Summary of Key Points
In the first half of this year, the leading companies in the enoki mushroom industry (Hualv Bio, Zhongxing Junye, and Xuerong Bio) all saw their net profits double or even nearly triple. However, this is not a sudden improvement in their operational capabilities, but rather the result of a cyclical rebound in enoki mushroom prices. In previous years, overcapacity in the industry led to a sharp drop in prices, causing companies to incur losses and reduce production. As supply decreased, prices have rebounded. Nevertheless, the industry's cyclical challenges—where it's easy to expand production but difficult to exit, and supply remains highly concentrated—continue to prevail. Companies are attempting to diversify their offerings (such as shiitake mushrooms, cordyceps, and high-end mushrooms) in order to reduce their dependence on enoki mushroom prices and find new sources of growth.
1. Profit Doubling: Not Due to Corporate Strength, but Thanks to Rising Enoki Mushroom Prices
The sharp increase in profits of these three companies this year is essentially due to the benefits of higher prices:
- Statistical Evidence: Hualv Bio's net profit increased by 185.85% year-on-year, Zhongxing Junye by 176.51%, and Xuerong Bio by 117.41%, while both had losses in the same period last year.
- Key Reason: Rising enoki mushroom prices significantly boosted their gross margins—Hualv Bio's gross margin jumped from -6.84% (loss-making) last year to 17.63% this year; Zhongxing's increased from around -5% to 24.67%; Xuerong's increased from -3.93% to 19.03%. The factories and production lines remain the same; it's simply the higher selling prices that have led to the profit increase.
- Why the Price Rise?: The industry was highly competitive in previous years (2022-2025), resulting in excess supply. By the first half of 2025, prices dropped to 4 yuan/kg in Beijing (even 3.8 yuan/kg in Xinfadi market), leading to substantial losses for companies. As a result, leading companies actively reduced production (for example, Zhongxing Junye converted its enoki mushroom production lines to cordyceps projects), and smaller firms went out of business. With less supply, prices naturally rebounded (rising to over 6.7 yuan/kg in the first quarter of this year).
2. The Cyclical Vicious Cycle of the Enoki Mushroom Industry: Why Such Extreme Fluctuations?
The root of the industry's cyclical problems lies in its industrial nature:
- Easy Expansion: It's quick to build factories and set up production lines, so everyone joins in when profits are high.
- Difficult Exit: Production lines are specialized and cannot be converted for other uses, and sunk costs are high, so companies often continue operating despite losses for a while.
- Concentrated Supply: Leading companies control most of the production capacity. When they all expand, there's excess supply; when they all reduce production, there's a shortage.
- Cycle Logic: Profits → Expansion → Excess Supply → Price Drop → Losses → Capacity Reduction → Reduced Supply → Price Rise → Further Expansion… This cycle repeats. For example, the national average price of enoki mushrooms in 2024 was 5.93 yuan/kg, a 9.88% decrease year-on-year, due to overcapacity.
3. Companies Seeking New Paths to Escape the Enoki Mushroom Cycle
The companies are trying to diversify to reduce their risk:
- Zhongxing Junye: Focusing on shiitake mushrooms, which now account for 58.82% of their revenue (up from 38.36% for enoki mushrooms) with a higher gross margin of 35.62%. They are also exploring cordyceps, but the scale of these new businesses is still small.
- Xuerong Bio: Established a subsidiary dedicated to cordyceps cultivation, planning to boost sales in 2026. Wild cordyceps are scarce and often counterfeit, so the stability of factory-produced products is a selling point. However, the difficulty of cultivation and consumer acceptance remain uncertain.
- Hualv Bio: Reduced the proportion of enoki mushrooms in their products to 66% and added high-end varieties like deer antler mushrooms and yellow boar liver mushrooms. They invested 300 million yuan in a deer antler mushroom factory and 200 million yuan in a yellow boar liver mushroom project. These higher-priced varieties have less competitive pressure.
Common Goal: All new businesses are more "high-end" than enoki mushrooms, either offering higher profits or less competitive markets, with the aim of reducing reliance on enoki mushroom prices.
4. The Cycle Will Return; Breaking Free from the Vicious Cycle Is Not Easy
The current good performance is due to the cyclical rebound, but potential risks remain:
- Concern 1: Could companies expand production again? With higher profits, they might build new production lines, leading to another oversupply (similar to 2022, when excessive expansion caused prices to drop).
- Concern 2: Will new businesses be successful? Cordyceps cultivation is challenging, and consumers may prefer wild products. How large is the market for high-end mushrooms? Even if shiitake mushrooms are doing well now, what if more companies enter the market?
Conclusion: For companies to truly break free from the enoki mushroom cycle, their new businesses must become stable sources of growth. Otherwise, they will suffer heavy losses during the next downturn.
In Conclusion
While the companies are currently benefiting from the current cycle, they need to develop new, sustainable sources of revenue. They can either switch to different varieties or focus on high-end products to avoid the recurring cycle of profit gains from price increases followed by losses due to overproduction.