A chef makes meals at a fast food restaurant in Shanghai. In front of him are compound condiments made by Unilever. Unilever and Nestle possess the lion's share of the market for such products in China. [Photo / Provided to China Daily]

BEIJING - Just two brands dominate the Chinese market for compound condiments, often known as stock and used as a basis for soups and sauces. However, analysts say the sector has huge potential and there is scope for more participants.

Data from China Condiment Industrial Association (CCIA) reveals that Nestle's joint venture Shanghai Totole Food Co Ltd enjoys the biggest market share of 45 percent with its granulated chicken products. Unilever's Knorr has 25 percent of the market share. The Shenzhen-listed Chinese company Jialong Food Co Ltd comes in third with about 7.5 percent.

Compound condiments refer to granulated or powdered meat, vegetable and fruit-based stocks. Traditional condiments refer to salt, pepper, sugar, monosodium glutamate and soy sauce.

About 2 million tons of compound condiments are made every year in China.

"In Western countries, more than 60 percent of the condiment market is made up of compound condiment products, while in China the figure is about 25 to 30 percent. This is good news for companies in this industry," said Wei Xiangyun, executive director of CCIA.

According to Wei, sales of chicken-based condiments grew by more than 20 percent year-on-year in 2010.

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"Compound condiments are convenient, easy and nutritious. They are especially handy for today's fast-paced lifestyles in which many families lack time to prepare complicated meals," Wei said at a cooking demonstration of Unilever's soup base, Nongtangbao (which means thick soup cube in Mandarin). The product is designed for the Chinese market.

Unilever China first marketed the jelly-like instant soup in 2007 specifically for Chinese palates. The company also invited the Chinese singer and cooking television program presenter Lin Yilun to be the face of the product.

"As the world's biggest condiments company, Knorr aims to be the leader in the Chinese market," said Wu Liang, Unilever China's spokeswoman. She said sales revenue of Knorr Nongtangbao soup cubes increased by more than 10 percent year-on-year.

However, competition in the instant soup market is heating up. In January, Campbell Soup Co, the world's biggest soup manufacturer by market volume, joined with Hong Kong-listed Swire Pacific Ltd in a joint venture based in Shanghai to give impetus to its less than sparkling entry into the Chinese market.

"Chinese companies have advantages here because they can develop different kinds of new products specifically for the Chinese, such as hot pot-based condiments," Wei said.

Jiang Xiaodong, an analyst from Huatai United Securities, said: "The use of condiments by restaurants in China is a 150 billion yuan ($22.79 billion) industry at the moment. When you add in household consumption, the total market is massive. Chicken-based condiments are the most promising for investment."