit.

Currently, the price of raw fresh milk remains at low levels. According to the "Monthly Report on Supply and Demand Situation for Fresh Agricultural Products in November 2025" issued by the Department of Market and Information of the Ministry of Agriculture and Rural Affairs, the purchase price of raw fresh milk in major dairy provinces was 3.03 yuan per kilogram, down 2.9% year-on-year. The dairy products industry generally faced pressure in the first three quarters of this year, with 63% of listed dairy companies experiencing revenue declines and 52% seeing a drop in net profit excluding non-recurring items. Since October 2021, raw milk prices have been falling continuously for four years, with a cumulative decline of nearly 30%.

For Beijing Sanyuan Foods Co.,Ltd., the question remains whether it can achieve growth through downsizing and transformation during this industry downturn. The outcome remains to be seen.