Image source @pexels
Wen 丨 Kai Pineapple Finance (ID: kaiboluocaijing), author 丨 Su Qi, editor 丨 Jin Jiepan
What brand of toothpaste and toothbrush are on your washstand?
I don't know how many people use Shuke. The parent company behind it, Vimax, has officially submitted a prospectus to the Hong Kong Stock Exchange on February 8 to be listed on the main board.
Founded in 2006, Vimax's revenue growth has gradually flattened from 2019 to the first three quarters of 2021, maintaining at about 1.6 billion. The overall revenue was flat compared with its peers, and the revenue in the first three quarters of 2021 was only 1/23 of that of its old rival Yunnan Baiyao. Due to Shuke's strong investment in marketing and advertising, from 2019 to the first three quarters of 2021, its adjusted net profit was about 100 million yuan.
Because of the characteristics of large market capacity, fast growth rate and high purchase frequency, the oral care track is known as "personal care fresh" in the industry. The development process of this domestic track can be divided into three stages.
Although it was once squeezed by foreign brands, many old enterprises were born in the 1940s and 1950s, such as two-sided needles, black people, Chinese, etc.;
From 2005 to 2006, Yunnan Baiyao, which takes the route of Chinese herbal medicine, and Shuke, which focuses on oral care, have been launched, and a new domestic toothpaste brand has appeared on the stage.
With the growth of the post-90s and post-00s into the main force of consumption, since 2015, a number of young enterprises have emerged in the oral care subdivision track, which have brought a wide range of toothpaste, electric toothbrushes, water floss, tooth stickers, mouthwashes and other products, and capital has also followed.
According to the statistics of the arterial network, in the first half of 2021 alone, a total of 33 financing incidents occurred in the domestic oral primary market, with a total financing amount of more than 5 billion yuan.
Shuke, which was born in the alternating period of the industry's new and old, also plays a role in carrying forward the upper and lower levels - not only continuing to promote the innovation of the main business of toothpaste/toothbrush, but also extending its tentacles to the field of electric and professional oral care, in 2016, almost with new brands such as usmile and Sushi, the morning and evening protection sonic electric toothbrush was launched in the same period.
But 16 years later, Shuke, who has the first-mover advantage, is in an increasingly awkward situation.
Some insiders summed up the "three major embarrassments" they face: the product positioning is not clear enough, the sales channels are traditional, and they are not as "understanding" young people as the emerging oral care brands.
After experiencing two "acquisition" rumors, Vimax's current listing road is still not optimistic, and now, the oral care track veterans are scrambling and new people are emerging, leaving shuke time may not be much.
Embarrassment one: the product positioning is not clear
Behind the best-selling oral care brands in the past, in addition to high brand recognition, it is more important to have a clear brand positioning.
Toothpaste has a mind. In the impression of most post-70s and post-80s consumers, bleeding gums buy Yunnan Baiyao, teeth sensitive with cold acid spirit, whitening toothpaste to buy black people, anti-moth and anti-caries to choose Crest / Colgate, children's toothpaste to buy Naes Ling Yale / Frog Prince.
When it comes to Shuke, most users probably don't have a clear understanding.
Li Yingtao, a senior analyst in the new consumer industry at Analysys, believes that even if consumers change generations, the user impression formed by Yunnan Baiyao is difficult to be replaced, and new brands want to rob users of their minds, so they must cut more subdivided and differentiated products.
Combined with the data of multiple reports, the toothpaste market with whitening function accounts for the largest proportion, reaching nearly 30%, mainly because the new generation of consumers pays more attention to tooth whitening. Enzyme whitening toothpaste promoted by Shuke is a product in this market segment.
According to the data given in Vimax's prospectus, according to the retail sales of whitening toothpaste in 2020, the five major domestic brands accounted for a total of 45% of the market share, and SHUKE ranked first in China's whitening toothpaste market, accounting for 11.3%.
Schuker ranks first in the Chinese whitening toothpaste market source / Frost & Sullivan
However, Li Yingtao believes that Shuke emphasizes its market share in Chinese brands, in fact, in the whitening toothpaste market, domestic toothpaste is still facing a strong squeeze from international brands. Moreover, Shuke's main "enzyme whitening", although it is innovative, there is also a certain controversy, so it is not easy to form a clear competitive advantage in the whitening category.
Many users mentioned that when buying toothpaste, most of them are planted by bloggers on social platforms. Taking Xiaohongshu as an example, in the relevant "planting grass" and "evaluation" notes, the main keywords mentioned in Shuke toothpaste are cost performance, packaging and taste, but the description of the whitening effect is mostly "reactive" or "need to be matched with tooth patches to have obvious whitening effects".
It is very difficult to conquer the market simply by whitening toothpaste. In 2015, SHUKE underwent a major transformation.
On the one hand, it launched the children's oral care brand Shuke Baby, providing children's toothpaste and children's electric toothbrushes and other products for children under 12 years old; on the other hand, expanding the electric and professional oral care business, launching new categories such as electric toothbrushes, water floss, portable mouthwashes, and tooth patches.
Source of the three major product lines of the Schuker brand / Vimax prospectus
Zhang Yi, CEO and chief analyst of Ai Media Consulting, analyzed that from the perspective of "in addition to adult toothpaste also do children's toothpaste, in addition to making electric toothbrushes and doing mouthwash", Shuke has always wanted to cut new user groups.
The new action has indeed attracted a group of young users for Shuke, but it is still inferior to some old brands. According to the "2021 First Quarter Oral Care Industry Network Attention Analysis Report" released by the Micro Hotspot Big Data Research Institute, Shuke's brand attention accounted for more than 60% of the user group under the age of 29, still lagging behind old brands such as black people, Colgate and Crest.
Judging from the actual data, the contribution of the new product line has not changed much. According to the prospectus, the contribution of SCHCO's children's basic oral care products, electric and professional oral care products to the total revenue has always been around 40%, and the proportion from 2019 to the first three quarters of 2021 is 40.2%, 39.3 and 39.1%, respectively, which cannot support half of the country.
Source / Vimax Prospectus
Jiang Xiaoxiao, director of CIC Insight Consulting, analyzed pineapple finance, compared with other brands, Shuke created a comprehensive oral care solution, but because the product line is too fully covered, resulting in not being prominent in each subdivision category, compared to the brand focusing on a single category segment, Shuke's brand positioning is not accurate, and the overall competitiveness of the future is expected to change little.
Embarrassment two: spend 600 million a year to advertise, but marketing is disconnected from channels
Schocker's oral care product line is divided into basic, electric and professional, toothpaste and toothbrush is still the main business. And the proportion of each part is relatively stable, maintaining a 7:2:1 ratio during the reporting period (2019 to the first nine months of 2021).
This business ratio reduces the pressure on the main business and also preserves a certain strength for it during the epidemic.
According to the prospectus, Scotel's revenue in 2020 was affected by the epidemic, down slightly by 2.8% year-on-year to 1.616 billion yuan, and as of the first three quarters of 2021, the revenue increased by 14.8% year-on-year to 1.23 billion yuan, but there is a certain gap compared with the annual revenue in 2019 and 2020.
It is worth noting that Shuke maintained positive profitability from 2019 to 2020, with net profits of 50.494 million and 211 million, respectively. However, as of the first three quarters of 2021, the company lost 494 million yuan, but this is not a real operating loss, but the book value change of 574 million yuan of redeemable capital injection was included in the current period. Putting aside this impact, Scovoor's adjusted net profit in 2019, 2020 and the first three quarters of 2021 was 48.193 million yuan, 152 million yuan and 129 million yuan, respectively.
"Shuke's profit is OK", Li Yingtao pointed out, compared with 2019 in 2019, the profit increased by 100 million, thanks to its adherence to high-end positioning, which brought it a relatively high gross profit in the industry. The gross profit margin of Shuke also showed a year-on-year increase trend in 2019, 2020 and the first three quarters of 2021, with 53.8%, 58.1% and 62.8% respectively.
What level is this in the toothpaste industry? Taking Yunnan Baiyao as an example, its operating income in the first three quarters of 2021 was about 28.362 billion yuan, which was 23 times the revenue of Shuke in the same period; the deducted non-net profit attributable to the shareholders of the listed company was about 3.667 billion yuan, which was 28 times that of Shuke in the same period.
Li Yingtao said that Shuke's revenue and profits are very dependent on marketing input, and the perennial marketing expense rate is about 40%, and once the marketing effect is not good, there will be a decline in revenue and profits.
This is another "embarrassment" of Shuke, the marketing style is more online, the sales channel is more traditional, and the channel is disconnected from marketing.
2019 is the time for Shuke to advertise wildly, inviting Beckham and Li Bingbing as spokespersons and implanting in the hit drama "Mr. Love", and in that year, Vichy's advertising expenditure reached 111 million.
Nowadays, Vichy is more using social media such as Xiaohongshu and Douyin to reach young consumer groups, and these marketing actions are not cheap. According to the prospectus, the promotion expenditure of Vimax's online channels increased from 12.3% in 2019 to nearly 30% in the first three quarters of 2021, and it still maintains more than 600 million advertising expenditures a year.
But in terms of sales channels, Shuke has always relied on offline channels.
From 2019 to the first three quarters of 2021, the revenue proportion of Vimax's offline channels remained around 60%, even if it was crazy online, the proportion of online channel revenue did not change much, only from 37.9% to 43.3%, of which online direct sales accounted for 24.4%. Jiang Xiaoxiao believes that this number is still at a low level compared to many emerging domestic oral care brands.
Online channels include Tmall, JD.com, Pinduoduo and Douyin, Xiaohongshu, Meituan and other sources / Vimax prospectus
In fact, the genes of the two founders of Vimax determine to a certain extent that SHUKE relies more on offline dealers. Founder Wang Ziquan was the sales manager of Guangzhou Blue Moon (December 1994 to December 1996), and founder Cao Ruian was also the sales director of Blue Moon (December 1994 to May 1998).
A daily chemical industry practitioner said that Shuke's successful route is similar to the blue moon of the past, playing the "city battle" - bringing city managers together and relying on them to use "strong terminal push + shopping guide people sea tactics" to go to the store promotion, so that sales soared in a short period of time.
Offline channels play old, Shuke tried to vigorously develop online marketing, but in the expansion of online channels, there was little effect. "In the field of oral care, the technical threshold of toothpaste and toothbrush category is not high, and the existing brands mainly play the channel threshold. For now, Shuke's online channels are easily challenged by new forces, and it is easy to fall into danger without a particularly obvious user mentality. Zhang Yi analyzed.
Embarrassment three: old players, new brands pinch
According to the summary of Kai Pineapple Finance, domestic oral care has roughly experienced three rounds of consumption waves, and some domestic new brands have seized the opportunity of the times to come into being.
The protagonist of the first wave is the toothpaste brand, which seeks a way to survive under the squeeze of foreign-funded enterprises, and the end is either to lose the initiative after being acquired, or to operate dismally after listing, which is represented by black toothpaste and two-sided needles.
The Yan brothers in Ningbo, Zhejiang Province, founded The parent company of black toothpaste, Hollywood Chemical, in 1933, and after being acquired by Colgate in 1985 with a 50% stake, it underwent two passive name changes. In 2004, it became the first listed company in the industry, but after landing on the capital market, it was because of blind expansion of business, and from 2006 to 2018, the net profit after deducting non-profit was negative for 13 consecutive years.
For a long time, the toothpaste market has been seized by three foreign brands, Colgate, Procter & Gamble (Crest) and Unilever (acquiring "Zhonghua" toothpaste), and the market has fought a price war. Until the establishment of a new domestic toothpaste brand represented by Shuke and Yunnan Baiyao, the second round of waves began.
Yunnan Baiyao Toothpaste, officially launched in 2005, changed the low-end positioning of domestic brands in the past and embarked on the high-end scientific research (Chinese herbal medicine) route. In addition to toothpaste, Shuke, launched in 2006, began to focus on electric toothbrushes and children's brands, pulling toothpaste brands into the "oral care" track.
With the post-90s, post-95s and even post-00s becoming the new main consumer force, a large number of new cutting-edge forces have emerged in the oral care track, led by Sushi, usmile, and Samban. They aim at the subdivision categories of the new tide, use marketing and sales channels that are closer to young people, develop new and strange product forms, quickly create Internet celebrity hits, gain the favor of VCs, and are expected to overtake in curves in the future.
Data Source / Sky Eye Check Charting / Open Pineapple Finance
It can be seen that Shuke has played a role in these three generations of waves. However, this was once regarded as a dark horse in the oral care industry, but in the development of recent years, it has been rumored that it will be acquired by Colgate and Unilever.
Shuke's IPO at this time, has it found a way out? In this regard, many industry insiders believe that there are difficulties in the development of its existing three major sections.
First of all, the professionalism of product research and development and product quality need to be further strengthened. For example, for the electric toothbrush market that Shuke is doing, Li Yingtao said that this track has a relatively professional brand, and it is far from the toothpaste research and development business that Shuke is good at, and it is difficult for Shuke to get out of the market.
Secondly, Shuke should compete with cutting-edge brands in fast-growing sub-categories such as electric toothbrushes, tooth stickers, and mouthwashes. Jiang Xiaoxiao believes that at present, there have been domestic brands that are closer to young people under these categories, such as usmile in electric toothbrushes and mixed in mouthwashes. In the short term, if Shuke does not have a major direction of strength, it is difficult to form an impact on the brands in these categories that have become Internet celebrities.
For the future of the oral care track, an industry expert in an interview with Third Bridge proposed two development directions: one is that the future growth point of the toothpaste track may be the increase in the unit price of customers, rather than the further sinking of the market; the other is to continue to exert efforts on the children's market, more subdivided in age, customizing related products according to children's different ages and different needs, and swallowable children's mouthwash is also a major trend.
Many industry insiders believe that this year and next year, the oral care track will also launch more fierce market competition. Whether it can anchor the brand positioning and seize the washing table of young people is the key to whether Shuke can be successfully listed and whether it can attract investors to enter the market.