Gourmet powder MSG: downstream demand grows; leading firms achieve increases in financial results 07-27-2023

Summary: Downstream demand for gourmet powder MSG, which comes from catering industry and food processing industry, grew. The recent financial results of leading MSG producers like Meihua Group and Lotus Health saw uplifts.

Downstream demand for gourmet powder MSG showed fast growth

In China, the demand for gourmet powder monosodium glutamate (MSG) principally comes from catering industry and food processing industry. Businesses in these two industries generally delivered year-on-year rises in their revenues for H1 2023, which is conducive to the facilitation of growth in demand for MSG.

In the aspect of catering industry, the catering market was previously under deep impact of the COVID-19 pandemic. Following the gradual mitigation of pandemic impact since early 2023, general rebounds were witnessed in revenues of the catering industry. Consequently, the demand for food seasonings like MSG increased. According to the statistics from National Bureau of Statistics, the year-on-year growth rate of total retail sales of consumer goods in H1 2023 was 8.2%, which went up by 2.4 percentage points over that in Q1 2023. Of the total retail sales of consumer goods in H1 2023, the total revenues from providing catering services were USD337.17 billion (RMB2.43 trillion), up 21.4% YoY; the total revenues of catering enterprises (units) above designated size were USD86.34 billion (RMB623.00 billion), up 23.5% YoY. Estimations from an industry insider indicate that the revenues of catering industry will increase to the USD665.22 billion (RMB4.8 trillion) level by the end of 2023, and the industry's demand for MSG will also keep going up.

In the aspect of food processing industry, the total operating revenues of enterprises above designated size in the agricultural and sideline food processing industry in H1 2023 were USD349.98 billion (RMB2.52 trillion) and went up by 4.9% YoY, according to the statistics from National Bureau of Statistics. Notably, the pre-made food industry, a sub-industry belonging to food-processing industry, recently exhibited robust momentum. The market size of pre-made foods reached roughly USD58.15 billion (RMB419.60 billion) in 2022. For the very first time, the pre-made food industry is mentioned in the "No. 1 central document"—Opinions of Central Committee of Communist Party of China and State Council on the Key Work of Comprehensively Promoting Rural Vitalisation in 2023 that was released in Feb. 2023. It can be expected that an increasing number of enterprises, under the encouragement from governmental policy, will throw themselves into the pre-made food industry, allowing the pre-made food market to grow at a high speed and further expand from business end to consumer end. When endeavouring to further ramp up MSG demand, MSG producers can now focus on pre-made foods, because the seasonings industry, which involves MSG, is closely associated with the pre-made food industry, plus consumers have certain requirements on the flavour of pre-made foods. Lotus Health Group Company (Lotus Health), one of the top MSG producers in China, is already making attempt to take part in pre-made food industry's competition. In March 2023, Lotus Health announced the intention to acquire more than 20% of shares in Hangzhou Jinlingyang Consulting Co., Ltd., a leading self-heating food producer that owns the brand "Zihaiguo", through cash payment.

On the other hand, the household demand for MSG products remains stable and only presents small growth rates, due to the relatively low monthly average usage, MSG products' long shelf life, and relatively low frequency of households' purchasing of MSG products.

Top MSG producers achieved increases in recent financial results

Top MSG producers in China include Meihua Holdings Group Co., Ltd. (Meihua Group), Fufeng Group Limited, Ningxia Eppen Biotech Co., Ltd. and Lotus Health. Against the backdrop of growing downstream demand for MSG, Meihua Group and Lotus Health achieved increases in their recent (or estimated) financial results.

According to the previously-released Q1 report of Meihua Group, its operating revenue for Q1 2023 totalled USD963.19 million (RMB6.95 billion), up 3.54% YoY; of which, the revenue from flavour enhancers (MSG, nucleotide, etc.) totalled USD315.96 million (RMB2.28 billion), up 2.08% YoY.

On 12 July, 2023, Lotus Health issued the estimated results for H1 2023. Its net profit attributable to equity holders for H1 2023 will expectedly range from USD6.93 million to USD7.07 million (RMB50.00 million–RMB51.00 million), which will climb by 56%–59% YoY or increase by USD2.49 million–USD2.63 million (RMB18.00 million–RMB19.00 million) YoY. Lotus Health stated that thanks to its moves to improve R&D of new products that are adapted for consumers' needs, step up marketing, and diversify product mix in H1 2023, the performance of main business segments achieved substantial growth and market share continued to rise.


More information can be found at CCM Amino Acid China Monthly Report.

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