Investors flee Yan Palace as aging brand struggles to find new audience

China’s largest maker of bird’s nest products has yet to find a winning formula beyond its traditional niche of high-spending older women

Key Takeaways:

• Yan Palace said its revenue and profit rose up to 20% and 50%, respectively, in the first half of 2026, but its shares still fell 14% in the two days after the announcement
• The company’s efforts to expand beyond its niche in traditional bird’s nest products have largely failed, leaving it dependent on cost cutting for profit growth

By Edith Terry

Xiamen Yan Palace Bird’s Nest Industry Co. Ltd. (1497.HK) has faced headwinds ever since it became China’s first “bird’s nest stock” with its Hong Kong IPO in 2023. That’s reflected in its shares, which have lost more than 40% of their value over that time.

The company’s revenue fell 2.4% last year to 2 billion yuan ($295.2 million), ending six consecutive years of growth, although its profit increased by 21% to 188.5 million yuan. Still, the uneven performance led one analyst to describe the results as “the most embarrassing report card since the listing.”

That kind of skepticism may partly explain why the company’s shares nosedived 14% in the two trading days after an upbeat profit alert last week. The company said its revenue totaled between 1.17 billion yuan and 1.22 billion yuan in the first half of this year, up 15% to 20% from the year-ago period, with its profit up 35% to 50% to 105 million yuan to 116 million yuan.

Those solid results weren’t enough to convince the market that Yan Palace is more than a faded rose in the market for traditional Chinese healthcare products. Its biggest problem may be the same laser-focused strategy behind its initial success, which catered to older, relatively affluent women who used its pricey products to improve their complexion and immunity.

Its core product is a steamed bird’s nest in a bowl. Chairman and founder Huang Jian, a former middle school teacher, developed it after working as China manager for a company based in Singapore, where he learned the importance of building scale and standardization. He seized on bird’s nests as a traditional industry with blue ocean potential for sales to China’s new and growing middle class.

By the time Huang returned to China in 1997, he was laser focused on positioning his products as a nutritional items sold from unique stores instead of the pharmacies where they traditionally sold for premium prices.

Bird’s nest empire

While building his store network, Huang looked for ways to raise standards and locked in suppliers in Indonesia, meanwhile weathering a food quality scandal in 2011. He signed up Hong Kong superstar Carina Lau, known as an “ageless goddess,” as his first brand ambassador, and the business soared as older women stocked up on the product.

China consumes 70% of edible bird’s nest products globally. The category’s signature bird’s nest soup originated in the Qing dynasty that dates from 1644. It’s even a key actor in a famous scene from the classic “Dream of the Red Chamber,” in which the frail heroine, Lin Daiyu, is fed the elixir to restore her health by her more robust friend and rival Xue Baochai.

The classic novel helped bestow bird’s nest products with a potent mix combining elite status, female beauty and wellness, despite the product’s prosaic origins. The key component to its products is hardened saliva of swiftlets, which use it as glue to hold their nests together. The saliva’s healthy properties come from its high glycoprotein content, which has made it popular not only in China, but also in Indonesia, Malaysia, Thailand and Vietnam.

After 28 years, however, Huang’s business model isn’t keeping up with the times.

The underlying problem lies in the industry’s movement toward greater volume at lower prices, according to e-commerce market research firm Jiuqian Zhongtai, which undermines its image as an elite product. While sales volume of bird’s nest products grew by 23.6% between 2023 and 2025, falling prices limited revenue growth to a slower 16.7% over that time.

Yan Palace has been trying to embrace the affordability trend by developing new product lines, pumping up its marketing, and squeezing costs through smart manufacturing using robots for logistics and AI to improve product quality.

The problem is, it isn’t working, at least not yet, although Yan Palace has succeeded in cutting other costs. The company’s efforts to attract younger women and male consumers have largely failed, and its core business has stalled. And its new product lines, which showed initial promise, have lost momentum over the past year.

Cliff hanger results

Since the IPO, Yan Palace’s bi-annual financial results have been almost as big cliff hangers as the nests where its core raw materials are typically found. In 2024, the company’s revenue rose by 4.6% to 2.05 billion yuan, but its profit dropped by 22% to 156 million yuan. It was a similar mixed bag last year, with revenue sagging by 2.4% to 2 billion yuan as its profit rose 21% to 189 million yuan.

Yan Palace has explained its wobbly performance by pointing to slack consumer demand. But the market for edible bird’s nest products should be skyrocketing. At the time of its IPO, data from the company’s prospectus said sales of such products grew at an average annual rate of 27.2% between 2017 and 2022 to 43 billion yuan by the end of that period. It further projected that market would more than double to 92.1 billion yuan by 2027.

But that bounty seems to have bypassed Yan Palace, whose efforts to develop new product lines have produced mixed results. Such new lines have expanded quickly, accounting for 231.8 million yuan in sales, or 11.7% of the total, in 2024. But the segment went into reverse last year, dropping by 7% to 215.6 million yuan, or 10.8% of total sales. New products use bird’s nests as additives or add other ingredients like coconut milk and grains.

Meanwhile, Yan Palace’s core product line of pure bird’s nest products has plateaued and even begun to decline. In 2025, revenue from those products fell 2.41% to 1.77 billion yuan, or 88.5% of total revenue, from 1.8 billion yuan in 2024.

The company’s attempt to target men by hiring celebrity businessman and adventurer Wang Shi, the founder of China Vanke now in his 70s, was largely a failure. It hasn’t given up on that market just yet, hiring the younger award-winning actor Zhu Yilong, in his 30s, to bring in male customers.

Yan Palace has scored its biggest success in reducing costs through layoffs and store consolidation as well as process improvements in its new smart factory in Xiamen, which opened in 2024. Last year it reduced its marketing and R&D costs, and also lowered its cost of sales by 10%, far more than its revenue decline that year. Those cost cuts may help to improve its profits in the short-term, but aren’t really a good longer-term strategy for maintaining its share of such a fast-growing market.

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