Business Report on Food-Grade Silicon Dioxide of Shandong Zhonglian Chemical & Its Subsidiary

This report systematically presents the business layout, product advantages, market positioning, development opportunities, implementation plans and cooperation propositions of  Zhongqi (Guangdong) Silicon Material Co., Ltd. and its subsidiary Shandong Zhonglian Chemical Co., Ltd. in the food-grade silicon dioxide sector, with details divided into six sections as follows:

1. Enterprise Overview: Strong Strength & Standardized Operation

Shandong Zhonglian Chemical focuses on the R&D, production and sales of food-grade, pharmaceutical-grade and high-end industrial-grade silicon dioxide. Currently, it holds 16 core patents and its production technology reaches international advanced standards. In terms of production capacity, it has 2 production lines in Fujian Province and 2 nano-level production lines in Shandong Province, with an annual output of 30,000 tons of food/pharmaceutical-grade silicon dioxide and 20,000 tons of high-end industrial-grade silicon dioxide. Its products have been exported to more than 20 countries and regions worldwide.

Zhongqi (Guangdong) Silicon Material Co., Ltd., its subsidiary founded in 2006, was listed on the Guangdong Equity Exchange in 2021 (Stock Code: 880747). With well-known brands including "Zhongqi", "Zhonglian" and "Zhonghu", it has established high market influence in industries such as flavors & fragrances, coffee powder and milk powder.

In production management, the enterprise strictly adheres to international standards:

• Workshops are built in accordance with GMP (Good Manufacturing Practice) standards, adopting fully enclosed management. Personnel access follows strict GMP protocols, while material in/out is controlled via automatic sensor doors.

• The production process complies with the ISO22000:2018 Food Safety Management System. It has invested heavily in high-end equipment to ensure product quality and provides customized services to meet diverse customer needs.

2. Product Characteristics & Advantages: Anti-Caking, Safe & Reliable

Food-grade silicon dioxide, featuring a fine, porous structure, exhibits excellent adsorption capacity for moisture and oil. As a core food additive, its primary function is anti-caking — it prevents granular/powdered food (e.g., powdered flavors, instant coffee, milk powder) from caking due to moisture absorption or pressure, maintaining the food's loose texture. It can be directly mixed with food raw materials and is widely applied in spices, non-dairy creamers, dehydrated vegetable powder, powdered sugar and other products.

The product has three prominent advantages:

1. High Safety: It has stable chemical properties, non-toxic and harmless. After human ingestion, it is not absorbed by the body but excreted directly without residual accumulation.

1. International Compliance: It meets the standards of the U.S. FDA (with a maximum allowable addition of 2%) and is classified as food additive E551 under EU regulations.

1. Strong Import Substitution Capacity: Its quality is comparable to or even superior to international first-class products. For example, compared with Degussa's Sipernat 22S (Germany), Zhonglian's ZLSIL-22S has lower moisture content, higher purity, stricter impurity control, better fluidity and anti-caking performance, enabling 100% substitution of foreign top brands. The mid-to-high-end model W-50B has also achieved successful market substitution.

3. Core Sales Directions: Two Target Segments with Great Market Potential

The company focuses on two types of enterprises that have urgent anti-caking needs for powdered products:

(1) Flavor & Fragrance Manufacturers

• Market Structure: The industry has high concentration, with the high-end market dominated by European and American enterprises. The top 5 global players (e.g., Givaudan, IFF) account for 45% of the global market share.

• Growth Prospects: According to industry forecasts, the global flavor & fragrance market scale is expected to reach USD 45.89 billion by 2029, with a CAGR (Compound Annual Growth Rate) of 5.8%.

• Application Scenarios: Food-grade silicon dioxide is widely used in powdered flavorings, instant coffee flavors, sticky microencapsulated flavors (e.g., in chewing gum), moisture-sensitive aldehyde/sugar-containing flavors, and high-value-added flavors requiring long-distance transportation and long-term storage.

(2) Solid Beverage Manufacturers

• Market Structure: The market is led by international giants such as Nestlé, Unilever and Starbucks.

• Growth Prospects: The global solid beverage industry has achieved a CAGR of 8.2% in the past years, and is expected to maintain a growth rate of 7.0%-8.2% in the next few years.

• Application Scenarios: It is applied in instant coffee, non-dairy creamers (coffee creamer), soup powder/seasoning powder, cocoa powder/protein powder and milk powder — it prevents caking and maintains looseness by absorbing moisture, separating particles and improving fluidity.

4. Future Opportunities: Seizing Dividends with Accurate Positioning

Amid the current economic downturn and rising tariffs, the company has identified clear development opportunities by focusing on the following strategies:

• Avoiding Red Ocean Markets: Steering clear of highly competitive fields and upstream raw material sectors (where end enterprises face high cost pressure, leading to weak demand).

• Focusing on Rigid Demands: Targeting industries with stable, rigid demand. Instead of merely selling products, it provides technical solutions to strengthen cooperation with downstream industries.

• Leveraging Industry Trends: The market for powdered food (e.g., bakery products, coffee, flavors) is expanding. Meanwhile, with the growing focus on health, food-grade silicon dioxide — as a safe alternative to traditional anti-caking agents such as potassium ferrocyanide — will see increasing demand.

• Cost Advantage: The price of domestic silicon dioxide is significantly lower than that in Europe and America, offering high cost performance.

In addition, the global high-end food-grade silicon dioxide market was traditionally dominated by international giants such as Evonik and Solvay. However, a key opportunity has emerged: Evonik plans to close its fumed silica plant in Waterford (U.S.) by mid-2025 and its precipitated silica plant in Harvard Grace by mid-2026. This creates a favorable window for the company to proactively connect with the original customers of these plants and seize the high-end European and American markets — as the European and American markets feature large scale and high profit margins, "capturing these markets will basically secure a leading position in the global market".

5. Implementation Plan: Simple Process for Accurate Model Matching

The company has established a clear cooperation process to help customers select the most suitable products:

1. Demand Confirmation: First, clarify the customer's application scenario (e.g., anti-caking for powdered spices or instant coffee).

1. Parameter Collection: Request the customer to provide the brand/model of the silicon dioxide currently used and the Certificate of Analysis (COA). Ready-made substitution solutions are available for conventional models.

1. Customized Matching: For special models or customized needs, the customer is requested to send samples. After testing the indicators, the company matches the most appropriate product based on the actual application scenario.

Moreover, the company has compiled a Model Recommendation List: For example, ZLSIL-17/18/38 are recommended for non-dairy creamers; 8 models are applicable to flavors & fragrances; and specific models are designated for fruit powder, garlic powder and seasoning powder, enabling customers to select directly.

6. Cooperation Proposition: Win-Win via Strong Alliances

With over a decade of experience in the silicon dioxide industry, the company has become a domestic leader in high-end food-grade silicon dioxide. However, as a Chinese enterprise, it faces challenges in accessing the supply chains of international top-tier enterprises due to limited global network resources. Therefore, it is seeking cooperation with professional teams.

The company aims to build "strong alliances": leveraging its own technology and products, combined with partners' resources and sales capabilities, to jointly develop the high-end European and American markets, expand global sales of cooperative achievements, and ultimately achieve win-win cooperation to promote the healthy development of the global food-grade silicon dioxide industry.