On August 25th, Huawen Food Co., Ltd. (hereinafter referred to as "Huawen Food"), known as "Jinzai Xiaoyu", disclosed its latest prospectus and preliminary inquiry announcement. According to the announcement, the company was listed on the SME board of the Shenzhen Stock Exchange on September 14, 2020, with the stock code 003000.

It is reported that the public offering of shares by Huawen Food this time will not exceed 40.01 million shares, accounting for no less than 10% of the total share capital after issuance, all of which will be newly issued shares, with a total planned fundraising of 160 million yuan. Among them, the initial offline issuance quantity is 28.007 million shares, accounting for 70% of the total issuance; The initial online issuance quantity is 1200300 shares, accounting for 30% of the total issuance.

This means that the nearly two-year IPO process of Huawen Food is coming to an end, and the company is only one step away from its goal of becoming the first leisure fish snack stock on the A-share market.

According to the Letter of Intent, the funds to be raised by Chinese Food this time will be used for the technical transformation project of flavored small fish production line and the construction project of brand promotion and marketing center.

Jinzai Deep Sea Fish Leaps Over Dragon Gate: Annual Sales Exceed 1.2 Billion Bags, Products Sell Well in 30 Countries Worldwide

As one of the well-known snack food enterprises in China, the main business of Chinese food is R&D, production and sales of snack food such as flavored small fish and flavored dried tofu. Since its establishment in 2010, Huawen Food has successfully transformed its subsidiary "Jinzai Xiaoyu" into a star single product with an annual sales volume of over 12 packs, firmly leading the industry. The raw materials are sourced from deep-sea fishing, and after 8 rounds of screening and selection processes, the processing uses a century old spicy braised secret formula; Leisure soy products have entered the top ten in the industry. Jinzai products are sold well in nearly 30 countries around the world, including China, the United States, Canada, and Australia.

According to the prospectus, the revenue of Huawen Food from 2017 to 2019 was 767 million yuan, 805 million yuan, and 895 million yuan respectively; The net profits were 75.6619 million yuan, 115 million yuan, and 118 million yuan, respectively.

In the first half of this year, under the influence of the COVID-19, the overall performance of Chinese food still maintained a steady growth trend. Data shows that from January to June 2020, the company achieved a revenue of 450 million yuan, a year-on-year increase of 2.55%; Achieve a net profit of 63.89 million yuan, a year-on-year increase of 5.05%; Deducting non recurring net profit of 44.63 million yuan, a year-on-year increase of 5.78%.

According to business records, the actual controllers of Huawen Food are Zhou Jinsong and Li Bingyu. Zhou Jinsong began to enter the food industry in 1990 and transitioned to the leisure fish products industry in 2010, focusing on the food industry for a full 30 years.

Around 2010, there were numerous and scattered leisure fish product manufacturing enterprises in China, mainly located in Hunan, Hubei and other places. The production scale was relatively small, mainly consisting of workshops, and the consumer market was mainly concentrated in the local area. The entire leisure fish product industry was limited by regional flavors and did not form a large scale and influence.

Since the start of his business, Zhou Jinsong has led his team to conduct market research and consumer interviews in many ways by constantly upgrading raw materials and processes. He has been deeply engaged in the research, development, production and sales of flavored small fish and flavored dried tofu for 20 years.

In recent years, Huawen Food has continuously improved its product quality through self built raw material bases, full process cold chain transportation, refined warehousing, intelligent production, and global marketing. With the mission of "being the inheritor of Chinese cuisine culture", it is committed to promoting traditional Hunan style leisure food to the whole country and even the world.

According to relevant statistical data in 2019, the annual sales volume of "Jinzai Xiaoyu" under Huawen Food exceeded 1.2 billion bags, with an annual sales revenue of 700 million yuan. With its billion dollar single product of flavored leisure Xiaoyu, Huawen Food has become one of the important benchmark brands of national snacks.

In 2016, Huawen Food received a strategic investment of 300 million yuan from Jiawo Group, a business platform under Lenovo Holdings that focuses on modern agriculture and food industry. This investment is also a well-known successful case of strategic investment in the leisure food industry in China in recent years. Currently, Jiawo Group holds 19.80% equity of Huawen Food, becoming its second largest shareholder.

The leisure food industry in China is currently in a period of industry dividends. In May of this year, Dongxing Securities released a report on the leisure food industry, stating that leisure fish products, as one of the important representatives of leisure food, currently have a total retail sales of about 20 billion yuan and are expected to reach 60 billion yuan by 2030.

In recent years, China's leisure food industry has shown characteristics of low market concentration and large industry space. Leisure food has long been influenced by geography, culture, quality control, and efficiency, resulting in low industry concentration. Currently, leading companies in segmented fields are gradually expanding their national layout through excellent supply chain management and brand capabilities, continuously improving their market share.

According to a research report by Chuancai Securities, since 2010, the growth rate of the non branded leisure brine product market has been 5% -10%, while the growth rate of the branded leisure brine product market is 29% -33%. In the short to medium term, the domestic leisure food industry still has great potential for development. Jinzai products have developed from regional brands to nationally renowned brands, and in the future, Chinese food will continue to rely on brand advantages and capital support, and the Matthew effect will become more significant, "said Chuancai Securities.

Online+offline omni channel layout: counter the trend of the COVID-19 and achieve "revenue+profit" growth

The sales model of Chinese food has always been mainly based on the distribution model, supplemented by the direct sales model. At present, the marketing network of Huawen Food basically covers all provinces, autonomous regions, and municipalities directly under the central government in China. In 2019, the number of distributors reached 1515, with extensive layouts in major market areas such as distribution channels, supermarket channels, and e-commerce channels.

The dealer direct management model can maintain a sustained and stable good cooperative relationship with dealers, achieving a mutually beneficial and win-win development situation between the brand and dealers.

At present, there are more than 1000 offline cooperative distributors of Chinese food, and cooperation with many well-known chain stores such as Wal Mart, Carrefour, RT Mart, CR Vanguard, Century Lianhua, Yonghui Supermarket, Bubugao, Pinghetang, Tianhong, Aeon, Renrenle has been deepening. This has also contributed to the continuous leading sales pattern of "Jinzai Xiaoyu" offline channels for many years.

On the one hand, Huawen Food actively assists distributor customers in expanding sales markets, maintaining and upgrading distributor channel products, and ensuring that products meet market demand; on the other hand, it actively shares development dividends with distributors, leaving reasonable profit margins for distributors and fully ensuring the stability and sustainable development of channels, "said the person in charge of Huawen Food.

In terms of online layout, Huawen Food is one of the snack brands that has laid out online channels earlier. According to the industry ranking of ready to eat fish snacks on Taobao and Tmall, from 2018 to 2019, the sales volume of Jinzai Deep Sea Fish exceeded 80 million yuan, ranking first in the industry and surpassing the second place by about 30%.

At present, Chinese food has formed an integrated e-commerce channel layout of Tmall, JD, Pinduoduo, Suning Yigou, Tiktok, Kwai, WeChat applet, etc., and expanded the market with new product strategy. In addition to increasing investment in online channel traffic and regular drainage, we also enhance online customer traffic through live streaming sales, and promote brand rejuvenation through traffic stars and influencers.

With the establishment of the company's brand rejuvenation strategy, "Jinzai Xiaoyu" has chosen the new generation young actor Deng Lun as its new spokesperson. 

Regarding this, Huawen Food has stated that choosing to cooperate with Deng Lun is based on the company's development strategy of youthfulness and onlineization.

In the first half of this year, despite the impact of the COVID-19, the overall performance of Chinese food achieved a double growth of "revenue+profit" by relying on the omni channel of "online+offline". According to the data disclosed in the prospectus, from January to June 2020, the company achieved a revenue of 450 million yuan, a year-on-year increase of 2.55%; Achieve a net profit of 63.89 million yuan, a year-on-year increase of 5.05%; Deducting non recurring net profit of 44.63 million yuan, a year-on-year increase of 5.78%.

In recent years, Huawen Food has integrated brand building into the entire process of business development. After nearly a decade of brand strategy and a series of marketing strategies, the popularity and reputation of the "Jinzai" brand have greatly increased, and Jinzai products have developed from regional brands to nationally renowned brands.

Huawen Food stated in its prospectus that it will continue to deepen its nationwide layout and further expand into markets such as Central China, Northwest China, and Northeast China. The company's operating performance is expected to see significant growth in the short and medium term.