Image source @ Visual China
Text | There is Niu Finance, the author | Spades and longswords
Compared with the obscurity of a few years ago, the domestic oral circuit is now a grand scene boosted by the young people who pay more and more attention to dental health. The "2021 Jingdong Dental Industry Trend Insight White Paper" pointed out that the Z generation young people have shown a new trend in oral consumption, and refined oral care products such as oral sprays, electric toothbrushes, toothbrushes, mouthwashes and so on are growing at a high speed.
In addition, the help of capital has also played a role that cannot be ignored - the figure of well-known VCs/PE such as Sequoia, Hillhouse, and SoftBank has repeatedly shot to the oral track. Under the blessing of capital, both the field of oral medical treatment and the field of oral care have shown a vigorous development trend, and some companies in good condition have even started to make a listing plan. Among them, in addition to Angel of Time, which was widely known for its ultra-high gross profit last year, Vimax, the parent company of Schuker toothpaste, also recently disclosed its listing plan.
According to the announcement of the Hong Kong Stock Exchange, Vimax Industrial (Guangdong) Co., Ltd. has submitted a prospectus on February 9 to be listed on the Main Board, and its co-sponsors are ABC International and BNP Paribas. Considering that domestic toothpaste brands such as Yunnan Baiyao are concentrated in A shares, this means that once the listing is successful, Vimax will have the opportunity to become the "first domestic toothpaste stock" in Hong Kong stocks.
The "follower" Shuke's way of survival
The story of Vichy and Shuke toothpaste also begins with one of its opponents, Yunnan Baiyao toothpaste.
In the vast domestic oral care product market, Colgate, Crest, Zhonghua, and black people have been known as the "four giants", and have long occupied the first echelon of major supermarket shelves. This pattern was not alleviated until 2005, when Yunnan Baiyao entered the battlefield - with the "national secret formula" and accurate product positioning, Yunnan Baiyao toothpaste successfully supported the high-end image, forcing Colgate and Crest to come up with high-end products of more than 20 yuan to fight, and some domestic brands learned from Yunnan Baiyao to make an article on the concept of "medicine into toothpaste", such as the same old pharmaceutical company's tablets, which launched their own toothpaste brand shortly after.
A year after Yunnan Baiyao entered the toothpaste market, Wang Ziquan and Cao Ruian, daily chemical veterans from Blue Moon, followed suit to create Shuke toothpaste and positioned it as an "oral care solution" similar to the former.
After observing the market, Wang Ziquan saw that Yunnan Baiyao maintained a high-end positioning for a long time, was reluctant to launch the weakness of low-cost products, and attracted many customers through the dual pricing strategy of high and low end. In order to make up for their lack of "national secret formula" shortcomings and create differentiation, Wang Ziquan and Cao Ruian also opened up a number of product line combinations including toothbrushes, mouthwashes, tooth stickers, floss, tongue scrapers, etc., coupled with quite distinctive store creative publicity, leaving a special impression of complete products and professionalism on the market.
The differentiated war between Shuke and Yunnan Baiyao doesn't stop there. In 2013, Shuke proposed the concept of "morning and evening toothpaste" based on the Toothpaste market in Europe and the United States, and invited international superstar David Beckham to advocate the separation of daily toothpaste and night toothpaste with saliva secretion as the boundary; in 2015, Shuke launched a new brand SakyKids to force the market for children under 12 years old.
Of course, SHUKE can decisively implement this series of differentiated strategies, and the support of the capital behind it is inseparable. According to the information of Tianyancha, The parent company of Shuk, Vimeizi, received more than 100 million yuan of investment from Legend Capital as early as 2014, and completed a 400 million yuan B round of financing in 2016, and the participants included Orchid Asia and Zhong Ding Capital. In the years since, Vimax has completed three more rounds of financing, the most recent of which was in August 2021, led by Turing Assets and others.
Relying on the differentiation strategy and support from capital, although Shuke failed to surpass the strong channels and brand power of Yunnan Baiyao, it also maintained its own foothold and did not completely fade out of the public eye like early domestic brands such as TianQi, Two-sided Needle, and Heimei. According to Frost & Sullivan data, as of 2020, Shuke will occupy a 5.3% share in the domestic oral care product market, ranking fourth; in the field of electric oral care, Shuke also ranks 4th with a market share of 4.3%.
Image from the prospectus
Behind the decline in profits, how is Vimax's diversification strategy running?
So, behind the market position that is enough to rank in the top five, what is the financial situation of Vimax?
From the prospectus, we can see that Vimax's financial data in the past two years has fluctuated a lot. From 2019 to 2020, its revenue was 1.662 billion yuan and 1.616 billion yuan, showing a decline. In contrast, vizier's net profit figures in the same period were 50.494 million yuan and 211 million yuan, and the gross profit margin was 53.8% and 58.1% respectively, an increase of considerable. From January to September 2021, Vimax's revenue reached 1.23 billion yuan, an increase of 14.8% over the same period last year; but on the other hand, Vichy generated a loss of 494 million yuan in 2021, which is really confusing.
For the question of huge losses, Vimax's answer in the financial report is that in 2021, a change in the book value of 574 million yuan of redeemable capital injection was included, and the reason for this change was mainly due to the conversion of redeemable capital injections with other preferential rights by early investors into equity. If this influence factor is put aside, Vimax's adjusted net profit in 2021 should be 129 million yuan.
In terms of segmentation, Vimax's revenue sources are mainly four items - basic oral care products based on toothpaste and toothbrushes, electric oral care products such as electric toothbrushes, and professional oral care products including tooth patches, flosses and tongue scrapers.
Among them, basic oral care products are undoubtedly the top pillar of Vichy's revenue, contributing 1.175 billion yuan and 1.201 billion yuan of revenue in 2019-2020, accounting for 70.7% and 74.3% respectively. It can also be seen from the statement that Vimax's consumers are still focusing on the adult group, and the income of adult basic oral care products will account for 60.7% of the total revenue in 2020, while the proportion of children's products will only be 13.6%. It can be seen that in order to gain a foothold in the children's market segment, Vimax still needs to do more homework in the future.
Products such as electric toothbrushes were once seen as an important part of Vichy's diversified oral solutions, but the financial data in recent years does not seem to reflect this. In 2020, vichy's revenue from 411 million yuan in 2019 fell to 295 million yuan, accounting for 18.3% of total revenue. From January to September 2021, Vimax's revenue on electric oral care products was 1.838 billion yuan, which is still far from 2.076 billion yuan in the same period of 2020. As for whether Vichy is still holding out hopes of making efforts to markets such as electric toothbrushes, we should be able to see the answer from its first financial report after its listing.
Unlike electric oral care products, professional oral care products seem to show a good growth rate, with revenue of 113 million yuan in 2020, accounting for 7%; from January to September 2021, this figure increased again to 9.8%. If this revenue continues to grow at this rate, it will only be a matter of time before it replaces electric care products as Vimax's second largest source of revenue.
Unlike the channel strategy of grasping large supermarkets in the early days of development, in recent years, Vimax has shifted its focus to online, followed by a significant increase in related revenue. From 2019 to 2020, the revenue of its online channels accounted for 37.9% and 41.7%, respectively, while the proportion of offline and large customer channels was 62.1% and 58.3%. In the long run, the attack on online channels is indeed conducive to the development of Vimax, but the new marketing method of online channels also needs to be gradually adapted.
Shu Ke and Vimezi need to start a mental war
Overall, Vimax's development in recent years seems to have been worse than in the past - even if it pointed out the "black swan" factor of the epidemic in the financial report, its old rival Yunnan Baiyao achieved 5.387 billion yuan of oral cleaning products revenue and 1.894 billion yuan of net profit in 2020, an increase of 15.38% and 16.88% respectively. With the high wall of Yunnan Baiyao in front, the pressure of Wei Meizi's future is not small, and it is even more difficult to surpass the more powerful Colgate and Crest.
Another point to note is that the domestic oral care products market has ushered in more segmented demand while growing rapidly.
Judging from Jingdong's "White Paper on Trend Insights in the Oral Industry", in recent years, various types of refined oral care products have grown faster than traditional categories such as toothpaste. For example, portable toothbrushes and mouthwashes far exceed other oral care products in terms of penetration, of which portable oral spray sales growth rate is in the front row; on the other hand, consumers are more willing to try various new concepts when choosing traditional care categories such as toothpaste, such as more subdivided efficacy, unique product forms and packaging, and rich and diverse tastes.
This development trend means that whoever can differentiate, verticalize and specialize around at least one new concept will have the opportunity to occupy the consumer mind of this category, and even achieve a counterattack on traditional brands in the short term, just like Yunnan Baiyao in the past.
An example is that the new brand of domestic mouthwash "Samsan" has attracted a large number of young consumer groups in recent years with no alcohol and no irritating taste, and a variety of joint styles. In terms of core selling points, Samson grasped the "fresh breath" that has always been an additional function of mouthwash as the main concept, and successfully entered the hinterland of mouthwash giant Li Shidelin - the latter mainly focuses on sterilization, but its spicy taste also forces a large number of non-patients and consumers with fresh oral needs; on the other hand, cutting-edge brands such as Ice Spring and BOP have also achieved good growth by relying on elements such as taste diversification, of which the GMV of Ice Spring in 2021 increased by 400% year-on-year.
Unfortunately, this is what Vimezi and Shuke lack.
In terms of toothpaste, the "morning and evening toothpaste" that Shuke once pushed is now very quiet, and even has been stolen by brands such as Di Wang and Haro. In addition, the stories it tells to the outside world also include bright white gum guards, plant extracts, etc., but this is basically the area where Brands such as Crest and Black occupy the advantage, and it is difficult for Shuke to rely on them to impress consumers.
In the emerging fields of electric toothbrushes, toothbrushes, mouthwashes, its products are also similar to most of the products on the market, which leads to the top sales on the e-commerce platform mostly for Philips, Huawei, Millet and other brands of products, known as the full field of oral care solutions Shuke is behind.
For vimeizi and Shuke, which are positioned in the middle and high-end, product diversification may be its boastful advantage, but it will also bring the impression of "doing everything, but not refining anything" to the market, so that it has only changed from a follower of Yunnan Baiyao to a follower of Crest and Colgate.
For the foreseeable future, Shuker will still need to find a breakthrough from the existing hands.
Making an article on the brand name is an answer - "Shuke" is easily reminiscent of Zheng Yuanjie's Shuk Beta series IP, and it is worth mentioning that the latter even confronted Vimax because of trademark issues. Fortunately, Zheng Yuanjie has recently reconciled with Vimez and authorized her to use the Shuk Beta IP. If Shuke can use this widely influential IP and combine it with its "Shuker Baby" brand to play a special role, perhaps it can make a difference in the children's oral care market.