Analysis of the Contradiction Between Grandpa's Farm's OEM Model and Its 'Organic' Positioning

Based on public information,

’s OEM model and its “organic” positioning , which are mainly reflected in the following dimensions:

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• As of September 2025, Grandpa’s Farm sources products from
  62 OEM manufacturers
  , of which only
  13 are overseas partners
  [1]
• It was not until October 2025 that the company completed a small production base with
  3 production lines
  in Zengcheng, Guangzhou[2]
• By the end of Q3 2025, the company’s SKU count had reached
  269
  , but the number of self-produced products was extremely limited

• In terms of product pricing, organic baby noodles are priced at
  CNY 170 per jin (500g)
  , while regular organic noodles cost only
  CNY 23 per jin
  , representing a premium of up to 7 times[1]
• The overall gross margin is as high as
  57.3%
  , comparable to that of Nongfu Spring[3]
• The brand emphasizes the
  high-end organic concept
  of “genuine ingredients, minimal additives, and nutritious”

Relying on large-scale OEM to achieve rapid expansion while charging a high premium under a high-end organic positioning, this combination of “asset-light operation + high brand premium” has inherent tensions in the infant food sector.

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Time	Problem Type	Specific Incident
June 2019	Nutrient Non-compliance	The detected sodium content of two imported products was 80% lower than the labeled value[1]
October 2019	Insufficient Iodine Content	The detected iodine content of infant rice flour failed to meet standards[3]
May 2020	Recurring Issue	Multiple grain rice flour products were again found to have insufficient iodine content[3]
2021	Unqualified Imported Products	Belgian-produced infant rice flour was rejected by customs due to non-compliant calcium content[1]

According to the Measures for the Administration of Organic Product Certification, the production, processing, and sales of organic products must [4]. Under the OEM model, the brand has extremely limited control over the production end, making it difficult to ensure that every production link meets the strict requirements of organic certification.

Consumers of infant food are far more sensitive to food safety and ingredients than ordinary consumers[1], yet the OEM model precisely weakens the brand’s ability to control product quality, which directly conflicts with the strict quality control required for the “organic” positioning.

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• Grandpa’s Farm Hawthorn Sticks:
  CNY 27.92 per 72g
• Hawthorn sticks under Jiye’s own brand, produced by the same OEM factory:
  CNY 26.9 per 308g
  [1]

After conversion, the

, while the only difference in ingredients is the addition of “concentrated apple juice”.

• In the first 9 months of 2025,
  sales and distribution expenses accounted for 36.3% of revenue
  [3]
• During the same period,
  R&D expenses accounted for only 2.2%
  and showed a downward trend[3]
• This means that more than one-third of the high premium paid by consumers is spent on advertising and marketing, rather than product quality improvement

High reliance on OEM means that the product itself has limited differentiation, yet there is a significant deviation between the high premium formed through marketing packaging and the actual product value.

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• When the product was launched in 2018, the brand used “originated from the Netherlands” and “European original import” as promotional points[3]
• The product outer packaging uses a large number of English words and European and American pastoral scenes
• However,
  all four founders are Chinese
  , and the brand operation is led by a Chinese company[3]
• The prospectus discloses that the brand’s intellectual property is registered by a
  Dutch company fully owned by an executive director
  , which is essentially a “Chinese brand registered in the Netherlands”[3]

The deliberately created “European native organic” brand image has a gap with the actual Chinese operating entity, and this marketing strategy is contrary to the organic consumption concept of “truth and transparency”.

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From industry practice, the OEM model itself does not necessarily contradict organic positioning, but it needs to meet the following conditions:

Conditions	Current Situation of Grandpa’s Farm	Gap Analysis
Strict OEM Factory Audits	Has an assessment system, but frequent historical problems	Doubts about the implementation effect of the system
Sound Quality Traceability System	Mainly relies on OEM factories	Insufficient independent control capabilities
Independent Control of Core Links	Self-built factory was only launched in October 2025	Severe delay in timeline
Transparent Brand Narrative	Early “foreign brand” promotion is inconsistent with reality	Brand trust has been damaged

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There is a

between Grandpa’s Farm’s OEM model and its “organic” positioning:

1. Fragile Trust Foundation
   : The OEM model inherently weakens the brand’s control over the entire product process, while the “organic” positioning precisely requires consumers’ deep trust in the brand’s entire process

2. Accumulated Historical Problems
   : Multiple product non-compliance records have damaged the brand’s reputation, and consumers have reason to be cautious about the organic commitments under the OEM model

3. Risk of Value Deviation
   : The high premium mainly comes from marketing-driven rather than product differentiation, which is inconsistent with the consumer expectation of “you get what you pay for” for organic food

4. Compliance Risk Exposure
   : The more OEM links there are, the more difficult it is to guarantee the integrity and credibility of organic certification, leading to greater compliance risks

For investors, this contradiction means that the brand needs to significantly increase the proportion of self-owned production capacity, strengthen quality control in OEM links, and establish a more transparent and authentic brand narrative to support the long-term sustainability of its high-end organic positioning.

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[1] Jiemian News - “Grandpa’s Farm Wants to Go Public, but It’s Difficult to Support the High Premium of Children’s Snacks with OEM” (https://m.jiemian.com/article/13861381.html)

[2] The Beijing News - “Infant Food Enterprise ‘Grandpa’s Farm’ Submits Listing Application to HKEX, Expands Product Lines Massively via OEM” (https://www.bjnews.com.cn/detail/1768303789168857.html)

[3] Economic Observer Network - “OEM-based ‘Grandpa’s Farm’ Enters Hong Kong Stock Market with 57.3% High Gross Margin” (http://www.eeo.com.cn/2026/0109/778146.shtml)

[4] Ministry of Justice of the People’s Republic of China - “Measures for the Administration of Organic Product Certification” (https://www.moj.gov.cn/pub/sfbgw/flfggz/flfggzbmgz/200503/t20050316_143800.html)