Naixue's tea has not yet been profitable, Xicha has not yet been listed, more new tea brands are still in trouble, and the juice suppliers, small material suppliers, and packaging material suppliers behind it have been listed. Is it really easier to make money in supply chain business than running a store?
Author | Hu Shu Editor| Luo Lijuan
The new tea circuit in 2022 seems to be getting tougher.
On the first anniversary of the listing of Nai Xue's tea, the "first share of new tea drinking", the issue price fell from HK$19.8/share all the way to the current HK$7/share. In 2021, Nesher's tea also did not achieve a profit, with an adjusted net loss of 145 million yuan.
Another head player, Xicha, is far from being listed, and how to maintain a valuation of 60 billion has become a problem first. In the past six months, Heytea has carried out two rounds of active price reductions, marching into the sinking market and seeking more possibilities in the future.
And many low-end milk teas such as CoCo Duke, Shanghai Auntie, Michelle Ice City, etc., with the dense spread of stores in major cities across the country, not only peaked in growth, but also fell into the competition of "inner volume"...
However, unlike the situation in the new tea drinking track, with the development of new tea brands to chain and scale, supply chain enterprises have slowly gathered from the previous small, scattered and chaotic, have a certain scale, and have started the process of listing.
Recently, the IPO application of "Tianye Shares", a supplier of juice for Naixue's tea, Tea Baidao, Shanghai Auntie and other brands, was accepted.
Prior to this, Hengxin Life, the packaging material supplier of Heytea and Luckin, disclosed the prospectus for listing on the ChiNext board. Last month, Baoli Food, a food seasoning enterprise that provides "small ingredients" for Xicha and Starbucks, was approved by the CSRC and will be listed on the main board of the Shanghai Stock Exchange.
Backed by new teas, suppliers seem to be profitable sooner.
But most of them also have the same drawbacks: they are limited by the market ceiling of new tea drinks; High dependence on a single large customer; Under the change of new consumption trends, the ability to cope with challenges is poor.
In addition, the various segments of the supply chain market have also shown an increasingly concentrated trend, the competition between similar enterprises has intensified, and the industry reshuffle is still continuing.
01 Suppliers lined up to go public
According to the "2022 China Catering Operation Research Report", in 2021, Mi Xue Ice City will add 3846 new stores, and the total number of stores will reach 20,000; Shuyi Burn Xiancao added 1953 new stores, and the total number of stores reached 7000.
As of the first quarter of 2022, Nesher's tea stores have reached 854. At the end of 2021, the number of Heytea stores also reached 897, close to a thousand stores.
With more and more brands with "thousands of stores", the tea supply chain also enjoys dividends. Driven by the chaining and standardization of tea brands, supply chain enterprises have been forced to gradually scale and standardize from small, scattered and chaotic, and a number of medium-sized enterprises with initial scale have been born. They also gradually have the confidence to seek capital attention in the secondary market.
Looking at the new tea industry chain, its supply chain has both the primary industry form represented by agricultural and sideline products such as tea, fruits, dairy products, and small materials, and the secondary industry form represented by equipment supply, packaging supply and other manufacturing.
A large-scale new tea brand often has dozens, if not hundreds, of suppliers. Among the many links, the upstream links that can be standardized and scaled up are easier to develop large supply chain companies.
In mid-June, the IPO application of "Field Shares" on the Beijing Stock Exchange was accepted. Founded in 2007, this company is mainly engaged in the research and development, production and sales of tropical fruit and vegetable products, the main products are raw juice, frozen fruit blocks, fresh fruits and so on.
At the beginning of its development, Tianye Co., Ltd. mainly provided pre-packaged juice drinks to Nongfu Spring and Coca-Cola. However, with the sluggish growth of demand for prepackaged juice drinks and the surge in demand for fresh fruits for new tea drinks, Tianye Shares' large customers in recent years have gradually become tea brands such as Naixue's tea, tea Baidao, and Shanghai Auntie.
In the cooperation between Tianye shares and tea brands, many popular drinks have also emerged. Taking the "domineering jade oil orange" that NaiXue's tea was popular last year as an example, the birth of this explosive model is inseparable from the supply of raw materials for Tianye Shares.
Top five customers of Tianye Shares Image from: Screenshot of prospectus
According to its prospectus, from 2019 to 2021, the proportion of revenue contributed by new tea customers of Tianye Shares increased from 4.20% to 61.82% respectively. Under the impetus of the rapid development of the new tea drinking track, its revenue has also increased from 290 million yuan in 2019 to 459 million yuan in 2021, with a gross profit margin of 27.04%, 26.48% and 29.16% in three years, respectively.
Prior to Tianye Shares, Hefei Hengxin Life Technology Co., Ltd. (hereinafter referred to as "Hengxin Life") also disclosed a prospectus for listing on the Gem Board.
This packaging materials company that develops, produces and sells paper and plastic dining utensils is very unfamiliar to the public, but behind this enterprise, there are brands such as Starbucks, Luckin Coffee, Xicha, Guming, and Michelle Ice City that the public is familiar with.
With the official implementation of the national "upgraded plastic restriction order", new tea and coffee brands have been rapidly reflected. From 2021 onwards, Luckin announced plans to gradually replace the single-cup paper bag in stores with the degradable material PLA, and Heytea also replaced the non-degradable plastic straws, tableware and packaging bags in all stores across the country by January 2021.
Hengxin Life stepped on this outlet, adding Luckin Coffee in 2020 and Xicha for customers in 2021. And in 2021, Luckin Coffee and Xicha have become the first and third largest customers of Hengxin Life - Luckin Coffee contributed 83.193 million yuan in sales to Hengxin Life, accounting for 11.57% of revenue; Xicha was 27.3314 million yuan, accounting for 3.8%.
In 2021, Hengxin Life's top five customers, of which Shenzhen Orangutan Technology is a subsidiary of Xicha Picture from: Prospectus screenshot
With the addition of coffee and tea customers, hengxin life's revenue has also ushered in a new height, from 2019 to 2021, Hengxin life achieved revenue of 540 million yuan, 420 million yuan and 720 million yuan, and the net profit of the same period was 70.266 million yuan, 24.877 million yuan and 81.236 million yuan, respectively.
In addition to Hengxin Life, Jialian Technology (Pizza Hut, Michelle Ice City supplier) and Nanwang Technology (Pizza Hut, Xicha supplier) of the same track have also opened the road to listing. Jialian Technology landed on the ChiNext board last year, and Nanwang Technology also recently replied to the second round of inquiries from the Shenzhen Stock Exchange and updated the prospectus, intending to be listed on the ChiNext board.
In the list of "2021 China Tea Supply Chain TOP10" released by NCBD (Food Treasure Book), the tea suppliers of Heytea and Naixue's tea, Xinrongyang and Bangli Tea, food supplier Jiahe Food, and milk source suppliers Anjia and Nestle are on the list.
Among the top 10 brands, Kaieri, Nestle, Jiahe Food and Fresh Juice were originally listed enterprises, and Dexin Beverage signed a listing counseling agreement with Essence Securities last year and submitted counseling filing information in the Zhejiang Securities Regulatory Bureau.
It is foreseeable that with the rapid development of the new tea industry, more and more tea supply chain enterprises will land on the capital market.
02 Opportunities and crises of change
While more and more supply chain companies are seeking capital attention, a "creamer" company that has been successfully listed has fallen into a storm.
A few days ago, Xicha released the "real milk" initiative, calling on the industry to use real milk and rejecting the end of plant fat (that is, creamer), believing that it is shouting to many low-end milk tea brands such as CoCo Duke, Shanghai Auntie, Michelle Ice City, Chabaidao and so on.
While detonating the topic of "real milk", it also brought a heavy blow to Jiahe Food, the first share of "creamer".
At the end of April 2021, Jiahe Food landed on the Shanghai Stock Exchange. The downstream customers of this supply chain enterprise include not only well-known beverage companies such as Unity, Xiangpiaopiao, wahaha, but also tea chain brands such as CoCo Duke, Shanghai Auntie, Gu Ming, and Mi Xue Ice City.
Its prospectus shows that from 2017 to 2019, the company's operating income was 1.368 billion yuan, 1.595 billion yuan and 1.836 billion yuan, respectively, and the net profit in the same period was 110 million yuan, 130 million yuan and 272 million yuan. In 2020, the sale of vegetable fat powder accounted for more than 85% of its operating income.
In 2021, its operating income was about 2.399 billion yuan, an increase of 28.02% year-on-year; However, the net profit attributable to the shareholders of the listed company was about 151 million yuan, a decrease of 30.19% year-on-year. In its annual report, Jiahe Foods attributed the decline in net profit to "mainly due to the increase in raw material procurement expenditure." ”
But in fact, from 2020 onwards, the profitability of Jiahe Food began to appear weak, and the net profit attributable to the mother in that year was 217 million yuan, a year-on-year decrease of 19.96%; Net profit after deduction of non-net profit was 196 million yuan, a decrease of 23.59% year-on-year.
This transformation is actually more about the changes in the market. Saying no to "creamer" has become a major trend in new tea drinking. For Jiahe Food, the key to its performance is actually the change in consumer choice and the impact of new tea drinks under the upgrading of consumption.
Even traditional beverage companies are gradually reducing the consumption of vegetable fat powder. According to the prospectus of Jiahe Food, from 2016 to 2018, the purchase amount of xiangpiaopiao's vegetable fat powder dropped from 160 million yuan to 86.13 million yuan. Behind the sharp decline in the purchase amount is also Xiangpiaopiao's determination to transform.
Under such a background, since the beginning of this year, the stock price of Jiahe Food has also continued to decline. As of the close of trading on June 29, Jiahe Food's stock price was 15.6 yuan / share, down 60% from 25 yuan / share at the beginning of the year.
With fresh milk, cream and cheese replacing "vegetable fat powder", New Zealand dairy giant Fonterra took the lead in the Chinese market to eat dividends.
In 2017, Fonterra received a demand from Heytea to punch cheese caps that were at least 2cm thick. Then, the cheese milk cap mixed with Fonterra Anjia light cream began to sweep the country, and popular drinks such as Zhizhi Berry and Zhizhi Portuguese are still selling well.
Anjia has also become a supplier of milk caps for many new tea brands, selling 200 million cheese cap products in 2017 and increasing to 500 million in 2018. In the first half of 2020, thanks to the development of the tea and baking channel business, Fonterra Greater China's catering services department achieved double-digit performance growth, and the profit margin of catering services increased from 12.7% to 17.2%.
Image courtesy of CBN Commercial Data Center, 2020 statistics
In addition to Fonterra, Flavor Quan and Nestlé are also being used by more and more new tea brands. In addition, Sanyuan and Mengniu have both launched their own milk caps to replace the milk cap powder on the market with the main ingredient of fat powder.
In parallel with this, there is a new trend of "plant milk replacing milk". Under the concept of health, green and environmental protection, more and more young people choose to replace milk with coconut milk and oat milk.
This trend first occurred on the coffee track. OATLY, the oat milk brand, has entered the coffee shop on a large scale with the "oat milk + coffee" style, successfully opened up the awareness of Chinese consumers on the category, and was listed on the NASDAQ in 2021. In 2022, OATLY began to embrace another important food and beverage power in the Chinese market – new tea drinks. Its launch of "Tea Master Oat Milk" also allows OATLY to achieve a breakthrough from "coffee milk base" to "tea milk base".
According to OATLY's first quarter 2022 financial report, 75% of the company's Asian revenue comes from the food and beverage channel.
Not only the milk source, but also the fresh fruit link.
Consumer health needs make fruit tea very popular, the proportion of fresher and healthier raw materials such as fresh fruits, jelly fruits, and NFC will continue to increase, and synthetic powdered sugar, pigments, etc. are also ushering in market shocks.
The consumption trend of downstream new tea drinks is gradually affecting the upstream supply chain and influencing the product changes on the supply chain.
03 Is it a good business?
In fact, the supply chain that grows on the back of new tea drinks has many difficulties and hidden dangers.
Because most enterprises do not face C-end users, so that enterprises themselves can not follow the changes in the market in time, once passively perceive the changes in demand from the downstream, there is a risk of being abandoned by the market.
At the same time, with the downstream development of suppliers, the business is greatly limited to the downstream single large customer.
Taking Tianye Co., Ltd. as an example, the sales of its products for the top five customers accounted for 68.17% of the company's total revenue. Such a proportion makes Tianye shares more dependent on large customers, and once orders and customers are lost, it will bring risks to the stable revenue of the enterprise.
In the past year, Heytea and Naixue have reduced prices, and to a certain extent, cost pressure has also been given to the supply chain. In 2021, the average price of products sold by Tianye to the new tea industry is 16,700 yuan, down from 17,300 yuan in 2020, which also means that Tianye shares are benefiting downstream enterprises.
At the same time, upstream raw materials have risen in price since 2021. In this context, how to maintain profitability of Field Shares is not an easy task.
For the problem of price reduction in the new tea industry, Huang Guohuang, chairman of Fresh Holdings, said: "The positive development of the industry is parity and high quality, and the brand requires suppliers to provide the same products not only with low prices, but also with better quality, which will increase the survival pressure of suppliers." ”
To cope with such changes, companies need to break up the supply chain and redo, such as the need for upstream fruit picking to quickly enter the manufacturing process, quick distribution, and then quickly enter all stores.
In fact, many new tea brands are currently building their own supply chains in order to optimize the supply system.
Taking Xicha as an example, Heytea goes deep upstream, and deeply participates in the planting and production of upstream tea gardens and orchards through self-construction and co-construction of bases. In terms of small ingredients, the raw materials used in the Heytea Taro Mud Wave series products include the raw materials of betel nut taro from the co-construction planting base of Heytea. In Guizhou, Heytea has also established its own tea garden with an area of 500 acres in Fanjing Mountain.
Another tea company, Gu Ming, invested hundreds of millions of yuan in the construction of a warehousing supply chain three years ago, and built its own warehousing system and logistics distribution system to ensure stable upstream supply quality and price. Therefore, the price of ancient tea is not high, but the materials used are fresh and standardized.
For tea brands, self-built supply chains can not only better ensure the continuous and stable supply of quality raw materials, but also optimize procurement costs. But that's not a good thing for suppliers who rely heavily on a single large customer.
However, Huang Guohuang believes that not all brands have the strength to build their own supply chains, and still need to find a shared supply chain. "And this kind of supply chain needs to be competitive in cost and trustworthy in quality, and this is the part of the industry that is worth integrating and improving."
On the other hand, competition in the supply chain is also intensifying. In the raw material juice processing industry, in addition to Tianye shares, fresh juice, Sichuan Jiamei food and other Taiwan-funded enterprises, is also a common supplier of new tea brands, from the product point of view, everyone's difference is not large, can be based on the needs of tea brands to provide customized products.
In addition to large suppliers, due to the late start of this subdivision industry, the number of enterprises is large and small, the industry concentration is low, and the integration of the industry is still continuing, which also makes the competition very fierce.
In order to stand out from the competition, it is particularly important to dig deep into the "moat" with the help of the power of capital.
Tianye shares disclosed that the IPO plans to raise 476 million yuan, mainly for investment project construction, expansion of production capacity, with the purpose of adding 8,000 tons of coconut products, 12,000 tons of flavor syrup, and 23,400 tons of fruit and vegetable products.
Behind the expansion of production capacity, it also shows the ambition of Tianye Shares to quickly seize market share.
Fresh Juice, on the other hand, chose to expand its business. Outside of its juice business, companies have looked to the "food snack" business, offering pearls, crystal ball granules, puddings and other products to many new tea brands.
Huang Guohuang mentioned in an interview with the media that in 2021 alone, fresh juice received about 2,000 customer proposals. Although there are not many final landings, it also highlights the huge potential behind this business.
The vigorous development of the new tea drinking track has promoted the integration of various chains from the bottom up, so that a number of representative supply chain enterprises have appeared in front of capital.
However, limited by the new tea drinking track, the bottlenecks faced by these companies themselves also need to be broken.