Grandpa's Farm Hong Kong IPO: Analysis of Quality Control and Safety Risks Under the OEM Model

Based on collected public information,

is a baby snack and complementary food enterprise applying for listing on the Hong Kong Stock Exchange, with its core business model being OEM (Original Equipment Manufacturer) production. Disclosures in its prospectus indicate that its OEM model has the following major drawbacks:

According to public regulatory information, Grandpa’s Farm had multiple product quality issues between 2019 and 2021 [1][2]:

• 2019
  : The State Administration for Market Regulation notified that the sodium content of two of its imported complementary food products did not meet standards
• 2020
  : The Guangdong Provincial Administration for Market Regulation notified that two of its infant rice cereal products failed to meet standards for pantothenic acid and iodine content. The relevant distributors had their illegal gains confiscated and were fined, with a total penalty and confiscation of approximately
  RMB 290,000
• 2021
  : The General Administration of Customs notified that a batch of its imported rice cereal was refused entry due to calcium content failing to meet national standards

These consecutive quality incidents do not reflect occasional issues, but rather

in the supply chain and quality control system [1].

• As a baby snack and complementary food brand that launched operations in 2015 and entered the market in 2018, it
  only obtained its quality management system certification in 2024
  , filling this basic certification gap nearly a decade after starting operations
• The company admitted, “Due to weak control over the production process, we may face risks of insufficient output or substandard quality, and our OEM manufacturers may not hold the necessary licenses or certifications” [1][2]

Financial data from the prospectus shows that the company’s resources are clearly skewed towards marketing:

• Sales and distribution expenses accounted for
  32.3%, 35.0%, and 36.3%
  of revenue (for the first three quarters of 2023-2025), showing an upward trend [1][3]
• As of the end of September 2025, the company has 640 full-time employees, with
  only 27 employees in the manufacturing segment

• The number of product SKUs surged from 158 in 2023 to
  269
  as of September 2025, with as many as
  62 cooperative OEM manufacturers
• The company clearly stated, “We entrust third-party manufacturers to produce almost all of our own brand products under the OEM model” [2][3]
• Its self-built factory (in Zengcheng, Guangzhou) has only 3 production lines, mainly producing pork liver powder, fruit juice, and edible oil. It
  only started production in October 2025
  , making it difficult to change the “heavy reliance on OEM” pattern in the short term [2]

, especially in the “trust-sensitive” baby food sector [1][3].

• Taking hawthorn sticks as an example, consumers found that the ingredients of Grandpa’s Farm’s OEM products are almost identical to those of Jinye’s own brand, but the prices differ significantly: Grandpa’s Farm’s hawthorn sticks are
  RMB 27.92/72g
  , while Jinye’s own brand is
  RMB 26.9/308g
  [3]
• Its claimed “low-salt soy sauce for children” actually has a higher sodium content than regular adult soy sauce, raising questions about the matching degree between the product’s “high premium” and its actual quality [2][3]

• Growth heavily relies on traffic acquisition, with e-commerce channels contributing
  over 72%
  of revenue [1]
• Traffic costs continue to rise, with e-commerce platform services and promotion fees accounting for
  over 70%
  of marketing expenses for a long time

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A Chinese food industry commentator pointed out that Grandpa’s Farm’s OEM model inherently leads to high gross margins, but

[1].

For investors, the OEM model itself is not an absolute problem; the key lies in whether the enterprise has sufficiently strong supply chain management capabilities, including supplier access, process audits, batch testing, sample retention systems, issue traceability, and recall mechanisms [1]. Judging from Grandpa’s Farm’s historical records, the depth and effectiveness of its quality control system remain to be tested by the capital market.

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[1] The Paper - “OEM Expert in Marketing: ‘Grandpa’s Farm’ Files for Hong Kong IPO” (https://m.thepaper.cn/newsDetail_forward_32349516)

[2] Beijing News - “Baby Food Enterprise ‘Grandpa’s Farm’ Submits Application to Hong Kong Stock Exchange, Expands Product Line Heavily via OEM” (https://www.bjnews.com.cn/detail/1768303789168857.html)

[3] Jiemian News - “‘Grandpa’s Farm’ Wants to Go Public, but OEM Struggles to Support High Premiums for Children’s Snacks” (https://m.jiemian.com/article/13861381.html)