Lao Gan Ma Denies Mass Layoffs After Claims AI Cut a Sorting Line From 600 Workers to 48

Staff on the official hotline of Guiyang Nanming Laoganma Flavor Food Co., the maker of Lao Gan Ma chili sauce, called claims that it used AI to lay off pepper-sorting workers untrue. The figure behind the claim is a China Business Herald report, cited by Shanghai Daily, that Li Xin, the company's chief quality officer, said a production line once had more than 600 pepper-sorting workers but retained only 48 after an AI inspection system went into operation. For Metaintro readers, this piece sets out what was claimed, what staff denied, what the social insurance data can and cannot show, and the rules that apply when a Chinese employer cuts staff.

What Did Lao Gan Ma's Quality Chief Say, and Where Did the Worker Numbers Come From?

The remarks came from Li Xin, executive deputy general manager and chief quality officer, at the 2026 Guizhou Quality Development Conference. Li said revenue in 2025 reached 5.4 billion yuan (about $808 million), the highest in the brand's history (translated), after four years of quality work and system changes.

The worker numbers rest on the China Business Herald account of Li's remarks. The staff kept on the line do the last experience-based check, according to the China Business Herald as cited by Huxiu (translated).

English coverage in mid-October sourced Li's comments to Yi Cai Global, the financial news arm of one of China's largest state-owned media groups.

What Did Lao Gan Ma Staff Say on October 26?

The response came from staff quoted in media reports, starting with a reporter's call to the company hotline after the topic became a trending search on social platforms on October 26 (translated). Hotline staff told Lan Jing News that the AI layoff information is untrue and that the company has never released such information, and asked consumers to treat the remarks rationally.

HR staff also told media that AI quality inspection has been launched in the production base, but the company has never had a personnel adjustment of the scale spread online, and added that "we have never employed so many workers" (translated).

The denial did not detail what happened to the other pepper-sorting workers, leaving their employment status unclear, according to the Shanghai Daily report.

Why Do the Numbers in Circulation Not Match?

Three different figures are moving around, and they describe different things. The first is the China Business Herald line count (translated). The second is a layoff number. The claim that the company laid off more than 500 workers after adopting artificial intelligence is how Shanghai Daily framed the allegation in its lead, and it is not a count the company gave.

The third is a social insurance figure. A trending topic claimed the company's number of social insurance participants dropped by more than 2,600, a total built by adding the parent company and its branches together.

The wording also shifted as the story spread. Li's revenue remark was folded into self-media posts about the layoffs (translated), and Li's figure was revenue, not a net profit.

None of these numbers is a confirmed count of job losses, and the actual situation remains to be further explained by the company. There is also no public data to verify how much cost the system has saved (translated).

What Does the AI Inspection System Actually Do?

At the Changming production base in Guiyang, cameras scan a conveyor belt every 0.3 seconds, with jets of air directing blemished peppers into a waste bin.

High-speed industrial cameras pick out moldy and black-spotted peppers and an airflow device removes the rejected raw material automatically (translated). The system went live across the whole workshop in 2025 (translated), and core raw materials became 100% traceable in 2025 (translated).

The scope goes beyond sorting. The system covers raw-material sorting, production quality control and supply-chain scheduling, and the defect rate at key production stages fell to 0.02 percent after it was introduced.

Li described the weakness of the old method. Picking peppers by eye over long hours of repetitive work made it easy to miss bad fruit.

The cameras are one step in a longer automation run. When Xinhua visited in 2024, the workshop already had automatic filling, capping, boxing and robot palletizing, and the automatic filling equipment alone cost nearly 80 million yuan (about $12 million) (translated).

What Do the Social Insurance Records Show, and What Do They Not Show?

Corporate records give a partial view of the workforce. Tianyancha data shows the parent company's social insurance participants fell from 2,912 in 2022 to 1,783 in 2023, 941 in 2024 and 740 in 2025.

Insured staff at the branches dropped from 1,279 to 793 over the same period, which is how online posts reached a larger combined decline.

These records are a weak guide to the sorting line. They generally count only formal employees who pay social security directly through it, not outsourced personnel, labor dispatch workers, seasonal temporary workers, or staff of subsidiaries and partner production entities.

Possible reasons listed include outsourcing transfer, non-renewal of expired contracts, natural attrition and production organization adjustment.

It is worth noting that this data covers the entire company and cannot be equated with the actual staff reduction in the pepper picking process, according to the Jiemian News analysis on 36Kr.

How Has the Business Performed While This Played Out?

Revenue has climbed back since it fell to 4.201 billion yuan (about $629 million) in 2021, a drop of nearly 1.2 billion yuan (about $180 million) in one year. Founder Tao Huabi was reported to have returned to take charge and restored Guizhou raw materials and the original formula, though company staff told Red Star News in January that she had always been at the company (translated). On the 2025 Guizhou top 100 enterprises list, revenue for 2022 to 2024 was 5.26 billion yuan, 5.381 billion yuan and 5.391 billion yuan (translated) (about $787 million, $806 million and $807 million).

Growth has nearly stopped, though. Annual revenue growth over 2022 to 2025 ran at 25.2%, 2.3%, 0.19% and 0.17% (translated).

The company's market position is still strong. Lao Gan Ma's share of China's chili sauce segment has held at around 55% from 2022 to 2025, on retail monitoring data from Ma Shang Ying, and its brand share across the broader flavored sauce category is about 16%, also ranking first. Li said capacity has passed one million tonnes, with sales in 160 countries and regions (translated), and China Daily has reported that the company can produce three million bottles of chili crisp a day. In September, Lao Gan Ma's operating company was one of three companies named for the fifth Guizhou Governor's Quality Award (translated).

Third-party sales data points to a drop since the rumor spread. On one e-commerce platform, daily sales have run at 1,000 to 5,000 yuan (about $150 to $749) since October 22 (translated), down from a usual range of 5,000 to 10,000 yuan (about $749 to $1,497) (translated) before the rumor spread. In 2022 the company dismantled its livestreaming team and scaled back online marketing to focus on offline distribution, and its official WeChat account last posted in March 2022, while its official Douyin flagship store has gone nearly a year without a livestream (translated). Earlier data showed e-commerce never exceeded 5% of its sales (translated), so this platform data is a small window on the business.

Some social media users threatened to stop buying the brand's products, saying: "If you put workers out of work, we'll get your products taken off the shelves." Founder Tao Huabi was herself a laid-off worker who sold cold rice noodles before building the business.

Online reaction split two ways. Some users saw automation as a normal means for the industry to improve quality and efficiency, which helps to stabilize product quality. Others argued that a brand that started with manual labor should take into account employment responsibilities while hitting a new high in revenue.

What Does Chinese Labor Law Require Before a Mass Layoff?

China treats a large cut as a formal process. Under Article 41 of the Labor Contract Law, a company can only apply for a layoff if at least 20 employees, or fewer than 20 but 10% or more of all staff, will be let go, and only on set grounds. One of those grounds is a change in production or business methods, or a major technological innovation that still requires layoffs after the labor contracts are amended.

Local rules spell out the filing step that Article 41 sets (translated). Shanghai, for example, has a 2009 notice from the city's human resources bureau that requires at least 30 days from explaining the plan to the union or staff to delivering the filing to the labor authority (translated). In Shanghai, the filing must include the written plan, which can list the number of people to be cut, their share of total staff, the names (with ID and contract term), how severance pay has been prepared and whether remedial steps were taken (translated).

Severance has a legal floor. Each worker in a layoff gets at least one month's salary for each year of service, based on average pay over the prior 12 months including allowances and bonuses. For workers paid more than three times the city's average monthly salary, the payment is capped at that level and a maximum of 12 years' service.

Some workers have priority to stay. These include staff on open-ended contracts, staff on long fixed-term contracts, and the only wage earners in households with minor or elderly dependents. Others are protected from layoff, including women during pregnancy, maternity leave or breastfeeding, and staff with at least 15 consecutive years of service who are less than 5 years from retirement age.

Can a Chinese Employer Dismiss Workers Because AI Took Over Their Tasks?

Recent rulings on AI job displacement in China make clear that AI replacement does not validate a dismissal on its own. In a case published by the Hangzhou Intermediate People's Court, a quality assurance supervisor earning 25,000 yuan (about $3,640) a month saw his work taken over by large language models, and the company tried to move him to a lower role paying 15,000 yuan (about $2,246) a month.

The court upheld the ruling that the dismissal was unlawful. AI replacement did not count as a major change in the objective circumstances, which usually means events such as relocation or a merger, and a reassignment with a substantial pay cut was not a reasonable offer. The worker had also won at arbitration and at the district court before the appeal. The court said the company's termination grounds did not fall under negative circumstances such as business downsizing or operational difficulties, nor did they meet the legal condition that made it 'impossible to continue the employment contract'. Legal scholars hailed the decision as a reassuring signal for labor rights protection at a time when the central Chinese leadership is pushing for industries to widely adopt AI technology.

A Beijing case points the same way. On Dec. 26 last year, the Beijing Municipal Bureau of Human Resources and Social Security released typical arbitration cases including a map data collector replaced by AI, where the panel ruled the dismissal unlawful because adopting AI was the company's own choice. The panel said that by ending the contract, the company was shifting the cost of the technological transformation to the employee.

What This Means for Factory and Quality Control Workers, and What Should You Do Next?

The Lao Gan Ma case shows how hard it is to count jobs lost to AI from the outside. Self-media posts turned the line figures and the revenue record into a layoff story (translated), and staff denials dispute the scale. A camera system now does the first pass on peppers, with an airflow device removing the rejects (translated).

If you work in sorting or inspection, the role left to staff in that account is the last experience-based check after the camera (translated), so that judgment is the skill to show employers.

Keep a copy of your contract and your pay records for the past 12 months, since retention priority and severance both turn on them under the Labor Contract Law rules on layoffs.

For job seekers anywhere, a useful question to ask an employer about an AI rollout is where the people on the line go next.

Lacey Kaelani, Metaintro's CEO, puts it this way: When the headlines and the company disagree on how many jobs a machine replaced, the job description tells you more. Ask what the people working beside the new system do every day.

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People Also Asked

Q: Did Lao Gan Ma lay off workers because of AI?

A: Company staff deny it. Hotline staff called the AI layoff information untrue (translated), and HR staff told media the company never had staff cuts of the scale spread online, while confirming that AI quality inspection is in use.

Q: Where did the 600 to 48 figure come from?

A: It traces to coverage of a speech by quality chief Li Xin, with the China Business Herald account that the line kept 48 of more than 600 pepper pickers (translated) after the AI system went live. Company HR staff dispute the scale spread online.

Q: Can a Chinese company fire workers just because AI can do their job?

A: Two recent decisions say AI alone is not enough. A Hangzhou court found that AI replacement was not a major change in objective circumstances that would justify ending a contract, and ruled the dismissal unlawful.

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