Baijia Food, a Chinese maker of high-end instant noodles and other convenience foods, has raised CN¥200 million ($28 million) in a Series B round led by GL Ventures, an affiliate of Beijing-based private equity firm Hillhouse Capital.
MTCCBT – a joint venture between drinks giant Kweichow Maotai and China Construction Bank‘s CCB Trust – also participated in the round, alongside Binfu Fund, Tongchuang Weiye, Yisan Capital, and others.
Chengdu-based Baijia Food started out as a maker of dry-frozen instant noodles in 2001. However, in recent years, it has refocused on so-called ‘new convenience foods’ – higher-end products, often seeking to recreate some of China’s myriad regional delicacies as microwave-ready meals.
The company’s product line features various hot and sour concoctions from its home province of Sichuan, as well as instant versions of luósīfěn (snail noodles) from Guangxi and beef rice noodles from Guizhou. It also offers a range of ingredients such as flavoring powders, oils, and soup bases. ‘Self-heating’ hotpot and barbecue kits are other top sellers.
This shift in focus matches changing habits across China. Traditional, dried instant noodles have been falling out of favor with Chinese consumers; according to market research firm Euromonitor, sales of the product recorded an annual compound growth rate of -4.1% between 2014 and 2019.
At the same time, interest in ‘new convenience foods’ or ‘instant delicacies’ has been on the rise. In 2018 alone, Alibaba’s Taobao – the world’s largest e-commerce site – sold 18 million self-heating hotpots, 28 million units of snail noodles, and 21 million units of kǎolěngmiàn (grilled cold noodles; a specialty of Heilongjiang province) to its users.
Online to offline
Alongside its shift towards ‘new convenience foods’ Baijia Foods has also reimagined itself as an online-first brand, while still selling in brick-and-mortar stores. Online purchases reportedly account for 55% of the company’s sales, driven by novel marketing channels such as livestreaming.
GL Ventures’ Dai Yuexiang said that online-first, high-end food and snack brands had been able to rapidly grow in popularity due to “changes in marketing methods and sales channels, especially the advantages brought by the rise of livestreaming channels in recent years.” Brands like Baijia Food see themselves as competing with restaurants on quality, but at a lower price point; while they’re able to command a higher price than traditional instant noodles and soups.
In the most recent edition of its China Agrifood Startup Investing Report, AgFunder found that companies in its Premium Branded Foods & Restaurants category attracted the second-highest amount of investment overall last year, with 44 deals to eGrocery’s 51.
The category covers food and beverage brands that are marketed as premium products, typically with an online bias and other tech elements to their offering, and often targeting the ‘Millennial’ demographic.
The largest deal in the category last year was Luckin Coffee‘s $150 million BlackRock-led Series B round, which came barely a month before the coffee chain made its $561 million NASDAQ debut in May. Luckin’s stock price nosedived earlier this year after it admitted that a senior executive had fabricated sales figures.
Other significant Premium Branded Foods & Restaurants deals last year included noodle restaurant-cum-bookstore Hefu Noodle‘s $31 million raise, premium teabag brand LeLeCha‘s $30m Vertex Ventures-led seed round, and online health drink maker Genki Forest‘s $21 million Series B raise.
IPO in 2021
Speaking to the National Business Daily [here, in Chinese], Baijia Food chairman Chen Zhaohui said the company’s revenue has grown by an annual average of 45% over the past three years. In 2019 sales reached over CN¥700 million ($98.7 million).
Since the start of 2020, sales have skyrocketed by 120% – something that Chen ascribed to Covid-19. With millions of consumers under lockdown and eating at home more often, ‘new convenience foods’ like those offered by Baijia Food received a boost in interest, he said.
The company closed its Series A round in February, banking CN¥110 million ($16 million) from Chinese private equity firm Cowin Capital, Before Capital, and Qianhai Equity Investment Fund – putting its funding total for this year at $44 million.
Baijia Food said it will use the Series B funding for product research and development, expanding its production capacity, and marketing and brand promotion. Chen said the company plans to file for an IPO at some point during 2021.
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