Image source @ Visual China
Author | Soy milk latte, produced | No two studies
Go, go to the "Zongzi Brother" Wufangzhai to buy mooncakes!
Remember last year's Mid-Autumn Festival Wufangzhai 'Ancient Taste' documentary "Approaching Science, Approaching the Mooncake"?
This year's Mid-Autumn Festival is approaching, Wufangzhai once again joined the annual mooncake marketing war; at present, the most popular gift box in its Tmall flagship store has won a monthly sales of 200,000+.
With an annual sales of nearly 400 million Zongzi, why does "Zongzi Brother" Wufangzhai make mooncakes? In fact, this century-old brand, which sells about 400 million Zongzi a year, has already begun the "slash" road: in addition to Zongzi, the product matrix of Wufangzhai also covers mooncakes, pastries, meals and other fields.
At the same time, it also frequently goes out of the circle with the help of "Wufang Pictures": from the "hardcore science fiction" of Zongzi to the ancient documentary of the mooncake, it actively moves closer to the back wave in marketing.
On the eve of this year's Dragon Boat Festival, Zhejiang Wufangzhai Industrial Co., Ltd. (hereinafter referred to as "Wufangzhai") submitted a prospectus to the CSRC to be listed on the Shanghai Stock Exchange. This is the third IPO shock it has launched.
According to the prospectus, Wufangzhai intends to publicly issue no more than 25,185,750 shares, raising about 1.056 billion yuan for smart food workshops, digital industry smart parks, research and development centers and information construction projects.
The CSRC recently gave feedback on listing, repeatedly mentioned the issues of Wufangzhai's equity, and inquired about a number of compliance issues such as VAM agreements and consumer complaints that Wufangzhai has not yet cleaned up.
As of 17:00 on September 3, Wufangzhai has not made a public reply.
In the view of "Fuji Research", as an enterprising century-old brand, Wufangzhai has successfully "gone out of the circle" in product matrix and marketing; however, from the financial data and business structure of the prospectus, it has not been able to get out of the comfort zone of the Zongzi business for the time being.
In addition to the marketing story of the circle, the capital market that votes with its feet may be more focused on the actual data: In addition to the Zongzi on the verge of the "ceiling", what investment value does the "Zongzi Brother" have?
Listing is not the end of Wufangzhai .
<h2>Three times hit the "first strand of rice dumplings"</h2>
Today, Wufangzhai has gone through a full 100 years.
Legend has it that the name "Wufangzhai" was born in the light years of the Qing Dynasty, and in 1921 Zhang Jinquan opened the first "Rongji Wufangzhai" Zongzi shop in Jiaxing, which was the predecessor of Wufangzhai .
In 1992, Wufangzhai Zongzi subsidiary was established, and the following year was rated as "China Time-honored Brand"; in 1998, through the restructuring of state-owned enterprises, Wufangzhai Industry was formally established.
In the promotion of state-owned enterprise reform and the pull of various capitals, Wufangzhai shares were gradually controlled by Sino-Ocean Group (the predecessor of Wufangzhai Group).
According to its prospectus, Wufangzhai Group directly holds 40.36% of the company's shares, and indirectly holds 9.7% of the shares through its wholly-owned subsidiary Sino-Ocean Decoration, holding a total of 50.06% of the company's shares. Li Jianping and Li Haojia father and son are the actual controllers of the company.
Chairman of Wufangzhai: Li Jianping
As early as 2019, Wufangzhai began to sprint A shares. Within three years, Wufangzhai changed the listed counseling institutions three times, and previously sought the counseling of GF Securities and CICC, and in 2020, Zheshang Securities became the third counseling institution, and finally helped it to successfully "graduate".
According to the prospectus data, from 2018 to 2020, Wufangzhai's revenue was 2.423 billion yuan, 2.507 billion yuan and 2.421 billion yuan, the net profit attributable to the mother was 0.97 billion, 163 million and 142 million yuan, and the comprehensive gross profit margin was 45.24%, 45.43% and 44.57% respectively.
Among them, in 2020, Wufangzhai revenue fell by 3.44% year-on-year, net profit fell by 12.90% year-on-year, and comprehensive gross profit decreased by 0.60 billion yuan year-on-year, down 5.26%.
Wu Fangzhai explained that the decline in performance was mainly affected by the new crown epidemic and the rising cost of major raw materials. Among them, although the gross profit margin has declined compared with 2018 and 2019, it is still higher than that of other listed companies in the same industry.
Gross margin compared to the average 38.78% of comparable companies is about 5.79% higher.
From the perspective of sales expenses, although it has declined under intentional control, the sales expenses of Wufangzhai are still higher than the level of its peers. From 2018 to 2020, the sales expenses of Wufangzhai were about 770 million yuan, 760 million yuan and 690 million yuan respectively, and the sales expense ratio was nearly 30%, which was significantly higher than the average of 17.61% of its peers.
In the view of the "Fuji Research", the high sales cost may be attributed to the continuous expansion of its sales channels, and the resulting transportation and storage fees, store rent and service fees are higher.
The prospectus also indicates the risk of failure of its listing, if Wufangzhai cannot complete the listing of A shares at the end of December 2021 or the end of December 2022, Ningbo Reunion and Ningbo Yongpeng have the right to require Wufangzhai to repurchase a total of 4.9% of the shares.
<h2>Is selling rice dumplings still a good business? </h2>
Selling rice dumplings is the main source of income for Wufangzhai.
According to the prospectus, from 2018 to 2020, the revenue of Zongzi products was 1.502 billion, 1.609 billion and 1.644 billion yuan respectively, accounting for 66.28%, 67.74% and 70.77% of the main business income of Wufangzhai respectively; in the same period, its Zongzi output was 411 million, 408 million and 366 million, respectively.
According to the Ai Media Consulting Report cited in its prospectus, in the list of Chinese Zongzi brands in the 2020 Dragon Boat Festival, Wufangzhai ranked first, followed by Beijing Daoxiangcun, Zhenzhen Laolao, Zhiweiguan, Sanquan Food and so on.
According to China's food statistics, the compound annual growth rate of the national rice dumpling market size from 2020 to 2024 is expected to be 7%, which is nearly 3% lower than the compound annual growth rate from 2015 to 2019.
According to the prospectus, the sales volume of Zongzi in Wufangzhai also showed a downward trend, with 411 million, 408 million and 366 million in 2018-2020 respectively, and sales in 2020 fell by 11% year-on-year.
To some extent, the market size of Rice Dumplings in China has approached the ceiling.
The "Fuji Study" noted that in the case of declining sales, Wufangzhai relied on price increases to maintain the stability of its main business income. From 2018 to 2020, the unit price of zongzi products increased from 2.99 yuan / 100g to 3.68 yuan / 100g, an increase of 23.08%.
At the same time, the sales volume of rice dumplings has a serious seasonality, and more than 50% of the revenue in the reporting period comes from the second season, resulting in uneven distribution of production capacity throughout the year.
In the peak season, Wufangzhai needs to meet the production demand through outsourced processing, and the proportion of outsourced processing production has increased year by year, accounting for 11.66%, 13.40% and 25.01% of the company's total output from 2018 to 2020, respectively. However, a large proportion of production capacity is idle in the off-season, dragging down the annual capacity utilization rate.
For the "century-old brand" moat that Wufangzhai is most proud of, it seems to be "unremarkable" in the Zongzi circuit. According to Koi Finance, as of June 15, 2021, Taobao's rice dumpling sales exceeded 200 million yuan, of which the top five brands with monthly sales are all long-established brands with a century-old history.
Li Jianping, chairman of Wufangzhai, said in an interview with the financial magazine Financial World in 2018 that in 2008, Wufangzhai hired a consulting company to investigate that China's rice dumpling market was 3 billion, and Wufangzhai had already occupied 25% of the share.
He said, "The rice dumpling circle is also so big, almost to the 'ceiling'." So we are very clear, to break through the 'ceiling' we must come out, not just make rice dumplings. ”
Or based on this, in addition to Zongzi, Wufangzhai actively explores other product categories.
According to the prospectus, in the revenue contribution in 2020, the mooncake series accounted for 8%, the new products such as egg products, pastries, and brine flavors accounted for 9.86%, and the meal series accounted for 11.4%.
The food business, which is not affected by the season, may be the main direction of Wufangzhai's next strategy, but the results seem to be less than expected.
In 2020, Wufangzhai catering business revenue decreased by 107 million yuan year-on-year; egg products, pastries and other business revenue decreased by 12 million yuan year-on-year; and only the mooncake series increased from 155 million yuan in 2018 to 185 million yuan in 2020.
In the view of the "No Two Research", Wufangzhai's new expansion business is still unstable, and its hope is that the catering business will become the second growth curve, and there is still a long way to go.
<h2>The century-old Internet saves itself</h2>
As a century-old brand in Zhejiang, the regional characteristics of Wufangzhai offline network are obvious. According to the prospectus, at present, the East China and Central China regions, where its stores are most concentrated, contribute 68.8% of the revenue.
In addition to the "base camp" of Jiangsu, Zhejiang and Shanghai, the penetration rate of Wufangzhai in other provinces and cities in China is limited.
The prospectus shows that: In terms of channels, by the end of 2020, Wufangzhai has established 474 stores through direct operation, cooperative operation, franchise, distribution, etc.; at the same time, Wufangzhai store expansion plan points out that direct stores will increase by 8 in 2021, 13 in 2022, and 30 in 2023.
In fact, by the end of 2020, the number of directly operated stores in Wufangzhai was 169, a decrease of 14 year-on-year.
The main reason for loss or store closure. According to the prospectus, in 2020, about 100 of the 169 Wufangzhai directly operated stores were in a state of loss, and many stores lost money for three consecutive years; more than half of the 42 cooperative stores also lost money.
The other side of the coin, as an e-commerce model that can effectively break through geographical restrictions, has naturally become the focus of Wufangzhai's efforts.
In addition, according to the prospectus, as early as 2009, Wufangzhai set up an e-commerce team and operated its own "Wufangzhai Official Flagship Store" on the Tmall platform.
In 2020, the proportion of revenue from e-commerce channels exceeded that of retail channels for the first time, becoming the channel category with the highest revenue contribution.
In 2020, the sales amount of Wufangzhai e-commerce direct channel was 671 million yuan, becoming the largest source of income for the company's direct business. Together with 6.67% of online distribution, e-commerce channels contributed a total of 35% of revenue in 2020. In the case of a large proportion of losses in offline stores, online revenue contributes a lot to the overall profit.
In the view of "No Two Research", relying on the empowerment of the Internet, centuries-old brands may be able to gain a new life online. However, the channel is not the decisive factor, after breaking the geographical restrictions of offline stores, Wufangzhai needs to return more to the origin of the product and establish a core moat.
<h2>After "Wufang Pictures" broke the circle</h2>
Under the marketing blessing of magic brainwashing, Wufangzhai embarked on the road to breaking the circle under the name of "Wufang Pictures".
In 2018, Wufangzhai's Dragon Boat Festival advertisement "White, Fat and Fat Only Tomorrow" became popular, bringing about the marketing trend of Wufangzhai promotional videos.
In June 2020, Wufangzhai's salted duck egg advertisement successfully broke the circle on Station B, and the current number of plays has reached 2.487 million, and the classic picture has even become a popular meme.
The 2021 Wufangzhai Dragon Boat Festival feature film "Looking for Li Xiaofen" also received 3.99 million views on Weibo.
According to the incomplete statistics of "No Two Research", in 2020, Wufangzhai filmed a total of 49 advertising short films, 11 of which were during the Dragon Boat Festival, and also bought the Banner advertising space of Station B for one day for publicity.
In addition, in 2020, Wufangzhai also co-branded with 18 brands in different fields, such as Disney, Small Can Tea, Ramen Talk, Pepsi, Zhong Xuegao, AKOKO, etc., and ran all the way in the most accessible magic brainwashing style of Houlang.
Unfortunately, can marketing success really translate into sales? According to the prospectus of Wufangzhai - 12.90% in 2020, the increase in net profit seems to be announcing that there is no linear correlation between marketing and performance.
Wufang Pictures accurately grasps the preferences of the back wave and actively embraces the attitude of Generation Z, and may need more time to achieve the transformation.
No one can guarantee that "going out of the loop" will start new growth. Whether Wufangzhai has regained its life with the help of Houlang marketing remains to be further tested.
<h2>A new stage for a long-established brand? </h2>
The entry of long-established brands into the capital market has become a trend.
According to the "2020 Enterprise Investigation and Inspection of Chinese Time-honored Trademark Big Data Report", a total of 60 listed companies currently have Chinese time-honored trademarks, which are distributed in various tracks such as liquor, traditional Chinese medicine, catering, and condiments.
After the listing of the old brands, some have become giants; some have been delisted; and some have been beautiful for a while and have been silent for a long time... You sing me on the stage, listing is not a good medicine for resurrection, nor is it the end.
If it can successfully land on the capital market this time, for Wufangzhai, on this new stage, it is also a new beginning for knowing and not blessing.
Some references in this article:
1. "The IPO of the Century-Old Wufangzhai: Maintaining Zongzi Revenue by Raising Prices, the VAM Agreement Surfaces", Green Squirrel
2. "The Past of Wufangzhai", Zebra Consumption
3. "The Armor and Weakness of "Brother Zongzi" Wufangzhai", Caijing Magazine
4. "Selling 400 million rice dumplings a year, "100-year-old" long-established Wufangzhai to be listed...", China Entrepreneur Magazine
The views in this article are the personal views of the author and do not represent any investment suggestions made by the platform in this regard. Investors should be cautious and rational in making investment decisions.