A bottle of Lao Gan Ma hot sauce Photo: CFP

Chinese people living abroad have become familiar with the image of a grumpy-looking lady in a white apron on the label for a popular hot sauce.

Li Yu, who has studied in New Zealand for 10 years, is grateful to be able to buy Lao Gan Ma products locally.

"Lao Gan Ma helps me get over homesickness, not only due to the 'Chinese' taste but also because the term 'Gan Ma' [meaning godmother] in the name reminds me of my mother," Li told the Global Times Thursday.

Without it, Western food like sandwiches can be "hard to swallow," said Li, adding that most Chinese people living in New Zealand use the sauce.

The brand has also become popular with a lot of foreigners. Selling on amazon.com at roughly $7.4 per bottle, Lao Gan Ma products have received numerous good reviews. 

Analysts said the Guiyang-based brand is now the leader in China's hot sauce sector. It has attracted interest from both domestic investment organizations and the local government, who are eager to capitalize on its success.

But Lao Gan Ma's founder, Tao Huabi, has said that she has no interest in floating on the stock market.

No thanks

Tao started selling her hot sauce products in 1984 and set up a company to increase production in 1996. By 2006, the company had annual output value of 1.2 billion yuan ($193.2 million), according to information posted on the company's official website, www.laoganma.com.cn.

Financial results for the last seven years are not available on the website, but according to data from the Guizhou Administration for Industry and Commerce, the company's revenue in 2012 reached 3.4 billion yuan, up from 3 billion yuan in 2011. Media reports said that in 2013 the figure rose to 3.7 billion yuan.

Given the good performance, the local government of Guiyang in Southwest China's Guizhou Province has long been trying to persuade Tao to take her company public, but in vain.

"Persuading Tao to go public is harder than introducing foreign investment," Guangzhou-based Time Weekly quoted an unnamed Guiyang government official as saying on Thursday.

Lao Gan Ma has long been run on the principle of avoiding fundraising or applying for loans. This is unusual in a world where most companies are eager to gain as much capital as they can, as quickly as possible.

Tao's attitude toward going public is backed up by Lao Gan Ma's sufficient cash flow, Fan Jie, an industry analyst with Beijing-based Adfaith Management Consulting, told the Global Times Thursday.

"She requires distributors to follow the rule of cash on delivery, to avoid debts. This is very rare in the domestic condiment industry. Manufacturers usually allow big retailers to get the goods first and pay the bill later," he noted.

But if Lao Gan Ma were to lose its current dominant position in the market, it would be harder to insist on cash on delivery, said Yan Qiang, a partner with Beijing-based Hejun Consulting.

Despite its dominant position in the market, Lao Gan Ma also has many competitors such as Sichuan-based Wei Ju Te and Lao Gan Die from Guiyang.

Meanwhile, Lao Gan Ma is not the only family-run company in the food sector that has decided not to go public.

The 126-year-old Hong Kong-headquartered sauce manufacturer Lee Kum Kee Co also has no plans to get listed.

Risky capital market

While these family companies show little interest in IPOs due to their strong cash flow situation, the potential risks in China's immature capital markets may be another reason for them to stay away, according to Fan.

Despite her lack of formal education, 67-year-old Tao seems to be well aware of the downside of the domestic stock market.

"After getting listed, a company can go broke. What is an IPO? I think it is a way to cheat people out of their money. And it will also bring in some shareholders who can suck all the money created by the company, leaving me to pay debts. I will not do it," Tao said in an interview last July with news portal ifeng.com.

China's stock markets are still fairly chaotic and are seen as a shortcut to raise money, Yan told the Global Times Thursday, noting that many companies overstate their financial results in order to gain more investment.

In the eyes of Lee Wai-sum, a director of Lee Kum Kee, enterprises' management ideas or development direction can sometimes change after they get listed.

"Shareholders or CEOs may think differently from the founders. They sometimes put more focus on short-term interests, which is not good for a company's development in the long run," he said in an interview in January 2013 with Ji'nan-based Economic Observer.

Privately controlled companies and listed ones require different management methods, said Lee Wai-chung, a member of Lee Kum Kee's founding family, on the company's official Weibo on April 8.

"We just think family inheritance is the core value of it and can better help the company develop in the long term," he explained.

A number of enterprises have suffered during the transition from being privately owned to being publicly owned.

Henan Lotus Flower Gourmet Powder Co, once an industrial leader, floated on the Shanghai Stock Exchange in 1998. The cooking powder sector in China surged in 2009, but the company was performing poorly at that time.

Some analysts attributed this to problems with the company's management after its IPO. In its annual report for 2009, the company admitted that it had various problems in areas such as financial management and internal control.

The report said that 1.95 billion yuan in current liabilities needed to be paid in 2010.

And an announcement posted by the company on the bourse in January forecast a net loss of 300 million yuan for the whole of 2013.

The domestic stock market may be full of uncertainties, but it can still benefit a company in many aspects, such as enhancement of its brand recognition, Yan said.

Lao Gan Ma's founder wants to keep the business simple and has no intention of changing her management methods. She reportedly has required her grandson and great grandson to stick to her ways of doing business.

This is her choice, Yan said. But he noted that even if the firm does not go public, it should still pursue innovation and reforms, such as diversifying its product range.

"Now the company only produces hot sauces. This single product category makes it more vulnerable amid the uncertainties of the economy," he said.

Global Times