Largest soy oil brand sees revenue rise but margins squeezed

Arowana, one of the largest crushers in China and the market share leader in soybean oil in China, reported that its revenue during 2022 was up by 13.8% to 257.5 billion yuan.

Despite this strong revenue, net profits fell by 40.6% to 3.8 billion yuan.

The company said it saw strong demand for feed materials in 2022 and increased its crushing operations. But at the same time, margins fell due to higher input costs for soybeans. Crushing margins were negative for most of 2022 and this is reflected in the weaker performance of Arowana.

Like many companies in the food industry, the company is also pushing into the pre-made meal industry.

The company has faced challenges in this market. Input costs have “increased significantly” in 2022 due to factors such as inflation and the war in Ukraine. This has led to the company raising its prices but this increase has not fully offset the rise in raw materials and therefore margins shrank.

The rising prices are also likely to further weigh on demand, and the company notes that 2022 saw “repeated domestic epidemics, a weak economy, and sluggish consumption”.

Despite this poorer performance, many companies remain very enthusiastic about the pre-made meal industry as consumers increasingly opt for convenient alternatives to cooking or dining in restaurants.

The recent major government agriculture policy announcement, the No.1 central document, also specifically mentioned the pre-made meal industry for the first time. The government said that the country should focus on the development of the pre-made food industry and many companies have received support from their local governments as many cities and provinces compete to be major players in this growing industry.