Image source @ Visual China
Text | Market Capitalization Watch, author | Brother Master, Editor | Little City Sister
The food processing and manufacturing industry performed well in the capital market before the end of the year, and the most concerned of it was the concept of prepared dishes that came out of nowhere.
From breeding, catering to food enterprises, the upstream and downstream industrial chains are laying out prefabricated dishes, and even Lu Zhengyao of Luckin has begun to incubate the "tip of the tongue workshop" to target the current hot pre-made dishes.
This article will focus on answering two questions:
1. Is prefabricated dish only a short-term market hotspot, or is it a real blue ocean industry?
2. Under the crowd of deer, which contestants have the "appearance of the king"?
He is the stone of the mountain
The so-called prepared dish refers to the dish that has been washed, cut, matched and processed, and then packaged and stored in a frozen or vacuum manner, and can be eaten by consumers after purchase by simply cooking or directly opening.
Prepared dishes are not a new industry, as early as the 1940s in the United States gradually sprouted, after the 1960s began to enter a period of rapid growth. Due to the large number of standardized catering enterprises in the United States, it provides unique conditions for the development of prepared dishes, and thus gives birth to Sysco, a global super-large food distribution supply chain company.
At present, Sisko has a market share of 16% in the US catering supply market, and in 2019 before the epidemic, Sisko's revenue reached 60.1 billion US dollars, equivalent to about 400 billion yuan, and the net profit was 1.674 billion US dollars, or more than 10 billion yuan. At present, the market value of Sisko is about 40 billion US dollars, about 250 billion yuan.
The maturity of prepared dishes was in Japan in the 70s and 80s of the last century, due to the rapid economic development and the rise of convenience stores, the growth rate of the prepared vegetables industry was as high as 20%.
In the Japanese prefabricated cuisine industry, the largest company is Nichiren Foods.
With more than 70 years of experience in the development of prepared dishes, Nichiren Foods was a food provider for the 1964 Tokyo Olympic Games and the 1970 Osaka World Expo, enjoying a high reputation worldwide.
In 2019, nichiren food revenue was 584.858 billion yen, amounting to about 32 billion yuan, of which prepared dishes accounted for about 35% of the company's revenue, and the share of the Japanese prepared food market was about 20%.
The experience of Japan and the United States has proved that pre-made dishes are a track that can run out of big companies.
The wind is coming
The rise of mainland prepared dishes, first in the B-end market, is due to the rapid development of the catering industry and takeaway.
From 2012 to 2019, the mainland's catering revenue increased from 2.33 trillion yuan to 4.67 trillion yuan, with a compound annual growth rate of 10.44%, significantly higher than the GDP growth rate.
Statistics from the China Hotel Association show that the average labor cost of catering enterprises accounts for 21.35% of revenue, and cooperation with prefabricated vegetable enterprises can not only obtain raw material price advantages, reduce the number of kitchen personnel, thereby significantly reducing costs, but also greatly improving the efficiency of dishes, helping branded catering enterprises to achieve large-scale and standardized expansion.
At present, the B-end market accounts for 80% of the sales revenue of prepared dishes, which has become the main source of revenue for the industry.
For C-end users, due to the current overall living standards in China, similar to the 60s and 80s in Japan, with the improvement of residents' income, changes in consumption habits, and increased time value, the future prefabricated vegetable industry is expected to replicate the industry trajectory of Japan and the United States in the C-end market and achieve rapid growth.
The rapid development of the mainland's cold chain logistics infrastructure has also provided solid technical support for the transportation of prepared vegetables. From 2015 to 2020, the domestic cold storage capacity increased from 93,000 cubic meters to 255,000 cubic meters; the number of cold chain transport vehicles increased from 10,700 to 17,700, paving the way for the continuous expansion of the prefabricated vegetable industry.
In the past 10 years, the compound annual growth rate of prepared vegetables in the mainland has exceeded 10%, and it has become one of the fastest growing segments in the food processing industry.
According to Euromonitor data, the domestic market size of the prefabricated vegetable industry in 2020 is 87.76 billion yuan, and the per capita prefabricated fast food expenditure accounts for only 5.56% of the per capita catering expenditure, far lower than the 19.05% of the United States and the 42.74% of Japan. Compared with the United States and Japan, in the long run, the scale of the domestic prepared vegetable industry still has room for 4 to 8 times to increase.
From the perspective of the industry life cycle, the current prefabricated dishes in China are still the stage of the initial rise of the industry and the mixed war, the industry concentration is extremely low, and no real leading enterprises and super brands have been born, and who can run out in this track in the future is still unknown.
However, once a company breaks through from this industry, under the dual logic of industry growth and concentration improvement, the future growth space is obviously huge.
Who wins?
We selected the first flavor of A-share main prefabricated dishes, the best performing Guolian aquatic products in the recent capital market, and Yasui Foods with a large market value as examples to introduce the three key companies in the prefabricated vegetable industry one by one.
- Flavor is fragrant
The purest prefabricated dish company in A shares is undoubtedly Weizhixiang, which was listed in April last year, and most of its main revenue comes from the prefabricated dish business.
The company has more than 200 kinds of semi-finished vegetable products, the richness of the category far exceeds other peers, the current products under development include high-end hot pot ingredients (in the pilot stage), local specialty foods (in the small test stage), smoked flavor food (in the early research and development stage).
The biggest feature and advantage of Weizhixiang is mainly based on its strategic positioning at the C-end, and the company's C-end revenue accounts for up to 70%. Compared with other enterprises that are more inclined to the B-end business structure, Weizhixiang's popularity among C-end consumers is obviously higher, and the two major brands of "Weizhixiang" and "Yanyu" established by it have also provided help for them to win the C-end market.
From the perspective of financial data, Weizhixiang is indeed a very good company, which to a certain extent proves that the prefabricated vegetable industry is a high-quality track, and also proves the correctness of its C-end strategy.
First look at the company's growth, from 2016 to 2020, the company's revenue increased from 290 million to 610 million, with an annual compound growth rate of more than 20%; net profit increased from 41.47 million to 125 million, with an annualized compound growth rate of more than 30%.
Looking at profitability, its gross profit margin rose from 24.5% in 2016 to 29.4%, and its net profit margin rose from 14.2% to 20%, which are also excellent among food processing companies.
The return on net assets has remained above 35% for five consecutive years since 2016, which is an excellent data in the A-share market, with no more than 5 in the whole market, even better than the performance of those super consumer brands.
RoE dismantling can be found that the asset-liability ratio of Weizhixiang is very low, currently only 8.34%, the last 5 years are also less than 25%, its higher ROE, mainly from high-speed asset turnover and net interest rate, which means that the company's operation and management capabilities are relatively excellent.
Under the rapid development of the industry and the rapid growth of the company's performance, the primary problem restricting the development of Weizhixiang is insufficient production capacity. Before the listing, its production capacity was only 15,000 tons / year, and the utilization rate was almost 100%. Through the IPO fundraising, its production capacity is expected to increase to 65,000 tons / year, and the future performance growth has a certain certainty.
- League of Nations Aquatic Products
Guolian Aquatic Products is the largest aquatic products enterprise in China, with many well-known brands such as "Longba", "Gome", "OGOOD", "ICOOK" and "Zhenyufang". In 2020, the revenue of Guolian aquatic prefabricated vegetables reached 730 million, accounting for more than 16% of the revenue, and the prefabricated vegetable product line includes crayfish series, grilled fish series, and bullfrog series.
From the performance point of view, Guolian Aquatic Products experienced a period of rapid growth in 2016-2018, when the company's revenue source was mainly shrimp exports, and it had a large market influence in the United States and other countries.
After 2018, due to the tightening of tariff policies in the United States, the company's performance began to change its face, revenue declined for two consecutive years, and net profit showed losses for two consecutive years, losing 460 million in 2019 and losing 269 million in 2020.
Guolian Aquatic Products net profit trend, source: Flush iFinD
In order to save the decline in performance, Guolian Aquatic Products has begun to shift its development focus to the domestic market in the past two years, and has comprehensively transformed into aquatic food, gradually getting rid of the positioning of primary processed products, and comprehensively shifting to catering ingredients and marine food deep-processed products based on pre-made dishes.
Since September last year, Guolian Aquatic Products has reached strategic cooperation agreements with Shandong Rileng Food and Hema Fresh, respectively, with the intention of using the resource advantages of industry and channel giants to seek faster development in the field of prepared dishes.
At the same time, the company is set to raise 1 billion yuan to continue to increase the prefabricated dish business. Among them, 200 million yuan is used for the central kitchen project of Guangdong Gome Aquatic Food Co., Ltd. and 500 million is used for the deep processing and expansion project of aquatic products of Guolian (Yiyang) Food Co., Ltd.
According to the calculation of Guolian Aquatic Products, the two projects that are scheduled to increase will increase the company's average annual sales revenue by about 2.567 billion yuan and an average annual net profit of about 177 million yuan.
Driven by the prefabricated vegetable business, the performance of Guolian Aquatic Products in 2021 has rebounded, and in the first three quarters of last year, the company's net profit exceeded 10 million, achieving a turnaround.
The biggest advantage of Guolian Aquatic Products lies in its cost control ability. The cost of ingredients for aquatic pre-made dishes accounts for more than 90% of the production cost, and the company, as the largest aquatic product enterprise in China, has a unique advantage in cost control.
In addition, aquatic products such as shrimp have a strong seasonality, and the company's global procurement advantage helps to iron out seasonal fluctuations and ensure a stable supply of raw materials.
- Yasui Foods
Anjing Food is mainly engaged in quick-frozen hot pot material products (mainly for quick-frozen surimi products, quick-frozen meat products), quick-frozen rice noodle products and quick-frozen dish products research and development, production and sales, the company has a total of more than 300 kinds of quick-frozen food, is an important supplier of Haidilao and the absolute leader of the domestic quick-frozen industry.
In recent years, the company has launched pre-made dishes such as plum meat, Buddha jumping wall, garlic bone, cowboy bone, sauerkraut fish, etc., and by the first three quarters of 2021, the revenue of pre-made dishes has reached 918 million, accounting for 15% of revenue.
In the past, the main direction of Yasui Food was for the B-end market, and its net profit margin was less than 10% for a long time, which was a large gap with the layout of the C-end of the flavor.
Yasui Food's net profit margin trend, source: Flush iFinD
In 2019, Yasui Foods launched the pre-made dish sub-brand "Mr. Frozen", mainly targeting the C-end market. In order to accelerate development, Yasui also operated "Mr. Frozen Product" independently, and set a 30% equity incentive policy for the operation team, and the assessment target set was to reach 198 million yuan in revenue and net profit of not less than 10 million yuan in 2023.
Relying on the deep channel resources and strong marketing capabilities of Yasui Barrier, "Mr. Frozen Product" has become more and more influential in the C-end market in recent years.
At the end of 2021, the company's 5.7 billion fixed increase landed, of which the production capacity of new dish products was as high as 105,000 tons, and the intention to increase the size of prefabricated dishes was very obvious.
With generous incentive policies, strong funds and channel support, the development of Yasui Foods in the field of prepared dishes is also worthy of attention.