Text | Liu Yueting
Edit | Huang Yida
In recent years, with the rapid rise of cutting-edge makeup brands, domestic brands have achieved breakthroughs in market segments. "The Light of Domestic Products" Winona successfully went out of the circle with sensitive skin care products, and the star product Shuminte Cream was greatly praised.
On This year's Double Eleven, Winona once again handed over a satisfactory answer. Among them, Tmall beauty and skin care category entered the Top6 for the first time, and it is the only domestic brand that has been shortlisted in the top ten for 4 consecutive years in 2018-2021.
But from the perspective of the capital market, investors do not seem to buy it. In March 2021, Winona's parent company Bethanie - the "first share of functional skin care products" landed on the A-share market, opening 272.09% higher on the opening day, and then the stock price soared all the way, reaching a record high of 289.35 yuan in July, and the total market value in the same period was close to 120 billion yuan.
Bethany's stock price trend wind, 36Kr finishing
But the good times were not long, after the high point, Bethany's stock price fell all the way, and even the sales of Double Eleven did not stop the decline. So, standing at this point in time, does Bethany still have the value of investment?
With the above questions in mind, this article attempts to present a point by answering the following questions:
What is the outlook for dermatological grade skincare?
What is Bethanie's moat?
Does Bethany's logic support valuation?
01 Dermatological grade skin care products - high-quality subdivision track
Bethany's main business is divided into skin care products, makeup, medical equipment, of which Winona's main brand as the "hope of the whole village", its revenue accounted for more than 98%, the gross profit margin remained above 75% for a long time, much higher than Marumei shares, Polaria, Shanghai Jahwa and other skin care manufacturers.
Comparable company sales gross margin wind, 36kr finishing
This is because Winona is targeting the subdivision of dermatological skin care products, which have the effect of gently repairing skin conditions compared to ordinary cosmetics. It is often more professional, so the added value is higher, which supports higher gross margins.
In recent years, due to air, environment, pressure and other factors leading to frequent skin sensitivity problems, and frequent makeup and medical beauty people to do postoperative repairs have increased, resulting in a large base of sensitive muscles and a significant increase in treatment needs.
At the same time, as the concept of consumption continues to mature, consumers' attention to product ingredients is also increasing, especially the pertinence and professionalism of products, and the market demand for dermatological skin care products continues to grow.
According to the Chinese Journal of Dermatology and Venereology, 40%-56% of women in Asia in 2016 were sensitive muscles, and more than 36.1% of women in mainland China belonged to sensitive skin groups.
People with sensitive skin often have symptoms such as skin redness and tingling, and there is a strong demand for repairing the skin barrier, and the willingness to consume is also stronger. At the same time, it is also more pursuing specialized ingredients, which usually do their "homework" before purchasing related skin care products, and in order to prevent the secondary damage to the skin caused by frequent brand changes, customers of dermatological skin care products are usually more sticky and more willing to buy back.
The proportion of consumers buying back sensitive skin care products (2019) CICC, 36Kr finishing
Moreover, the growth potential of the dermatological skin care market is even more impressive, and Euromonitor data shows that the size of China's dermatological skin care market in 2020 is 18.93 billion yuan. The average compound growth rate from 2015 to 2020 reached 25.2%, much higher than that of the skincare industry. In the future, benefiting from strong demand and high repurchase rate, it is expected to maintain rapid growth.
Cosmetics segment track growth rate CICC, 36Kr finishing
In addition, according to Euromonitor statistics, the penetration rate of dermatological skin care products in France in 2020 was as high as 44.8%, followed by Germany and the United States with 20.1% and 16.6%, respectively, and only 7% in China. Compared with the European and American markets, the mainland still has a lot of room for improvement in the dermatological skin care market, especially the market penetration rate is expected to continue to increase.
Major national dermatological grade skin care product penetration level Euromonitor, 36Kr finishing
In short, the current dermatological skin care industry has the characteristics of large demand, high growth rate and low penetration rate, and is one of the most promising tracks for skin care products.
In terms of competition pattern, bethanie's core product Winona has increased rapidly in recent years, reaching 21.6% in 2020, ranking first in domestic dermatological skin care products.
Market share of China's dermatological skin care brands CICC, 36Kr finishing
02 The three dimensions of product strength, marketing power and channel power have performed well
In order to stand out and be the leader in the dermatological skin care track, product strength, marketing power and channel power are indispensable, winona has performed well in these three dimensions, and thus built a closed loop of her own business logic.
Product strength
Located in sensitive skin populations, Winona prepares and produces sensitive skin care products by extracting active ingredients from Yunnan characteristic highland plants, such as purslane, which relieves skin irritation, and lysoping fruit, which promotes ceramide synthesis.
In fact, raw materials are not scarce, and their moats have certain technical barriers in extraction methods and preparations. According to the prospectus information, the company has 46 patents, 11 core technologies, and the decade-long technological precipitation has made it a relative advantage in the field of dermatological-grade skin care products, which is one of the keys to the high valuation given to it by the market.
Moreover, the reason why Winona can sit firmly in the leading position is also closely related to her "life". In 2012, Dianhong Pharmaceutical spun off and transferred the loss-making "Winona" brand to Bethanie, with a background in pharmaceutical research and development, and under the endorsement of doctors, won the trust of consumers, Winona has an incomparable advantage of ordinary skin care brands.
Marketing power
With her background in pharmaceutical companies, Winona has established promotional partnerships with dermatologists in many hospitals since its inception. According to social media feedback, a large number of consumers first contacted Winona products, or through the recommendation of hospital dermatologists, with the authoritative endorsement of doctors, consumers' sense of trust is stronger, and it also happens to lay the foundation for catching up with the Internet dividend in the future.
In addition, with the rise of recommended scenes and the rapid popularization of various social platforms, Winona also conformed to the development trend in time, accurately launched new media for content marketing, and through vertical content platforms such as Weibo, Little Red Book, and Douyin, intensively output professional skin care knowledge by using KOL planting grass and dermatology experts to pass on the correct skin care concept.
In the end, an emotional connection is established with consumers, with loyal core users as a channel, reaching more consumers through social fission, bringing more free or low-cost customer traffic. On the basis of strong product strength, the brand word-of-mouth effect is formed, thereby improving consumer stickiness and promoting the repurchase rate of customers.
Channel power
Relying on the pharmaceutical channel resources accumulated by Dianhong Pharmaceutical in the early days, Winona entered the pharmacy OTC channel with a first-mover advantage, superimposed benefiting from the industry outlet and Internet traffic dividend, and finally formed a channel strategy of laying the foundation offline and expanding sales online.
Among them, the offline channels have learned from the experience of overseas brands Vichy and other domestic brands, and have not rushed to enter other channels such as CS supermarkets, but have concentrated on professional channels such as pharmacies and established a professional brand image. By the end of 2020, it has covered more than 10,000 chain pharmacy channels across the country.
Moreover, as an earlier brand that attaches importance to e-commerce channels and establishes an e-commerce team, Bethany's online revenue has grown rapidly, and the sales revenue of online channels will reach 82.34% in 2021, of which Ali will account for 45.36%, accounting for almost half of the total revenue.
Bethany online self-operated model of the main traffic sources prospectus, 36Kr collation
However, with the serious internal volume of traffic on major platforms, the increasingly expensive public domain traffic has become a commonly recognized problem in the industry. Under the expectation of peaking Internet traffic, the superimposed customer acquisition fee rate continues to grow, and bethanie, which focuses on online channels, not only uses algorithms to achieve accurate delivery, but also continuously deepens the construction of private domain traffic and guides the conversion of public domain traffic into private domain traffic.
Usually, private domain traffic has the advantages of high repurchase rate, high customer unit price, and low customer acquisition cost. Bethany independently built the "Winona Counter Service Platform" based on the WeChat platform in March 2017, and according to the prospectus, from 2017 to 2019, betty has the highest repurchase rate among Bethanie's respective e-commerce channels.
Bethany's private domain traffic pool also includes Mini Program malls, official accounts, video accounts, WeChat groups and offline BA, etc., mainly through the BA (promotion personnel) stationed at terminal sales outlets to guide customers to scan the code and other ways to register as platform members, as well as through advertising on the WeChat platform, short videos and other ways to obtain public domain traffic customers, and through the public account regular articles and activity pushes, weChat group QR codes attached to buyers after consumption, and provide rewards for joining the group, etc., to guide consumers to join the company's brand WeChat community. Realize the conversion of public domain traffic to private domain traffic.
By precipitating the brand's private domain traffic pool, Bethany can enhance the emotional connection between the brand and consumers, thereby effectively enhancing customer stickiness and the long-term value of customer traffic, thereby better improving operational efficiency and reducing operating costs.
At the same time, in order to reduce the cost of head anchors with goods, Bethany has focused on the development of self-broadcasting channels, and has successfully established self-broadcast rooms on platforms such as Douyin, ranking first in the Douyin beauty self-broadcast last year.
In addition, Bethany also began to lay out other channels, and reached a cooperation with Watsons in 2020, and opened an offline brand experience store to meet the needs of more users and further enhance brand power.
Three-force fusion = Bethany's business model
From the perspective of Bethany's business model, the winning in terms of product strength, marketing power and channel power is not separated, but the integration and complementarity of these three together to build a complete closed loop of Bethany's business logic.
First of all, Bethany's product strength is at the core of this commercial closed loop, and the effectiveness of skin-sensitive care is the core reason for consumers to pay and repurchase, and it is also the basis for the capital market to believe in Bethany's business model.
It is under the support of strong product strength that Bethanie's marketing and channels have a place to play. On the one hand, it is based on the background of pharmaceutical companies and the authoritative recommendation of dermatologists based on the predecessor Dianhong Pharmaceutical, which can establish a professional brand image and help seize the minds of consumers.
On the other hand, it is the use of new media for content marketing, so that products reach more consumers, do high penetration rate, and fission more consumers. At the same time, through private domain operation, it has established an emotional connection with consumers, deepened consumers' awareness of the brand, and enhanced their loyalty to the brand.
The foothold of marketing and channels is still product power, it is precisely because the good product efficacy of Winona products itself can be cashed in the consumers obtained by marketing and channels, gain the trust of consumers, and finally promote the repurchase, thus realizing the complete closed loop of Bethany's business logic, that is, the cycle of planting grass - effective - repurchase.
After that, the positive feedback spiral of product strength and marketing and channels has accumulated a good product reputation, which increases customer stickiness, ensures a reasonable repurchase rate, and makes Bethany's business become long-term and sustainable, and the complete business logic is another major reason for investors to give high premiums.
Bethany's decision-making in channel construction is also quite wise, taking the offline pharmacy channel as the basis, establishing a professional image, and then vigorously developing asset-light online channels, from the early public domain to the later private domain, which always reflects the asset-light thinking of Bethany channels.
Coupled with reasonable operations, including mature online self-operated channels, self-broadcast channels, low-cost private domain channels, etc. to reach more consumers, it is intended to maintain and continue to expand the market share in the incremental market of dermatological skin care products, which is also the key to Bethany's industry leader.
03 Can Bethany's logic support valuation?
In recent years, Bethany's revenue and net profit have achieved rapid growth, in addition to the slight slowdown in 2020 affected by the new crown epidemic, the compound growth rate of operating income from 2017 to 2021 is 38.19%, and the compound growth rate of attributable net profit is as high as 41.16%.
Bethany's 2017-2021 revenue and net profit attributable to the mother, unit: 100 million yuan wind, 36kr finishing
In general, benefiting from the industry's high prosperity and online traffic dividends, Bethany has quickly become a leading enterprise in dermatological skin care products, with considerable advantages in technical barriers, channel play and consumer reputation, and is accelerating the creation of a multi-brand matrix.
In the current case of dermatological skin care product penetration is still at a low level, Bethany's industry ceiling is still very high, and the dermatological skin care market is still expected to continue to maintain a high growth rate in the next 3-5 years.
However, considering that bethanie's current market share in China has reached more than 20%, as well as the decline in Internet traffic growth and the rise in platform fees, the future year-on-year growth rate may slow down slightly.
On March 22, Bethany disclosed the 2021 annual financial report, of which the net profit attributable to the mother in 2021 was 863 million yuan, a year-on-year growth rate of 58.77%. Therefore, in terms of valuation, assuming that the growth rate of Bethanie's attributable net profit in 2022-2023 is 47% and 35%, respectively, the corresponding attributable net profit is calculated as shown in the following table:
2021-2023 Bethany valuation estimates, units: 100 million yuan wind, 36Kr finishing
Therefore, the valuation (PE) of the corresponding company in the next two years is 56.5X and 41.86X, which is basically close to the consensus expectation of wind, and the PE-TTM of Bethany was recorded as 83X on March 23, 2022, indicating that the market has given Bethany a certain premium space, which is also the ability to digest the valuation in the future.
As a result, we believe that Bethanie's business model is complete and sustainable in the long term, and the rapid growth of the company's performance in the past confirms our view. And Bethany is in the incremental market of dermatological skincare, and the quality track will also give it a higher premium.
However, in the future, the expansion of channels will face no small challenge, and the increasingly strong money-making effect of A shares in style will also make Bethany bear higher valuation pressure, and high volatility may be a major pain point for investing in Bethany.
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