Executive Summary: Key Takeaways for Investors
The recent social media storm over Southern Black Sesame Paste’s ingredients has uncovered significant issues facing legacy Chinese consumer brands. This controversy is not an isolated incident but a symptom of broader challenges in the fast-moving consumer goods (FMCG) sector. For investors monitoring Chinese equities, this case offers critical insights into corporate governance, product innovation, and market sustainability.
Here are the essential points from our analysis:
– The core product, Southern Black Sesame Paste, has been found to use black sesame as a minor ingredient despite its branding, highlighting regulatory gray areas and potential consumer trust issues.
– Financially, the parent company Black Sesame Group Co., Ltd. (黑芝麻集团) has seen declining revenues since 2019, with 2024 sales dropping to 24.65 billion yuan, reflecting poor performance in its staple food business.
– Repeated failed diversification attempts, from logistics to新能源 (new energy) and healthcare, have strained resources and led to regulatory warnings over governance lapses.
– A control transfer to state-owned Guanglv Da Jiankang (广旅大健康), backed by Guangxi State-owned Assets Supervision and Administration Commission (广西国资委), promises stability but raises questions about future synergies and growth.
– This saga underscores the risks for investors in aging Chinese consumer brands that fail to adapt to modern market demands, emphasizing the need for diligent due diligence on product claims and corporate strategy.
The Ingredient Uproar: Is Black Sesame Just a Flavoring?
For decades, Southern Black Sesame Paste has been marketed as a wholesome, sesame-rich product, immortalized by nostalgic advertising campaigns. However, a viral social media post in late 2024 exposed a startling reality: in some variants like the “Walnut Black Sesame Paste,” black sesame is not the primary ingredient. This revelation has sparked widespread debate among consumers and regulators, forcing a reevaluation of what defines this iconic product.
At the heart of the controversy is the product’s配料表 (ingredient list), which showed that black sesame ranked fourth or fifth, behind items like谷物粗粮粉 (grain coarse flour) and sweeteners. While the company clarified that black sesame content meets the national standard of不低于10% (not less than 10%) as per GB/T23781-2014, the ordering in the list—which by regulation reflects descending proportions—suggests that other components dominate. This situation creates a perceptual gap where the Southern Black Sesame Paste might be more accurately described as a grain-based paste with black sesame flavoring.
Regulatory Standards and Consumer Trust
China’s食品安全国家标准预包装食品标签通则 (National Food Safety Standard for Prepackaged Food Labeling) mandates that ingredients be listed in order of weight contribution. In the case of Southern Black Sesame Paste, the placement of black sesame after grains and additives implies it is not the主角 (main character), contrary to consumer expectations. This has led to accusations of挂羊头卖狗肉 (selling dog meat as mutton), eroding trust in a brand built over 40 years.
Industry experts note that such practices are not uncommon in the药食同源 (medicinal and edible) product segment. For instance, competitors like老金磨坊 (Laojin Mofang) also list grains ahead of black sesame in similar products. However, for a market leader like Southern Black Sesame Paste, this oversight is particularly damaging. The company’s reliance on brand heritage without transparent labeling risks alienating health-conscious consumers, a growing demographic in China’s consumer market.
Broader Implications for FMCG Labeling
This incident highlights a regulatory gray zone where products can technically comply with minimum content rules while misleading consumers through branding. The Southern Black Sesame Paste case may prompt stricter enforcement or revisions to labeling laws, similar to global trends toward clearer food transparency. Investors should monitor regulatory developments from bodies like the国家市场监督管理总局 (State Administration for Market Regulation), as changes could impact profit margins and compliance costs across the sector.
For international investors, this underscores the importance of scrutinizing product claims beyond surface-level marketing. The Southern Black Sesame Paste controversy serves as a cautionary tale: even established brands can face reputational damage if product integrity is questioned, potentially affecting stock performance in the Shenzhen Stock Exchange (深圳证券交易所) where Black Sesame Group is listed under ticker 000716.SZ.
Financial Decline: A Staple Brand Losing Its Way
The ingredient debate is merely a symptom of deeper financial malaise at Black Sesame Group. Since its peak in 2019, the company has struggled with declining revenues and shrinking market share, reflecting broader challenges in China’s固体冲泡类 (solid instant beverage) market. As consumer preferences shift toward ready-to-drink options and healthier alternatives, legacy brands like Southern Black Sesame Paste have failed to innovate, leading to a steady erosion of their customer base.
Financial data paints a stark picture: revenues fell from 44.76 billion yuan in 2019 to 24.65 billion yuan in 2024, a nearly 45% drop. Within this, the core food business segment saw revenue decline from 20.35 billion yuan in 2019 to 17.75 billion yuan in 2024. More tellingly, sales volume of black sesame paste products plummeted from a high of 9.52 million units in 2014 to just 4.39 million units in 2024, with a further 2.45% year-on-year decrease in the first half of 2025. This trajectory mirrors struggles seen in similar brands like维维豆奶粉 (Weiwei Soy Milk Powder), indicating a sector-wide issue.
Failed Diversification and Strategic Blunders
Recognizing the天花板 (ceiling) in its core market, Black Sesame Group embarked on multiple跨界转型 (cross-border transformations) over the past decade, but with little success. Key missteps include:
– The 2015 acquisition of容州物流园 (Rongzhou Logistics Park) for 2.56 billion yuan, which was sold two years later due to lack of synergy with the main business.
– A 7 billion yuan investment in e-commerce platform礼多多 (Lidueduo), which delivered on业绩承诺 (performance commitments) initially but then incurred losses exceeding 1 billion yuan in 2021 and 2022.
– Ventures into新能源 (new energy) via天臣新能源 (Tianchen New Energy) in 2017, healthcare through广投国医 (Guangtou Guoyi) in 2020, and a 35 billion yuan energy storage battery project in 2023, all of which diluted focus without yielding profits.
These diversifications not only drained financial resources but also exposed governance weaknesses. In 2025, the company received regulatory警示函 (warning letters) from the China Securities Regulatory Commission (中国证监会) for failures like undisclosed guarantees for the南宁儿童医院PPP项目 (Nanning Children’s Hospital PPP project) and issues with控股股东及关联方非经营性占用资金 (non-operational fund occupancy by controlling shareholders and related parties). Such lapses have further undermined investor confidence in the Southern Black Sesame Paste parent company.
Market Parallels and Consumer Shifts
The decline of Southern Black Sesame Paste is emblematic of a larger trend in China’s FMCG sector, where传统品牌 (traditional brands) are losing ground to agile newcomers. Factors contributing to this include:
– Rising demand for convenient, on-the-go products, as seen in the growth of即饮 (ready-to-drink) beverages.
– Increasing health awareness, with consumers seeking低糖 (low-sugar) and天然 (natural) alternatives, which many legacy products lack.
– The power of social media in amplifying product controversies, as demonstrated by the recent ingredient scrutiny.
For fund managers and institutional investors, this highlights the need to assess not just financial metrics but also brand relevance and innovation pipelines when evaluating Chinese consumer equities. The Southern Black Sesame Paste saga shows that even market leaders can become vulnerable if they neglect core consumer trends.
Corporate Governance and Regulatory Fallout
The financial troubles at Black Sesame Group are compounded by significant corporate governance issues, which have attracted regulatory attention and pose risks for shareholders. The company’s aggressive diversification and internal mismanagement have led to a series of compliance failures, reflecting broader challenges in some Chinese listed firms where governance standards may lag behind market expectations.
In 2025, regulatory actions included warnings for未及时披露 (untimely disclosure) of guarantees and违规担保 (irregular guarantees), pointing to weaknesses in internal controls. These incidents are not isolated; they stem from the complex ownership structure involving the李汉朝 (Li Hanchao) and李汉荣 (Li Hanrong) family, who have controlled the company for nearly two decades. Such governance risks can directly impact stock volatility and long-term viability, making Southern Black Sesame Paste a case study in the importance of robust oversight.
Impact on Investor Confidence and Stock Performance
The cumulative effect of product controversies and governance lapses has weighed heavily on Black Sesame Group’s stock performance. While specific price data isn’t provided in the source, the overall trend aligns with declining revenues and regulatory scrutiny. Investors in Chinese equities, particularly those focused on consumer staples, must consider how governance quality affects risk profiles. The Southern Black Sesame Paste example underscores that even in stable sectors, poor governance can erode value.
Moreover, these issues may influence the broader market perception of similar companies. As regulatory bodies like the深圳证券交易所 (Shenzhen Stock Exchange) tighten oversight, firms with weak governance could face higher compliance costs or restricted access to capital. This is crucial for international investors who rely on transparent reporting for decision-making.
The Control Transfer: A Lifeline from State-Owned Backing
In a pivotal move to stabilize the company, the controlling shareholders of Black Sesame Group agreed in August 2025 to transfer 20% of shares to广旅大健康 (Guanglv Da Jiankang), a subsidiary under the广西国资委 (Guangxi State-owned Assets Supervision and Administration Commission), for approximately 9.42 billion yuan. This deal, which includes the relinquishment of voting rights by the original owners, will make Guanglv Da Jiankang the new控股股东 (controlling shareholder), with the广西国资委 as the ultimate实控人 (actual controller).
The transaction has cleared key hurdles, including反垄断审查 (anti-monopoly review) by the国家市场监督管理总局 (State Administration for Market Regulation) in December 2025 and approval from the广西国资委. Once finalized after深圳证券交易所 (Shenzhen Stock Exchange) compliance checks, this marks a significant shift for Southern Black Sesame Paste, potentially offering financial stability and strategic support from a state-owned entity focused on文旅和大健康 (culture, tourism, and health).
Future Synergies and Performance Commitments
As part of the deal, the sellers have extended业绩承诺 (performance commitments) for 2026-2028, guaranteeing that the existing business segments achieve net profits of at least 0.95 billion yuan, 1.05 billion yuan, and 1.15 billion yuan, respectively. To secure this, 5% of remaining shares will be质押 (pledged) to the buyer. This arrangement provides some assurance to investors but also raises questions about execution.
The potential synergies with Guanglv Da Jiankang’s portfolio—which includes景区 (scenic spots),酒店 (hotels), and康养业务 (healthcare services)—could open new distribution channels or product lines for Southern Black Sesame Paste. For instance, the paste might be rebranded as a health supplement within tourism packages. However, challenges remain, such as integrating disparate business cultures and revitalizing the aging product lineup. The success of this partnership will depend on how effectively the new management addresses the core issues plaguing the Southern Black Sesame Paste brand.
Broader Trends in Chinese Equity Markets
This control transfer reflects a growing trend in China where struggling private firms seek state-owned backing for resilience. For investors, such moves can reduce short-term volatility but may also limit aggressive growth strategies. In the case of Southern Black Sesame Paste, the国资背书 (state-owned backing) could improve credit ratings and investor sentiment, yet it doesn’t automatically solve fundamental problems like product innovation or market competition.
Analysts should watch how similar transactions unfold in other sectors, as they could signal regulatory preferences or economic priorities. The Southern Black Sesame Paste deal highlights the interplay between market forces and state intervention in China’s equity markets, a dynamic that global investors must navigate carefully.
Investment Implications and Forward-Looking Guidance
The Southern Black Sesame Paste controversy offers several lessons for sophisticated investors in Chinese equities. First, it emphasizes the need for deep due diligence on product claims and regulatory compliance, especially in consumer goods where branding can obscure reality. Second, it showcases the risks of over-diversification without core competency alignment, a common pitfall for legacy companies seeking growth. Third, the state-backed rescue illustrates both the safety nets and constraints in China’s market ecosystem.
Looking ahead, key factors to monitor include:
– Regulatory changes to food labeling standards, which could affect costs and marketing strategies across the FMCG sector.
– The performance of Black Sesame Group under new ownership, particularly its ability to meet profit commitments and innovate its product offerings.
– Broader consumer trends in China, such as the shift toward health and convenience, which will determine the relevance of traditional brands like Southern Black Sesame Paste.
For institutional investors and fund managers, this case underscores the importance of holistic analysis that combines financial metrics with brand health and governance quality. While the Southern Black Sesame Paste brand may have lost some luster, its evolution under state stewardship could present opportunities if managed effectively.
Navigating the New Landscape of Chinese Consumer Equities
The saga of Southern Black Sesame Paste is more than a story of ingredient scrutiny; it’s a microcosm of the challenges facing China’s consumer staples sector. From declining sales and failed diversifications to governance lapses and a state-led rescue, this narrative reveals the complex dynamics at play for investors. The Southern Black Sesame Paste brand, once a household name, now stands at a crossroads where its future hinges on strategic reinvention under new ownership.
As global markets continue to integrate Chinese equities, professionals must stay vigilant about such underlying issues. We recommend that investors:
– Conduct thorough reviews of product portfolios and regulatory exposures for companies in the FMCG space.
– Assess governance structures and track records of diversification to avoid firms with scattered strategies.
– Monitor state-involved transactions for potential stability benefits versus innovation trade-offs.
The Southern Black Sesame Paste episode serves as a timely reminder that in China’s rapidly evolving market, even iconic brands are not immune to disruption. By learning from these insights, you can make more informed decisions and capitalize on emerging opportunities in Chinese equity investments.