Chinese Startup Expands Mycelium Production with New Chengdu Facility

Chinese startup Inner Mongolia ZhongGu Junchuang Biotechnology Development Co., Ltd has recently formed a partnership with the Xinjin District Government of Chengdu to establish a cutting-edge mycelium research and development (R&D) facility. This new facility will be situated in Chengdu’s Tianfu Intelligent Manufacturing Industrial Zone, marking a significant step forward for the company in western China.

This expansive 43,000 square foot facility, supported by an investment of RMB 150 million (approximately $22 million) from the government, boasts an impressive 20-fold increase in production capacity compared to its previous site in Inner Mongolia. Operations at the facility are anticipated to commence this summer.

ZhongGu Junchuang recently secured a substantial annual contract to supply 1,000 tons of mycelium flour to a client in central China at around $5,000 per ton. Tao Zhang, co-founder of Dao Foods International, which invested in ZhongGu Junchuang in 2024, highlighted that “This partnership is expected to last 3-5 years. Given that current production is fully allocated to customer orders, expansion is essential to meet the burgeoning demand.”

The Chengdu facility will serve as a bridge connecting ZhongGu Junchuang’s base in Inner Mongolia with the rapidly flourishing markets of Southwest China. Launched just over six years ago, the firm aims to achieve annual production output valued in the hundreds of millions of RMB when operating at full capacity.

Harnessing Chengdu’s Innovation Hub

Founder Wenqi Shan explained, “Our decision to base operations in Chengdu taps into its innovation hub. By collaborating with Sichuan University and other institutions, we are accelerating technology transfer from lab to industry, ensuring our biomass fermentation platforms remain globally competitive.”

B2B and B2C Strategies for Growth

The new facility will enhance the production of mycelium powders and concentrated purees tailored for B2B customers, alongside CPG (consumer packaged goods) products like fungi-based snacks and performance beverages marketed directly to consumers. The company has developed sub-brands such as Myceloop, which features coffee infused with Morel and Cordyceps militaris mycelium, and Gu Nei Sheng mycelium-enriched flour.

To produce the flour, ZhongGu Junchuang employs a fermentation process where cereal grains are treated with fungal inoculants, enriching their nutritional content, followed by milling into flour suitable for enhancing staple foods such as dumplings and buns. The company engages directly with consumers through social commerce platforms including Douyin, WeChat, and Taobao and utilizes various production methods, including solid-state and liquid fermentation.

“Currently, there is only one solid fermentation tank operational in Hohhot, the capital of Inner Mongolia. However, the new Chengdu facility will be equipped with both solid and liquid fermentation bioreactors,” added Wenqi Shan.

Enhancing Staple Foods with Mycelium

Rather than focusing on growing mushroom fruiting bodies, ZhongGu Junchuang’s approach emphasizes mycelium cultivation. “This method offers distinct advantages, including higher nutritional density, lower production costs, enhanced scalability, and improved extraction of specific compounds,” explained Wenqi Shan.

In the B2B sector, mycelium protein enables traditional manufacturers to create more differentiated products, which proves beneficial in markets saturated with homogeneous offerings. This advancement particularly assists established food companies producing low-value, high-volume items such as instant noodles and beverages to elevate their product value.

From a B2C standpoint, mycelium protein provides consumers with natural fungal protein sources, along with a variety of nutrients and unique flavor profiles—especially noted in coffee, where mycelium fermentation improves both taste and health benefits. Additionally, it offers a safer, healthier alternative for vegetarians and those exploring non-meat options, aligning with the growing “food as medicine” trend that highlights the functional benefits of specific strains like Reishi and Lion’s Mane.

Investment Insights from Dao Foods International

Dao Foods International’s investment stemmed from a recognition of the founding team’s dedication to mycelium-based food innovation. Zhang remarked, “We were impressed by Mr. Shan’s ability to adapt swiftly and demonstrate entrepreneurial resourcefulness, in addition to the company’s robust focus on both production engineering and the commercial application of its technologies.”