With the soaring global food prices and the frequent occurrence of black swan events, China, with thousands of years of farming tradition, has begun to pay more and more attention to the issue of food self-sufficiency. However, what many people do not expect is that in the major supermarkets in China, some non-staple foods known as "national brands" have a strong "foreign blood".
For example, Henan Shuanghui, the controlling party is Goldman Sachs; Silver Heron Food, a subordinate brand of Nestlé, Switzerland; Harbin Beer, part of the Belgian beer giant Budweiser Group. Compared with the above enterprises, the golden arowana with a "Chinese style" name is more "pure" with foreign blood! Shuanghui, Yinlu, Harbin Beer, etc. have become foreign brands after being acquired by foreign capital.
Arowana, on the other hand, is not a Chinese brand in itself. Now it is because the stock price has plummeted, which has triggered the anxiety of 190,000 shareholders.
First, the "national brand" Arowana
In the field of grain and oil production, the market value of Arowana of "Maotai in Oil" was once comparable to that of BYD, the "popular fried chicken". In January 2021, the value of Arowana A stock market reached 786.1 billion yuan. In contrast, in April this year, BYD, which won the title of "the first domestic car company", had a total market value of 707.408 billion yuan (wind data).
But unfortunately, the Arowana highlight is followed by a low. Over the next year, Arowana's stock price has fallen all the way, from a peak of 145.51 yuan to 45 yuan today. The market value has evaporated 540 billion yuan in 16 months, leaving only 240 billion yuan, a decline of 68.97%. This makes us wonder, what exactly happened to Arowana?
In the 1980s, due to the relaxation of the policy of attracting foreign investment in China at that time, the famous Malaysian wealthy businessman Guo Henian led a group of Overseas Chinese from Southeast Asia to invest in the mainland. Unlike Li Ka-shing, who entered the mainland market at the same time, Guo Henian's mainland investment was not limited to "real estate in the real estate market", but was widely distributed in commercial real estate, service industry, grain and agricultural processing and other fields.
In 1988, Guo Henian invested in the establishment of nanhai oil, which is not only the predecessor of Yihai Kerry, the parent company of the Arowana brand today, but also the first private oil factory in New China. In 1991, Yihai Kerry introduced its first bottled cooking oil to the market, Arowana. It was also through this that Guo Henian ushered in a new era of edible oil sales in the mainland.
When the state-owned grain and oil store was still in the stage of bulk weighing, the golden arowana packaged into barrels had entered the supermarket and opened up marketing. Due to the early entry into the Chinese market and the high exposure rate, for more than 30 years, many Chinese people have always thought that Arowana is a Chinese company.
So why did Arowana, a foreign company that once became a "grain and oil brother" in China, fall so badly in its stock price?
Second, "grain and oil brother", why not fragrant?
After more than 30 years of construction, the "Arowana" brand edible oil has set up 64 production bases in China, which is a grain and oil giant integrating oil trade, processing, production and sales. Its market share has remained above 30% all year round, of which in 2019, the market share reached 40%.
So why has the market value of Arowana fallen again and again? Is it because it is not a "local enterprise", it is not welcomed by the Chinese people? Although many people now know that Arowana is not a national brand, there are many people who buy Arowana with the help of past word of mouth. The reasons for the plunge in the market value of Arowana are as follows:
1. Inflated valuation
In fact, the internal logic of the decline in stock prices is very simple, that is, most investors are reluctant to buy this stock at the current price. From the analysis of Arowana's financial situation, not to mention the market value of 700 billion yuan at the high point of 2021, even if it is 240 billion today, many people feel that it is not worth it.
At present, Arowana's price-to-earnings ratio (PE) is as high as 500 times, which means that it will take shareholders more than 500 years to return their capital by relying on net profits. With such a rate of return, who dares to invest?
2. Poor operating ability
According to the released financial report, in the first quarter of 2022, Arowana revenue fell by 10.97% year-on-year. According to the 2021 annual report, Arowana's net profit fell by 31.62% year-on-year, the lowest since its listing in 2018. The total revenue of 226.225 billion yuan only created a net profit of 4.132 billion yuan, and the net profit margin was only 1.83%. Compared with its peer Haitian Flavor Industry, the total revenue in the same year was 25.004 billion yuan, the net profit was 6.671 billion yuan, and the net profit margin was as high as 26.68%, which was 14 times that of Arowana.
3. The marketing model is conservative
In addition to creating a number of "industry firsts" when it first entered the domestic market, in recent years, Arowana has fallen into a long period of "lack of innovation".
Taking marketing strategy as an example, after many years, the construction of Arowana's marketing channels is still limited to the traditional distribution system. In early markets with fewer dealers, Arowana could achieve a winner-take-all model through a dealer-bound model.
However, with the transformation of dealers into brand owners, as well as the "tit-for-tat" of state-owned brands such as COFCO, Arowana can not change back to the previous growth rate even if it increases its annual marketing expenditure.
III. Conclusion
On the surface, the grain and oil industry is an industry that "makes big profits" and makes "hard money". After grain and oil enterprises buy crops from farmers, they will first process primary processed products such as bran and brown rice, and then after cleaning up and removing impurities, quenching and tempering, cold pressing, filtering, crude oil and other steps, they will eventually form edible oil that has entered thousands of households. The whole set of operations looks simple, but in fact it is very elaborate.
At present, the domestic non-staple food giant Haitian Flavor Industry invests 770 million yuan in R&D every year, accounting for 3% of the total revenue. Arowana not only invested 255 million yuan, but also accounted for only 0.1% of the total revenue. It is nearly 30 times different from Haitian Flavor Industry.
Do not seriously do products, do not seek transformation and upgrading in the new consumption model, even if it was once the industry leader, under the big wave of sand, it will eventually become history. I believe that with the wisdom of Guo Henian, I must understand this truth. We also believe that Arowana, a foreign brand rooted in China for 30 years, will return to its peak one day.