In the hot casual snack track, the attraction of spicy strips to consumers continues to be realized.
According to iiMedia Research, the market size of China's spicy strip food reached 51.7 billion yuan in 2022 and is expected to increase to 92.7 billion yuan by 2026.
It is foreseeable that Weilong, as the industry leader, will enjoy all the dividends of the industry's expansion.
On the evening of March 21, "Spicy Brother" Weilong Delicious released its 2023 financial report. Thanks to product innovation and omni-channel expansion, Weilong Delicious's revenue has achieved the best performance in history.
During the reporting period, Weilong Delicious achieved revenue of RMB4.87 billion, a year-on-year increase of 5.2%, a net profit of RMB880 million, a year-on-year increase of 481.9%, an adjusted net profit of RMB970 million, a year-on-year increase of 6.3%, and an adjusted net profit margin of 0.2 percentage points year-on-year to 19.9%.
Now, with the support of the fundamentals of exceeding expectations, Weilong Delicious has conveyed its confidence in steady growth.
Since its listing in 2022, Weilong Delicious has always attached great importance to the return to shareholders. According to the announcement, Weilong Delicious plans to pay a large proportion of dividends for the first time since its listing. Its board of directors recommended a final dividend of RMB0.1 per share (tax included) for 2023 and a special dividend of RMB 0.11 per share (tax included) considering that 2024 is the first anniversary of listing.
As a result, including the interim dividend, the annual dividend payout ratio of Weilong Delicious is as high as about 90%, and the dividend yield reaches about 6.18% based on the closing price of Weilong Delicious on March 21 at HK$5.8 per share.
To a certain extent, this shows that the company's management has full confidence in the long-term development of Weilong Delicious, which is even more valuable in the complex and changeable consumption environment.
In summary, while continuing to innovate products and expanding channels in line with industry changes, Weilong Delicious finally achieved steady growth last year. Similar to the significance of its large single product spicy strips to consumers, this is the "small luck" of Weilong Delicious to investors.
Product innovation drives steady growth in performance
For a long time in the past, Weilong Delicious has become the envy of most of its peers in the casual snack track - making the brand a category, "Weilong is spicy strips".
Because the market pattern of the leisure snack track is scattered, it can not only be divided into sub-categories such as candy, nut roasting, bread and cake, spicy marinade, etc., but also the competition pattern in each sub-industry is extremely scattered, and brand products are facing fierce competition from white-label goods, and price wars are inevitable.
According to the research report of East Asia Qianhai Securities, the CR5 of the mainland leisure snack industry is only 24.6%, and the market share of Want Want is only 6.7%.
In the seasoned noodle products (spicy strips) sub-industry where Weilong Delicious is located, according to Weilong Delicious's prospectus, its market share will be as high as 14.3% in 2021, far ahead of the second place by 11.9 percentage points.
This means that Weilong Delicious, which has already built a brand mental barrier in the field of spicy noodles, no longer needs to go to great lengths to educate the market, but invests money in the supply chain, product development and marketing, digging deep into the moat.
Founder Securities Research Report believes that with the continuous standardization of the development of the seasoned noodle products industry, Weilong Delicious, as the industry leader, is expected to be strong.
In 2023, Weilong Delicious's core category of seasoned noodle products will contribute 2.549 billion yuan in revenue, accounting for 52.3%. During the reporting period, the tonnage price of seasoned noodle products increased from 18.1 yuan/kg to 20.5 yuan/kg, driving the gross profit margin of Weilong Delicious to increase by 5.4 percentage points year-on-year to 47.7%, the gross profit margin hit a record high, and the profitability increased significantly.
In fact, continuous product innovation capability is the core competitiveness of Weilong Delicious, which ensures its continuous and steady growth.
At present, Weilong Delicious has set up application R&D centers in Henan and Shanghai, with nearly 100 professional scientific research personnel.
In the last year, Weilong Delicious launched an independent sub-brand of spicy strip products "Domineering Panda", the target core customers are 18-26 years old Generation Z students and young office workers, widely favored by consumers, it is reported that Domineering Panda has been on the market for two months, with an average monthly shipment of more than 10 million.
In December, Weilong Delicious launched a new spicy crispy slice "Crispy Huohuo", which focuses on crispy and spicy spicy, which further enriches the brand matrix and expands its brand influence among young consumers.
In addition to spicy strips, Weilong Delicious is calmly copying its R&D and supply chain advantages in other casual snack tracks.
In 2023, the revenue of vegetable products, the second largest category of Weilong Delicious, will increase by 25.11% year-on-year to 2.119 billion yuan, and the proportion of revenue will increase by 6.9 percentage points to 43.5%.
Among vegetable products, konjac has the characteristics of low calories and strong satiety, which is in line with the trend of healthy snacks. 100g of konjac contains 3.3g of cellulose, which is about 6 times that of kelp, 3 times that of bananas, and 2 times that of apples.
Weilong Delicious pioneered konjac shuang products and has now become the leader of this category. According to the research report of Founder Securities, konjac products have reached a volume of more than one billion yuan, far ahead of the industry.
In 2023, Weilong Delicious will launch a new brand of konjac products, "Little Witch", targeting core customers mainly women aged 18 to 25. It is reported that the little witch has been online on the e-commerce platform for only 10 days, and the sales of single products have increased by 6 times, and 75,000 packages have been sold in the first wave of the Double 11 Tmall platform, with sales revenue exceeding 10,000, and it has the potential to become another major single product.
From the rhythm of Weilong's delicious new products, it can be clearly seen that as more and more product categories become mature, its consumption scene is gradually expanding from young people to family consumption.
With the support of Weilong's delicious product research and development capabilities, with the formation of consumption habits, it is expected that more and more consumer groups will bring continuous performance increment to it.
Take advantage of the trend to expand channels
Compared with most peers, another competitive barrier of Weilong Delicious is that it has a broader and more refined offline channel.
In 2023, Weilong's offline channels will contribute 4.361 billion yuan in revenue, a year-on-year increase of 5.19%, accounting for 89.5%, and online channels will contribute 510 million yuan in revenue, accounting for 10.5%.
At the moment of drastic changes in the retail channels of consumer goods, Weilong Delicious's channel expansion action is also changing with the times.
For example, before 2015, Weilong's delicious offline channel model was a provincial generation model, through the provincial generation, a batch of merchants, the second batch of merchants and other layers of distribution, the management model was more extensive.
In 2020, Weilong Delicious launched a partnership system, which has improved the operating efficiency of traditional KA channels.
In 2022, Weilong Delicious will further optimize the offline channel model - launching a refined operation model of "high-line auxiliary sales" and "low-line assisted sales", which is committed to improving the coverage of offline channels. Because for snack products that are for immediate consumption, it is far more important for consumers to buy them than advertisements.
Specifically, "high-line auxiliary sales" refers to Weilong's establishment of sales offices in first- and second-tier high-tier cities, and then improves the terminal yield by improving the execution ability of key channels and key stores.
According to the research report of Founder Securities, as of the first half of 2023, the number of stores covered by Weilong Delicious in high-tier cities has increased from 26,300 at the end of 2022 to 37,100, and the average SKU of stores has increased from 10.8 to 12.5, with remarkable results.
Weilong's "low-line sales" model aims to promote terminal coverage and increase yields in lower-tier cities by selecting high-quality distributors.
According to a research report by Founder Securities, as of the first half of 2023, the number of Weilong Delicacy stores in lower-tier cities has increased from 95,000 at the end of 2022 to 172,000, and the average SKU of stores has reached 9.6 to 9.9.
In addition, in 2023, the "highlight" of the snack industry lies in the rise of mass snack channels. Taking the snack very busy group after the merger with Zhao Yiming snacks last year as an example, the number of stores nationwide has reached 7,500 stores, and the total revenue of stores exceeds 20 billion yuan. You know, in June last year, the number of stores that were very busy with snacks was only 3,000.
Snack is busy, founder and CEO Yan Zhou said that snack is busy this year will launch an impact on the scale of 10,000 stores.
Under the boom of mass snack channels, Weilong Delicious has actively embraced this emerging channel since May last year, covering more than 10,000 key snack stores by the end of June last year.
It is reported that Weilong Delicious provides a special price system through customized packaging and product specifications for the mass sales snack channel, and the mass sales channel has accounted for more than 10% of Weilong Delicious in September and October last year.
Adapting to the mass merchandising channel is not as simple as putting products into it, and the mass merchandising snack channel has extreme requirements for the middle and back office and supply chain. For example, the age of the product requires that the goods be received within 12-15 days, the manufacturer's profit requirement is less than 20% or lower, and the supply chain inventory turnover is 5 days on average.
In order to cope with the above requirements, Weilong Delicious adopts flexible production, actively responds to the needs of "customers at any time and any product combination", and adopts the distribution mode of direct sales and direct distribution to meet the real-time changing sales needs of the terminal.
Up to now, Weilong's delicious mass snack channel has reached consumers 50 million times per month, and it is expected that the proportion of Weilong delicious in this channel will continue to increase in 2024.
It is precisely with accurate consumer insight that Weilong Delicious has been able to continue to innovate and replicate the successful experience of spicy strips to more categories such as konjac and kelp shreds, and Weilong's management "gene" that changes with the times and follows the trend is the key to its ability to enjoy dividends in every industry change.
As a result, Weilong Delicacy has grown rapidly driven by both products and channels, which may become an important foundation for its future growth benefits for investors.
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