Why is it difficult to support an IPO with a bowl of bird's nest for hundreds of yuan?

Introduction: The dilemma of the "first share of bird's nest"

Exhibitors丨数科社

Author丨Lin Mu

In Indonesia, the world's largest bird's nest producer, swiftlet flying into a private house to build a nest is regarded as an auspicious omen, and the house built for it by locals according to the living habits of swiftlet is called "swallow house", from which the name of the well-known bird's nest brand Swiftlet House is also derived.

In 2002, Yan's House opened its first chain store in Xiamen, and in less than a few years, it has become the star product endorsed by Hong Kong superstar Carina Lau and the largest bird's nest chain brand agency in China.

However, in the past decade, Yan's house has not been on a smooth journey in the capital market. Since the Hong Kong stock market was shattered in 2011 due to the "poisonous blood swallow" turmoil, Yan's House has broken its IPO several times and oscillated between Hong Kong A-shares.

Recently, the news of Tsubame's House seeking an IPO is coming out again. According to reports such as Ryan Capital and Unicorn Early Know, Yan's House is considering a Hong Kong listing, raising about $200 million, and is currently in the preliminary consideration stage.

The Digital Science Agency contacted the contact person of the relevant department of Yanzhiya in this regard, and has not received a reply as of press time.

After more than 20 years of long-distance running, why has Yan's House IPO road repeatedly hit a wall? What kind of capital dilemma does the industry reflect behind it?

01丨Trapped in the "first stock of bird's nest"

The "Poisonous Blood Swallow" incident has always been a lingering shadow on the IPO road of Yan's House.

In 2011, the bird's nest industry experienced the biggest negative event in history - consumers reported fever, headache, nausea and other symptoms after eating the "special blood swallow" of Yan House.

After testing, it was found that the nitrite content in the blood swallow products of Yanzhiwu and Eagle Emperor exceeded the highest national mandatory standard by 33 times. In the end, it was found that these blood bird's nests were smoked by illegal merchants in Malaysia and Indonesia in boxes filled with swallow droppings in order to make more money.

Although Yan's House was not the initiator of the "Poisonous Blood Yan", the roaring public opinion still drowned it out, causing hundreds of chain stores to close, merge, and stop until only more than 100 remained, and the Hong Kong listing plan that had been printed on the prospectus was forced to terminate.

This year, players such as Xiaoxian Stew in the bird's nest industry have not yet been born, and Yanzhiya, which has more than 500 stores across the country, has almost no rivals, and has spent a lot of money to invite Carina Lau to stand for it, which should have been a good prize in the capital market, but the sudden crisis of trust made it miss the best opportunity to go public.

Until Yan's House once again reported that the IPO plan was ten years later, relying on ready-to-eat and standardized bowl swallow products, Yan's House took nearly ten years to gain a foothold in the market again. However, the door of capital seems unwilling to open to it anymore.

In 2021, Yan's House once again attacked the Hong Kong stock listing, but still without success, and submitted a prospectus on the A-share market at the end of the same year. In April last year, the CSRC raised 57 questions in response to Yan's House prospectus, directly addressing issues such as Yan's House's marketing, food safety and related party transactions.

In the subsequently updated prospectus, it did not respond accurately to this. But five months later, on the eve of the meeting, Tsubame suddenly withdrew the IPO application materials.

As for the reason for withdrawing the application materials, the reason given by Tsubame House was that the listing application was withdrawn due to changes in the capital market environment and comprehensive consideration of the company's own actual situation, development plan and other factors.

It is worth mentioning that the VAM agreement signed between Yanzhiya and Yangming Kangyi and other shareholders includes "if the issuer's IPO application is returned or rejected by the CSRC or the stock exchange, or the issuer withdraws the IPO application, the investor has the agreement that the VAM clause such as preferential privilege clause will be automatically restored".

If the news this year is true, this is the fourth IPO of Yanzhiya, and the repeated defeats and vacillations of the past three years also reflect its urgency and anxiety. After twenty years of running away, the shareholders behind Yanzhiya have long since gradually lost patience.

But at present, the trouble of Yan's House IPO does not only come from the missed timing of the listing.

02丨Marketing-driven brand premium

In November 2020, Simba's team continued to ferment the sale of "sugar water bird's nest" in the live broadcast room, and it also once again triggered the public's controversy about "whether bird's nest is an IQ tax".

Regarding the nutrition and efficacy of bird's nest, there has been no unified statement from the outside world. According to relevant records in ancient times, bird's nest has always been regarded as a regular meal for imperial meals, and it is quite a health symbol.

In modern medicine, the sialic acid contained in it has many effects such as antioxidant, skin whitening, and improving stem cell value-added, but some studies believe that the sialic acid content of bird's nest is not high, and the protein content is not as good as tofu and eggs.

Yan's House said in the prospectus that bird's nest is a rare ingredient that has been eaten in China for hundreds of years, and it is more of a dietary habit and lifestyle, and it also has gift attributes.

It seems reasonable that bird's nest is expensive. The Digital Science Institute found that a "Yan's House Bowl Bird's Nest 108g×6 Bowl" product currently on sale in the Tmall flagship store of Yan's House showed that the original price was 1268 yuan / box, and the price of 618 activity was 914.58 yuan / box.

According to the discounted price, the retail price of this bowl of Yan's house can reach 152 yuan per bowl.

According to the introduction of this "Random Bowl" product, the raw materials contain only purified water, rock sugar and bird's nest, and the amount of edible bird's nest is not less than 2.5g per bowl. It is not difficult to find that most of the ingredients are rock sugar and water.

According to the prospectus of Yan's House, the average purchase price of "Bowl Yan" raw materials is 11.77 yuan / gram. In other words, the lowest price of 152 yuan a bowl of bird's nest is only about 30 yuan, which shows that this is a profiteering product.

As the ace product of Yan's House, the Bowl Yan series has supported half of its revenue in the past few years. According to the prospectus, from 2019 to 2021, Yanzhiya achieved revenue of 951 million yuan, 1.299 billion yuan and 1.499 billion yuan respectively, of which the revenue of Bowl Yan products accounted for 56.64%, 41.94% and 45.56%, which also contributed to the overall gross profit margin of Yanzhiya as high as 48.55%, 48.65% and 52.67%.

However, under the high gross profit, its net profit margin is only single digits, 8.28%, 9.37% and 11.46% respectively. The cumulative sales expenses of Yanzhiya in the three years from 2019 to 2021 were 1.016 billion yuan, of which the proportion of revenue from advertising expenses alone has been hovering around 18%.

In contrast, its R&D investment accounts for less than 2%, and it has a downward trend year by year. It can also be seen that Tsubame House is a marketing-driven brand.

Over the years, the spokesperson of Yan's House has transitioned from Carina Lau to Lin Chiling, and then welcomed the new brand spokesperson Zhao Liying in January last year, and also titled programs such as "Lu Yu Has a Day Trip", "Love Cabin", "Wise People See Wisdom", "Smart Made China" and other programs, relying on heavy marketing to continuously increase brand premium.

For a new consumer brand, marketing is the only way to open the market in the early stage and create strong consumer momentum, but for a brand that has been running for 20 years, it is not a good long-term motivation.

Without the support of hardcore products, the story told by marketing is naturally difficult to win the favor of capital.

03丨An industry competition that blends water and fire

On the bird's nest circuit, Bird's Nest is not the one that is the best at storytelling with marketing.

Founded in 2014, Xiaoxian Stew is a leading new bird's nest brand that has risen rapidly in recent years. Stepping on the wave of new consumption, Internet celebrity concepts and other waves, Xiaoxian Stew took advantage of high brand exposure, and its market share soared, and even once left the big brother of Yanzhiya behind.

Since the outbreak of the "Poisonous Blood Swallow" incident in 2011, the bird's nest industry has fallen into a situation of mixed fire and water, on the one hand, the haze shrouded by food safety problems, and on the other hand, the huge profits of "Bowl Swallow" products have attracted Xiaoxian stew players to enter the game.

According to the "2022-2028 China Bird's Nest Market Status Research Analysis and Development Prospect Forecast Report", the bird's nest industry has the potential of a 100-billion-level market, and it is expected that the scale of China's bird's nest market will exceed 100 billion in 2025. Prior to this, the scale of the mainland bird's nest market has grown for 9 consecutive years, which is really a big cake.

But the rising star Xiaoxian Stew can compete with Yan Zhiya who has been working hard for more than ten years in just a few years, which also indirectly shows that there is no too deep moat on this track.

According to the "2022 China Bird's Nest Market New Pattern Research Report" released by Shangpu Consulting, the bird's nest market is a duopoly pattern, with two leading companies, Xiaoxian Stew and Yanzhiwu, occupying more than 50% of the market share. In 2021, the market share of Xiaoxian Stew and Yanzhiya is 36% and 22% respectively, and the market share of other brands such as Shuanglian, Muscle Live, Zhengdian and other brands is not higher than 5%.

From the perspective of business model, the vast majority of bird's nest brands are completely dependent on raw material imports, and are more inclined to operate as a food processing enterprise. Taking Yan's House, an industry representative, as an example, Xiamen Yan's House Bioengineering Co., Ltd. was established in 2014, although it holds high the banner of "bioengineering", but the actual R&D investment has been pitiful.

If heavy marketing is the secret of the bird's nest industry to increase brand premium, then the Internet celebrity brand Xiaoxian Stew is a typical case of insufficient stamina.

Xiaoxian Stew understands marketing and e-commerce. On the one hand, Xiaoxian Stew, which adopts the C2M model (factory directly connects consumers), cuts out the middleman link, and improves the user experience by relying on shipment speed and cost control; On the other hand, it has invested heavily in new media marketing platforms such as Xiaohongshu, Douyin, and anchors with goods on major platforms as the main battlefield for brand launch.

In 2020.11, Xiaoxian Stew won the crown of Tmall Double 11 bird's nest category sales champion with 465 million sales, and this position has always belonged to Yan's House until then.

Also this month, the staging of the "sugar water bird's nest" door completely tore off the gorgeous packaging outside the bird's nest product, leaving its original value exposed to the public. In the past few years, Xiaoxian Stew has been repeatedly punished by the Administration for Market Regulation for involving false commercial promotion.

Marketing is just a means, and brand premium is really based on excellent products. This conclusion also applies to Tsubame's House, which is constantly breaking through IPOs.