Analysis of the Impact of Enwise Holdings' R&D Expense Ratio of Only 1% on Its Long-Term Competitiveness

Enwise Holdings Group Co., Ltd. is a comprehensive maternal and child enterprise focusing on baby food and infant hygiene products, with four major brand matrices: ‘Enwise’, ‘Supiqi’, ‘Yixiaokou’, and ‘Weilingge’ [1]. The company’s original ‘Scientific 5-Stage Precision Feeding System’ precisely matches products to the physiological and nutritional needs of babies aged 6-36 months at different growth stages [1].

From the financial performance perspective, Enwise Holdings has shown a sustained growth trend in recent years. From 2022 to 2024, the company’s operating revenue increased from 1.296 billion yuan to 1.974 billion yuan, and its net profit attributable to parent company shareholders rose from 117 million yuan to 211 million yuan [1]. In the first half of 2025, the company’s revenue reached 1.132 billion yuan, with a net profit of 153 million yuan. The company maintains a high gross profit margin; the gross profit margins of its main business during the reporting period were 55.10%, 57.81%, 57.38%, and 58.68% respectively [1]. Infant supplementary food is Enwise Holdings’ core business, contributing more than 70% of its revenue during the reporting period [1].

According to the prospectus, Enwise Holdings’ R&D expense ratio has been less than 1% for a long time, far below the industry average [1]. This data is in sharp contrast to the company’s high marketing investment:

Indicator	2022	2023	2024	H1 2025
Sales Expense Ratio	35.04%	34.26%	36.53%	35.07%
R&D Expense Ratio	<1%	<1%	<1%	<1%

The company’s sales expenses increased from 454 million yuan in 2022 to 721 million yuan in 2024, with platform promotion fees reaching 151 million yuan, 215 million yuan, 300 million yuan, and 184 million yuan respectively in each period [1]. High marketing investment leads to high sales expense ratios, which are higher than the average level of comparable companies in the same industry [1].

It is worth noting that as of the end of 2024, the company had a total of 33 R&D personnel, including 1 doctoral student and 26 master’s students [2]. The company has established industry-university-research cooperation relationships with research institutions such as the Chinese Nutrition Society, the Chinese Maternal and Child Health Association, and the Hunan Provincial Institute of Agricultural Product Processing Quality and Safety, as well as universities like Shanghai Jiao Tong University, Jiangnan University, and Central South University of Forestry and Technology [2].

In terms of patents, the company has 62 patents in infant supplementary food, including 3 invention patents, 16 utility model patents, and 43 design patents [2]. However, in terms of input-output ratio, the R&D investment amount in 2024 was 17.1483 million yuan, with a compound annual growth rate of 76.10% [2], but the absolute amount is still low.

Insufficient R&D investment will restrict the company’s long-term competitiveness in the following aspects:

: In the infant supplementary food industry, product innovation is key to maintaining market competitiveness. A low R&D expense ratio means the company cannot continuously develop new products and optimize existing ones. As consumers’ awareness of infant nutritional needs continues to improve, the market’s requirements for product formula science, nutritional balance, and safety are also increasing; insufficient R&D investment will directly affect the company’s innovation capabilities in these aspects.

: Foreign brands such as Heinz, Gerber, and Little Freddie occupy important positions in the mid-to-high-end market with their brand advantages and technical accumulation [1]. If Enwise Holdings cannot build technical barriers through continuous R&D investment, it may be at a disadvantage in the competition for the high-end market.

Insufficient R&D investment also indirectly affects the company’s supply chain management capabilities. During the reporting period, the proportion of commissioned production procurement increased from 39.83% at the beginning to 55.10% in 2024, and although it fell back to 47.37% in the first half of 2025, it is still at a high level [1].

The commissioned production model itself is not a problem, but insufficient R&D investment means the company lacks sufficient technical capabilities to guide and supervise quality control in the commissioned production process. During the reporting period, Enwise Holdings has received many consumer complaints, increasing from 63 to 223, mainly focusing on product quality and safety issues, especially foreign objects in products [1].

In terms of brand building, the company currently mainly relies on high marketing investment to maintain market share. However, this model has the following risks:

• Increasing marketing costs
  : As industry competition intensifies, platform promotion fees continue to rise, reaching 300 million yuan in 2024 [1], squeezing profit margins.
• Shallow brand moat
  : Brand premium capabilities supported by a lack of core technologies and patent barriers are limited, making it easy to be imitated or surpassed by competitors.

China’s infant supplementary food industry is facing multiple challenges. The most fundamental is demographic change: China’s number of newborns decreased from 9.56 million in 2022 to 9.02 million in 2023, and although it rebounded to 9.54 million in 2024, the overall fertility rate is on a downward trend [1]. The decrease in the number of newborns means the contraction of the total market capacity, and enterprises must maintain growth through product upgrades and differentiated competition.

Market competition is extremely fierce. Foreign brands such as Heinz, Gerber, and Little Freddie occupy important positions in the mid-to-high-end market with their brand advantages and technical accumulation; local emerging brands such as Qiutian Manman and Grandpa’s Farm quickly seize market share through differentiated positioning and flexible marketing [1]. Enwise Holdings admitted in its prospectus that although the ‘Enwise’ brand ranks first in sales in the infant supplementary food market, its market penetration rate is still not high [1], indicating that there is still room for improvement in industry concentration, but it also means that competition will become more intense.

The company plans to raise 334 million yuan, mainly for five major projects [1][2]:

1. Hunan Enwise Maternal and Child Industry Base (Phase II) Innovation Center Construction
   : Aims to build the company’s independent R&D core platform, which may intend to gradually reverse the ‘light R&D’ status quo [1].
2. Infant Ready-to-Eat Nutritious Porridge Production Construction Project
   : Gradually convert the currently commissioned ready-to-eat nutritious porridge products to independent production, strengthening direct control over key production links [1].
3. Production Line Quality Improvement and Transformation
   :
4. Full-Link Digital Intelligence Upgrade
   : Optimize the efficiency and transparency of the entire process from production to marketing through digital means [1].
5. Brand Building and Promotion
   :

These two investments indicate that Enwise Holdings is trying to build long-term competitiveness based on innovation and refined management in a market with intensified competition and increasingly high consumer demands [1]. The company clearly stated that the arrangement of independent production will prioritize core categories [1], which reflects a pragmatic strategic balance: making trade-offs between pursuing supply chain efficiency and flexibility and strengthening quality and safety control.

• Stable industry position
  : According to the confirmation of many well-known market research institutions, the sales volume of the ‘Enwise’ brand has surpassed many foreign brands and ranked first in the infant supplementary food market for three consecutive years from 2022 to 2024 [2].
• Increased brand recognition
  : According to the ‘China Online Consumer Brand Index (2023-2025)’ released by the National School of Development at Peking University, ‘Enwise’ entered the ‘Global Brands China Online Top 500’ which reflects brand quality, and is the only infant supplementary food brand to receive this honor [2].
• Forward-looking fundraising uses
  : If the innovation center construction and full-link digital intelligence projects can be effectively implemented, it will help improve the company’s long-term competitiveness.

• Uncertainty about the effectiveness of R&D transformation
  : It takes time and continuous investment to build a competitive R&D system from an R&D expense ratio of less than 1%, and the effect remains to be seen.
• Hidden concerns about governance structure
  : Historical issues such as equity holding on behalf of others, technical operations in the identification of concerted actors, and initial avoidance of share sale restrictions reflect deep-seated concerns about the company’s governance [1].
• Persistent quality control risks
  : The increase in consumer complaints under the commissioned production model, if not effectively resolved, will directly erode the brand foundation and growth prospects [1].

The problem of Enwise Holdings’ R&D expense ratio of only 1% does pose a potential threat to its long-term competitiveness. In the infant supplementary food industry, which has extremely high requirements for product safety and nutritional science, continuous R&D investment is the key to building technical barriers and brand moats. The company’s current ‘heavy marketing, light R&D’ business model can maintain sales growth in the short term, but it is difficult to support the construction of sustainable competitive advantages in the long run.

It is commendable that the company has shown its intention to transform through its IPO fundraising plan, especially the innovation center construction project is expected to gradually improve the status quo of insufficient R&D investment. However, the successful implementation of the transformation requires the company to truly attach importance to R&D at the strategic level, continue to invest, and establish a sound R&D system. Whether Enwise Holdings can continue to lead in fierce competition depends on whether it can completely bid farewell to the path of relying on marketing and channel expansion, truly attach importance to and continue to invest in R&D, and strictly manage the quality of commissioned production.

For investors, it is recommended to pay close attention to the actual changes in the company’s R&D investment, the construction progress of the innovation center, and the improvement of quality control issues. Under the dual pressures of intensified industry competition and demographic changes, Enwise Holdings’ R&D transformation will be a key factor determining its long-term investment value.

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[1] Sina Finance - ‘Enwise Holdings闯关"辅食第一股"：高增长下的模式之困与治理隐忧’ (https://finance.sina.com.cn/stock/marketresearch/2025-12-24/doc-inhcwtcm9865877.shtml)

[2] Western Securities Co., Ltd. Issuance Sponsorship Letter for Enwise Holdings Group Co., Ltd.'s Public Offering of Stocks to Unspecified Qualified Investors and Listing on the Beijing Stock Exchange (https://pdf.dfcfw.com/pdf/H2_AN202512151801176842_1.pdf)