Cross-Border Payment Risk Analysis of Grandpa's Farm

Based on the information I collected, “Grandpa’s Farm” (Grandpa’s Farm International Holdings Limited) is a Chinese local maternal and infant food brand currently applying for listing on the Hong Kong Stock Exchange[1][2]. The company adopts a business model that combines global procurement and localized production, involving multiple dimensions of cross-border payment risks. The following is a detailed analysis:

Grandpa’s Farm’s cross-border business is mainly reflected in the following aspects[1][2][3]:

• Raw materials are sourced from multiple countries/regions around the world, including organic rice from Northeast China, water buffalo milk from Guangxi, walnut oil from France, olive oil from Spain, grains from Australia, etc
• The supplier network is decentralized, involving 62 overseas OEM manufacturers
• Some products are labeled as “Imported from Spain”, “Originated in Portugal”, etc

• Overseas entity: Earth Prime Enterprise B.V. (established in the Netherlands in 2017)
• Hong Kong company: Earth Prime Enterprise Limited (the brand’s owning company)
• Chinese operating entity: Earth Prime (Guangzhou) Food Co., Ltd.
• The brand’s founding team previously worked together at Walch (Guangzhou) Daily Necessities Co., Ltd.

According to the latest data from the State Administration of Foreign Exchange in January 2026, the scale of enterprises using foreign exchange derivatives to manage exchange rate risks in 2025 exceeded USD 1.9 trillion, nearly doubling that of 2020[4]. As an enterprise involved in multi-currency procurement, Grandpa’s Farm faces the following risks:

• Procurement-side exchange rate risk
  : Purchasing French walnut oil in euros, Australian grains in Australian dollars, and paying for some imported raw materials in US dollars
• Revenue-side structure
  : Although most revenue comes from within China (online channels account for over 70%), brand authorization and some product sales may involve foreign exchange income
• Hedging coverage rate
  : As of 2025, the company’s foreign exchange hedging ratio is about 30%, meaning a considerable portion of its business is still exposed to exchange rate fluctuations[4]

Grandpa’s Farm relies on a highly decentralized global supplier network, and the payment risks include[3]:

• Foreign exchange compliance risk
  : Cross-border procurement must comply with the “Foreign Exchange Administration Regulations”, and large-value and frequent foreign exchange payments require authenticity verification
• Product quality notification risk
  : In 2021, the General Administration of Customs notified that Grandpa’s Farm’s infant rice flour imported from Belourthe S.A. in Belgium was refused entry due to non-compliant calcium content, causing direct economic losses[3]
• “Fake foreign brand” controversy
  : Overemphasizing its “European brand” identity in the early stage may involve compliance risks of false advertising[1][2]

According to the prospectus disclosure, Grandpa’s Farm has the following related party transactions[2][3]:

• Related party transactions with Mummy.com
  : E-commerce platform services, advertising services, KOL promotion services, etc.
• Two-way transactions with core platform customer (JD.com)
  : Acting as both a customer and a supplier, the company sold goods worth RMB 132 million, RMB 212 million, and RMB 187 million to JD.com in each reporting period, while purchasing platform services worth RMB 32.75 million to RMB 92.27 million
• Related party advertising service provider
  : Purchases marketing services from an advertising service provider controlled by the actual controller Yang Gang

The fairness of pricing and transparency of capital flow for such transactions are potential risk points.

Enterprises can take the following measures to manage exchange rate risks[5]:

• Establish a hierarchical supplier management system, giving priority to core suppliers
• Introduce third-party quality inspection to control pre-procurement risks
• Negotiate more favorable payment terms with OEM factories (such as account period optimization)

• Ensure complete authenticity documents for cross-border procurement
• Standardize information disclosure of related party transactions
• Strengthen product quality control to reduce the risk of rejection due to quality issues

As a company applying for IPO, Grandpa’s Farm’s cross-border payment risk management capability will be one of the key focuses for investors. The company needs to strike a balance between global procurement expansion and risk control, especially continuously improving in raw material quality control, foreign exchange hedging strategy optimization, and transparency of related party transactions.

[1] Beijing Business Daily - The Plight of Grandpa’s Farm’s IPO (https://xinwen.bjd.com.cn/content/s695e8684e4b0687a288f6c28.html)

[2] Cailianshe - Grandpa’s Farm IPO: All-Chinese Team Packaged as a “European National Complementary Food Brand” (https://m.caizhongshe.cn/news-7909636537457268208.html)

[3] Sina Finance - Dependence on OEM and Food Safety Dilemma: Hidden Worries of the Light Asset Model Behind Grandpa’s Farm’s IPO (https://finance.sina.cn/stock/ggyj/2026-01-12/detail-inhfzqat6909741.d.html)

[4] State Administration of Foreign Exchange - Press Conference on Monetary and Financial Policies by the State Council Information Office (http://m.safe.gov.cn/safe/2026/0115/27035.html)

[5] Nuvei - Effective Strategies for Hedging Foreign Exchange Risks (https://www.nuvei.com/zh/posts/hedging-fx-risk)