Selling 228,000 tons of vinegar annually, Hengshun Vinegar Industry's performance still falls short. The company launches a 7-yuan per bottle fragrant vinegar cola and aims to capture the northern market.

Source: Era Weekly, Author: Zhang Yijing

Image source: Tuchong Creative

On the evening of April 14, 'the first vinegar stock' Hengshun Vinegar Industry (600305.SH) released its 2025 annual report. During the reporting period, the company achieved total operating revenue of 2.287 billion yuan, an increase of 4.13% year-on-year; net profit attributable to shareholders was 144 million yuan, an increase of 12.80% year-on-year.

Behind this seemingly dual-growth in revenue and profit lies another missed target for the company's equity incentive performance assessment.

On the same day as the earnings disclosure, Hengshun Vinegar Industry issued an 'Announcement on the Repurchase and Cancellation of Certain Restricted Shares under the 2024 Restricted Share Incentive Plan.' The announcement pointed out that according to the company’s 2025 audit report, the corporate-level performance evaluation for the second release period of the aforementioned incentive plan did not meet the release conditions. Therefore, it plans to repurchase and cancel 1,709,760 restricted shares already granted but not yet released to those incentive targets.

According to past announcements from Hengshun Vinegar, the incentive plan's performance assessment target for 2025 is: 'Based on 2023 figures, the total profit growth rate in 2025 must be no less than 18%, and the main business revenue growth rate must be no less than 21%. These indicators must not be lower than the industry average. Additionally, the proportion of main business revenue to total revenue should be no less than 95%.'

Based on this calculation, Hengshun Vinegar must achieve main business revenue of at least 2.548 billion yuan and total profits of at least 120 million yuan in 2025 to meet the target. Judging by actual performance, there remains a significant gap between the company’s 2025 revenue and the set target. This marks the second consecutive year that the company has failed to achieve its equity incentive performance targets.

The performance of core businesses diverged, with sauce products dragging down gross margins to their lowest level in nearly a decade.

Records show that Hengshun Vinegar was established in 1840 during the Qing Dynasty's Daoguang era. It is a representative enterprise of Zhenjiang aromatic vinegar, one of China’s four famous vinegars, and is recognized by the Ministry of Commerce as a 'China Time-Honored Brand.' The company completed its shareholding reform in August 1999 and adopted its current name. It went public on the Shanghai Stock Exchange in February 2001, becoming the first, and currently the only, A-share listed company in China’s vinegar industry.

Hengshun Vinegar’s main business involves the research, production, and sales of a full range of condiments including vinegar, soy sauce, pickled vegetables, compound seasonings, and packaging materials. Its core product lines cover vinegar, liquor, and sauces.

A breakdown of Hengshun Vinegar’s annual report reveals that the primary reason for its 2025 revenue falling short of expectations lies in the divergent performance of its three core categories—vinegar, liquor, and sauce. Both liquor and sauce categories performed weakly, failing to provide effective growth support.

Image source: Hengshun Vinegar Industry's 2025 Annual Report

Data shows that during the reporting period, only the vinegar series achieved growth, generating annual revenue of 1.321 billion yuan, a year-on-year increase of 4.38%, corresponding to sales volume of 228,000 tons. In contrast, both the liquor and sauce series declined, achieving revenues of 304 million yuan and 174 million yuan respectively, representing year-on-year drops of 7.60% and 3.34%, with sales volumes of 84,000 tons and 33,000 tons respectively.

Notably, the revenue from the sauce series has declined for the third consecutive year. From 2023 to 2025, the revenue growth rates for the sauce series were -23.57%, -8.07%, and -3.34% respectively.

However, while the revenue from the sauce series declined, operating costs continued to rise rigidly. In 2025, the category’s operating costs increased by 5.51% year-on-year. Among the cost components, manufacturing expenses saw the most significant increase, surging by 46.26% year-on-year.

Squeezed by both declining revenue and rising costs, the gross margin of sauce products plunged 8.19 percentage points year-on-year in 2025, standing at a mere 2.39%. Affected by this, Hengshun Vinegar Industry's annual comprehensive gross margin dropped 2.93 percentage points year-on-year to 32.17%, hitting a decade-low.

Image source: Wind

In addition to pressure on revenue and profitability, the inventory scale of sauce products has also surged significantly. By the end of 2025, the company's vinegar product inventory reached 18,000 tons, surging 69.22% year-on-year; its wine product inventory hit 3,772.70 tons, growing 55.13% year-on-year. Notably, despite a 0.88% drop in sales volume, the inventory of wine products still rose sharply.

Competition in the vinegar sector intensifies, aiming for the top three positions in the condiments industry remains a formidable challenge

In addition to the pressures on wine and sauce products, Hengshun Vinegar Industry’s seemingly stable vinegar business is now facing challenges from cross-industry players.

As the undisputed leader in China's condiment industry, Haitian entered the vinegar industry in 2017 by acquiring Zhenjiang Danhe Vinegar. According to a market report released by Mashangying titled '2025 Q4 Condiment Market Review,' the top five players in the vinegar category held a combined market share of 53.67%, with Haitian ranking second, just behind Hengshun.

Image source: Win Now

Another major soy sauce giant, Qianhe Flavouring, entered the vinegar track in 2019 by acquiring Zhenjiang Hengkang Sauce and Vinegar. Currently, vinegar has become one of the company’s two main businesses. In the first half of 2025, Qianhe Flavouring's vinegar business revenue reached 159 million yuan.

Moreover, leading companies such as Zhong炬 High-Tech and Lee Kum Kee have also been expanding into the vinegar category. The previously relatively fragmented vinegar market is now witnessing fierce competition from leading enterprises.

In fact, in response to intensifying competition, Hengshun Vinegar Industry has been attempting to break through. On one hand, the company launched a series of crossover products, introducing 'Sweet and Sour Hug' light vinegar fruit-flavored sparkling water and cultural creative ice cream in 2022; in 2023, it launched 'Daily Flower Vinegar' drinks and vinegar candies emphasizing a low-sugar concept; in early 2026, the company introduced vinegar cola. This product features a combination of 'six-year aged fragrant vinegar + cola,' attempting to reach more young consumers through the widespread popularity of cola. According to the official mini-program of Hengshun Vinegar Industry, the product costs approximately 7 yuan per bottle (480ML). Such buzzworthy products indeed brought traffic and attention to Hengshun Vinegar Industry, but market feedback shows these crossover attempts mostly remain at the 'novelty' level.

Additionally, Hengshun Vinegar Industry has set its sights on the northern market. According to its 2025 annual report, the Northern Theater Command region generated revenue of 192 million yuan, representing the smallest proportion of revenue among all regions.

In March 2026, Hengshun Vinegar Industry announced that the fundraising project 'Annual Production of 30,000 Tons of Fermented Vinegar Expansion Project,' initially set for a private placement in 2023, had officially started operations. The core objective of this project's launch is to further expand the company’s market share of vinegar in the northern region.

Regarding the company’s future outlook, Hengshun Vinegar Industry stated in its 2025 annual report that it will further drive the company to reach a new stage of development in 2026, striving to achieve its goal of ranking among the top three in the condiment industry by the end of the 15th Five-Year Plan period.

However, considering the current landscape of the industry, achieving this goal will be extremely challenging. According to the 2025 Hurun China Food Industry Top 100 list reviewed by reporters, there are 11 companies in the condiment sector included on the list, but Hengshun Vinegar Industry is not among them. The top three companies in the industry are Haitian (603288.SH), Lee Kum Kee (not publicly listed), and Meihua Bio (600873.SH).

In terms of revenue scale, Haitian achieved revenue of 28.873 billion yuan in 2025; while Meihua Bio has not disclosed its 2025 financial results, its revenue from the condiment business in 2024 was as high as 7.945 billion yuan. In contrast, Hengshun Vinegar Industry's total annual revenue was only 2.287 billion yuan, with a revenue gap of approximately three times compared to Meihua Bio.

Regarding the company’s 2025 performance and the roadmap for achieving its 15th Five-Year Plan goals, reporters from Time Weekly sent an interview outline to Hengshun Vinegar Industry on April 15. As of the time of writing, no response had been received.

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