With declining sales and single revenue, it is difficult for Li Ziyuan to find a "second growth curve"

"The first share of sweet milk" plum orchard can't be sold. On the evening of April 9, Li Ziyuan announced its 2023 financial report, except for milk drinks, other main businesses declined, and the overall sales volume decreased by 3.14% year-on-year. In the product line, Li Ziyuan relies too much on the "sweet milk" large single product, and the "second growth curve" has not yet appeared.

Industry analysts pointed out that in the past two years, in the case of poor product sales, Li Ziyuan's supply chain system has been tested, except for the large single product "sweet milk", other products have not formed a scale effect, coupled with Li Ziyuan's alternative products are more, young people's consumption of non-essential goods has weakened, resulting in a decline in the company's ability to resist risks.

According to the financial report released by Li Ziyuan, in 2023, the revenue will be about 1.412 billion yuan, a slight increase of 0.6% year-on-year, the net profit attributable to shareholders of listed companies will be about 237 million yuan, a year-on-year increase of 7.2%, and the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses will be about 219 million yuan, a year-on-year increase of 16.65%.

From the perspective of Li Ziyuan's revenue, the revenue of milk-containing beverages accounted for more than 97%, and the other three products, milk-flavored beverages, complex protein drinks and others, accounted for less than 3% in total. After exceeding 1.4 billion yuan in 2021, Li Ziyuan has encountered a growth bottleneck, hovering around 1.4 billion yuan for three consecutive years, and in 2022, there will be the first revenue decline since 2016. From 2021 to 2023, Li Ziyuan's revenue will be 1.47 billion yuan, 1.404 billion yuan and 1.412 billion yuan respectively, and there is still a gap of 58 million yuan compared with 2021 last year.

Through the financial report, it can be found that the reason for the stagnation of Li Ziyuan's revenue last year was the year-on-year decline of 3.14% in sales. In terms of products, the sales volume of milk-containing beverages decreased by 1.67% year-on-year, the sales volume of milk-flavored beverages decreased by 60.38% year-on-year, the sales volume of compound protein beverages decreased by 19.13% year-on-year, and the sales volume of other products decreased by 42.35% year-on-year.

As for why the net profit increased while the sales volume declined, Li Ziyuan said in the financial report, "Due to the slight decline in sales, the production volume decreased year-on-year, and the transportation cost decreased accordingly." The sales volume of compound protein beverages and other beverages decreased year-on-year, and the sales volume of direct materials, direct labor, manufacturing expenses and transportation costs decreased year-on-year. At the same time, this year, the production line of the company's Henan base was put into operation, the production capacity of its own production line was increased, and the depreciation expense in the manufacturing expenses increased."

However, through the 2023 semi-annual report, it can be found that Li Ziyuan's net profit has skyrocketed by 30.55% despite a slight increase in revenue. Li Ziyuan's explanation was due to the company's price increase on some products, the year-on-year decline in the price of some raw materials during the reporting period, and the year-on-year decrease in sales expenses during the reporting period. In 2022, Li Ziyuan announced that from July 1, it will raise the ex-factory prices of some Li Ziyuan sweet milk milk drinks and flavored milk beverage series products, with a price increase of 6%-9%.

Founded in 1994, Liziyuan's products include six series of dairy beverages, dairy products, plant-based protein beverages, compound protein beverages, fruit juice beverages, and cereal beverages, and was listed on the A-share market of the Shanghai Stock Exchange in February 2021.

In recent years, in addition to milk-containing beverages based on sweet milk, Li Ziyuan has focused on the development of other beverages, including formulated milk-containing beverages, fermented milk-containing beverages, compound protein beverages, milk-flavored beverages and other products, but it is still difficult to get rid of the dependence on large single products. According to the financial report, from 2021 to 2023, the revenue of Li Ziyuan's milk drinks will be 1.427 billion yuan, 1.359 billion yuan and 1.381 billion yuan respectively, with obvious weak growth.

Regarding the problem of relying too much on "sweet milk" large products, Li Ziyuan's management realized early on that in 2018, it had launched 18 new products in one go, including lactic acid bacteria drinks, VD calcium lactic acid drinks, walnut peanut and other milk-flavored drinks, and wanted to cultivate a "second growth curve", but did not stir up any waves.

Song Liang, a senior dairy analyst, said, "Because the milk beverage products produced by Li Ziyuan are not necessities, with the downgrade of consumption in the past two years, people's consumption of necessities is relatively stable, and the consumption of non-essential goods is declining, and there are many alternative products for such products in Li Ziyuan, which directly affects the consumption of products."

Previously, Li Ziyuan was criticized by consumers for "low quality and high price", taking "sweet milk milk drink" as an example, the first ingredient list is "drinking water", followed by full-fat milk powder, white sugar, food additives, food flavors, per 100ml protein content is only 1g, and it is not labeled as containing calcium.

According to the statistics of the Toubao Research Institute, in 2022, the milk beverage market is expected to be 136.17 billion yuan, with a CAGR of 7.41% from 2017 to 2021, China's milk beverage market has experienced a rapid growth stage in the past ten years, with the improvement of people's consumption level and the growth of demand for flavored beverages, it is expected that the dairy beverage industry will maintain an average annual compound growth rate of 5.4% in the next five years, and the market size is expected to reach 161.23 billion yuan in 2026.

In recent years, there have been many milk-containing beverage products on the market, including Wahaha AD Calcium Milk, Yili Yogurt, Mengniu "Sour Yogurt", Jule "Sour Milk", Yakult, Yantang "Red Date and Goji Berry Milk", JuneYao "Wei Power" and other milk-containing beverage products, which have squeezed the market share of Li Ziyuan.

Zhu Danpeng, an analyst of China's food industry, said, "Li Ziyuan's products, models, channels, and promotion are relatively single, and the growth has hit the ceiling, although the so-called 'second growth curve' is sought, but on the whole, because the core market of Li Ziyuan is in the third, fourth and fifth tier cities, and the audience of new products is more in the first and second tier cities, so the market is misaligned, resulting in the inability to match the development strategy, resulting in a decline in performance."

Song Liang said, "Last year, many food companies experienced a sharp contraction in performance and a sharp decline in profits, the main reason is that the whole industry is now doing promotions, and the involution is very serious, which has caused pressure on the survival of small brand products." And in the past two years, due to the poor sales of products, the supply chain of enterprises has been tested very much, and the supply chain system of small and medium-sized enterprises is relatively weak, the relative cost of end products will increase, and the ability to resist risks will be very poor."

Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said that it can be seen from Li Ziyuan's financial report last year that the company is still facing challenges in diversification, especially the sharp decline in milk-flavored beverages and compound protein drinks, which shows that the company still needs more efforts to find the "second growth curve".

Zhan Junhao further said that relying too much on "sweet milk" large single products also brings potential risks, "If the market environment changes, or if the tastes and needs of consumers change, then the company's performance may be greatly affected." Therefore, Li Ziyuan needs to increase new product development and marketing efforts while maintaining the competitiveness of existing products to achieve business diversification and sustainable development."

Regarding the decline in sales and the over-reliance on "sweet milk" large items, a reporter from Beijing Business Daily sent an interview letter to Li Ziyuan by email, but did not receive a reply as of press time.

Beijing Business Daily reporter |

Edited by Topol