A Hong Kong Stock Exchange filing on July 6, 2026, revealed that the prospectus for viral infant supplementary food brand Grandpa's Farm had lapsed. The company, which submitted its listing application on January 6, 2026, with CMB International as its sole sponsor, failed to complete its hearing within the six-month review period, marking an initial public offering defeat. Looking at the financials, Grandpa's Farm's performance was hardly disappointing: revenue came in at RMB 622 million, RMB 875 million, and RMB 780 million for 2023, 2024, and the first three quarters of 2025, respectively, with net profits of RMB 75 million, RMB 103 million, and RMB 87 million. In 2024, based on gross merchandise value (GMV) in China's infant supplementary food sector, the company ranked second in the industry with approximately RMB 1.5 billion in GMV, and it led the organic infant supplementary food niche with a 23.2% market share. However, these impressive numbers failed to open the doors to the capital markets. Breaking down its business model, at least three structural concerns emerge.

Concern One: 269 SKUs Nearly All Outsourced, 27 People Managing Quality Control in an 'Asset-Light' Gamble

The prospectus laid bare this company's most critical risk exposure. As of September 2025, nearly all of Grandpa's Farm's 269 SKUs relied on external contract manufacturing, working with as many as 62 OEM manufacturers, 49 of which are based in China. It wasn't until October 2025 that its Zengcheng factory began small-scale production, with designed annual capacity covering just 100 tons of pork liver powder, 2,400 tons of juice, and 300 tons of cooking oil, while the company's revenue had already surpassed RMB 700 million during the same period. Even more worrying is the staffing structure. As of September 30, 2025, of the company's 640 full-time employees, only 27 were responsible for production and quality control, with over 70% of staff concentrated in areas like brand operations, e-commerce marketing, and sales promotion. These 27 manufacturing-related staff members were tasked with coordinating hundreds of SKUs and 62 contract factories, making the quality control chain so long and management so complex that it far exceeds the capacity of a typical food company.

Industry comparisons further highlight the issue. Industry leader Ying's Holding saw its outsourced production ratio drop from 55.10% in 2024 to 47.95% in 2025, whereas Grandpa's Farm's near-100% reliance on contract manufacturing makes it an outlier in the infant food sector. The quality control problems tied to this outsourcing dependency are not merely theoretical. Public records show that between 2019 and 2021, at least eight batches of its products failed inspection, with issues concentrated in key nutritional indicators such as sodium, iodine, and calcium falling short of standards. In June 2019, the State Administration for Market Regulation reported that two of its imported products had sodium levels below 80% of the labeled value, with over 43,000 defective units reaching the market. In October 2025, several baby soy sauce products were exposed for having sodium content higher than adult versions, and its DHA high-protein cod sausage contained up to 774 milligrams of sodium per 100 grams. On the Black Cat Complaints platform, more than 200 complaints have been filed regarding foreign objects, spoilage, and off-flavors in the brand's products. In the prospectus, the company itself admitted that "due to weak control over the production process, the company may face the risk of product quality failing to meet standards."

Concern Two: Marketing Spend is 16x R&D, a 'Marketing Company' Rather Than a 'Food Technology Enterprise'

Grandpa's Farm's second major concern lies in the nature of its growth model. In 2023, 2024, and the first three quarters of 2025, the company's selling and distribution expenses were RMB 201 million, RMB 306 million, and RMB 283 million, with their share of revenue climbing from 32.3% to 36.3%. In stark contrast, R&D investment during the same periods was only RMB 17.685 million, RMB 28.347 million, and RMB 17.206 million, accounting for just 2.8%, 3.2%, and 2.2% of revenue, respectively. Marketing expenses were 11.37 times, 10.8 times, and 16.45 times higher than R&D spending. This company, which touts its "wholehearted development" slogan and positions itself as a "food technology enterprise," shows an R&D outlay so light that it sharply contradicts its brand narrative. What's more concerning is the continued decline in R&D intensity. In the first three quarters of 2025, R&D spending fell 1.3% year-over-year, dropping from 3.2% in 2024 to 2.2%. This brings a key issue into focus: Grandpa's Farm's domestic holding company, Aspiri (Guangzhou) Food, was certified as a High-Tech Enterprise in December 2022, enjoying a reduced 15% corporate income tax rate, and renewed this status in December 2025. According to the Administrative Measures for the Recognition of High-Tech Enterprises, a company's total R&D expenses over the past three fiscal years must account for no less than 3% of its sales revenue. If R&D intensity continues to fall below the threshold, whether the High-Tech Enterprise qualification can be successfully renewed will directly affect the "quality" of the company's consolidated financial statements. The fragility of a marketing-driven model is also reflected in a persistently declining net profit margin. Despite gross margins staying above 55% (reaching 58.8% in 2024), net margin fell from 12.1% in 2023 to 11.7% in 2024, and further down to 11.2% in the first three quarters of 2025. Heavy selling expenses are continuously eroding profitability.

Concern Three: Compliance Gaps and Cracks in Brand Trust

Beyond the risks inherent in its business model, Grandpa's Farm also carries notable hidden dangers in compliance and brand trust that cannot be overlooked. The prospectus reveals that in 2023, 2024, and the first three quarters of 2025, the company's shortfalls in social insurance and housing fund contributions reached RMB 4.7 million, RMB 6.8 million, and RMB 5.9 million, respectively, accumulating to RMB 17.4 million owed over less than three years. Against this backdrop of insufficient employee social security payments, the company had previously made generous dividend distributions, a contrast that drew regulatory scrutiny during the IPO review. On brand trust, Grandpa's Farm's long-standing "foreign brand" positioning also faces questioning. The prospectus discloses that the company was established in 2015 in Guangzhou by four Chinese founders—Yang Gang, Jiang Fuquan, He Jiannong, and Liu Haibo—whose core founding team came from local daily chemical backgrounds at companies like Bluemoon and Weilai Daily Chemical, with no deep experience in the food industry. However, when the products hit the market in 2018, the brand presented itself as a "European Dutch infant food brand," with promotional copy repeatedly emphasizing "European original import" and "rooted in Europe." The brand identity controversy is particularly sensitive during the listing process because it directly touches the valuable asset of consumer trust—and once trust is damaged, the cost of repair is extremely high.

Industry Mirror: The Model Conundrum in the Infant Supplementary Food Track

Grandpa's Farm's difficulties are not an isolated case. China's infant supplementary food market is highly fragmented, with the top five brands holding a combined market share of just 14.2%. The industry leader, Ying's Holding, ranks first with a 5.7% share, followed by Grandpa's Farm at 3.3%, and together the two account for less than 10%. Against the backdrop of declining birth rates and shifting consumer conditions, the appeal of an "asset-light plus high-marketing" model is waning. The Hong Kong Stock Exchange has tightened its scrutiny of supply chain transparency and profitability sustainability, with contract manufacturing ratios, quality control systems, and financial health in prospectuses becoming key focal points. Industry insiders point out that Grandpa's Farm's IPO failure is not merely a case of a listing being blocked; it is a microcosm of the entire infant supplementary food industry's "marketing-heavy, product-light" model facing fresh scrutiny both in the capital markets and from consumers. For this brand with annual revenue in the RMB 800 million range, the real test may not lie in the IPO itself, but in whether it can shift from a "marketing-driven" to a "product-driven" approach—a question that is both a compliance challenge for listing success and a fundamental question of brand survival.

Note: This article was generated by AI; please read with discernment.