Consolidation underway amongst China's condiment brands

The top five players in the segment account for only 21% of the market share.

The consolidation trend amongst China’s condiment brands is expected to accelerate coming into 2020-2024 as the lead brands become increasingly competitive in a relatively fragmented segment, according to a report from Jefferies.

The report noted that the top five players account for only 21% of the market share as of 2019, much lower than the other consumer staple sector. However, as they build up their advantages in branding, national distribution networks, and production costs, their market share could potentially rise to 24% in 2024.

Amongst the condiment brands, Haitian leads with a 7.5% market share. The report stated that the company has one of the best management teams in China's consumer space, and is expected to continue gaining share by expanding into new regions and new categories.

Meanwhile, Jonjee's market share lags behind Haitian, though comparable in branding and product quality, as management was less motivated in the past. Following the SOE reform in 2019, the company’s earnings growth is tipped to accelerate, Jefferies said.

In 2019, the condiment sector had sales of $53.03b (RMB370b). The sector sales is projected to expand at a 7% compound annual growth rate (CAGR) in 2020-2024, driven by higher volumes due to consumers' increasing dining out demand, product mix upgrades, and price hikes.

Sales volume is expected to expand at a 3% CAGR in the next five years, whilst average selling price is expected to rise at a CAGR of 4% over the same period.