The Q3 reports of pre-prepared meal companies have been released, revealing a mixed bag of outcomes.
In the pre-prepared meal sector, it’s not just specialized manufacturers that are involved; many cross-industry entrants, such as downstream restaurant businesses and upstream agricultural, forestry, animal husbandry, and fishery enterprises, have also joined the fray.
Recently, the Q3 reports of companies related to pre-prepared meals have been released. The Catering Supply Chain Guide has categorized them based on their primary business into three major types—Frozen Food, Agricultural & Livestock, and Specialized—to analyze the latest performance of 21 related companies and assess the current state of the pre-prepared meal market.
Looking at the third quarter alone, most of these 21 publicly listed companies in the pre-prepared meal sector turned a profit, with only four companies reporting losses. Cependant, 13 companies experienced a decline in net profit growth. The performance varied across different types of companies.
1. Frozen Food Companies Overall Are Performing Well, with Several Reporting Increases in Both Revenue and Profit
The “Frozen Food” companies related to pre-prepared meals generally reported increases in both revenue and profit in Q3. For instance, Anjoy Foods (603345.SH), Qianwei Yangchu (001215.SZ), Huifa Foods (603536.SH), and Sanquan Foods (002216.SZ) all showed strong performance. In contrast, Haixin Foods (002702.SZ) lagged behind, reporting declines in both revenue and profit.
Anjoy Foods continued its growth trajectory in Q3, achieving a revenue of 3.377 milliards de RMB, en haut 17.21% année après année, and a net profit of 386 millions de RMB, en haut 63.75% année après année.
Looking at the first three quarters overall, Anjoy’s pre-prepared meal business remains strong, not only becoming the company’s largest business segment but also growing nearly 50% in revenue. According to Anjoy’s regularly disclosed operating data, its frozen food business revenue in the first three quarters of this year reached 3.109 milliards de RMB, en haut 47.46% année après année.
Huifa Foods, which had previously suffered losses exceeding 100 million RMB over the past two years, appears to be improving. In Q3, Huifa Foods reported a net profit of 601,100 RMB, en haut 102.83% année après année.
Since going public, Huifa Foods has experienced unstable profitability, with consecutive losses exceeding 100 million RMB in 2021 and 2022. Cependant, in the first half of this year, Huifa Foods reduced its losses by 44.29% année après année. Despite this, the company still reported a loss of 29.95 million RMB for the first three quarters, un 60.62% reduction compared to the same period last year.
Cependant, the contribution of pre-prepared meals to Huifa’s reduced losses appears to be limited. In the first three quarters of this year, Huifa’s revenue from Chinese dishes increased from 145 million RMB last year to 162 millions de RMB, accounting for only 10% of total revenue. The revenue growth in its meatball and fried products, both of which grew by over 20%, played a significant role in reducing losses, as these two business segments account for nearly 50% of total revenue.
Compared to Huifa Foods, which is still in the red, “Catering Supply Chain First Stock” Qianwei Yangchu is in a much better position.
In Q3, Qianwei Yangchu reported a revenue of 477 millions de RMB, en haut 25.04% année après année, marking its highest single-quarter sales, while its net profit increased by 60%. Although Qianwei Yangchu did not disclose specific revenue figures for its various business segments, it emphasized its strategy of parallel operations for both B2B and B2C segments.
In response to investor inquiries, Qianwei Yangchu stated that its C-end (consumer) division and Yuzhi Cuisine performed well in Q3. Yuzhi Cuisine focuses on customized semi-finished products for large B2B clients, while the C-end division has established good supply chains within the convenience store system, with clear business directions.
Sanquan Foods also saw its net profit increase by more than 20% year-on-year in Q3, although revenue grew only slightly by 3.03%.
For the first three quarters of this year, pre-prepared meals contributed to some performance growth for Sanquan. In response to investor inquiries, Sanquan acknowledged that frozen ready-to-cook food products, such as meat-based pre-prepared ingredients, have seen significant growth, with items like meat rolls, egg dumplings, and small crispy pork, as well as microwave and air fryer products like grilled sausages and microwave pasta, performing well.
Compared to the above four frozen food companies, Haixin Foods (“First Stock of Frozen Fish and Meat Products”) underperformed.
In Q3, Haixin reported a revenue of 400 millions de RMB, vers le bas 1.06% année après année, and a net profit of 2.4814 millions de RMB, vers le bas 92.43% année après année. For the first three quarters as a whole, Haixin’s performance was also less than satisfactory, with revenue of 1.134 billion RMB and a corresponding net profit of only 3.6721 millions de RMB, down over 90% année après année.
Haixin explained the profit changes in its Q3 report, citing three reasons: increased production costs, promotional discounts in the supermarket system, and the initial investment in seafood products not yet yielding results, leading to a decline in gross profit margin; as well as increased spending on promotional activities.
The Catering Supply Chain Guide also noted that while Haixin increased its promotional spending, it reduced its R&D investment. In the first three quarters, Haixin’s R&D spending decreased from 12.2053 million RMB in the same period last year to 10.9618 millions de RMB.
This trend of reducing R&D spending is not unique to Haixin. Cette année, frozen food companies generally focused on cost reduction and efficiency improvement, with several companies cutting down on R&D and management expenses to optimize cost efficiency. Qianwei Yangchu, cependant, is an exception.
Specifically, Sanquan reduced various expenses, including management, R.&D, and sales, with its sales and management expense ratios showing a downward trend.
Haixin, Anjoy, and Huifa all increased their spending on market sales while reducing management and R&D expenses. According to an investor survey report released by Anjoy, when asked about its spending plans for Q4 and Q1 next year, Anjoy stated that it would, if necessary, accelerate revenue growth by increasing promotional efforts and sales expenses.
Cependant, Qianwei Yangchu continued to increase its spending across multiple areas, with sales expenses and R&D expenses up 65.22% and 33.69%, respectivement, and management expenses up 13.54% in the first three quarters.
2. “First Stock of Pre-prepared Meals” Sees Decline in Net Profit as Beef Sales Slow Down
While frozen food companies that have entered the pre-prepared meal sector performed well, specialized pre-prepared meal player Weizhixiang (605089.SH) has seen its rapid growth in recent years come to a halt.
According to financial reports, Weizhixiang’s Q3 revenue was 202 millions de RMB, vers le bas 11.89% année après année, and net profit was 32.5289 millions de RMB, vers le bas 18.76% année après année.
Overall, Weizhixiang’s net profit for the first three quarters of this year was 107 millions de RMB, vers le bas 2.90% année après année. In contrast, Weizhixiang’s net profit growth rates in the same periods of 2021 and 2022 were 9.02% and 7.65%, respectivement.
Weizhixiang’s operating data revealed that declining sales of beef products have impacted profit margins.
In Q3, Weizhixiang’s beef product series generated revenue of only 81 millions de RMB, vers le bas 23.15% from 105 million RMB in Q3 2022.
Although the Q3 report did not disclose the specific gross profit margin for beef products, previous data shows that beef products have long accounted for more than 40% of total revenue, with a gross profit margin of no less than 20%. This indicates that beef products are a crucial profit source for Weizhixiang.
Weizhixiang explained that in the context of consumer downgrading, high-value products are selling less well than low-value products. As the company’s wholesale channel mainly consists of high-value beef products, overall production volume remained relatively stable, but this led to a decline in Q3 revenue.
Guotai Junan Securities also noted in its research report that Weizhixiang’s segmented product performance diverged in Q3, mainly due to weakened consumer spending power. High-ticket items like beef and shrimp saw revenue declines, while low-ticket items like poultry and pork saw revenue increases.
Weizhixiang also pointed out that the challenging environment has affected franchisees’ willingness to open new stores, leading some to adopt a wait-and-see approach, slowing down the pace of new store openings.
According to financial report data, Weizhixiang did indeed slow down store openings in Q3, with revenue from franchise store operations down 6.43% année après année. In Q3, Weizhixiang opened 91 new franchise stores, only half the number opened in the same period last year (182 stores in Q3 2022).
En plus, Weizhixiang noted that it made significant resource investments this year, and the launch of new factories in Q3 also added to costs. These factors combined to contribute to the decline in Q3 net profit.
As a specialized pre-prepared meal company heavily reliant on beef products, Weizhixiang’s ability to restore and grow profitability may depend on an overall improvement in the consumption environment.
3. Pig and Poultry Farming Affected by Cyclical Fluctuations—Can Diversification into Pre-prepared Meals Improve Profitability?
An increasing number of companies are entering the pre-prepared meal sector, hoping to gain a share of the market, including agricultural, forestry, animal husbandry, and fishery enterprises, as well as meat processing companies.
Cependant, due to the decline in prices of raw materials such as pork, bœuf, and chicken in Q3, many farming enterprises, while remaining profitable, saw a decline in net profit growth.
According to data released by the National Bureau of Statistics, in September this year, pork and beef prices increased by 0.2% and 0.6% month-on-month, respectivement, but showed a downward trend compared to September last year, with pork prices down 22.0% and beef prices down 4.9% année après année. Notably, pork prices have been declining year-on-year for five consecutive months from May to September this year.
Chicken prices were also sluggish in Q3. According to the “Food and Catering Chain Enterprise Procurement Market Monthly Reference (August 2023)” produced by Wangju Capital and the Hongcan Industry Research Institute, the average price of white-feathered broiler chickens in China in July was 4.15 RMB per jin, vers le bas 4.60% month-on-month and 12.26% année après année.
Leading poultry farming company Wens Foodstuff (300498.SZ) also noted that Q3 is traditionally the peak consumption season for broiler chicken products, but this year’s Q3 performance was average, with chicken prices falling short of expectations.
The fluctuations in raw material prices inevitably impact the production and operations of upstream agricultural and animal husbandry enterprises.
Longda Foodstuff, Groupe Nouvel Espoir, Fucheng Group, Tangrenshen Group, Xiangjia Group, Wens Foodstuff, Xiantan Group, Chunxue Food, Dahua Group, Haodangjia, and Yike Food are among the companies whose main businesses involve farming, slaughtering, or meat processing. They have all now diversified into pre-prepared meals. Financial reports show that in Q3, all 11 of these companies experienced negative net profit growth.
Among them, “pig farming giant” New Hope Group (000876.SZ) reported a net loss of 875 million RMB in Q3, largely due to the sharp decline in pork prices. The company noted that in Q3 2022, pork prices were around 22 RMB, while in Q3 2023, they were only around 15 RMB.
En plus, companies like Shengnong Development (002299.SZ), Shuanghui Development (000895.SZ), and Huaying Agriculture (002321.SZ) managed to achieve positive net profit growth. Cependant, some of these companies also noted that their performance was affected by fluctuations in raw material prices.
Leading broiler chicken farming company Shengnong Development reported increases in both revenue and net profit, but it noted that its asset impairment loss increased by 85.67% year-on-year during the reporting period, primarily due to losses from the decline in beef raw material prices and provisions for the decline in value of some chicken products.
Shuanghui Development’s net profit increased by 11.62% in Q3, while revenue declined by 5.20% année après année. The company noted that although its total meat sales volume reached 840,000 tons in Q3, en haut 4.6% année après année, revenue did not grow due to the significant year-on-year decline in pork prices.
Despite the impact of raw material price fluctuations, many companies involved in farming businesses still managed to turn a profit in Q3. Among the 15 publicly listed companies included in the Catering Supply Chain Guide‘s incomplete statistics, 11 reported profits. Cependant, of these 11 profitable companies, 8 experienced a decline in net profit growth.
Agricultural and livestock enterprises’ performance is easily affected by cyclical fluctuations in farming, leading more and more of them to actively expand into pre-prepared meal processing to seek new growth opportunities.
Cependant, the Q3 reports show that the performance of companies that disclosed their pre-prepared meal revenue varies significantly.
For instance, “First Stock of Cattle Farming” Fucheng Group significantly reduced its pre-prepared meal production this year but still faced inventory pressure in Q3. Fucheng Group primarily conducts its pre-prepared meal business through its fast food subsidiary, and the fast food business mentioned in its annual reports refers to pre-prepared meals.
Fucheng Group’s disclosed inventory figures for Q1, H1, and Q3 this year were 93.14 tons, 262.28 tons, and 357.27 tons, respectivement. In the same periods in 2022, the corresponding figures were 293.99 tons, 409.60 tons, and 329.54 tons. The data shows that while Fucheng Group significantly reduced inventory in the first half of this year compared to last year, Q3 inventory levels exceeded those of the same period last year.
Operating data disclosed by Fucheng Group shows that its fast food production in the first three quarters decreased by 40% année après année, with fast food revenue down 52.87% année après année. According to the H1 report, Fucheng Group’s fast food production in H1 2022 and H1 2023 was 3,437.97 tons and 1,868.90 tons, respectivement, a decrease of 45.64%.
Chunxue Food (605567.SH), which started with poultry farming, also saw a decline in the revenue share of its pre-prepared meal business.
In Q3 2023, the revenue share of Chunxue Food’s prepared food (pre-prepared meals) business decreased from 47.98% in the same period last year to 42.96%, a slight decline. Cependant, the revenue share of fresh products jumped from 22.72% in the same period last year to 40.24%, with revenue increasing from 160 million RMB to 290 millions de RMB.
In 2019-2021, Chunxue’s prepared food (pre-prepared meals) business consistently accounted for more than 50% of total revenue. In 2022, prepared food revenue accounted for nearly half of total revenue, indicating that prepared food has been a significant source of revenue for Chunxue.
Whether this pattern will change remains to be seen in the Q4 performance. Cependant, Chunxue’s actions this year suggest an increased focus on its fresh products business.
The H1 report shows that Chunxue produced 66,000 tons of fresh chicken products in H1, en haut 35% année après année. En plus, Chunxue expressed optimism about the growth of fresh products, noting in its H1 report that as the structure of the main consumer population changes and people’s lifestyles improve, the market growth rate of fresh meat will gradually accelerate.
Although New Hope Group reported a loss in Q3 this year, its popular small crispy pork product continued to perform well.
In September alone, the sales of small crispy pork exceeded 140 millions de RMB. New Hope stated that the sales of small crispy pork are expected to exceed 1.4 billion RMB this year. En plus, its large intestine product has maintained stable monthly sales of 35-40 millions de RMB.
Shuanghui Development’s pre-prepared meal business also performed well, with sales exceeding 50,000 tons in the first three quarters of this year, an increase of over 80% année après année. The company plans to continue expanding its pre-prepared meal business.
Shuanghui Development revealed that it has established a professional R&D team and a team of chefs. Moving forward, the company plans to strengthen product development and market expansion in categories such as ready-to-eat dishes, semi-finished dishes, pre-cut ingredients, and convenient ready-to-eat meals.
Conclusion
Since the beginning of this year, the pre-prepared meal market has cooled down and is no longer as hot as it was in previous years. With the changing market environment, some companies have begun to adjust their business layouts. Cependant, there are still companies that choose to continue investing heavily in pre-prepared meals, especially those that have already reaped the benefits.
The Q3 reports show that while many pre-prepared meal-related companies turned a profit, net profit growth has slowed. As more players enter the market and competition intensifies, the era of wild growth and rough expansion in pre-prepared meals will eventually come to an end, and the industry’s barriers will gradually become apparent.
