Executive Summary: Critical Takeaways from Grandpa’s Farm’s IPO Filing
– The IPO prospectus of Grandpa’s Farm (爷爷的农场) exposes a deliberate ‘fake foreign branding’ strategy, where the company marketed itself as a European brand while being founded and controlled by Chinese entrepreneurs, eroding consumer trust.
– Heavy reliance on OEM manufacturers with minimal in-house production has led to frequent product quality failures, resulting in multiple regulatory penalties from authorities like the State Administration for Market Regulation (国家市场监督管理总局).
– Marketing expenses dwarf research and development spending, with over 70% of revenue from e-commerce channels, creating high operational vulnerability amid rising online promotion costs.
– Concerning related-party transactions, particularly with entities linked to founders, and aggressive pre-IPO dividends raise red flags about corporate governance and financial priorities.
– Persistent underpayment of employee social security and housing funds highlights compliance risks, casting doubt on the company’s sustainability ahead of its Hong Kong listing attempt.
The Mask Slips: A ‘Fake Foreign Brand’ Built on Deception
For years, Grandpa’s Farm cultivated an image as a premium European infant and child food brand, capitalizing on the ‘imported halo’ to command higher prices in China’s competitive maternal and child market. However, its recent IPO application to the Hong Kong Stock Exchange has torn away this facade, revealing a company built on a foundation of ‘fake foreign branding’. This strategy, where a domestically founded company poses as a foreign entity to gain market advantage, is now under intense scrutiny, threatening the very trust that fueled its growth.
Manufactured Origins and Marketing Mirage
Early brand promotions consistently emphasized ‘European origins’ and ‘Dutch heritage’. In a 2018 launch event themed ‘European Infant Food Brand Officially Enters China’, co-founder Jiang Fuquan (姜福全) was introduced as the ‘China Regional Head’, carefully obscuring the brand’s true roots. The prospectus, however, confirms that Grandpa’s Farm was established in 2015 by four Chinese nationals: Yang Gang (杨钢), Jiang Fuquan (姜福全), He Jiannong (何建农), and Liu Haibo (刘海波). The core entity is Guangzhou Jiantewei Daily Necessities Co., Ltd. (广州健特唯日用品有限公司), with all founders hailing from a background in Whaley (威莱) household chemicals, not food manufacturing. They held 100% ownership pre-IPO. An overseas entity, Earth Prime Enterprise B.V., registered in 2017 by Jiang Fuquan (姜福全), was used to bolster the foreign illusion, with its legal representative changed to Michele Iacovitti in 2018 when the brand ‘entered’ China. The Chinese distributor, Esprey (Guangzhou) Food Co., Ltd. (艾斯普瑞（广州）食品有限公司), was also led by Jiang Fuquan (姜福全), completing a circular control structure designed to mislead.
Local Production and a Belated Reckoning
Despite the European marketing, most of Grandpa’s Farm’s core products have long been manufactured in China, relying on a network of over 60 OEM partners. Only a minimal portion were imported. It wasn’t until 2024, facing public criticism, that the company abandoned its European heritage claims. This ‘deceive first, correct later’ approach has severely depleted consumer goodwill. For investors, this ‘fake foreign branding’ episode underscores a critical vulnerability: in an era where authenticity is prized, brands built on such deception face profound reputational and regulatory risks that can unravel rapidly.
OEM Dependency and a Trail of Quality Control Failures
The company’s operational model is a house of cards, heavily dependent on third-party manufacturers with weak internal oversight. This ‘fake foreign branding’ was not just a marketing ploy but part of a broader pattern where product integrity was sacrificed for scale and cost savings.
A Skeleton Production Team and Regulatory Blowback
As of September 30, 2025, Grandpa’s Farm had only 27 manufacturing employees out of 640 total staff. Production was entirely outsourced to 62 OEM manufacturers. A small in-house factory began operations only in October 2025, covering limited categories. This lack of control has direct consequences: regulatory records show at least eight batches of products failed quality checks since 2019. Issues included deficient levels of iodine, sodium, and calcium – critical nutrients for infant development. In June 2019, the State Administration for Market Regulation (国家市场监督管理总局) flagged two imported rice cereal and fruit puree products for sodium content falling below 80% of the labeled value. By October 2019, its infant rice cereal was again blacklisted for insufficient iodine. Penalties followed; in 2020, the company was fined approximately 290,000 yuan for substandard iodine and pantothenic acid levels in baby cereal.
Ongoing Controversies and Ingredient Misrepresentation
The quality concerns persist. In September 2025, media reports questioned its ‘A2 Buffalo Pure Milk’, noting that the ingredient list showed ‘raw milk, raw buffalo milk’ with buffalo milk comprising only about 40%, not the claimed pure buffalo milk product. Later, in October 2025, its marketing of ‘child-specific’ and ‘reduced-salt’ soy sauce was challenged. Reports indicated its sodium content was higher than some adult low-salt versions, yet it was priced nearly ten times more. Similarly, its DHA cod sausage contained 774mg of sodium per 100g, far exceeding standards for high-sodium food. These incidents point to a pattern of concept炒作 (concept hype) over substantive product quality, a dangerous game in the sensitive infant nutrition sector.
Marketing Overdependence and Opaque Related-Party Deals
Grandpa’s Farm’s financial priorities appear skewed, with extravagant marketing spending and entangled transactions that raise governance questions. The revelation of its ‘fake foreign branding’ is symptomatic of a deeper imbalance where perception is valued over product and prudent management.
Sky-High Customer Acquisition Costs and E-commerce Vulnerability
From 2023 to the first nine months of 2025, sales and distribution expenses ballooned from 201 million yuan to 283 million yuan, rising from 32.3% to 36.3% of revenue. In stark contrast, R&D spending was a mere 17.685 million yuan, 28.347 million yuan, and 17.206 million yuan for the same periods, representing just 2.8%, 3.2%, and 2.2% of revenue. Marketing spend was 11.37 to 16.45 times higher than R&D. Over 70% of revenue comes from e-commerce channels, with platform service and promotion fees consuming over 70% of marketing支出 (expenditure). Rough estimates suggest the company spends 1 yuan on promotion for every 3.6 yuan of online revenue. With industry reports indicating e-commerce promotion costs rising 30-50% since 2024 and conversion rates dropping over 10%, this model is inherently unstable and costly.
Transactions with Founder-Linked Entities
Compounding these risks are related-party transactions detailed in the prospectus. Grandpa’s Farm has significant dealings with Guangzhou Shengcheng Mama Wang Technology Co., Ltd. (广州盛成妈妈网科技股份有限公司, ‘Guangzhou Shengcheng’), where founder Yang Gang (杨钢) and his spouse hold approximately 51.17% equity. Guangzhou Shengcheng operates ‘Mama Liangpin’ (妈妈良品), an e-commerce platform that directly sells Grandpa’s Farm products. Between 2023 and Q3 2025, sales through this platform were 400,000, 200,000, and 100,000 yuan, with service fees of 122,000, 60,000, and 26,000 yuan – a consistent 30% rate. More notably, Grandpa’s Farm is a major advertiser on Guangzhou Shengcheng’s properties like Mama.cn (妈妈网), paying 4.922 million, 3.976 million, and 2.984 million yuan for ad services in those periods, plus additional fees for KOL promotions. Another entity, Guangzhou Aidibei (广州爱迪贝), indirectly owned by company directors, previously supplied imported infant rice cereal and assisted in sales to membership stores. The Hong Kong Exchange scrutinizes such transactions for fairness; any perception of inflated costs or benefits could jeopardize the IPO by casting doubt on financial authenticity.
Pre-IPO Cash Extraction and Neglect of Basic Compliance
In a move that starkly contrasts with its underinvestment in R&D and quality control, Grandpa’s Farm engaged in substantial dividend payouts ahead of its listing, while simultaneously failing to meet fundamental labor obligations. This imbalance reveals a troubling preference for shareholder enrichment over long-term corporate health.
Aggressive Dividend Payouts Amid Financial Needs
The company distributed 7.5 million yuan in dividends to founder shareholders in 2024. Then, in the first three quarters of 2025, it paid out a staggering 63 million yuan in dividends, which constituted 72.07% of the profit for that period. This ‘cashing-out’ behavior occurs while the company faces slowing profit growth, ongoing capital expenditure for its own factory, and has yet to address significant employee benefit arrears. It signals to the market that insiders may be prioritizing liquidity over reinvestment into the business’s core deficiencies exposed by the ‘fake foreign branding’ scandal.
Chronic Underpayment of Employee Benefits
The prospectus discloses that as of September 2025, Grandpa’s Farm had accumulated arrears in social insurance and housing provident fund payments totaling 17.4 million yuan over nearly three years (4.7 million in 2023, 6.8 million in 2024, and 5.9 million in Q3 2025). The gap is widening. The company acknowledges that authorities may require rectification and impose fines, yet it chose to allocate profits to dividends instead of addressing these compliance holes. For institutional investors, this is a major red flag, indicating potential labor disputes, regulatory penalties, and a corporate culture that neglects basic stakeholder responsibilities.
Market Implications and the Road Ahead for Grandpa’s Farm
The IPO document of Grandpa’s Farm serves less as a growth story and more as a risk disclosure ledger. The exposure of its ‘fake foreign branding’, coupled with systemic quality, governance, and compliance issues, presents a high-risk profile for potential investors. In today’s market, where consumers and regulators demand transparency and authenticity, companies built on artifice face intense pressure. For Grandpa’s Farm, merely listing on the Hong Kong Stock Exchange (香港交易所) will not resolve these fundamental flaws. The path forward requires a genuine transformation: substantial investment in in-house production capability, a rigorous overhaul of quality control systems, transparency in all transactions, and full compliance with labor regulations. Investors should scrutinize this IPO not for its past growth metrics, but for credible commitments to address these embedded risks. The saga of Grandpa’s Farm is a cautionary tale for the broader consumer sector in China – sustainable value is built on product integrity and sound governance, not on marketing illusions like ‘fake foreign branding’.