Which sector has disappointed investors the most in 2022? If you want to choose a list, new consumption believes that it is absolutely on the list.
The Value Research Institute (ID: jiazhiyanjiusuo) mentioned in its previous report "New Consumption Has No Future" that new consumption will enter a node from prosperity to decline in 2021: the primary financing market is frozen, head brands have thundered one after another, and consumer dissatisfaction is also increasing.
In 2022, most of these problems have not been alleviated, but have intensified. With the "ice cream assassin" discussion triggered by Zhongxue Gao in the middle of the year, the scandal of arrears of wages, arrears of construction payments at the end of the year, and the fact that a large number of brands have been blocked from going public, it seems that the new consumption that has been on fire for many years has fallen into the ice cave.
What lessons have new consumer brands learned during this difficult year? In the rise and fall of the wind, which tracks will become the new favorite of capital? Have there been any positive changes in the industry as a whole?
To find out, we have to start from scratch and sort out a few keywords for new consumption in 2022.
This article is too long, and the main highlights are summarized for you:
- Prudent capital: Large financings are almost extinct
- Fierce competition: Accelerated expansion of leading brands
- Broken outlets: who is the worst in makeup, alcohol, and trendy play?
- Favorite tracks: Outdoor sports lead the way
- Awakened users: consumption downgrading into an inevitable trend?
- The formula that doesn't work: Marketing is no longer king
- Future trends: Supply chain and digital intelligence are getting more attention
Prudent capital: Large financings are almost extinct
The sensitivity of capital has always been far ahead of brands and end consumers. The cooling of the primary financing market has set a sad tone for the new consumer industry in 2022.
According to the statistics of CaiLian Venture Capital Connect, a total of 903 investment and financing events were completed in the new consumer sector in 2022, and the publicly disclosed investment and financing amount was about 67.413 billion yuan. In comparison, there were 842 investment and financing events in 2021, less than in 2022. However, in terms of financing amount, 90.721 billion yuan in 2021 was 25% higher than last year.
This set of data highlights a significant change in the new consumer industry: capital has not completely lost confidence, and there is still an intention to invest money in new consumer brands; However, in the cold environment, capital became more cautious, and huge financing basically disappeared this year.
According to the statistics of Xinmaobang, in the first half of last year, only 34 new consumer brands received a single financing of 100 million yuan or more, and the highest record was the 600 million yuan equity financing of Shuyiyao Xian Cao.
According to publicly disclosed information, most of the brands that can obtain high financing are in the late stage of financing. In addition to the book and burning fairy grass, Coffee Wings and Mingkang Hui have also entered the strategic financing stage, and the hometown chicken and nut projection have entered the pre-IPO round of financing. Only the brand Noke and daily necessities brand Jia Helper of the Xinfeng Outlet outdoor sports track can receive angel round financing of more than 100 million yuan.
Most of the institutions participating in financing are old shareholders of related brands or deep investors in the corresponding consumption track, and the willingness of capital to expand is insufficient, and the space for trial and error is also shrinking. For example, Tomato Capital has intensively invested in new catering brands such as auspicious wontons, majaw claw and commune, while Innovation Factory has successively bet on offline collection stores such as Aobo Outlet and WOW COLOUR.
(Image from Xinmaobang)
In addition, if the time is more granularly divided, the investment and financing market in the second half of the year is more depressed than in the first half - which shows that capital confidence has been declining over the past year.
In December, the worst of these days, only 39 investment and financing events were completed in the new consumer sector, far lower than the 50 in November, and a direct reduction from 89 in the same period in 2021. The cumulative amount of investment and financing in December was only 1.4 billion yuan, down 48.15% month-on-month and 79.23% year-on-year, respectively. In contrast, although the primary market also shrank in the first half of the year, the amount of financing has not fallen off a cliff.
Who scares away passionate capital? According to the Value Research Institute (ID: jiazhiyanjiusuo), there are both force majeure effects and problems within the new consumer industry.
Objectively speaking, in the second half of last year, the epidemic prevention situation in many places across the country was dangerous, and the general environment of the consumer industry was indeed not ideal. According to data from the National Bureau of Statistics, the national catering revenue fell by 5.4% year-on-year in the first 11 months of last year, and the decline in November was as high as 8.4%; In addition, the social retail sales of consumer goods such as cosmetics, clothing, shoes and hats, and furniture also declined year-on-year.
However, compared with the deterioration of the general environment, the poor performance of many new consumer brands in the past year has made capital more chilling.
In the past, the top brands that have received multiple rounds of financing, stood at the top of the industry pyramid and even rang the bell to go public are still struggling to survive, how can capital have the confidence to transfuse blood and burn money for new projects?
Fierce competition: Accelerated expansion of leading brands
In 2022, the originators of new consumer brands are really having a hard time.
In the secondary market, leading brands including the "three giants of snacks" three squirrels, good shop, hundred herb flavor, "the first stock of new consumer beauty" Yixian e-commerce, "the first new tea drink" Naixue's tea, "the first share of tide play" bubble mart and other head brands have all delivered unsatisfactory financial reports in the past year.
Among them, the revenue and net profit of the three squirrels in the third quarter were only 1.219 billion and 11.3653 million, respectively, down 32.63% and 87.43% year-on-year. Nai Xue's tea mid-year report showed a net loss of 254.2 million yuan, and its revenue also fell 3.81% year-on-year to 2.045 billion yuan. By the end of December last year, Naixue's share price had fallen by nearly 60% from its peak.
In addition to the snack giants that have been severely beaten by the capital market, new consumer brands that have not yet been listed are also full of crisis in the context of capital becoming more cautious and tightening their faucets. However, unlike the cost reduction and efficiency increase route taken by Internet giants, the top new consumer brands choose to continue to expand in the cold winter - they try to expand market share, and cover up the weakness on the profit side with growing stores and product lines.
The most obvious wave of expansion has appeared in the new tea drinking track. On December 5, Nai Xue's tea official announced that he had invested in Shanghai Chatian Catering Management Co., Ltd., the parent company of Lele Tea, and spent 525 million yuan to purchase 43.64% of the latter's shares, becoming the largest shareholder and actual controller of the latter, which is also one of the largest acquisitions in the history of the new tea market.
It is worth mentioning that before Nai Xue took a stake, Heytea had the intention of acquiring Lele Tea, but unfortunately it was not done in the end. But this sign also shows that the two leading brands have never stopped expanding.
In the first half of last year, Lele Tea lost ground in the South China market, and once closed all stores outside Shanghai. But after receiving the capital injection from Naixue, Lele Tea opened 12 new stores in Jinan, Zhengzhou, Hefei, Yantai, Beijing, Qingdao, Shanghai and Hangzhou at the end of December. There is no doubt that Lele Tea will become another trump card under Naixue and expand its store layout across the country.
Heytea, which gave up the acquisition of Lele Tea, did not rest, and at the end of the year, it offered the big move of opening up to join.
Statistics from Narrow Door Restaurant Eye show that as of early December last year, the total number of Heytea stores nationwide was 849, and a total of 45 new stores were added during the year, and the speed of opening stores could not keep up with the ambition of expansion. You know, in 2020 and 2021, Heytea added 305 and 170 stores respectively. In contrast, the number of stores in Naixue has exceeded 970 at the end of the third quarter of last year, and it successfully entered the 1,000-store club in January this year.
In order to speed up the pace of opening stores and simplify the process of store location selection and staff training, opening up joining is the most direct way. Michelle Ice City, which has already exceeded the scale of 10,000 stores, is believed to become the focus of learning for Heytea and Naixue. However, when franchise replaces direct management as the mainstream expansion method, the ensuing problems of product stability and food safety will become the focus of consumer attention.
After all, Heytea and Naixue do not grasp the initiative of the price war like Michelle Ice City. The corresponding price must match the corresponding quality. If you lose stable quality while expanding, consumers will not buy it. Once consumers defect and performance growth stagnates, the capital behind it will be even more ruthless.
The Heytea and Naixue who finally climbed to the top of the pyramid never had room to relax. And those brands whose strength is not as strong as Heytea and Naixue, and the popularity is not as high as the new tea drink, and the difficult situation in the past year can be imagined.
Broken outlets: who is the worst in makeup, alcohol, and trendy play?
Although still loved by capital, many F&B/New Tea brands have had a hard time in the past year. For example, Chinese fast food brands such as Hefu Lao Noodles, Ma Jiyong, and Zhang Lala have not opened stores as fast as expected. Hefu Lao Mian proposed a goal of 1,000 stores at the end of 2021, but in the second half of last year, news of store closures was frequently reported.
Of course, if you want to judge the new consumer outlets that have performed the most dismal in the past year, there must be someone else: beauty, alcohol, trendy play and other tracks are more depressed than catering.
In the first half of the year, when the financing environment was not quite severe, beauty was the first to fall to the bottom. According to the statistics of Lianshang.com, the beauty track has only completed 38 investment and financing events, and only a few brands such as Dewy Lab have obtained tens of millions of dollars in financing. HAYDON, A POPULAR BEAUTY COLLECTION STORE, ALSO FELL INTO A WAVE OF STORE CLOSURES LAST YEAR, AND STORES IN HANGZHOU, HARBIN, GUANGZHOU, SHANGHAI AND OTHER PLACES CLOSED ONE AFTER ANOTHER.
As a representative brand, Perfect Diary's situation also perfectly explains the decline of the beauty industry. In April last year, Perfect Diary's parent company, Yixian E-commerce, admitted to receiving a delisting warning from the New York Stock Exchange because the company was trading below compliance standards. If Yixian E-commerce is unable to get the average share price back above $1 in the next 6 months, it will face the risk of being delisted.
Stock prices are volatile, and declining performance is the direct cause. According to the third quarter financial report, the revenue of Yixian E-commerce's makeup business was only 858 million yuan, a year-on-year plunge of 48.8%, close to the waist. Under the collapse of performance and stock prices, Perfect Diary also took the initiative to contract. According to data compiled by third-party organizations, the number of Perfect Diary offline stores fell to 183 at the end of November last year, down 100 from the beginning of the year.
You know, in last year, Perfect Diary's goal was to open 600 stores by the end of the year. The gap between ideal and reality is really embarrassing. The situation of alcohol and trendy play is similar to that of beauty, and they are facing the double blow of freezing investment and financing and declining performance of head brands.
In the third quarter of last year, the revenue of Bubble Mart Chinese mainland fell by 10%-15% year-on-year, and retail stores, robot stores, box drawers and e-commerce platforms all declined. On the drinking side, the "first share of the bistro" Helens' listing peaked, and then the stock price fell at a speed of light, and the store expansion plan was not as expected.
Of course, the rivers and lakes of new consumption will rise, and if someone is beaten into the cold palace, someone will naturally become the new favorite of capital.
Favorite tracks: Outdoor sports lead the way
After the fall of beauty, alcohol and other popularity, capital quickly found new prey.
On the one hand, from the Frisbee that exploded at the beginning of the year, to the camping that set off a lot of discussion in summer and autumn, and then to the popular skiing after winter, outdoor sports have become one of the hottest consumer outlets in the past year, and it is also a popular upstart for capital.
According to statistics from the Community Marketing Research Institute, by the end of 2022, the size of China's outdoor sports goods market was about 405.3 billion yuan, a year-on-year increase of 13.5%. It is expected that by 2025, the market size will grow to 593 billion yuan, and it will maintain triple-digit growth in the next three years.
Looking at the publicly disclosed investment and financing data in the past year, it can also be found that many outdoor sports brands have received capital support. Among them, outdoor camping equipment brands Naturehike and Moodlab, camp operator ABC Camping, etc. have received a new round of financing, and many predators such as Tsingshan Capital, Sequoia China Seed Fund and Zhongding Capital have participated in the investment institutions.
On the other hand, the catering and food industry, which has been booming for many years, is still the safest choice for investors, and even becomes the only remaining fig leaf in the cold winter of financing in the second half of the year.
From the perspective of investment distribution, there are two types of catering brands that capital loves: one is a track with streamlined production, large-scale expansion, and production that is highly dependent on the central kitchen, such as Chinese and Western fast food and prepared dishes; The other category is catering tracks that are in line with consumer trends, especially catering to the preferences of young people, such as coffee. The statistics of Moose new consumption show that in the first half of last year alone, 9 new catering consumer brands received more than 100 million yuan in financing.
In the view of the Value Research Institute (ID: jiazhiyanjiusuo), the above two outlets can maintain the heat, which has a lot to do with the epidemic that has repeatedly invaded social life in the past year.
During the lockdown phase, going out became a luxury, long-distance travel was even more difficult, and many young people who had been trapped at home for a long time became more enthusiastic about outdoor sports. For Gen Z who pursue a sense of ritual and social space, frisbee, skiing, and camping can allow them to temporarily escape the real world and obtain temporary satisfaction.
As for catering, although the past two years have become more and more difficult, chain catering happens to be the model with the most fixed cost and the clearest expansion path, which is just in line with the demands of capital. After all, in the final analysis, of the three mountains of rent, manpower and cost, only the latter two have room for compression and adjustment. The rise of central kitchens, prepared dishes and cooking kits has laid the foundation for the standardized expansion of chain catering.
However, outdoor sports and chain catering brands that have been ripened by capital have a common problem: profit.
In April last year, sunscreen brand Banana submitted an IPO application to the Hong Kong Stock Exchange, taking the lead in disclosing its financial data to the public. According to the prospectus, Banana's revenue in 2019-2021 was 380 million, 790 million and 2.41 billion, respectively, maintaining rapid growth. At the same time, the adjusted net profit was only 19.68 million, 39.41 million and 140 million yuan, respectively, and the net interest rate was about 5%; In the past three years, the losses attributable to shareholders of the parent company reached 23.207 million yuan, 77,000 yuan and 547,300 yuan respectively.
In October last year, Banana's IPO application failed to pass the hearing for more than half a year, and the prospectus officially expired. Although Banana has since updated its prospectus to attack the main board of the Hong Kong Stock Exchange again, its outlook remains uncertain.
The dilemma of banana is a microcosm of the new consumer brand of Internet celebrities. The more things are sold, the more expensive the profit, the lower and lower the profit, the consumer resentment is also increasing, and everything seems to enter an endless cycle.
Awakened users: consumption downgrading into an inevitable trend?
Whether it is new outlets such as outdoor sports and camping, or new consumer brands in traditional fields such as catering, snacks, beauty and clothing, the most questioned is one word: expensive.
Taking banana as an example, the average price of umbrellas on sale is about 102 yuan, hats are close to 100 yuan, and the price of new products such as sunscreen clothing is even more amazing. For sunscreen products that do not have too many technical barriers and are difficult to find too big a gap compared with competing products, this price has undoubtedly dissuaded many potential consumers. In the summer, Zhongxuegao's "ice cream assassin" incident pushed the price controversy of new consumer brands to a climax.
In July, Wang Hai, known as a "professional counterfeiter", released a video criticizing Zhong Xuegao. According to its monitoring, the actual cost of Zhongxuegao ice cream is about 1.32 yuan, but the average selling price is more than 20 yuan, which is not much compared with the top Haagen-Dazs in the kingdom.
Since the fermentation of the "ice cream assassin" incident, "yogurt assassin", "fruit assassin", "mooncake assassin", "ramen assassin" and so on have continued to emerge, and new consumer brands such as Jane Eyre, Duan Mang and Hefu Lao Noodles involved have also been pushed to the forefront of public opinion.
In fact, the cooling of new consumption tracks such as beauty and trendy play is also closely related to the trend of consumption downgrade. Consumers who become more rational pay more attention to the practicality and basic consumption of goods, and the demand for enjoyable consumption is weakened. Consumer goods such as trendy toys and beauty that are not necessities of life are difficult to continue the popularity of the past.
Another side proof of the trend of consumption downgrade is the rise of temporary food/skin care products and offline discount stores and collection stores.
iMedia Consulting's report pointed out that by 2026, the advent food market will reach 47.1 billion yuan, an increase of nearly 30% over 2021. On Douban, there is a "I Love Advent Food" group, which currently has more than 90,000 members. According to Taobao's official data, as of the first half of 2022, there are currently more than 10,000 temporary food stores on the platform, with more than 2 million annual consumers.
Advent food has not only captured Taobao, but also expanded offline. As a representative, Hi Special Purchase completed the A+ round of financing exclusively participated in by Blueprint Venture Capital in January last year, and immediately began to expand nationwide - at this time, it was only one year after the establishment of Hi Special Purchase.
(Image from iMedia Consulting)
The above indications show that after being tortured by the epidemic for three years, many consumers' consumption concepts have undergone profound changes, and consumption downgrading has replaced consumption upgrading as a new trend. Behind the general trend of consumption downgrading, new consumer brands create high-end images through large-scale marketing and Internet celebrities, and the way to increase brand premiums is likely to fail - which will undoubtedly force brands to make fundamental changes.
The formula that doesn't work: Marketing is no longer king
Why are consumers no longer paying for expensive new consumer brands? This is a common question for many.
In addition to objective factors such as the deterioration of the economic environment, the shrinking job market, and the instability of income levels, changes in consumption concepts are also an important reason. Behind this change is the failure of a universal formula for new consumer brands - marketing is king, and the era of harvesting IQ taxes by riding the east wind of the Internet celebrity economy seems to be over.
From Perfect Diary, Han Shu to Banana and Zhong Xuegao, no matter which sub-track they are in and what period they are born in, new consumer brands always seem to be unable to escape the emphasis on marketing over research and development, and the product quality cannot keep up with the dead knot of Internet celebrity marketing popularity.
Banana's prospectus revealed that from 2019 to 2021, the number of KOLs working with it has continued to increase, doubling from 274 to 597. In the first half of last year, the number of KOLs released by Banana reached an all-time peak of 1,577, a year-on-year increase of 264%. However, between 2019 and the first half of 2022, KOLs accounted for only 31.%, 10.2%, 9% and 9.3% of Banana's revenue, respectively, and there were even signs of decline.
According to the Value Research Institute (ID: jiazhiyanjiusuo), the trend of cooling the Internet celebrity economy in the past two days is quite obvious - the decline of traffic dividends, the rise of the trend of consumption downgrading, and the massive investment of brand launches in the past few years have led to ecological imbalance, and the ROI of KOL investment has been significantly lower than a few years ago.
The good news is that brands like Perfect Diary, Three Squirrels and others have also recognized the problem and consciously reduced marketing costs.
In FY2020, Yixian e-commerce marketing expenses reached RMB3.412 billion, with an expense ratio of an astonishing 65.2%. During the same period, the marketing expense ratio of international beauty giant L'Oréal hovered below 30%. In the first quarter of last year, Yixian e-commerce directly cut marketing costs by 60%.
In January this year, Xiaohongshu, the marketing base of new consumer brands, made a major change: the dandelion brand logo was upgraded, the brand cooperation logo was changed to the brand logo formation, and bloggers could not display the cooperation logo with the consent of the brand owner.
Although Xiaohongshu did not respond to this matter, it is not difficult to imagine that this move is to dilute the commercial nature of bloggers and notes, and return the community atmosphere of Xiaohongshu to the past. In fact, it is not difficult to see from the comments of users and bloggers that overly commercial notes have changed the ecology of Xiaohongshu and made some users feel bored. If you do not pay attention to these voices and make changes in time, it is likely to affect Xiaohongshu's user stickiness.
Of course, changing the way you play and slashing your marketing budget will definitely bring pain to new consumer brands. For example, Yixian e-commerce's revenue fell by nearly 40% in the first quarter of last year as marketing spending plummeted. However, this transformation is also necessary, the traffic dividend is gone, the Internet celebrity economy is difficult to return to its former peak, and new consumer brands can only hope to achieve sustainable development if they make changes.
Future trends: Supply chain and digital intelligence are getting more attention
When new consumer brands realize the end of the marketing era, they must pick up long-termism. In this way, the supply chain will be the first to highlight value. The first to react was also the capital market - a wave of supply chain company listings, which reached its climax in 2022.
In February last year, Sanyuan Biotechnology, a raw material supplier of erythritol, successfully landed on the Shenzhen Stock Exchange and raised nearly 3.7 billion yuan. According to the prospectus, Genki Forest is its largest customer in 2021, and Heytea, Coca-Cola and Nongfu Spring are also on the customer list.
In June, Tian Ye Shares, which supplied raw materials such as fresh fruit, jelly fruit, concentrated juice and NFC for Nai Xue's tea, tea Bai Dao, Dian Dian and Shanghai Auntie, was submitted to the Beijing Stock Exchange. Later, Dexin Food, which supplies ingredients to Luckin, and Hengxin Life, which supplies packaging materials for Heytea, respectively launched IPO applications on the main board of the Shenzhen Stock Exchange and the Growth Enterprise Market...
From the perspective of financial indicators, these supply chain companies hiding behind the scenes have no less profitable ability than the glamorous new consumer brands in front of the stage, and the profit margins of some companies are rising year by year. According to the prospectus, the net profit attributable to the parent of Tianye in fiscal 2021 soared by 195.45% year-on-year to 65 million yuan. Despite a slight decline last year, net profit margin and operating margin remain at a high level in the industry.
The IPOs of these companies have proved to new consumer brands that the value of the supply chain cannot be ignored. With influencer marketing rules no longer working, new consumer brands must return to the essence of the consumer industry and retain users by providing high-quality goods and services. A stable supply chain is their most reliable internal moat, which can play a series of roles such as controlling costs and stabilizing production capacity.
The good news is that new consumer brands are aware of the problem. Michelle Ice City has repeatedly expanded the production capacity of Anyue's lemon orchard to ensure its own supply chain capacity, and more brands have begun to invest in supply chain enterprises. Of course, in addition to the supply chain, there are other phenomena that can also prove that new consumer brands are paying more attention to long-term and actively practicing internal strength.
Genki Forest, for example, has been expanding its production lines, and two more self-built factories have received new news in the past year. On February 25, Genki Forest announced that it signed a strategic cooperation agreement with Taicang City, Jiangsu Province to build the sixth intelligent aseptic carbonic acid production line plant there. It is reported that the factory covers an area of 120 acres, with a total of 6 production lines and an annual output value of about 2.4 billion yuan.
In March, Yuanqi Forest's fifth self-built plant in Dujiangyan, Sichuan Province, officially entered the trial production stage. According to Genki Forest's plan, the plant's production capacity is mainly for the southwest market, with an annual production capacity of more than 1.2 billion bottles. In addition to securing supplies from Sichuan and Chongqing, after the Dujiangyan plant is on track, Yuanqi Forest will accelerate its expansion into markets such as Qinghai, Gansu and Tibet.
New tea brands such as Naixue and Michelle Ice City have begun to actively develop automation equipment, and carry out comprehensive digital and intelligent reforms in raw material procurement and transportation, store operations, and personnel management.
In March last year, Michelle Ice City established a wholly-owned subsidiary, Xuewang Interstellar Technology Company, whose business scope includes intelligent robot research and development. Naixue's pace is faster, and its self-developed automatic milk tea machine has been trialed in hundreds of stores in June last year, and basically completed the popularization in all stores in the third quarter.
According to the official data released by Naixue, the production efficiency of freshly made tea drinks has increased by at least 40% after the application of automatic milk tea machines, and the cup can be completed in as fast as 10 seconds. Founder Peng Xin once said that digitalization is imperative for Naixue. Digital intelligence upgrading can not only improve the standardization of stores, reduce the difficulty of employee operation, but also save more human resources, which is definitely a major trend in the future of the consumer industry.
Although 2022 for new consumption is not good, the rise of long-termism is definitely a harvest in a cold winter. After the cooling of the Internet celebrity economy, supply chains, self-built factories, and intelligent equipment/systems will undoubtedly shoulder the future of the new consumer industry.
Write at the end
Compared with the listing boom of supply chain companies, the road to listing of new consumer brands standing in front of the stage is not so smooth.
On January 12, the CSRC's official website disclosed a feedback on the IPO application of Adopt-A-Cow Holdings Group. In the 10,000-word document, the CSRC sharply raised 48 questions: the source of raw milk, food safety, VAM agreements, cooperative milk source management, and transaction traceability.
In fact, since the IPO application was submitted, the business model and profitability of adopting a cow have been questioned, and many institutions and analysts are worried about its listing prospects. Now the CSRC has personally issued the "48 Questions of Chasing the Soul", which has added more challenges to the listing of this new consumer brand of Internet celebrities.
It is not difficult to see from the difficult IPO of adopting a cow and the listing of supply chain enterprises that after bidding farewell to the era when marketing is king, new consumer brands must cultivate internal strength, attach importance to supply chain construction and core technologies, and create a moat if they want to develop in the long term and healthily.
The sad 2022 has passed, new consumption has experienced a lot of difficulties, and some brands have fallen in this winter. But the surviving brands still have hope. Seizing the new development opportunities of the industry and strengthening the shortcomings is the key for new consumer brands to turn defeat into victory in the next year.