Oden, eat out an IPO

Backed by head customers such as Haililao, how sure is Dingweitai going public?

Source: Straight through IPO; Text/Sun Yuan

If you have eaten 7-11, Rosen's oden, or patronized Haidilao and Xiabu Xiabu, then you have most likely eaten the products of this company.

That is Dingmitai, known as the "King of Oden" and "King Cod".

Following the end of October last year, Dingweitai and Minsheng Securities signed a listing guidance agreement to be listed on the A-share market; In August this year, led by Bailian Zhigao Capital, Dingweitai completed a pre-IPO financing of nearly 100 million yuan, which is one step closer to listing.

As an enterprise established in 2009, specializing in the development, production and sales of marine food and surimi products, Dingweitai not only supplies ingredients for hot pot brands, but also serves as a supplier of oden and ready-to-eat food for convenience stores and casual snack brands.

At present, the prefabricated vegetable enterprises in the domestic A-share listed enterprises are mainly quick-frozen foods, such as Anjing and Guolian Aquatic Products, while Dingweitai belongs to the leader in the segment of high-end cod products.

With the suspension of consumer investment in the primary market, Dingweitai's new round of financing is a spring breeze for the prefabricated vegetable track. However, on the IPO journey, how sure can Dingweitai be?

Oden started as a business, returned to his hometown after 75 to start a business, and sold 400 million a year

Dingweitai was born in Jiangsu, which has more than 5,000 pre-made vegetable supply chain enterprises.

The founder, Tan Guolin, was born in 1976 and is a native of Humpfeng Township, Donghai County, Lianyungang, Jiangsu. When he was young, he has been working hard in Taicang City, working as a worker, workshop director, sales... And Dingweitai belongs to him to return to his hometown to start a business.

In the early days of its establishment, Dingweitai mainly cultivated the oden track, and a considerable part of its products were used to supply ingredients for some big hot pot brands and some convenience stores and chain stores. With the rise of supermarket convenience stores, Dingweitai is known as the "King of Oden" in the industry. Among them, Dingweitai's representative products include cod bamboo wheel, cod tofu, cod pine leaf crab flavored fillet, cod fish roe bag, simulated crab flavor stick, etc.

At that time, the domestic high-end cod intestine market was mainly occupied by Korean and Japanese companies such as ZEK Foods, and the market share of Chinese companies was very small. And Dingweitai is a major Chinese player competing with foreign companies.

In order to solve the problem that "cod products made in China meet international food quality standards", Tan Guolin started a "benchmarking".

Because it mainly produces cod products, in order to form its own competitive advantage, Dingweitai specially went to Alaska, USA, and went deep into the raw material production areas to purchase high-quality cod. In order to strengthen the high-end brand position through the quality of Alaskan cod.

However, relying on the advantages of raw materials is not enough to "capture" more large customers, and Dingweitai spares no effort in the technical process and R&D investment in product production. Among them, the addition of Chūji Nishikawa plays a "cross-era" role in the development of Dingweitai.

As one of the five founders of contemporary surimi product technology development in Japan, Tadaji Nishikawa has been engaged in the research and development of surimi products since 1949 and enjoys a high position in Japan's modern surimi product industry. In order to invite him to be a food technology consultant, Tan Guolin personally went to Japan three times to invite him, before the 83-year-old came to Dingweitai in 2016.

It was this move that allowed Nishikawa to assist Dingweitai Foods in developing cod cake, which attracted the attention of Haidilao and promoted this product to stores nationwide.

Under the benchmarking role of Haidilao, Dingweitai immediately became the supplier of leading hot pot chain brands such as Xiabu Xiabu, Laowang, and Zuoting Youyuan.

In June 2017, Dingweitai relocated from Suzhou to Donghai Development Zone, with a total investment of 400 million yuan, introduced Japan's most advanced production line equipment and technical technology, and became the largest cod surimi base in Asia. Under the leadership of Tan Guolin, Dingweitai invests millions of yuan in R&D and technological innovation every year, and plans to continuously improve the scientific and technological content of its products with no less than 2% of the company's annual revenue in the future.

With both ingredients and craftsmanship, Dingweitai has developed and produced hundreds of high-end surimi products, mainly serving B-end head customers in three major business scenarios, such as hot pot brands such as Haidilao, Banu and Laowang; 7-11, convenience store brands such as Family Mart and Lawson, as well as leisure snack brands such as Good Shop and Three Squirrels.

Hand in hand with leading enterprises, Dingweitai's performance naturally rises.

According to Tan Guolin, the annual growth rate of Dingweitai from 2019 to 2021 is between 40% and 50%. In 2022, Dingweitai will have sales revenue of nearly 400 million yuan, and its products occupy nearly half of the domestic high-end cod intestine market.

In order to win more markets, Dingweitai not only invested more than 10 million yuan to set up a research and development center in Osaka, Japan in July last year, but also joined the "overseas order grab" craze at the beginning of this year.

After inspecting supermarkets and catering markets in Japan, Singapore, Australia and other countries, Tan Guolin won a framework order of 100 million yuan from Maruha, an important supplier of Japanese seafood, and signed an agreement of intent with a well-known supermarket enterprise in Australia.

The initial overseas expansion results seem to prove the market growth potential of Dingweitai.

4 years 8 capital bet, how many hurdles are there for Dingweitai IPO?

The rapid development of Dingweitai and the action of looking forward to running and going public are also related to capital assistance.

After 2014, the rapid development of the takeaway market and the gradual popularization of cold chain logistics have led to a rapid growth in the number of prepared vegetables and related enterprises every year.

According to research data from China Insights Consulting and Blue Whale Finance, there were about 7,140 prepared vegetable companies in the country in 2017, which increased to 12,367 in 2020 and surged to 59,400 in 2021.

The timing of capital attention to Dingweitai coincides with the popularity of pre-made dishes.

In 2019, Dingweitai won the favor of the primary market for the first time, Zhirong Private Equity Fund, Hongzhang Capital and Yuanshi Fund became its Series A investors, and then after completing the strategic financing of nearly 100 million yuan led by Yida Capital in June 2022, Dingweitai signed a listing guidance agreement four months later, intending to be listed on the A-share market.

According to the data, on the basis of the first phase of the annual output of 15,000 tons of high-end marine quick-frozen food capacity, Yida's investment in Dingweitai is mainly used for the second phase of the investment and construction of the new factory, and by the end of 2022, the project has been completed and put into operation. After full production, it will achieve an annual output of 60,000 tons of high-end marine food products, with annual sales of 2 billion yuan. At that time, Ding Weitai may become the largest producer of cod products in Asia and become a well-deserved "king cod".

According to the first quarter industrial economic report card of Donghai County, Dingweitai's sales successfully exceeded 110 million yuan in the first quarter of 2023, an increase of more than 30% compared with the same period in 2022.

So, the question is, compared with the 400 million sales in 2022, who will pay after the expansion?

If in the past, Dingweitai relied on the rapid growth of large brand chain catering customers such as Haidilao, then in 2022, Dingweitai's growth rate reached a record low, and only 10% was also due to the performance impact of large catering customers. Taking Haidilao as an example, its operating income last year decreased by 15.5% year-on-year; Among them, from continuing operations decreased by 20.6% year-on-year.

Relying on major catering customers not only makes it difficult for Dingweitai to "share hardships" with the industry, but also makes it difficult for Dingweitai to obtain higher bargaining space, resulting in a certain impact on the company's gross profit margin. At the same time, the industry barriers in the field of hot pot ingredients are not high, which also means that the competition faced by Dingweitai has intensified. According to the Tianyan investigation, there are more than 12,000 enterprises related to hot pot ingredients.

Moreover, surimi products are not unique to Dingweitai, Tianyan inspection shows that there are more than 15,000 enterprises related to "surimi", of which Jiangsu ranks second with more than 3,900. To this end, Dingweitai buys about 3,000 tons of high-grade cod from Alaska every year with high quality, and the quantity is growing with the growth of the business. However, as the global supply of naturally caught cod has been shrinking in recent years, the pressure on raw material costs cannot be underestimated.

Judging from the recent entry of Bailian Zhigao Capital and the offline expansion of Dingweitai Group's own brand with retail and channel resources, Dingweitai is doing the transformation and upgrading of catering food ready-to-eat, and carrying out diversified layout with large-scale retail chains and opening up international markets, in order to break the sales problem after the expansion of production.

For investors in the primary market, under the background of healthy snack food and socialization of children's snacks, high-protein, low-fat, DHA-rich cod intestines and refrigerated ready-to-eat crab fillets have the opportunity to become a supplement or even a substitute for cheese sticks, and create another 10 billion category in 3-5 years, which is also the opportunity for Dingweitai.

However, Dingweitai has seen the trend of high-end and diversified surimi industry, and the head enterprises are also layout.

For example, in 2013, Haixin acquired the "Yuji" brand and is committed to building a high-end brand image; In 2018, Yasui launched the "Maru no Tsune" to position itself as a high-end. Compared with Dingweitai, Anjing has exceeded 10 billion revenue, Haixin, Huifa Food has also reached a scale of more than one billion, and companies in the same industry such as Anjing Food, Guolian Aquatic Products, Haixin Food, Delis and other companies have increased the layout of high-end surimi products, and the surimi industry concentration is high, which means that the competition is more intense.

Before Dingweitai, the aquatic prepared vegetable company Ximeilai, which is also one of the suppliers of Haidilao, failed to break into the IPO three times, and problems such as excessive reliance on large items, reduced gross profit margin, and low technical threshold for category processing were clearly revealed in its prospectus.

It can be seen that whether it can achieve a diversified layout of increasing revenue and profits and building product technical barriers will become the key to its smooth landing on A-shares.