Sushi Technology or the first listing, electric toothbrush disputes again

In recent years, with the improvement of consumption level and the strong blessing of marketing, electric toothbrushes as oral care and personal care small household appliances two tracks of cross market has also ushered in a huge opportunity for development, but also created a number of players with good market competitiveness, such as the parent company of electric toothbrush brand usmile Guangzhou Interstellar Yuedong Co., Ltd., and Xiaomi ecological chain enterprise Sushi Technology are not only in the forefront of electric toothbrush brands, but also announced last year to impact the secondary market.

However, compared with the delay in usmile's further listing news, Sushi Technology has entered the inquiry stage, according to the prospectus, it intends to issue no more than 10 million new shares, raising about 775 million yuan. If the follow-up of the listing goes smoothly, Sushi will become the "first stock of electric toothbrush".

However, the market share is still inferior to that of usmile's Sushi can not be homogeneous products and many brands out of the siege there are still too many unknowns, especially in the fierce competitive environment, the listing may only be a new round of electric toothbrush brands a new round of reshuffle of the new chip.

Marketing supports performance

Sushi Technology has carried an obvious millet brand since its birth, and has received investment from Xiaomi Group and Shunwei Capital a few months after its establishment, and Sushi, which has become a link in the ecological chain of millet, has also developed more confidently. According to the prospectus, the revenue of Sushi Technology from 2018 to 2020 and the first half of 2021 reached 534 million yuan, 1.025 billion yuan, 1.371 billion yuan and 906 million yuan respectively, of which the average annual compound growth rate of Sushi Technology's revenue from 2018 to 2020 was as high as 60.17%.

Like the cloud rice stone, Sushi Technology benefits from the xiaomi ecological chain at the same time, but also suffers from "millet dependence". According to the prospectus, from 2018 to 2020 and the first half of 2021, the proportion of Sushi Technology's revenue from the Xiaomi model was 73.52%, 61.31%, 60.60% and 56.40%, respectively.

Although Sushi Technology has been minimizing the impact of Xiaomi, more than half of its revenue share is still an important example of its dependence. Even if the millet model contributes most of the revenue of Sushi Technology, the net profit of Sushi Technology is not optimistic.

According to the prospectus, from 2018 to the first half of 2021, the net profit of Sushi Technology was 46.5446 million yuan, 36.3759 million yuan, 69.8181 million yuan and 92.1567 million yuan, and the net profit margin was 8.7%, 3.6%, 5.1% and 10.2% respectively, of which the net profit in 2019 also declined.

That is to say, the profitability of Sushi Technology is not as optimistic as imagined, and the reason behind this is actually a large amount of marketing expenses, not only with Wei Ya, Li Jiaqi and other head anchors, but also to find star endorsements and popular variety show sponsorship.

According to the prospectus, from 2018 to the first half of 2021, the sales expenses of Sushi Technology were 0.44 billion yuan, 135 million yuan, 261 million yuan and 185 million yuan, and the sales expense ratios were 8.15%, 13.15%, 19.04% and 20.43%, respectively, of which the sales expenses increased by 209% in 2019 and 94% year-on-year in 2020.

Although Sushi Technology has the blessing of Xiaomi's ecological chain, it is clear that the vigorous expenditure of marketing is also the key to ensuring its high revenue. With the decline in the proportion of revenue in the millet model, Sushi Technology still maintains the rise in performance, and the marketing style of Internet celebrities is obviously crucial.

Obviously, as the electric toothbrush track, the two companies that took the lead in impacting the secondary market have invariably chosen the Internet celebrity-style marketing style, which also means that behind the increase in their brand market influence is a huge amount of marketing support.

The market is chaotic and profiteering

Of course, sushi technology chooses high marketing to burn money behind also has an important market impact, Taobao data show that since 2017, the online sales growth rate of electric toothbrushes has basically remained above 69%, from 2015 to 2020 In the five years, the average annual compound growth rate of the entire market has reached 40.1%, while the penetration rate of domestic electric toothbrushes is only 5%.

The market growth rate is gratifying and the prospect is broad, so the field of electric toothbrushes has poured into more players, there are thousands of brands competing for the market together, how to stand out among many brands or even become the head of the industry is obviously particularly critical, and the addition of capital also allows Sushi Technology to have a breakthrough confidence, but also makes their traffic play feasible.

According to the data of Tianyancha, Sushi Technology has experienced a total of six rounds of financing from its inception to listing, in addition to Xiaomi's continuous increase, it has also attracted capital such as Kaihui Fund, Jiayu Capital, and Yuanyi Investment, with a cumulative financing of more than 300 million yuan, while behind usmile stands Zhong Ding Capital, Source Code Capital, hillhouse Venture Capital. The blood transfusion of capital also gives Sushi Technology and USMILE more marketing space, and also makes each other the leader of new brands, the former becoming the first sales volume at a price of 100 yuan, and the latter ranking second in the market share in 2020.

However, the key to the electric toothbrush can really pry open the market, in addition to the overwhelming advertising and marketing, it is also indispensable to the 9.9 yuan free shipping of the Volkswagen brand. Their figure in the e-commerce platform and live broadcast room, once in front of consumers in front of the price of hundreds of yuan or even thousands of yuan of electric toothbrush suddenly became within reach, sales will rise, and the key to this is extremely high profits.

After all, an electric toothbrush costs 9.9 yuan, and it can still make money, which can be imagined to be high. The cost of most electric toothbrushes on the market generally does not exceed 200 yuan, mostly concentrated in the tens of yuan to 100 yuan or so, the return on wealth is so rich, it is not surprising that many players are pouring into the electric toothbrush track.

Ordinary players can make money, powerful brands are obviously more imaginative, like the profit of international big-name electric toothbrushes can reach hundreds of percent, and the gross profit margin of newly created domestic brands is also about 20%.

According to the prospectus, the gross profit margin of Sushi Technology during the reporting period was 23.64%, 25.24%, 30.04% and 37.28%, of which the gross profit margin of Sushi Technology's xiaomi model did not exceed 23% and became a downward trend, while the gross profit margin of its own brand gradually increased and exceeded 50%, and the gross profit margin of its own brand during the reporting period was 24.89%, 33.17%, 43.41% and 51.19%, respectively.

In this way, the gross profit margin of Sushi Technology still maintains an upward trend even if it is affected by the millet model, and the high gross profit of its own brand also allows Sushi Technology to have the confidence to reduce millet dependence, but as mentioned earlier, the net profit performance of vegetarian technology is not optimistic, and the net profit margin remains in single digits and there is a decline in net profit.

The reason is that in the chaotic and profiteering market environment, behind the large-scale growth of Sushi Technology's revenue is actually the strong support of marketing and limited market competitiveness, if the role of marketing is removed, the performance of Sushi Technology is likely to regress significantly, which is why Sushi Technology and usmile can become the head of new brands, and listing has naturally become the key to maintaining their competitiveness.

In addition to competition, it is still competition

The huge profit return of electric toothbrush makes the entire market environment surging underground, the low entry threshold and the crazy influx of many players make the competitive environment of electric toothbrushes more and more intense, although Sushi Technology has taken the lead in brand and market influence, but in such a fierce competitive environment, it is still difficult.

The first is a serious homogenization of products, the cost of electric toothbrushes mentioned earlier is not high, the price gap between brands and non-brands is basically a brand premium, but the bottom is the high marketing expenses, but also diluted the net profit. In particular, the appearance and style of electric toothbrushes are easier to imitate, which makes similar products appear at different prices, which greatly weakens the benign development of the industry.

Compared with the technical advantages of foreign brands, domestic brands are also mostly FOUNDG products, and are not responsible for production, such as the foundry road of Sushi Technology's electric toothbrush, the R & D investment does not exceed 5% of the revenue, and the technical competitiveness is not dominant under the premise of only marketing.

As a result, the electric toothbrush market with limited core technology has also derived many models and become a new way of playing for homogeneous products. Although there are many models of electric toothbrushes, the difference is not reflected in the effect of brushing teeth, but in the use experience of products, such as sports mode, battery and auxiliary functions, and the added value of electric toothbrushes has become an important reference condition for different models and prices.

The second is that the traffic dividend has declined, and the growth of online channels has peaked. According to the National Bureau of Statistics, online physical sales in 2019 were about 8.5 trillion yuan, the growth rate fell back to 21.4%, and the 2021 China Internet Data Report also shows that the overall revenue of China's Internet advertising in 2021, although still improving, the growth rate was 4.53% slower than the same period last year.

As of the first half of 2021, the number of domestic online shopping users is 812 million, the penetration rate is nearly 80%, and the cost of customer acquisition on e-commerce platforms such as JD.com is also rising sharply, and Pinduoduo has risen eight times in five years. This will also increase the cost of electric toothbrush marketing, and also make the revenue growth space of the small household appliances behind them focusing on online channels.

However, although the market prospect of electric toothbrushes is optimistic, its development situation is particularly bumpy, and the market competition is particularly severe. According to the data of the Prospective Industry Research Institute, since 2019, the quarterly sales growth rate of the electric toothbrush industry has declined, and for the first time in 2020, there has been a negative sales growth, and the revenue growth rate has dropped to -12%. By 2021, the annual retail sales of electric toothbrushes will only be 6.71 billion yuan, down 18.5% year-on-year.

The concentration of the electric toothbrush market is also decreasing, and CR5 has changed from 86.5% in 2017 to 68.5% in 2019. While the growth rate of the electric toothbrush industry is slowing down, the industry concentration is also decreasing, which shows that the competitive environment for electric toothbrushes is more intense, which means that the industry ceiling of electric toothbrushes is not as high as imagined.

In addition, under the premise of increasingly fierce competition pattern and limited core competitiveness, Sushi Technology no longer pays attention to a single category such as electric toothbrushes, and has developed into new categories such as toothbrushes. According to the prospectus, the oral care business based on electric toothbrushes is the main business of Sushi Technology, and the revenue during the reporting period was 329.8 million yuan, 606.6 million yuan, 813.2 million yuan and 526.5 million yuan, accounting for 61.71%, 59.20%, 59.31% and 58.12% of the current revenue, respectively.

That is to say, although the electric toothbrush has a lot of imagination, but the imagination of Sushi technology is limited, especially under the competition of foreign brands, traditional domestic brands and newly entered Internet companies, Sushi technology still needs new answers, and the listing has added a new boost for them, but it has also opened a new round of reshuffling of electric toothbrush brands, and the new market competition pattern is obviously waiting to be re-established.