Why is Haier "big but not strong"?

Image source@Visual China

Text | Big V Business, Author | Fang Wen, ed Xiao Jun

Among the three giants of white electricity, Haier's situation is very embarrassing.

When we look at the three dimensions of revenue, market capitalization and products, Haier is a pity.

The revenue gap between Haier and Midea is gradually widening.

Haier is currently ranked second in white electricity, but the revenue gap with the first beauty is widening, and from 2021, Haier's revenue will be more than 100 billion yuan compared with the United States.

Haier's price-to-sales ratio is lower than Gree's.

Compared with Greehair, the advantage is not obvious, and the position of the second is not stable. Haier's revenue in 2022 is 243.5 billion yuan, and its market value is currently 199.1 billion yuan, while Gree's revenue in 2022 is 190.2 billion yuan, and its current market value is 184.9 billion yuan.

In recent years, Gree has been considered to be lagging behind in the market, and an important factor in the widening of the revenue gap between it and Midea Haier is the small overseas market.

Looking at the domestic market alone, Haier's competitiveness is declining. In 2022, Haier's domestic market revenue will be 116.3 billion yuan, Midea's 201.3 billion yuan, and Gree's 129.9 billion yuan.

Ranked second in domestic white electricity, Haier is embarrassed, big, but not strong.

01 Embarrassing second

As the stock price continued to slump, Haier began to buy back shares.

According to the announcement, in the past six months, Haier has continued to spend money to repurchase shares, repurchasing a total of 5,340 shares at a cost of 1.188 billion yuan.

The downturn in the stock price may be due to the fact that Haier's fundamentals are not strong enough.

Since 2018, Haier's revenue growth has slowed. From 2019 to 2022, Haier's revenue was 200.7 billion yuan, 209.7 billion yuan, 227.1 billion yuan and 243.5 billion yuan respectively, with a growth rate of only single digits.

In the third quarter of this year, Haier Smart Home released its performance report for the third quarter of this year. According to the financial report, the company's total revenue in the first three quarters of this year was 198.657 billion yuan, a year-on-year increase of 7.5%, and the net profit attributable to the parent company was 13.149 billion yuan, a year-on-year increase of 12.71%.

As one of the "Big Three" of white goods, Haier Smart Home is now facing a scale that cannot catch up with the United States, and is still being chased by Gree.

Consumption has picked up this year, and the home appliance industry has also ushered in a slight increase in the first three quarters, and the performance of the three giants has achieved a double increase in profits.

Among them, after Midea's revenue in the first half of the year hit a record high in the same period in history, the revenue in the first three quarters of this year also ushered in a record high of 292.38 billion yuan, a year-on-year increase of 7.58%. According to the current momentum, Haier and Midea's revenue will further increase.

In addition, although Haier is large enough, it is not outstanding in terms of competitiveness, and it is not even as good as Gree, which is currently ranked third.

Midea's net profit growth in the first three quarters of this year is considerable, the net profit in the first three quarters reached 27.72 billion yuan, an increase of 13.27% over the same period last year, although Gree's revenue is less, but the revenue in the first three quarters of this year is only 155.812 billion yuan, but its net profit attributable to the parent has surpassed Haier to reach 20.092 billion yuan, more than 5 billion yuan more than Haier's 14.71 billion yuan, and there is a faint tendency to widen the distance.

Specifically, in Haier's expense control, the utilization rate of sales expenses is extremely poor.

In the first three quarters of this year, Midea and Gree's sales expenses were 25.3 billion yuan and 13.3 billion yuan respectively, while Haier's sales expenses were as high as 29.2 billion yuan. Compared with the revenue in the first three quarters of this year, Haier's sales expenses are too high.

This situation is not accidental, in 2022, the largest of the three largest Midea sales expenses will be 28.716 billion yuan, the smallest Gree will be 11.285 billion yuan, and Haier, which is in the middle, will have the highest sales expenses, reaching 38.598 billion yuan.

Profitability has always been a "big problem" that has plagued Haier, and in the context of continuous escalation of industry competition, the pressure on Haier's profit side may be difficult to dissipate.

Even after spending a huge amount of sales expenses, Haier has many terminal and advertising problems.

In July, Haier was exposed to false propaganda. According to Credit China, Qingdao Haier Drum Washing Machine Co., Ltd. was fined more than 30,000 yuan by the Dong'an County Market Supervision and Administration Bureau for publishing false advertisements, and the reason for the punishment was that a billboard placed on one of Haier's washing machine products declared that "antibacterial window mats: antibacterial rate > 99%", which effectively inhibits mold growth and avoids secondary pollution. However, the actual sample test showed that the antibacterial window mat only achieved 99% antibacterial effect on Escherichia coli and Staphylococcus aureus, and the advertising slogan exaggerated the antibacterial range and misled consumers.

In the official website of Black Cat Complaints, Haier has 22,510 complaints, and there are many problems about false publicity.

As one of the "Big Three" of white goods, the influence of the brand has long been familiar to consumers, and it still spends a huge amount of sales expenses, which is not a good thing for Haier.

At the same time, instead of putting a lot of effort into publicity, it is better to do a good job in quality control and reduce the image consumption caused by some "low-level" mistakes.

02 Strong overseas, weak at home?

According to the data, in the first three quarters of this year, Midea's gross sales margin was 25.84% and the net sales profit margin was 9.72%, Gree's gross sales margin was 29.25% and 12.59%, and Haier's sales gross profit margin was 30.71% and the net sales profit margin was 6.68%. It can be clearly seen that Haier's gross profit margin is the highest among the three, but its net profit margin is the bottom.

In addition, Haier's growth rate has almost stood still in recent years, and if it does not advance against the current, it will retreat, compared with the previous performance of more than 30% profit growth in 2017, Haier's growth rate is slightly weak.

In this case, Haier is also anxiously looking for new growth.

However, in the context of industry competition tending to be "white-hot", it has become more and more difficult for home appliance companies to achieve increments, and almost all of the global home appliance giants have begun to fight closely, while the choice of Haier Smart Home's new increment points to overseas markets and high-end.

In terms of overseas layout, Haier began to export as early as more than 20 years ago, and by 2005, Haier formally determined its global brand strategy, and then continued to increase its overseas weight through cooperation, joint ventures and acquisitions with overseas brands.

For example, in 2011, Haier Smart Home acquired Japan's Sanyo Electric and successfully laid out the white goods business in Japan and Southeast Asia, in 2016, it acquired GE Appliances and entered the North American market, in 2018, it acquired all the shares of Haier Group's Fisher & Paykel to enter the Australian and New Zealand markets, and in 2019, Haier Smart Home acquired Candy, a well-known European home appliance brand, and started a new layout in Europe.

In addition, in recent years, in the context of the tide of going overseas, domestic enterprises have opened the "go overseas to create a brand" model, Haier, which has long been the first to go to sea, more than half of its brands such as Casarte, Leader, GE Appliances, Candy, Fisher & Paykel and AQUA are overseas business lines and business divisions.

Not only that, in the financial report, the company mentioned that the market share in overseas markets has continued to increase by promoting high-end brand strategy and in-depth development of the network, which emphasizes that it has continued to promote and deepen high-end brands in the North American and European markets.

High-end has allowed Haier Smart Home to gain a lot of new increments, among which the increase brought by Casarte is the most obvious. The financial report shows. In the first half of 2023, Casarte's market share increased from 12.8% to 14.2%, a net increase of 1.4pct year-on-year, and continued to rank first in the high-end market. Among the brands, refrigerators and washing machines have a market share of 39.4% and 82.9% in China's market of more than 10,000 yuan, and air conditioners have a market share of 29.2% in China's market of more than 15,000 yuan.

Haier's overseas business has grown rapidly in recent years due to its open overseas markets and high-profit high-end brands.

At the AWE 2023 Summit Forum, Li Huagang, Senior Vice President of Haier Group and Chairman of Haier Smart Home Co., Ltd., said that Haier Smart Home's entire overseas revenue accounted for 52% in 2022, which is also the first time that overseas revenue exceeds domestic revenue. In comparison, Midea Group's overseas business accounted for 41.48%, while Gree Electric only accounted for 12.24%.

However, Haier's competitiveness in the domestic market is weakening.

If divided by region, Haier's revenue in the domestic market in the past four years was 106.2 billion yuan, 107.2 billion yuan, 111.8 billion yuan and 116.3 billion yuan respectively, in addition to its own basic growth, it has also been lower than Gree for a long time, the latter in the past four years were 136.1 billion yuan, 110.4 billion yuan, 122.3 billion yuan and 129.9 billion yuan.

03 Is it difficult to tell a new story of intelligence?

In August this year, Haier took the lead in formulating the first home large model standard, and on November 20 this year, Haier Smart Home displayed the first vertical model of smart home, Smart Home Brain HomeGPT.

Haier can be said to be the most active in the promotion of intelligent home appliances. In 2019, Qingdao Haier changed its name to Haier Smart Home, opening a new direction for the intelligent development of home appliances.

However, as early as 2006, Haier entered the Internet of Things with Uhome, and in 2015, the smart home strategy was officially launched, and then in 2020, it released the world's first scene brand, Three-winged Bird. Haier Smart Home has customized a "1+3+5+N" full-scene and whole-house smart solution for Three-winged Bird, which can more actively meet user needs.

2019 is a turning point for the home appliance industry. It was this year that Haier's revenue growth finally fell below double digits, with a year-on-year increase of only 9.05%.

Intelligence has become a new way out for Haier as a whole when the industry as a whole is slowing down.

According to IDC data, China, as the world's largest smart home market, will reach US$54.5 billion in 2022, a year-on-year increase of 18.2%. It is estimated that by 2025, the size of China's smart home market will reach US$87.8 billion, with a compound annual growth rate of 14.9%.

According to the data, in 2022 alone, the number of smart home investment and financing events in China will reach 79, with an investment amount of 14.384 billion yuan.

Haier Smart Home got up early in the morning, but caught up with a late set, and today's smart home market has long been a crowd of rivals.

The cake is big, and there are many people who want to share it, in addition to traditional home appliance companies, there are also a number of Internet technology companies, such as Alibaba, Baidu, Xiaomi, etc.

All parties are fighting, even as a veteran home brand, it is not easy to get ahead, not to mention that "smart home" is first intelligent and then home, it can be seen that the core competitiveness of intelligent software is the top priority, but as a traditional enterprise that has always relied on selling hardware to improve thinking, it will inevitably fall into weakness in software capabilities.

Haier lays out smart homes, and wants to drive the sales of home appliances through scenario-based experience through the three-winged bird.

However, judging from Haier's domestic home appliance sales in recent years, Haier has not realized the role of refinement and cross-selling, and its domestic market share has not been effectively boosted.

Especially,At present, intelligence has become the standard,Such as Hisense、Changhong and other domestic second-echelon home appliance companies have increased their weight in cost performance、Core technology,In terms of revenue, it has approached Haier,According to the current trend,Haier's second position may have to move。