The plant milk market shuffles, and when Lulu becomes a memory, players like Oatly are breaking in

Recently, the two giants of domestic plant milk, Chengde Lulu (000848.SZ) and Yangyuan Beverage (603156.SH), released their 2020 annual financial reports. However, the performance of the two companies last year was not satisfactory, and the annual revenue of Yangyuan Beverage plunged by 40.56% year-on-year.

When the local plant milk giant was secretly worried, recently, Oatly, an Internet celebrity oat milk brand from Sweden, quietly submitted a prospectus to the US Securities and Exchange Commission, planning to list on the NASDAQ with the stock code "TTLY".

Open the Red Book, a gathering place of internet celebrities, to search for "oat milk", there will be a large number of articles with the topic of Swedish oat milk brand Oatly. Driven by KOLs, Oatly's star product oat milk, whether recommended or complained, can attract the attention of many users.

Some people may find it novel when it comes to the category of oat milk, but the plant milk represented by oat milk has become overbeat in China. In fact, the six walnuts, lulu and Vivi soy milk that were well-known in the early years all belong to the category of plant milk.

However, when Oatly used oat milk to be on fire in China, six walnuts, Lulu almond dew and Weiwei soy milk from Yangyuan Beverage, Chengde Lulu and Weiwei soy milk (600300.SH) have lost the user's heart.

Homologous plant milk

Originally born from the same root, why six brands such as walnuts are declining, but new plant milk brands such as Oatly are on the rise.

First of all, the starting point of products facing consumers in different eras is different. Six Walnuts, which arose in the 2000s, swept the country with the slogan "often use your brain, drink more than six walnuts". When Six Walnuts first entered the market, it gained the love of consumers with a beverage supplement with brain-strengthening effects and became one of the essential gifts for people to visit relatives and friends.

In contrast, Oatly is designed with environmental protection and consumer eating habits as the starting point. In its prospectus, Oatly mentions that traditional food production processes are one of the important factors affecting the environment, occupying about half of the earth's habitable land, requiring large resources, emitting greenhouse gases, and endangering biodiversity. In the case of oat milk production, for example, replacing milk with one liter of oats can reduce greenhouse gas emissions by about 80 percent, land use by 79 percent, and energy consumption by 60 percent.

If we leave it alone, how much oat milk production can play in protecting the environment. Oatly said today's food systems and eating habits are no longer able to meet the nutritional needs of consumers, leading to the epidemic of noncommunicable diseases such as malnutrition, obesity and cardiovascular disease.

"Instead of changing the milk itself or mimicking the nutritional content of milk in new products, we are pursuing powerful plant-based ingredients, especially the nutritional and sustainability elements of oatmeal, to help people move from traditional dairy products to plant-based products," Oatly said. ”

The biggest difference between plant milk and milk is that it is made of plant-based milk and does not contain milk-specific ingredients such as lactose and cholesterol. According to research on The Lancet, about two-thirds of the world's population is unable to eat milk due to lactose intolerance. Therefore, scientists have found alternative milk plant milk that is conducive to human absorption and has certain nutritional value.

Secondly, related to the previous cause is that people with lactose intolerance may have diarrhea and bloating after eating milk, and people are concerned about health problems. Moreover, people are more concerned about the health effects of food ingredients.

The "2021 National Health Insight Report" released by Dr. Ding Xiang shows that in 2020, people have higher expectations for physical health, reaching a high score of 8.4, and people pay more attention to diet health in the three major events of life. People's concern about healthy eating has also led to the consumption of related products.

From the ingredient list, Oatly oat milk has fewer additives. According to the ingredient list of original dews sold at Taobao's official flagship store, the original dew contains water, white sugar, mountain almonds, polyglyceride fatty acid esters, sodium bicarbonate, citric acid and edible flavors. Later sugar-free dew ingredient lists contained water, almonds and xylitol, polyglyceryl fatty acid esters, sodium bicarbonate, citric acid, acesulfame potassium and food flavors.

In contrast, Oatly's ingredient list consists of oat pulp (water, oats), canola oil, calcium carbonate, and tricalcium phosphate table salt.

(Image source: Oatly Tmall flagship store)

Since the market has been driven by demand, why has the sales of China's homegrown plant milk repeatedly declined? Another reason for this situation is the difference in the company's business strategy.

The old plant milk brand that fell to the bottom of the line

Looking at China's old plant milk brands from Chengde Lulu, Lulu almond dew's sales have been declining except in 2019. The data shows that from 2014 to 2018, the sales volume of Lulu almond dew was 339,900 tons, 333,600 tons, 308,200 tons, 241,600 tons and 213,300 tons, respectively, which declined for five consecutive years. In 2019, sales rebounded slightly to 223,600 tons.

With the decline in product sales, Chengde Lulu's revenue growth rate has also fluctuated, and the revenue growth rate has dropped to negative since the first quarter of 2020.

The reason is that some analysts pointed out that when the entire plant protein beverage industry developed rapidly, Chengde Lulu did not have too many innovative products to match the core needs of the consumer side, which was an important reason for its development.

According to the company's 2020 annual report, 99.3% of the company's revenue comes from the almond butter series. Chengde Lulu also said in the financial report that the company's sales revenue mainly comes from the Chinese domestic market.

In the whole year of 2020, the revenue of Chengde Lulu's research and development expenses accounted for only 0.59%, and the sales expenses accounted for 15.4%. R&D expenses and sales expenses decreased from the same period, down 19.77% and 40.17% respectively.

(Image source: Chengde Lulu financial report)

Although Chengde Lulu follows the trend and wants to increase sales through live broadcasting and other forms, on the one hand, Chengde Lulu actively tries live e-commerce and achieves certain product sales while promoting products; On the other hand, all employees are encouraged to increase product exposure on the Douyin and Kuaishou short video platforms, and realize online drainage through self-media. But the results are not ideal.

Chengde Lulu's 2020 annual report shows that revenue was RMB1.86 billion, a decrease of 17.5% year-on-year; Net profit attributable to shareholders was RMB430 million, down 7.03% year-on-year.

The situation of Yangyuan Drink is also similar to that of Chengde Lulu. In the fourth quarter of 2019, the company's revenue growth rate briefly recovered to 7.98%, and then fell to negative in the following quarters, with revenue growth rate of -48.78% in the first quarter of 2020.

The decline in revenue of Yangyuan Beverage has a lot to do with its single product and not favored by consumers. According to the latest financial report, in the fourth quarter of 2020, the revenue of Yangyuan Beverage was RMB1.407 billion, down 45.38% year-on-year. For the full year of 2020, the revenue of Yangyuan Beverage was RMB4.427 billion, down 40.65% year-on-year.

Yangyuan Beverage has also carried out a series of self-help actions, including live selling, launching a sugar-free series, and six walnut-related products for children. In addition, the company has also issued several announcements to purchase wealth management products in 2020, which said that through the moderate and timely cash management of temporarily idle own funds, it is conducive to improving the efficiency of the use of the company's own funds, and can obtain certain investment returns, which is conducive to further improving the overall performance level of the company.

However, at present, the effect of the new product in the market is not yet known.

The pursuing soldiers are behind

The popularity of domestic oat milk can be said to be driven by the fire of Oatly. Oatly opened the market as a coffee companion for brands such as Starbucks.

From Europe to North America to China, Oatly is expanding its markets. As mentioned above, because of its simple oat milk ingredients, few additives, coupled with high integration with coffee, good taste, it is loved by consumers.

As of December 31, 2020, Oatly offered dozens of product lines and categories in approximately 60,000 retail stores and 32,200 coffee shops.

It is understood that Oalty's products include oat milk master series, original series, chocolate series and so on. Oatly also sells ice cream and yogurt made from oat milk in many countries.

Oatly's products are sold through a variety of channels, from independent coffee shops to continental Partnerships with established franchisees like Starbucks, from food retailers like Target and Tesco to high-end natural grocery stores and corner stores, and e-commerce channels like Alibaba's Tmall.

From the perspective of sales region, Oatyl's current largest market is EMEA, but the growth rate in China should not be underestimated. In 2020, Oatly accounted for 64% of total sales in EMEA, 24% and 13% in the Americas and Asia, respectively.

The company entered the Chinese market in 2018 through specialty coffee and tea. In the approximately two years since entering the Chinese market, as of December 31, 2020, the company has a total of more than 9,500 foodservice and retail points of sale, with a growth rate of more than 450%.

Zhang Chun, president of Oatly Asia, had predicted that Oatly's total sales in Asia would reach nearly 100 million bottles in 2021, and China has become one of Oatly's most important growth markets in the world.

In recent years, as domestic consumers have also noticed plant milk, many companies are optimistic about China's plant milk market.

Under the growth of the Chinese market, domestic dairy head enterprises and some start-ups have also begun to enter the market.

At the 2021 customer conference, Yili (600887.SH) Plant Selection announced that it will launch two new products of oat dew and plant yogurt in 2021, officially stepping into the oat milk and plant yogurt market. The two new products are based on high dietary fiber and 0 added sucrose as the core selling points.

oat oat was established in April 2020 and belongs to Beijing Uemotole Food Technology Co., Ltd. Within a few months of its establishment, the company launched the original bottled oatmeal drink and the coffee companion oat drink used with coffee.

At present, the number of fans of the OAT OAT Tmall flagship store has reached 80,222.

According to Tianyan, OAT OAT completed tens of millions of yuan in Series A financing in March this year. This is also the third round of financing that OAT has completed following the launch of the product in September 2020.

The influx of innovative players is difficult for companies such as Chengde Lulu and Yangyuan Beverage, which lack innovation and weak marketing capabilities, and their products are currently difficult to find a way out. It is not easy for China's old plant milk brands to transform from now on, and they have fallen behind a lot in terms of timing.

Dairy analysts believe that "for Yangyuan drinks that are accustomed to making large items, if the six walnuts are booming, if they launch subdivision brands, there should be good market results." But companies missed the best time, and other beverage companies are pushing subdivided products. In this context, It is almost impossible for Yangyuan Beverage to have a competitive advantage. "

Industry insiders believe that the plant milk track is becoming more and more crowded, new brands are grabbing the market share of old companies through large-scale marketing, and as the competition between new and old brands heats up, the plant milk market will enter a reshuffle period.

However, some investment bankers believe that the original business volume of the old enterprises is large, so the resources in investing in plant milk and other products are limited, and the new brands have no scruples and dare to invest heavily in marketing in order to survive. But the new track of consumption is not only faster than who runs, but also depends on who runs for a long time, when the new brand competes to burn money to reach the critical point, there will still be a situation of head-on competition with the old brand, who can win the favor of consumers more, who can survive in the knockout round.

This article originated from Capital State