We are a leading compound condiment manufacturer in China primarily targeting the hot pot condiment market. We are the largest mid- to high-end hot pot soup flavoring condiment manufacturer in China as measured by sales value in 2015, accounting for over 30% market share which is over three times that of the second largest market participant, according to Frost & Sullivan.. We are also the second largest hot pot condiment manufacturer in China as measured by sales value in 2015, accounting for 6.8% market share, according to Frost & Sullivan. We are the only hot pot condiment manufacturer primarily focused on the fast-growing mid- to high-end segment, according to Frost & Sullivan . During the Track Record Period, substantially all of our hot pot soup flavoring products were mid- to high-end products and we achieved the highest sales value growth rate among the five largest hot pot condiment manufacturers in China.
Benefitting from the well established “Haidilao” (海底撈) brand as well as our market-oriented and solid innovation capabilities, extensive network coverage, advanced production techniques and stringent quality control mechanism, we are one of the few Chinese compound condiment manufacturers with a nationwide reputation. We aspire to become a leading culinary condiment solutions provider in China.
Our market leadership is built upon the success of our products. We aim to provide comprehensive and high quality products by relentlessly executing the following strategies (i) consistent focus on the mid- to high-end marketsector, (ii) continuous expansion into new segments of the compound condiment market, and (iii) uncompromising commitment to product quality to keep abreast of the evolving customer expectations and food safety standards. We offer a wide range of condiment products, ranging from hot pot condiments to Chinese-style compound condiments such as spicy stir-fry pot and pickles and fish stew condiments. As of 31 December 2015, we had three major product lines with 56 products.
We have established an extensive nationwide distribution network. As of 31 December 2015, our 339 distributors covered 31 provincial territories, all first-tier cities, 28 second-tier cities and 134 third- and fourth-tier cities in China as well as 11 overseas countries and overseas markets, enabling our products to reach over 6,000 hypermarkets and supermarkets in China, including Walmart and Carrefour, and traditional retail channels, such as grocery stores, neighborhood stores, and butcher shops. In addition, we have established and have been continuously strengthening our presence in overseas markets through our distributors. Our physical network is further supplemented by e-commerce channels such as Tmall.com and JD.com. Our products are sold to 11 overseas countries and overseas regionsmarkets in North America, Europe and Asia.
We are the sole supplier of hot pot soup flavoring products for Haidilao Group in China, and our products have significantly contributed to the successful growth of Haidilao Group. Haidilao Group was the largest Chinese hot pot restaurant chain and the No.1 Chinese cuisine restaurant company in China as measured by sales value in both 2014 and 2015, according to Frost & Sullivan. In 2013, 2014 and 2015, Haidilao Group owned 93, 111 and 142 hot pot restaurants in 24, 29 and 39 cities across China, respectively, and owned two, four and seven hot pot restaurants in two, three and five overseas locations, respectively. The continuous expansion and growth of the Haidilao Group in China and around the globe has significantly boosted our business growth as well as promoted customers’ recognition and acceptance of our products. Our products are displayed and available for purchase at Haidilao hot pot restaurants, giving us access to promote our products to our target customers. Over 50 million customers dineding at Haidilao hot pot restaurants in 2015 and 8.6 million members with Haidilao Group’s memberships.
We have a dedicated research and development team with a market-orientated focus to collect and analyze market information and data, formulate and upgrade product formulas, and optimize production processes and equipment. Our research and development team has been continuously improvinged our products’ formulas to meet our customers’ evolving taste and has launched several popular condiment products on the retail market. The formulas of our hot pot condiment products have been well tested and endorsed by hundreds of millions of the Haidilao Group’s customers, and our products have significantly contributed to the success of the Haidilao Group. Furthermore, our market-oriented and solid in-house research and development capabilities enable us to expand quickly into new market segments and command a significant market share. During the years ended 31 December 2013, 2014 and 2015, we launched one, four and ten new products, respectively.
As of 31 December2015, we employed 12 research and development professionals, each of them has relevant education or working experience in food science and consumer sectors. We also collaborate with other institutions, including academic institutions and catering service providers on research and development activities.
We believe that our research and development capabilities have enabled us to maintain our competitiveness, and have supported the development of our business. Our research and development efforts are market-oriented. We regularly conduct market research and collect market information from our sales and marketing team, contract manufacturers and raw material suppliers to assist our research and development activities, which are primarily focused on the following areas:
Developing new products. We continuously develop and test innovative products to be launched when appropriate opportunities arise. We often conduct field studies to discover and explore new recipes and raw materials. We have a track record of launching successful new products that help drive our revenue growth. For example, we were one of the first companies offering high quality vegetable-oil-based hot pot soup flavoring products to address consumers’ growing health consciousness.
Upgrading existing products. In addition to developing new products, we continuously upgrade our existing products by improving formulas and developing different flavors and packaging materials. For example, in 2015, we introduced premium hot pot dipping sauce products, which contain more sesame sauce and less sodium with restaurant-like flavor.
Optimizing production process and equipment. Our research and development team works closely with our production team to optimize production processes to enhance product quality and production efficiency. We have installed a set of automated equipment in the stir-fry pots to monitor the timing, pressure and temperature in the production process for delivering hot pot soup flavoring products that are stable and consistent in quality.
On 13 January 2012, Sichuan Haidilao established Zhengzhou Shuhai as a limited liability company in the PRC with a registered capital of RMB1,000,000, to principally engage in the production and sales of Compound Condiments. Upon completion of the construction of its production facilities, Zhengzhou Shuhai commenced the production of Compound Condiments in June 2013. Immediately prior to the Reorganization, Zhengzhou Shuhai and Haidilao Chengdu Branch were primarily engaged in the production of Compound Condiments.
In line with our business development strategy, we intend to expand our production capacity to meet market demand for our products. We plan to construct our Bazhou Production Base located in Bazhou, Hebei Province with an aggregate plant area of approximately 66,667 sq. m. that can accommodate production facility designed for a maximum annual production capacity of approximately 100,000 tons, the initial stage of which will equip with production facilities that have an annual production capacity of approximately 35,000 tons. Thus construction of the initial stage of Bazhou Production Base will take place in two phases. Phase I will mainly consist of construction of the production facilities and is expected to be completed and commence operation by the first half of 2018. Upon completion of Phase I, the production facilities at Bazhou Production Base will have an annual production capacity of approximately 35,000 tons. Phase II will mainly consist of construction of the storage and research and development facilities and other ancillary facilities and is expected to be completed by 2019 and commence operation in 2020. The initial stage of our Bazhou Production Base will (i) increase our production capacity and reduce our need for contract manufacturers, particularly during our peak seasons, (ii) optimize our product portfolio to manufacture new product lines and utilize new packaging materials by installing new production and packaging equipment that enable us to manufacture bottled compound condiment products, (iii) upgrade our storage facilities, and (iv) help us better manage our logistics costs due to its central geographic location in Northern China.
We engage third-party logistics service providers to collect our products from warehouses at our production facilities in Zhengzhou and Chengdu and deliver them to our customers. As of 31 December 2015, we had four logistics service providers. Our transportation arrangements with third-party logistics service providers enable us to maintain a low level of capital investment in developing and maintaining an in-house logistics system.
We select logistics service providers based on their reputation, scale of operation, track record and price. We usually enter into agreements with our logistics service providers on a semiannual basis. We use a standardized logistics agreement for our logistics service providers. Our logistics service providers bear the risks associated with the delivery of our products， are liable for product contamination occuring during the transportation process and are required to purchase necessary insurance. We assess our logistics service providers based on delivery performance, transportation capability and overall service quality. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material disruption in the delivery of our products or suffered any loss due to late delivery or mishandling of products by our logistics service providers.