Impact Analysis of New Food Contract Manufacturing Regulations on A-share Food and Beverage Enterprises

Based on online search information [1][2][3][4][5], I will systematically analyze the impact of the new food contract manufacturing regulations on A-share food and beverage enterprises.

The State Administration for Market Regulation issued the Measures for the Supervision and Administration of Food Contract Manufacturing on December 29, 2025, which will come into effect on

[1]. The measures have the following core regulatory key points:

Bring various forms such as

into the scope of contract manufacturing management [1]. This means that various “asset-light” operation models that may have been in the regulatory gray area in the past will be fully brought into standardized supervision.

The new regulations clearly require the entrusting party to:

• Establish and improve
  food safety management systems
  adapted to the contract-manufactured food
• Equip corresponding
  food safety management personnel
• Implement
  supervision
  over the production behavior of the entrusted party
• Regularly conduct
  inspection and evaluation
  of the safety status of contract-manufactured food
• Be responsible for the food safety of the contract-manufactured food
  [1]

• Must legally obtain food production许可
• The product details specified in the production license副本 should include the food varieties produced under entrustment
• Have corresponding production capacity and food safety guarantee capacity
• Accept supervision from the entrusting party
  and be responsible for production behavior [1]

• Establish a food contract manufacturing
  reporting system
• Standardize food safety matters involved in contract manufacturing contracts
• Strengthen
  recall management
  of contract-manufactured food
• Set corresponding
  penalties
  [1]

According to the requirements of the new regulations, the entrusting party must increase the following investments:

Cost Item	Specific Content	Estimated Impact
Personnel Cost	Deploy professional food safety management personnel and establish supervision teams	Labor costs increase by 10-30%
Management System Construction	Establish food safety management systems and inspection and sample retention systems	IT system investment + system operation costs
Supervision and Inspection Cost	Regularly conduct inspection and evaluation of the entrusted party, and raw material control inspection	Inspection fees increase by 20-50%
Contract Cost	Standardize contract manufacturing contracts and add food safety clauses	Legal costs increase
Potential Fine Risk	Face corresponding penalties for violating regulations	Risk costs increase significantly

• Need to establish a more完善的
  supplier audit system
• Increase
  frequency
  and
  depth
  of on-site inspections
• Strengthen
  raw material traceability
  and
  finished product inspection
  requirements
• Establish
  recall plan
  and emergency response mechanism

Enterprises that relied on contract manufacturing to achieve rapid expansion and low-cost operations in the past will face:

• Management complexity
  increases significantly
• Quality control requirements
  improve significantly
• Compliance investment
  continues to increase
• Original
  cost advantages
  are compressed

Such enterprises adopt the

, flexibly using OEM production capacity to achieve multi-category coverage, with business focus on channel operation, demand capture and quality control [4].

• Cost Side:
  Compliance costs and management costs will increase significantly, expected to affect gross profit margin by
  2-5 percentage points
• Operation Side:
  Need to significantly increase supply chain management teams and establish stricter quality control systems
• Strategy Side:
  The advantages of the asset-light model are weakened; may need to consider self-built production capacity or find closer partners

According to online search information [5], Three Squirrels’ net profit attributable to parent company in the first three quarters of 2025 decreased by 52.91% year-on-year, Bestore’s net profit in the first three quarters of 2025 fell by 730.83% year-on-year. Both enterprises are already facing huge performance pressure, and the new regulations will further increase operational challenges.

Adopt the model of

, with the outsourcing proportion of zongzi products in 2024 being approximately [5].

• The outsourced processing part needs to fully upgrade compliance management
• It was involved in a food safety incident in 2024 (consumers found foreign objects in zongzi from Layefen) [5], highlighting the risk of contract manufacturing
• May need to
  increase the proportion of self-production
  and reduce the proportion of outsourcing

Such enterprises have their own production bases, and contract manufacturing is mainly used for capacity supplement or specific categories [4].

• The degree of impact depends on the proportion of contract manufacturing
• The self-owned production capacity part is not directly affected by the new regulations
• May consider
  further expanding self-owned production capacity
  to reduce dependence on external entrustment

According to online search information [4], enterprises such as Weilong Delicious, Qiaqia Food, and Jinzai Food usually have category brands representing specific categories and strong independent production capabilities.

Such enterprises have complete production and manufacturing systems and basically do not rely on contract manufacturing.

• Almost no impact
• May even
  benefit
  from the increase in competitors’ costs

Enterprise Type	Adjustment Strategy	Implementation Path
Asset-light Enterprises	Partial self-built + optimized entrustment	1. Self-built production capacity for core categories<br>2. Optimize entrustment structure for non-core categories<br>3. Establish in-depth cooperation with high-quality OEMs
Hybrid Model Enterprises	Increase self-sufficiency rate	1. Expand self-owned production capacity<br>2. Reduce the proportion of outsourcing<br>3. Strengthen outsourcing management
Full Industry Chain Enterprises	Maintain the status quo	Strengthen their own advantages and pay attention to M&A opportunities

1. Establish a special contract manufacturing management department
   • Equip professional food safety management personnel
   • Formulate detailed contract manufacturing management systems
   • Establish supplier audit and evaluation systems

2. Strengthen quality control system
   • Increase the frequency of raw material inspection
   • Establish process monitoring mechanisms
   • Improve finished product inspection and sample retention systems

3. Application of digital management tools
   • Establish a contract manufacturing information management system
   • Realize traceability of production processes
   • Use data analysis to optimize management

1. Reorganize contract manufacturing contracts
   • Add food safety responsibility clauses
   • Clarify the boundary of responsibilities between the two parties
   • Agree on liability for breach of contract and compensation standards

2. Establish emergency plans
   • Formulate product recall plans
   • Establish crisis public relations mechanisms
   • Purchase food safety liability insurance

1. Re-evaluate product structure
   • Gradually shift core products to self-production
   • Continue to entrust non-core products but strengthen management
   • Consider eliminating some high-risk entrusted products

2. Price Strategy Adjustment
   • Some products may need to
     raise prices
     to cover increased compliance costs
   • Optimize product structure and increase the proportion of high-margin products

1. Accelerated Industry Consolidation
   • Small OEMs face elimination or integration
   • Leading enterprises may acquire high-quality OEMs
   • Industry concentration increases

2. Cost-driven Price Increases
   • Some products relying on contract manufacturing may raise prices
   • Consumers may feel price changes

3. Increased Compliance Threshold
   • Non-compliant enterprises gradually exit the market
   • Market share concentrates on compliant enterprises

1. Business Model Reconstruction
   • Asset-light model is no longer mainstream
   • “Moderate heavy asset” becomes a new trend
   • Vertical integration of the industrial chain deepens

2. Increased Industry Differentiation
   • Enterprises with complete industrial chains have prominent advantages
   • Enterprises relying on contract manufacturing face transformation pressure
   • Threshold for new entrants increases significantly

3. Overall Improvement in Food Safety
   • Strengthened supervision promotes industry standardization
   • Consumer confidence improves
   • Long-term healthy development of the industry

• Full industry chain enterprises such as
  Yili Group, Haitian Flavoring
  (least affected by the new regulations)
• Enterprises with strong independent production capabilities such as
  Qiaqia Food
• Enterprises capable of integrating the industrial chain through mergers and acquisitions

• Asset-light enterprises highly dependent on contract manufacturing such as
  Three Squirrels, Bestore
• Enterprises with contract manufacturing proportion exceeding 30%
• Enterprises with a history of food safety records

Investors can evaluate the degree of impact on enterprises from the following dimensions:

1. Proportion of Contract Manufacturing
   • <10%: Limited impact
   • 10-30%: Medium impact

   • 30%: Significant impact

2. Self-owned Production Capacity Reserve
   • Sufficient self-owned production capacity: Impact is controllable
   • Expanding production capacity: Medium-term relief
   • No self-owned production capacity: Facing transformation pressure

3. Supply Chain Management Capability
   • Established perfect quality control system: Strong response capability
   • Weak management system: Need significant investment

4. Financial Strength
   • Sufficient cash flow: Can bear the increase in compliance costs
   • Tight funds: Facing greater pressure

The introduction of the Measures for the Supervision and Administration of Food Contract Manufacturing is an important improvement of China’s food safety supervision system and will have a far-reaching impact on the food and beverage industry:

1. Short-term Pain is Inevitable
   - Enterprises relying on contract manufacturing will face increased costs and management complexity

2. Accelerated Industry Clearance
   - Non-compliant small OEMs and brand owners will gradually exit the market

3. Business Model Reconstruction
   - The advantages of the asset-light model are weakened, and vertical integration of the industrial chain becomes a trend

4. Long-term Beneficial to the Industry
   - Food safety level improves, industry concentration increases, which is beneficial to leading enterprises

• Quickly establish a compliance system
• Optimize the structure of contract manufacturing
• Improve independent production capacity
• Strengthen supply chain management

• Full industry chain enterprises are more investment-worthy
• Focus on enterprises’ compliance system construction and supply chain management capabilities
• Avoid asset-light enterprises highly dependent on contract manufacturing with weak management capabilities

The new regulations will be officially implemented on December 1, 2026, and enterprises have nearly one year of preparation time. Whether they can complete the construction of the compliance system and the adjustment of the business model within this window period will become a key factor determining the future competitiveness of enterprises.

[1] Xinhuanet - “OEM Processing” and Other Food Contract Manufacturing Will Face Regulatory New Rules (http://www.news.cn/fortune/20251229/ee31b335296a42648b293f789ebd8cb1/c.html)
[2] Sina Finance - State Administration for Market Regulation Responds to “Antarctic Krill Oil” Incident: Will Strengthen Supervision of Food Contract Manufacturing (https://finance.sina.com.cn/wm/2025-12-25/doc-inhczhsi3513441.shtml)
[3] Xinhuanet - 46 People Support 1.1 Billion Market: How Far Can IF Coconut Water Go? (http://www.news.cn/food/20250429/ef67ea9247164756b802c4cf42388774/c.html)
[4] Guosen Securities Research Report - Weilong Delicious (09985.HK) Company Research Report (https://pdf.dfcfw.com/pdf/H3_AP202502271643573812_1.pdf)
[5] Guancha.cn - Zongzi也要出海? Wufangzhai Seeks Hong Kong IPO, A-share Market Value Has Shrunk by 30% (https://www.guancha.cn/economy/2025_09_28_791738.shtml)
[6] The Paper - Three Squirrels Was “Knocked Down” by Ling Shi很忙 and Zhao Yiming, What Else Can They Do to Save Themselves Besides Raising Prices? (https://m.thepaper.cn/newsDetail_forward_32016366)