New tea brands are going upstream, and the life of suppliers is getting more and more difficult.
This article was originally published by Red Meal Network (ID: hongcan18), author: Li Jinzhi, editor: Fang Yuan.
Just one year after listing, the performance has "changed face", and the life of supply chain enterprises seems to be getting more and more difficult.
According to the financial report data, in 2023, Tianye shares (832023. BJ) achieved a total revenue of 460 million yuan, a year-on-year decrease of 2.33%, and a net profit of 33.3781 million yuan, a year-on-year decrease of 37.69%.
In this regard, Tianye said that the main reason for the decline in net profit is the slowdown in the growth rate of the downstream new tea beverage industry, the intensification of competition, the increase in customer price sensitivity, and the reduction of its gross profit margin to cope with market competition.
In fact, the gross profit margin of Tianye shares has declined for three consecutive years. From 29.16% in 2021 to 28.38% in 2022, and then to 21.68% in 2023, an overall decline of 7.48%.
In February 2023, Tianye Co., Ltd. was listed on the Beijing Stock Exchange, and its products include raw fruit juice, quick-frozen fruits and vegetables, fresh fruits, etc., and it is a supplier of brands such as Tea Baidao, Nai Xue's Tea, a little bit and Shanghai Auntie.
With the slowdown in the growth rate of the new tea beverage industry, the hand-to-hand combat between brands has intensified, and higher requirements have been put forward for suppliers. Especially since 2023, new tea brands have increased their supply chains, and the battle between brands and upstream suppliers has begun.
In this context, there are not many suppliers who have a similar situation with Tianye shares. At the end of 2023, 2 new tea suppliers withdrew their listing applications. Suppliers that have been successfully listed are also facing the current situation of declining gross profit and pressure on performance.
The selling price of products decreased, and the gross profit of many suppliers declined
Dexin Food and Fresh Beverage have withdrawn their listing applications at the end of 2023.
According to the prospectus of Dexin Food, its customers include Luckin Coffee, Starbucks, Michelle Bingcheng, 7 Fen Tian and so on. In order to boost product sales, Dexin Food has reduced the selling price of some products, and the unit price of beverage thick slurry in 2022 will decrease by 8.89% compared with 2021, and the unit price of beverage ingredients and other products will decrease by 7.14%.
Dexin Food said in the prospectus that if market competition intensifies and the demand of downstream industries changes unfavorably, the average price of its main products will further decline.
The average sales unit price and gross profit margin of its main products, taste granule products, have been declining year by year.
FROM 2020 TO 2022, THE AVERAGE SALES UNIT PRICE WAS 13.3 YUAN/KG, 10.15 YUAN/KG AND 7.55 YUAN/KG, RESPECTIVELY, AND THE GROSS SALES MARGIN WAS 57.77%, 43.62% AND 20.75%, RESPECTIVELY. The contribution rate of this business to the revenue of fresh drinks is nearly 3%.
The price reduction brought about a decrease in gross profit margin and a decline in performance.
According to the prospectus, from 2020 to 2022, Dexin Food's gross profit margin has declined year after year, from 39.09% in 2020 to 31.40% in 2022. According to the prospectus, from 2020 to 2022, Dexin Food's revenue will be 357 million yuan, 529 million yuan, and 535 million yuan respectively. The corresponding net profit was 67.4886 million yuan, 95.8051 million yuan and 75.2786 million yuan.
The same is true for fresh drinks, whose gross profit margin fell by 17.26% in 3 years from 2020 to 2022. In 2022, the performance of fresh beverages will decline significantly, with total revenue of 929 million yuan, down 12.62% year-on-year, and net profit of 106 million yuan, down 43.56% year-on-year.
Fresh Beverage said in the prospectus that if the downstream market recovers slowly or continues to decline in the future, it will face the risk of declining performance.
Suppliers who have successfully listed are also having a hard time, and they are also facing the dilemma of declining performance and continuous compression of new tea drink-related business segments.
At present, in addition to Tianye shares, the listed supply chain companies also include erythritol supplier Sanyuan Biotechnology (301206. SZ) and Baoling Bao (002286.SZ), and Baoli Foods (603170.SH), which provides ingredients for drinks and desserts......
According to the 2023 annual report of Baolingbao, the annual revenue was 2.52 billion yuan, a year-on-year decrease of 6.96%, and the net profit was 53.969 million yuan, a year-on-year decrease of 59.47%.
In 2023, the gross profit margin of Bowling Bao will only be 8.1%, which is attributed to the rapid decline of the sugar alcohol business. In 2023, the revenue of Bowlingbao's sugar alcohol business will be 210 million yuan, a year-on-year decrease of 41.8%, and the gross profit margin will also decline significantly, from 14.9% in 2022 to -9.7%.
Bowling Bao said that in 2023, the erythritol market is highly competitive, oversupply, and the price has dropped seriously, and it still retains part of the sugar alcohol business in order to maintain long-term cooperation with strategic customers.
△ Image source: Picture Worm Creative
Beverage dessert ingredient supplier Baoli Foods (603170.HK) Since 2019, the proportion of revenue from Baoli Food & Beverage dessert ingredients has been declining, accounting for 15.77%, 12.28%, 9.9%, 6.46% and 6.02% of revenue from 2019 to 2022 and as of the third quarter of 2023, respectively.
According to the financial report, the total revenue of Baoli's food and beverage dessert ingredients business in 2021 will be 155 million yuan, and in 2022, it will be 132 million yuan, a year-on-year decrease of 15.25%, and the corresponding gross profit margin will also decrease by 3.98% year-on-year. By the third quarter of 2023, the revenue of its beverage dessert ingredients business will only be 36.8507 million yuan.
According to a record of investor relations activities released by Baoli Foods in November 2023, the gross profit margin of beverage ingredients has declined, mainly due to product structure and some customer strategies.
Customers become competitors, and the life of suppliers is getting harder and harder
In fact, the hard days for new tea suppliers have just begun.
At present, many supply chain companies rely on downstream large customers. According to the financial report and prospectus, in 2023, the sales of the top five customers of Tianye Co., Ltd. will account for 73.69% of the total revenue, of which only tea Baidao will contribute 31.41%; in 2022, among the top five customers of Dexin Food, the sales revenue of Mixue Bingcheng, Luckin, Starbucks, and 7 Fentian will account for 42.75%; in 2022, among the top five customers of fresh drinks, the sales revenue of new tea drink-related customers will account for 40.9%.
But at present, the situation of major customers of new tea drinks is also different from the past.
New tea drinks have entered the stock market, and various brands are accelerating their staking in order to seize more markets, and the competition is becoming more intense. According to the statistics of Yilan Business Data, 20 leading new tea brands such as Hey Tea, Tea Baidao, and Bawang Tea Ji will open more than 25,000 new stores in 2023.
△ Image source: Picture Worm Creative
In addition to "grabbing scale", new tea brands also need to "grab users". In the past year, food and beverage consumption has become more and more rational. In order to retain more users, brands are engaged in price wars, resulting in a decline in the average order value and increasing price sensitivity.
According to the financial report data of Chabaidao, in 2023, the average retail sales per order will drop from 28.6 yuan in 2022 to 27.4 yuan. According to Naixue's financial report data, the average sales of Naixue's tea orders in 2023 fell by 13.7%, from 34.3 yuan in 2022 to 29.6 yuan. This is related to the launch of the 19.9 product line and the 9.9 yuan promotion in 2023.
The price of downstream products has decreased, and the demand for cost reduction and efficiency improvement has increased, which has been transmitted to the upstream, and the profit margin of suppliers has also decreased accordingly.
On the one hand, the decline in customer unit value will inevitably lead to lower profits, and new tea brands will have to seek cost reductions from the upstream supply chain. At the same time, the scale of the new tea beverage brand expands, and its bargaining power on the upstream supply side will also increase. Brands can also take advantage of the scale to further drive down supply prices.
Many supply chain companies have mentioned in their prospectuses and financial reports that in order to meet the needs of downstream customers, they have taken the initiative to reduce product prices, or due to changes in downstream demand, the sales of products with low gross profit have increased, resulting in a decline in profits.
At the same time, as more and more new tea brands invest heavily in their supply chains, this also means that they are directly starting the business of suppliers.
In March this year, Shanghai Aunt Shanghai Supply Chain Management Co., Ltd. was established, with business scope including supply chain management services, catering management, etc.
In January, Mixue Bingcheng established Snow King Smart Supply Chain (Zhengzhou) Co., Ltd., whose business scope involves supply chain management services.
In 2023, there is more news like this. In November, Tea Baidao and Bawang Chaji jointly established Sichuan Rongshang Jiahe Technology Co., Ltd. and Sichuan Tea Benyuan New Material Technology Co., Ltd. to cooperate in the supply chain.
Many brands such as Mixue Bingcheng, Gu Ming, Starbucks China, and Luckin Coffee are building raw material bases, production plants, and filling supply chains.
△ Image source: Picture Worm Creative
The self-built supply chain of new tea beverage brands can not only meet their own supply needs, further control costs and product quality, but also supply other brands or purchasers to obtain profit margins in the industrial chain.
For example, Cha Baidao uses Senmian New Materials to produce packaging materials (such as biodegradable straws and cups) for Cha Baidao's tea drinks and sells to external buyers.
For suppliers, they face the dual challenge of losing large customers and turning them into competitors.
According to the prospectus, from 2020 to 2021, the procurement demand of Dexin Food's major customers is decreasing, and the sales revenue of the top five customers accounts for 50.91%, 54.17%, and 42.75% of the total revenue respectively. Among them, in 2022, Luckin's procurement volume will be directly cut in half, and the procurement volume of Starbucks and 7 Fentian will also decline to varying degrees.
Tianye shares suffered the loss of major customers in 2023. According to the financial report data, in 2023, the top 5 customers of Tianye Co., Ltd. will be Tea Baidao, Nai Xue's Tea, a little bit, Nongfu Spring and Guangzhou Pumai Biotechnology Co., Ltd. The previous fifth largest customer, Aunt Shanghai, is no longer there.
In 2021, Shanghai Auntie contributed more than 4,800 yuan, which will decrease to more than 22 million yuan in 2022.
Conclusion
In 2023, the new tea beverage supply chain will collectively sprint to IPO, and at that time, the topic of "new tea drinking water is in deep trouble, but the suppliers behind it are making a lot of money" once aroused heated discussions.
However, the situation is not optimistic, as the new tea beverage brand relies on the scale advantage to seek profits upstream, while building its own supply chain and starting a business of selling equipment and raw materials, it is becoming more and more difficult for suppliers to make money. In such a situation, suppliers have to find new ways to "make money".
Note: The cover image comes from the idea of the picture worm.