Summary in Plain Language
This industry report sheds light on the true situation in the soy sauce market, debunking two common misconceptions: First, the recent “general increase in net profits” reported by leading soy sauce companies is not a collective surge across the entire industry. The gap between the market leader, Haitian, and second-tier brands is so significant that it’s not even in the same league. The high growth of the other companies is mostly a recovery from previous poor performance, not a sign of them overtaking Haitian in strength. Second, why are companies from other industries, such as those producing monosodium glutamate, pickled vegetables, and chicken essence, rushing into the soy sauce business? The reason is the industry’s high gross margin of nearly 40%, which makes it extremely profitable and stable. However, this profit margin is not something new entrants can easily access. The soy sauce industry has moved beyond the era of acquiring new customers and has entered a phase where competition focuses on who has the most extensive distribution channels and who can save the most money. The industry’s market shares are largely fixed, leaving little room for newcomers.
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Detailed Analysis
1. The “General Increase in Net Profits” is a Deception: The Gap Between Leaders and Second-Tier Brands is Huge
Many people are dazzled by the numbers in financial reports. For example, Jiajia Food’s net profit increased by 397% year-on-year, which sounds impressive, but in reality, the company only earned 41.54 million yuan in half a year—less than what Haitian Flavor Industry earns in just two days (Haitian earned 4.19 billion yuan in half a year, averaging over 23 million yuan per day). Although all companies seem to be making more money, the underlying situations are vastly different. Haitian has maintained a steady profit growth rate of around 7% for two years, with all its earnings coming from new business. In contrast, Jiajia has suffered losses in 2024 and 2025, and companies like Qianhe and Zhongju have also seen declining profits. This year’s growth is more of a recovery from previous losses, and their performance levels have not yet returned to their peak from two years ago. The difference in revenue is even more pronounced: Haitian’s revenue for half a year was 16.1 billion yuan, while the combined revenue of the other three companies is less than one-third of Haitian’s. This disparity reflects a huge difference in distribution capabilities. Haitian has 7,000 distributors, covering 100% of all prefecture-level cities and 90% of counties nationwide. Zhongju High-Tech, on the other hand, has only about 2,700 distributors, with a county coverage rate of just over 80%. In many rural shops, you can’t even find other second-tier brands’ soy sauce products. This level of penetration is the result of years of investment and cannot be easily matched by newcomers.
2. Cross-Industry Entrants Flocking to Soy Sauce: The Profitability is the Main Attraction
Why are companies from other industries, such as those producing monosodium glutamate, pickled vegetables, and chicken essence, entering the soy sauce market? The answer lies in the industry’s high profitability. The demand for soy sauce is incredibly stable; people may skip milk tea or new clothes, but they still need soy sauce for cooking. Even if their income decreases, they won’t reduce the amount of soy sauce used to save money, as the demand is hardly affected by economic cycles. The gross margin for soy sauce is around 40%, compared to around 11% for soybean oil. Selling soy sauce for 10 yuan yields a profit of 4 yuan, four times that of soybean oil. Lotus Holdings, for example, saw its liquid seasoning revenue increase by nine times after entering the soy sauce market, which is a clear incentive for others to follow.
3. Don’t Call Soy Sauce an “Excessively Profitable Industry”: The 40% Gross Margin is a Barrier for New Entrants
Many criticize soy sauce for its high profit margin, arguing that it’s unfair. However, this margin is not something new entrants can easily achieve. There are several barriers: First, compliance requirements; new food standards have led to the closure of small, non-compliant factories. Second, brand recognition; consumers trust established brands like Haitian and Chubang because they trust their quality. Third, distribution channels; leading brands have built a vast network that covers all types of stores, from large cities to rural shops. New brands need to spend millions just to get into these channels. The top five brands already control 77% of the offline market, and the remaining shares are held by local brands, leaving no space for newcomers.
4. The Industry’s Focus on Cost Savings Indicates the End of Rapid Growth
This year, all soy sauce companies are focusing on cost reduction. Jiajia Food cut sales expenses by 10 million yuan and management costs by over 3 million yuan, turning a loss of 147 million yuan last year into a profit this year. Haitian Flavor Industry reduced advertising spending by over 60 million yuan and invested in AI and automated production. Even Zhongju High-Tech, which used to spend heavily on promotions, is now targeting more profitable areas more efficiently. This shift indicates that the industry’s growth has slowed down. To make more money, companies must focus on reducing costs rather than expanding into new markets.
5. The Trend of “Less Salt and Zero Additives” Does Not Offer Opportunities for New Entrants
Some believe that health-oriented trends, such as zero additives and less salt, offer new opportunities for soy sauce companies. However, established brands have already addressed these trends with their range of products (low-salt, organic, gluten-free, etc.). New entrants lacking distribution channels and consumer trust will struggle to gain market share. In summary, the soy sauce industry’s rapid growth period has ended, and companies are now competing on cost efficiency and sustainability.