China Consumer

In a pickle

Famed food firm from Sichuan is in acquisition mode


Fuling Zhacai is known throughout China for its spicy offering

According to China Daily, Chongqing Fuling Zhacai ranks as “one of the world’s three most famous pickled dishes”, with the other two being sauerkraut and pickled cucumber. Although that might be true, most of Fuling Zhacai’s fans are Chinese.

That is what the author Peter Hessler discovered when he taught English in the small city of Fuling for the Peace Corps in 1996. Hessler found that wherever he ventured in China, the city’s pickle was the ideal conversation starter. “All of the Chinese were familiar with Fuling hot pickled mustard tuber and that was the easiest way to tell people where I was from,” he wrote in his memoir River Town.

Fuling Zhacai can take praise for making Fuling (now a district of Chongqing municipality) synonymous with pickles, much like the way Kweichow Moutai has made its hometown of Moutai inseparable from the liquor baijiu.

Fuling Zhacai traces its origins to 1898 when a merchant named Qiu Shou’an began selling dried mustard roots that had been preserved in a spiced marinade. The pickling method he used is known as zhacai, or “pressed vegetables”.

The recipe was such a success that only 17 years later, when the newly founded Republic of China was attending the Panama-Pacific International Expo, the delegation brought along a batch of the pickled product to showcase. It was perhaps a brave choice for the Republic’s first appearance at the global fair, but it paid off, as the zhacai was awarded a Gold Medal. Fuling Zhacai has been awarded a number of domestic accolades since, including a ‘seal of origin’ by the State Administration of Industry and Commerce, certifying that only the pickles of Fuling can be called Fuling zhacai (in much the same way that Champagne is just fizzy wine if it comes from anywhere but the Champagne region of France).

With an annual production capacity of 600,000 tonnes, Fuling Zhacai is China’s largest producer of pickled vegetables. According to NetEase Finance, since the company’s IPO on the Shenzhen Stock Exchange in 2010, profits have soared 639%. Today its market value towers at Rmb17.74 billion ($2.81 billion).

Not bad for a company whose flagship product only costs $0.5 a bag.

However, according to Investor China, the company’s growth might have hit a ceiling. Zhu Danpeng, a pundit on China’s food industry, told the magazine that Fuling Zhacai is stuck in the lower-end consumer market, which it has already saturated, leaving no room for growth.

The group’s financial reports suggest otherwise, however. Last year, the group reported revenues of Rmb1.52 billion, marking a 36% increase on the year before, and profits climbed 61% year-on-year to Rmb414 million in 2017.

Keen for new avenues of growth, Fuling Zhacai has attempted to acquire or launch a number of other businesses, but the proposals have always fallen through.

In September last year, the group declared it would invest Rmb760 million in a processing plant for radishes in northern Liaoning province, with a production capacity of 50,000 tonnes. However, two months later it scrapped the plans, claiming rather vaguely that the conditions weren’t adequate.

Most recently, the group scrapped a plan to buy Weizhinong and Sichuan Hengxing, two condiment manufacturers, for Rmb237 million. Fuling Zhacai suspended trading in December to begin talks on the acquisition. But by March 28, it announced the sale had been called off because shareholders had been unable to resolve an issue of “industry competition”.

Speaking to Investor China, Fuling Zhacai’s board secretary Wei Yongsheng was adamant that the company is still on a growth track. “Restructuring and engaging in mergers and acquisitions is our company’s development strategy. We won’t be put off this course… we will become the absolute leader in the table dishes industry.”

In this respect Fuling Zhacai probably aspires to emulate Haitian, a company with a dominant position in China’s soy sauce market.

As we reported in WiC403, Haitian’s market value (at $24 billion) exceeded that of America’s McCormick last month, making it the world’s biggest seasoning firm.

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