Core Viewpoint - The recent food safety controversy involving Wufangzhai's products, specifically the "honey date rice dumplings" produced for Laiyifen, has raised significant concerns during the peak sales season of the Dragon Boat Festival, impacting the company's performance and recovery prospects [2][3]. Company Performance - Wufangzhai has experienced fluctuating performance over the past three years, with a 14% decline in both revenue and net profit in 2024, reaching revenues of 2.251 billion yuan and a net profit of 142 million yuan [3][4]. - The company's revenue from rice dumpling products accounted for 70% of its total revenue in 2024, highlighting its reliance on this product line [3]. - In the first quarter of 2025, Wufangzhai reported a revenue of 243 million yuan, a year-on-year increase of 17.24%, but faced a net loss of 45.23 million yuan [4]. Market Competition - The rice dumpling market is highly competitive, with Wufangzhai's rice dumpling sales declining by 18.64% in 2024, and sales volume down by 20.92%, while inventory increased by 33.82% [6]. - The competition includes various brands such as Zhenzhenlaolao, Sanquan Foods, and others, which have also reported poor performance in their rice dumpling segments [6]. - The industry is characterized by a seasonal demand that heavily relies on the Dragon Boat Festival, and traditional rice dumplings face challenges from modern health trends [6]. Strategic Response - Wufangzhai has acknowledged the need for innovation and has introduced an organic rice dumpling series to capture market demand and enhance brand value [7]. - The company has established a special task force to address the food safety issues and is cooperating with relevant authorities for inspections [2][3].