On 8 April, Banana Holdings Limited (hereinafter referred to as "Banana") submitted an application for listing to the Hong Kong Stock Exchange. It is proposed to be listed on the main board of the plan, and CICC and Morgan Stanley serve as joint sponsors.
The name banana should not be unfamiliar to everyone. Founded in 2013 as a small double-layered umbrella with a double-layered umbrella, the brand, known for its "sunscreen", has expanded to include most of its sunscreen categories (umbrellas, clothing, hats, accessories) as well as underwear, warm clothing, and casual footwear.
Red Star Capital Bureau noted that Banana pays attention to brand marketing and adopts the "selected single product methodology", which makes it quickly successful in the sunscreen market and even achieves the first annual sales. The financial data under banana is also very eye-catching: from 2019 to 2021, the total revenue under banana increased from RMB385 million to RMB2.407 billion, with a compound annual growth rate of 150.1%, and net profit increased from RMB19.7 million to RMB136 million, with a compound annual growth rate of 162.6%. For three consecutive years, revenue has increased and profits have increased, which is rare among new consumer brands.
However, after red star capital bureau dismantled the prospectus under banana, it also noticed two major risks in the future: first, in the case of products being questioned as not cost-effective, research and development investment is not high, and the cost of online customer acquisition is high, if the existing method of play continues, the future brand development of banana may not be as desired; second, banana does not have its own factory on the supply side, or even has no factory to cooperate with it exclusively, which not only becomes an obstacle to banana in terms of cost control, but also lays hidden dangers for the future product quality instability of banana and the expansion of product range.
Screenshot from banana under the official Weibo
The "magic weapon" under the banana
Heavy branding, heavy marketing, selected single product methodology
"Brand is the cornerstone of our success." In its prospectus, Banana constantly emphasizes the value of brands to themselves, and the reason given is that in the footwear industry, brand awareness is a key factor in consumers' purchasing decisions.
In order to build a brand, bananas have indeed made blood. According to the prospectus data, the advertising and marketing expenditure under the banana has increased year by year from 2019 to 2021, and in 2021, the advertising and marketing expenditure under the banana accounted for 24.4% of the total revenue, reaching 586 million yuan.
The money is mainly used to "strengthen the launch of existing marketing channels and expand new marketing channels to promote products and increase brand awareness", as follows:
Cooperation with a large number of live broadcast anchors - Banana launched a long-term cooperation with Li Jiaqi in 2020, and products such as sunscreen umbrellas and hats have also frequently appeared in the live broadcast rooms of anchors such as Luo Yonghao;
Investing a large number of KOLs on social platforms – The prospectus shows that in 2021, Banana works with more than 600 KOLs, which have a total of about 1.4 billion followers on mainstream social media platforms, of which more than 199 KOLs have more than one million followers and 4.5 billion views.
In addition, Banana also carries out a large number of single product promotions in the live broadcast room, and its high sales growth is inseparable from the help of these promotions. Taking the "Banana Flagship Store" with the highest recent sales in the banana self-operated live broadcast room as an example, Feigua data shows that about 70% of the account's recent sales come from "limited time purchase" products.
Screenshot from Feigua data
The "selected single product methodology" adopted by Banana also fits their brand building method - re-launching a small number of potential products, which is convenient for dissemination, captures the user's mind, and can create a label of "strong product" for the brand. According to the prospectus data, from 2019 to 2021, the revenue generated by the top 30 hot-selling selected items under the banana accounted for 99.8%, 88.6% and 74.1% of the total revenue, respectively.
The total number of paid customers in the Tmall flagship store, one of the main sales channels under bananas, increased from 1 million in 2019 to 3 million in 2020, and further increased to 7.5 million in 2021, an increase of 150% year-on-year, and the repurchase rate reached 46.5%.
The brand premium is high and the cost performance is low
Many consumers call their products "IQ tax"
Red Star Capital Bureau noted that in addition to the strong product label, the high brand premium and low cost performance have always been the problems of products under the banana. Taking sunscreen umbrellas as an example, most of the price of sunscreen umbrellas of the old brand "Paradise" is around 80 yuan, while the price of sunscreen umbrellas under bananas goes straight to 200 yuan. The "black technology" such as sun protection, heat insulation, and blocking greater than 99% ultraviolet rays advertised under the banana is also not lacking in a paradise umbrella of 39.9 yuan (according to the publicity of "paradise" and customer service Q&A). As a result, many consumers refer to the products under the banana as the "IQ tax".
Screenshot from the prospectus under Banana
Of course, it is impossible for Banana not to hear these voices, and it constantly emphasizes product upgrading and research and development in the prospectus. In "Our Strategy", Banana first wrote: "Product upgrade iteration to consolidate market leadership", and then mentioned "through internal research and development and external cooperation, improve product development capabilities".
But determination alone is not enough, and the R&D investment under the banana is much less than the cost of advertising and marketing. According to the prospectus, from 2019 to 2021, the R&D expenditure under bananas will be about 19.9 million yuan, 35.9 million yuan and 71.6 million yuan. In 2021, the R&D investment under the banana is only 12.21% of the advertising and marketing costs. In the future strategy under the banana, the marketing efforts will continue to strengthen. "We plan to expand our marketing team and further improve our ability to produce quality marketing content to deliver a more distinctive brand image to consumers."
Looking at the field of marketing, the pressure under the banana is also increasing. As the cost of Internet customer acquisition continues to rise, the advertising and marketing expenses under the banana will also rise. In the case that the product has been questioned that the cost performance is not high, the banana may face a dilemma: if the price is not raised, the cost is under pressure; if the price is raised, consumers may flow to other brands in the same industry.
After all, bananas not only have international sports and outdoor brands that have begun to enter the field of sunscreen clothing to compete, but also vvc and Oh sunny, which are highly overlapping with banana products, and face Uniqlo, which is similar to its category and model and also has explosive sunscreens.
If the existing style of play is continued, the future brand development of banana may be difficult to meet its wishes.
Full OEM, 166 cooperative factories
Uncertainty over cost control and product expansion has increased
Red Star Capital also noted that bananas mentioned in the prospectus that all of its production was outsourced to contract manufacturers. "Working with contract manufacturers gives us extreme flexibility in managing our supply chain and optimizing our operations," Sayoshita believes. ”
However, the prospectus also explicitly mentions that the risks of this model are: "We may encounter operational difficulties related to contract manufacturers, including reduced capacity of available contract manufacturers due to competitive orders or surges in demand, failure to comply with product specifications, inadequate quality control, unauthorized disclosure of sensitive information, failure to comply with quality control standards and production deadlines, delays in delivery of products to our warehouses, increased manufacturing costs and extended delivery times." ”
"In addition, due to our non-exclusive cooperation with such third party contract manufacturers, we cannot ensure that such contract manufacturers do not prioritize orders from other principals, including our competitors, in the event of a shortage of supply."
According to the prospectus, there are 166 contract manufacturers under the banana, most of which have a contract term of only one year, and the looser supply side will hinder its cost control and make it difficult to improve the cost performance. Uniqlo, which is similar to the product category under the banana and has a similar model, also has explosive sunscreen clothes, and the price of its sunscreen clothes ranges from 99 to 199 yuan, while the price of sunscreen clothing under the banana is between 199-399 yuan. UNIQLO has a more price advantage, which is inseparable from its relatively tight supply side. Uniqlo's parent company, Fast Retailing Group (06288. HK) has released data that as of July 2021, there are 282 core cooperative factories, of which China occupies 144, including head manufacturers such as Shenzhou International (02313.HK), which are deeply bound to it.
In the prospectus, Banana also mentioned: "The ability to effectively control costs and expenses is critical to our success." During the Track Record Period, cost of sales represented a significant portion of our total costs and expenses. ...... We have implemented a number of measures, such as maintaining in-depth cooperation with high-quality contract manufacturers and reducing our reliance on any single contract manufacturer to ensure that our product supply is generally available, adequate and cost-stable, independent of price fluctuations. Nonetheless, the supply and pricing of finished products from contract manufacturers will continue to have a significant impact on our cost of sales and operating results. ”
In addition, the absence of self-operated factories or deeply bound factories will also affect the strategic development of expanding the product range under the future impact of bananas. If bananas really want to work product development and expansion, self-operated or deeply bound factories can provide space for research and development, design and testing.
Sports brand Li Ning (02331. HK) has also been adopting a full-line outsourced production model, but has been building its own factory since 2018. Li Ning has publicly stated that it is necessary to invest in this regard, because in addition to the profit margins of the production link, there are also its own core process technologies precipitated into the self-built factory, "self-operated this part, must be the most valuable we think, but also to create a lot of research and development, design, test space." ”
Red Star News reporter Yuan Ye intern reporter Zhang Luxi
Edited by Yu Dongmei
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