What changed in this filing

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Item 1. Business

2023-03-31 compared with 2023-01-31 · 88 added, 34 removed, 165 unchanged (43% of the section changed)

HF Foods Group Inc., operating through its subsidiaries (“HF Group,” the “Company,” “we,” “us,” or “our”), is a leading foodservice distributor to Asian restaurants, primarily Chinese restaurants located throughout the United States.

HF Foods Group Inc., operating through our subsidiaries (“HF Group,” the “Company,” “we,” “us,” or “our”), is a leading foodservice distributor to Asian restaurants, primarily Chinese restaurants located throughout the United States.

HF Group was formed through a merger between two complementary market leaders, HF Group and B&R Global Holdings, Inc.

("B&R Global"), on November 4, 2019.

With 18 distribution centers and a fleet of close to 400 refrigerated vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.

Capitalizing on our deep understanding of the Chinese culture, with over 1,000 employees and subcontractors, and supported by two outsourced call centers in China, we have become a trusted partner serving approximately 15,000 Asian restaurants in over 46 states, providing sales and service support to customers who mainly converse in Mandarin or Chinese dialects.

With 18 distribution centers and a fleet of over 400 refrigerated vehicles, our distribution network now spans 46 states covering approximately 95% of the contiguous United States.

Capitalizing on our deep understanding of the Chinese culture, with over 1,000 employees and subcontractors, and supported by two outsourced call centers in China, we have become a trusted partner serving over 15,000 Asian restaurants providing sales and service support to customers who mainly converse in Mandarin or Chinese dialects.

We are committed to providing excellent customer service by delivering a distinctive product portfolio built from an indelible partnership with both foreign and domestic suppliers.

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Our Business and Products

As of December 31, 2021, our business featured 16 strategically positioned distribution centers with over one million square feet of warehouse space and a fleet of over 380 vehicles to provide a wide variety of products with a strong focus on Asian specialty food ingredients essential for Asian cooking.

Our business features 18 strategically positioned distribution centers with over one million square feet of warehouse space and a fleet of over 400 vehicles to provide a wide variety of products with a strong focus on Asian specialty food ingredients essential for Asian cooking.

Supported by an extensive supplier network, we aim to provide a one-stop service with on-time delivery and high fulfillment rates, at competitive pricing.

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Product offerings range from meat and poultry, perishable fresh produce, frozen seafood, general commodities and takeout food packaging materials to meet our customers’ demands.

The majority of our procurement currently consists of goods purchased domestically and imported good purchased through domestic brokers, such as frozen meat, seafood and fresh vegetables, which are procured through large suppliers or directly from producers.

The majority of our procurement currently consists of goods purchased domestically and imported goods purchased through domestic brokers, such as frozen meat, seafood and fresh vegetables, which are procured through large suppliers or directly from producers.

The following table sets forth our broad range of products and sales percentage by category for the year ended December 31, 2022:

Category Description Percentage

Seafood Lobster, shrimp, crab, scallops and fish, such as tuna and Alaskan salmon 30%

Asian Specialty Products with an Asian flair or flavor, including specialty noodles, rice, dry goods, such as dried mushrooms or dried beans, specialty sauces/seasonings, spring rolls, and canned products, such as preserved vegetables, bamboo shoots and water chestnuts

Meat and Poultry Beef, pork, chicken and duck 20%

Seafood Lobster, shrimp, crab, scallops and fish, such as tuna and Alaskan salmon 16%

Fresh Produce Fresh, seasonal fruits and vegetables, such as celery, Chinese cabbage and winter melon which are widely used in Chinese cuisines 11%

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We believe our wide range of Asian-centric product offerings is unmatched, as many of the items we offer are unique and specific to the Chinese restaurant industry.

We believe that the following strategic initiatives provide us with a competitive advantage over our direct competitors and have contributed greatly to our success:

We believe that our scale and deep knowledge of our customers’ needs provide a competitive advantage over our direct competitors and have contributed greatly to our success, including the following:

• Wide array of Asian specialty products:

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As our customers are primarily Chinese and Asian restaurants, most of our employees can speak Mandarin as well as the native dialects of our customers.

This is extremely crucial as many of the restaurants' owners/chefs are migrants who feel less comfortable conversing in English.

We believe this is a key business strength and competitive advantage, as many of the restaurants' owners/chefs are migrants who feel less comfortable conversing in English.

• Lower sales and administrative expenses:

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• Purchasing power:

We capitalize on economies of scale and have strong relationships with both our domestic and foreign suppliers over our direct competitors.

We capitalize on economies of scale and have strong relationships with both our domestic and foreign suppliers.

• Warehouse location:

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Our employees’ bilingual capabilities provide a competitive advantage against other major providers in the industry.

We aim to further expand into new key markets, as well as to strategically consolidate our market leadership position in existing markets through acquisitions.

We will also explore potential vertical expansion, both upstream and downstream of the foodservice value chain, including providing value-added items such as semi-prepared food products to help our customers upgrade their service, as well as exploring adjacent markets.

We aim to further expand into new key markets, as well as to strategically consolidate our market leadership position in existing markets, primarily through acquisitions.

We will also explore potential vertical expansion in our acquisition strategy, both upstream and downstream of the foodservice value chain, including providing value-added items such as semi-prepared food products to help our customers upgrade their service, as well as exploring adjacent markets.

We continue to invest in technological advancements to develop state-of-the-art management information and operating systems, to further improve our operational efficiency, accuracy and customer satisfaction, and to cement our foothold as a leading foodservice distributor to Asian restaurants in the U.S.

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There are tens of thousands of Chinese restaurants spread throughout the U.S., primarily serving non-Chinese American customers.

Although the dishes they serve cater to the preferences of American mainstream customers and are more simply and quickly prepared as compared to traditional full-service Chinese restaurant cuisine, they still require specialized and distinctive Chinese ingredients with traditional Chinese cooking styles.

Operated by Chinese Individual Families .

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The owners and workers in these Chinese restaurants usually speak Mandarin or other regional dialects of the Chinese language.

Understanding their culture and language is paramount to facilitating efficient communications and building trust with customers.

We believe that understanding their culture and language is paramount to facilitating efficient communications and building trust with customers.

Close-Knit Chinese American Community .

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Cultural Barriers to Entry .

Understanding Chinese cooking culture is important to run a Chinese restaurant and, therefore, most Chinese restaurants are operated by Chinese Americans.

It is very difficult for mainstream food distributors to serve these restaurants because of various cultural and language barriers.

Understanding Chinese cooking culture is important to running a Chinese restaurant, and, therefore, most Chinese restaurants are operated by Chinese Americans.

We believe that it is very difficult for mainstream food distributors to serve these restaurants due to various cultural and language barriers.

Highly Fragmented Market .

The Asian foodservice market is currently highly fragmented with many small and unsophisticated direct store distributors, such as small-scale wholesaler redistributors, specialty import brokers, farmers markets, and local produce retailers, operating without the financial support or a sophisticated logistics infrastructure.

The Asian foodservice market is currently highly fragmented with many small and unsophisticated direct store distributors, such as small-scale wholesaler redistributors, specialty import brokers, farmers markets, and local produce retailers, operating without significant financial support or a sophisticated logistics infrastructure.

We believe we are the leading Chinese food distributor in the U.S.

with a well-developed logistics infrastructure, strong financial means, and experienced management team that provides the market place with an avenue for consolidated purchasing, high fill rate, and efficient delivery frequency at a competitive price.

Infrastructure Barriers for New Entrants .

with a well-developed logistics infrastructure, strong financial means, and experienced management team that provides the marketplace with an avenue for consolidated purchasing, high fill rate, and efficient delivery frequency at a competitive price.

The fragmented nature of the Asian foodservice market creates acquisition opportunities for our company to continue to expand its geographic footprint and customer base.

Competitive Advantages over New Entrants .

Each distribution center requires a large amount of invested capital to support the full temperature-controlled logistics and warehouse operations to help customers grow their sales and profit.

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We believe our continued investment in technology will lead to long-term expense reduction and further administrative efficiency.

These competitive advantages result in economies of scale which are unparalleled and unmatched by smaller and fragmented suppliers.

These competitive advantages result in economies of scale which smaller and fragmented suppliers cannot match.

Demand for Value-Added Services .

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Our employees speak their language, understand their culture and build a bond with our customers.

Our 24-hour after sale service call domestically and in China eradicates any doubt of a supportive and dependable business partner.

Our 24-hour after sale service call domestically and in China allows us to serve as a supportive and dependable business partner.

Through vendor partnerships, we help our large customers source distinct products from their choice of vendors, either domestically or internationally.

These are the value added services that we are able to add to our customers in our one-stop shopping offering.

These are the value added services that we are able to provide to our customers in our one-stop shopping offering.

Continued Consumer Spending on Food Away From Home .

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We believe the long-term trend of increasing food away from home market consumption will resume and continue to be a key driver of demand for Asian/Chinese restaurants.

We believe we have numerous advantages to address the current market imperfections and become a national leader in this unique market.

With our economies of scale, we can provide high quality products at competitive prices in an efficient way.

Customer Service

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Full sales support from the beginning of a sales order to post-sales service is offered through these call centers.

These services are complemented by our domestic sales teams who make frequent and periodic on-site visits to customers’ restaurants.

With cultural understanding coupled with a distinct and diverse cultural bonding, the entire sales team is adept at forging better customer rapport and retention with better ability to understand customers’ needs and operations as compared to the mainstream foodservice distributors attempting to serve this channel.

Utilizing our customized information system to share valuable and pertinent information with our customers is imperative to help them grow their business.

These services are complemented by our domestic sales teams who make regular on-site visits to customers’ restaurants.

With cultural understanding coupled with a distinct and diverse cultural bonding, the entire sales team has been successful in forging better customer rapport and retention and is better able to understand customers’ needs and operations as compared to the mainstream foodservice distributors attempting to serve this channel.

Utilizing our customized information system to share valuable and pertinent information with our customers is important to help them grow their business.

This information includes, but is not limited to, purchasing history, order tracking, item availability, items on promotion, and best-selling or trending items.

We formulate strategies and implement action plans to ensure cohesive sales and marketing efforts to our existing and prospective customers.

The domestic sales team works closely with the sales staff in China to ensure our cohesive strategies are implemented effectively and our action plans are carried out swiftly.

The domestic sales team works closely with the sales staff in China to ensure our strategies are implemented effectively and our action plans are carried out swiftly.

Distribution centers are decentralized and empowered to cater to local and regional customers’ needs by customizing their specific product portfolio.

Where customer care and satisfaction are concerned, we offer a refund policy without penalty, which many of our small competitors in the market segment and the direct store distributors are unable to provide.

With respect to customer care and satisfaction, we offer a refund policy without penalty, which many of our small competitors in the market segment and the direct store distributors are unable to provide.

Our 100% satisfaction guarantee permits our customers to reject part of the order or the entire order within 24 hours of receipt without any penalty.

This refund policy further cements the trust and loyalty of our customers toward our brand and company.

We believe that this refund policy further cements the trust and loyalty of our customers toward our brand and company.

We consolidate procurement on bulk and frequently sold items.

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Products that are ordered through import brokers have lead times of up to seven days.

None of our suppliers accounted for more than 10% of our aggregate purchases during the years ended December 31, 2021 and December 31, 2020.

None of our suppliers accounted for more than 10% of our aggregate purchases during the years ended December 31, 2022 and 2021.

Except for the trademarks for HF black and white/color logos, Rong, Rong GREEN LEAF, Great Wall logos, <333>, SEA333, and SEA888, we do not own or have the right to use any patent, trademark, trade name, license, franchise or concession, the loss of which would have a material adverse effect on our business, financial condition or results of operations.

As of December 31, 2021, we had a workforce of over 900 personnel, which includes approximately 650 employees and approximately 250 workers engaged through agency placements.

Over 99% are full-time associates and over 10% of our employees have worked for us for ten or more years.

Our workforce is not unionized and we are not aware of any plans for them to unionize.

We have never experienced a strike or significant work stoppage.

Human Capital

One of our primary areas of focus is to continue to strengthen our team by retaining, attracting, and hiring qualified top talent.

This includes implementing the right organizational structure with a focus on growing capabilities through training and development of our talent.

We believe one of the key factors of our success is the commitment and loyalty of our workforce.

All of our general managers and distribution level management team have been with the business since our inception.

Their deep understanding of the business and the strong relationships they maintain with front line employees enable us to be a union free workforce.

As of December 31, 2022, we have 1,070 total employees, which includes 890 permanent employees and 180 temporary employees through agencies.

Compensation and Benefits

We are committed to positively impacting the lives of our employees by offering competitive pay and affordable benefits.

In 2022, we made the decision to completely revamp our compensation and benefits programs.

We rolled out a comprehensive management incentive bonus and long-term incentive equity plan to include a broader group of non-executive employees.

We also adopted plans to enhance our benefit plan designs with lower employee premiums and offer more free benefits to our employees with an effective date in 2023.

Recruiting, Training, and Development

Our ability to continue to retain, attract, and recruit top talent at all levels is key to our future success.

In 2022, we launched an Operations Leadership Development Program aimed to develop the next generation of general manager leaders.

As we continue to transform our operations through new system and process improvements, training and development of our existing employees is vital.

Diversity and Inclusion

HF Foods was founded by Asian Americans.

Building a successful business based on diversity and inclusion has been part of our DNA since our inception.

Throughout our history, we have continued to maintain diversity and inclusion as one of our top priorities.

99% of our total workforce is made up of Hispanic, Black or African American, and Asian employees.

In recent years, we have strengthened our commitment to diversity and inclusion.

Three out of five members of our Board of Directors are Asian and two out of five are women.

At the corporate level, nearly 47% of our director and above positions are held by women.

Government Regulation

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Such matters as weight and dimension of equipment also fall under federal and state regulations.

We also are subject to federal and state immigration laws, regulations and programs that regulate our ability to hire or retain foreign employees.

In addition, we are subject to the U.S.

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Customs and Border Protection, which is a part of the Department of Homeland Security.

Information about our Executive Officers

Name Age Position

Xiao Mou Zhang 50 Chief Executive Officer

Xi Lin 34 Chief Operating Officer

Carlos Rodriguez 49 Chief Financial Officer

Christine Chang 40 General Counsel and Chief Compliance Officer

Xiao Mou Zhang (aka Peter Zhang) has served as Co-Chief Executive Officer and director since November 4, 2019 following the merger between HF Group and B&R Global Holdings Inc.

("B&R Global"), and was promoted to sole Chief Executive Officer on February 23, 2021.

From 2014 until the merger, he served as Chairman of the Board and a Director of B&R Global that was co-founded by Mr.

Zhang and his partners, to consolidate the shareholdings of various operating entities across the Pacific and Mountain States regions.

Zhang has well over 20 years of experience in the food distribution industry with extensive experience in sales, marketing, financing, acquisitions, inventory, logistics and distribution.

Zhang’s leadership, B&R Global established a large supplier network and maintained long-term relationships with many major suppliers stemming from business relationships that were built up over the years.

A large purchase volume and a centralized procurement process also allowed B&R Global favorable negotiating power with vendors that source high quality products at lower prices than many competitors.

Xi Lin (aka Felix Lin) has served as Chief Operating Officer since May 1, 2022.

Lin also previously served as an independent director of HF Group from November 2019 to April 2022.

Lin has worked in a number of positions at Blue Bird Corporation since 2011 until his resignation on April 1, 2022.

Prior to his resignation, he was Vice President of Human Resource and External Affairs, with responsibility for human resources, government relations, training and strategic relationships.

He also held various other positions within Blue Bird Corporation in the Operations Management Department from 2015 to 2016, the Finance and Accounting Department in 2011 and from 2013 to 2015, and the Business Development Department in 2012.

Lin received his B.A.

in Accounting and Finance from the Eugene Stetson School of Business and Economics in Georgia, a Master’s degree in Accountancy from the J.

Whitney Bunting College of Business in Georgia, and a Master’s degree in Business Administration from the University of North Carolina at Chapel Hill.

Carlos Rodriguez has served as Chief Financial Officer since August 1, 2022.

Rodriguez brings more than 25 years of finance and accounting experience across various industries, including technology, entertainment, restaurants, and life science.

Most recently, Mr.

Rodriguez served as Chief Accounting Officer and Vice President Corporate Finance for Generate Life Sciences, Inc., a $300 million high growth company.

In that role, he led the Accounting, Finance, Financial Reporting, Treasury/Cash Management, Strategic and Financial Planning, M&A Due Diligence, and other financial responsibilities.

Prior to Generate Life Sciences, Mr.

Rodriguez served as Vice President of Accounting and Corporate Finance for California Pizza Kitchen, Inc.

Rodriguez holds a Bachelor’s degree in Accounting and a Master’s of Business Administration degree from the University of Southern California and is also a Certified Public Accountant in the State of California.

Christine Chang has served as General Counsel and Chief Compliance Officer since September 8, 2021.

Chang previously served as Vice President - Legal Affairs, Labor Relations and Litigation for Boyd Gaming Corp.

From 2014 through August, 2020, she served in various capacities as Corporate Counsel, Litigation, Senior Corporate Counsel, Litigation, and Vice President and Chief Counsel, Litigation, for Caesars Entertainment, Inc.

Chang also served as an associate at the law firm of Dentons LLP, from 2008 to 2013.

Chang holds a Bachelor of Arts in Rhetoric from the University of California and a Juris Doctorate from Columbia University.

Website and Availability of Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business