Listing|Myotou APP
Author: Li Yujia
Header image: Visual China
Nai Xue's tea market value has evaporated by 90% in the two years since it was listed, and the stock price of Tea Baidao has plummeted by 30% in three days after it was listed. It seems that the listing of tea stocks will "bleed" has become a financial consensus.
But even so, after Tea Baidao, Mixue Bingcheng, and Gu Ming went to Hong Kong for IPO, Aunt Shanghai also hurriedly submitted a prospectus to the Hong Kong Stock Exchange on February 14 this year.
When milk tea has become the most accessible low-price emotional consumption for young people, the outbreak of demand has made the ready-made tea industry grow savagely, and the head brands have accelerated their staking efforts.
Through comparison, Miaotou found that Aunt Shanghai is the most urgent one among the four companies to raise funds for listing.
"Anyway, (continue to open the store) should be diluted, and don't leave the opportunity to competitors." In the freshly made tea track that will be swept to death if it is not done well, even if it is "bleeding", the Shanghai aunt will have to work hard to IPO.
(Image source: Visual China)
First, the franchisee "blood transfusion", savage growth
If you summarize the development of the ready-made tea industry in recent years in two words, it is undoubtedly the scattered and savage growth of the competitive pattern.
The barriers to the ready-made tea industry are low and the homogenization of products is serious, so when the demand for the industry explodes, capital has poured into the track, boosting the rise of many brands and accelerating the brutal growth of the entire industry.
According to public information, the scale of the domestic ready-made tea market has increased from 87.3 billion yuan in 2017 to 213.7 billion yuan in 2022, with a compound annual growth rate of 19.6%, making it the largest sub-category in the domestic beverage market, accounting for 50.7%.
The expansion rate of the top freshly made tea brands is even more exaggerated, with a net increase of 25,459 stores in one year from 20 large-scale brands in 2023, a year-on-year growth rate of 32.5%.
There is no doubt that this brutal growth rate can only be achieved by the rapid expansion of the franchise model of asset-light operation.
Compared with the directly operated stores, the franchised stores do not occupy brand funds, and the company collects franchise fees from franchisees, while selling equipment and daily operating materials as the main source of income. Therefore, the franchise business model is lighter, and it can open thousands of franchise stores a year to help the brand scale increase rapidly.
The essence of the franchise business is to operate the supply chain, so the gross profit margin of the ready-made tea industry is generally about 30%, and the net profit margin is generally about 15%, which is definitely a good business.
Good business naturally wants a piece of the pie.
In the past two years, almost all tea brands have turned to franchise business, and even Heytea and Naixue's tea, which originally insisted on direct sales, have also opened to join in 2022Q4 and 2023Q3 respectively.
Taking 2023 as an example, Big Brother Michelle Bingcheng will have a net increase of 6,138 stores in a year. followed by Tianlala and Gu Ming, with a net increase of more than 3,500 stores a year. The net increase in the number of Hey Tea, Bawang Tea Ji, and Shanghai Auntie also exceeded 2,000.
Nowadays, the number of stores of various brands of tea drinks, Mixue Bingcheng's domestic stores are close to 30,000 home furnishings, followed by 4 brands, including Gu Ming, Tea Baidao, Shuyi Burning Fairy Grass, Sweet Lala, and Shanghai Auntie, with a store volume of about 8,000-9,000.
(Data source: One View Commercial, Hua Chuang Securities)
After the savage growth of the ready-made tea industry, the dividends of first- and second-tier cities have peaked, and the third- and fourth-tier cities have become new markets, and the growth of the industry will be greatly reduced.
According to iResearch's forecast, from 2023 to 2025, the growth rate of the new tea beverage market is expected to be 13.4%, 6.4%, and 5.7% respectively, with a compound annual growth rate of only 8.44%, which is about 40% of the growth rate in the previous five years.
What's worse is that good store locations and franchisees in the sinking market are more scarce, and the competition between brands will undoubtedly be more fierce. As a result, freshly made tea drinks are becoming more and more inclined to the "franchisee market", and the brand has become the party to be selected.
(Data source: public information collation)
So what are the chances of winning in this "grabbing" battle between brands?
2. "Grab people", can you grab it?
The core of the sustainable growth of the franchise business is to let the potential franchisees who come to them become real franchisees, and help them make money through operations, so as to continue to open stores (new stores or new franchisees of old franchisees).
Therefore, this "franchisee" battle is for brand voice, franchise policy and supply chain operation ability.
(1) Spell brand voice
Let's take a look at the brand voice first, and the specific indicators that can be compared include the total number of stores, performance scale, performance growth rate, Baidu search index, etc.
Compared with brand awareness, Shanghai Auntie mainly focuses on the second and third-tier cities that are slightly lower, and the expansion is slower before the A round of financing in 2020, so the popularity is not as good as that of the rest of the head brands.
Baidu index shows that compared with the industry's leading brands such as Hey Tea, Gu Ming, and Mixue Bingcheng, the search index of Shanghai Auntie is the lowest.
(Image source: public information)
However, brand popularity often changes with large single products, IP co-branding, spokespersons, etc., and whether the brand popularity can continue needs to be judged in combination with comprehensive capabilities, and it is not yet conclusive.
In addition, the number of stores and revenue scale of Shanghai Auntie continue to rank at the bottom of the four, and it is impossible to make up for the brand awareness gap from these two points.
As mentioned earlier, Mixue Bingcheng, which focuses on the sinking price band, is far ahead with a total of nearly 30,000 stores, and the volume of ancient tea, tea Baidao, and Shanghai aunt is 8000+, which is completely incomparable.
Compared with the scale of revenue and net profit, Shanghai Auntie's peers are not in the same order of magnitude as the other three.
According to their respective IPO prospectuses in Hong Kong, in the first nine months of 2023, Mixue Bingcheng's revenue was 15.4 billion yuan and net profit was 2.5 billion yuan, Gu Ming's revenue was 5.57 billion yuan and net profit was 1 billion yuan, Chabaidao's annual revenue in 2023 was 5.706 billion yuan and net profit was 1.15 billion yuan, and Shanghai Auntie's revenue was 2.535 billion yuan and net profit was 324 million yuan.
(Source: IPO Prospectus)
(2) "Volume" franchise policy
With the intensification of competition, the head tea brands have lowered the threshold for joining, from the opening to the daily operation, the full benefit of franchisees, "grabbing people" has entered the white-hot stage.
Comparing the new policies of each franchise, it can be found that in addition to the direct reduction and rebate policies, Gu Ming and Shanghai Auntie also implement credit easing for franchisees. In short, everyone is trying their best to lower the threshold for joining, and they are full of sincerity.
Mixue Bingcheng: Not only is it free of logistics fees, free space design fees, and free of promotional materials for franchisees, but also announced at the beginning of 2022 that it will reduce the franchise fees for all domestic franchisees for one year by the end of 2021, and at the same time reduce the prices of 69 materials and equipment, with an average price reduction of 15%.
Tea Baidao: From February to May this year, the new franchise partner signed 1 new store, and the franchise fee was reduced by 40,000 yuan, and 2 new stores were signed, with a total reduction of 180,000 yuan. The old franchise partner will be free of 90,000 yuan per store for a new store. At the same time, 100,000 yuan/room will be reduced for opening stores in core business districts, 90,000 yuan/room will be reduced for opening large stores, and there will be 2%-5% rebate subsidies for materials and high rents according to the GMV contribution of stores.
Gu Ming: The implementation of the franchise cooperation fee of 98,800 yuan "0 down payment, 15 months installment" model, closed within one year, franchise cooperation fee (brand cooperation fee, operation service fee, training service fee, store opening service fee) according to the actual payment amount of full refund.
Shanghai Auntie: From August 2022, the "100 Days and 1000 Stores" plan will be opened, allowing franchisees to pay in installments, not only the management fee is free, but the 49,800 yuan franchise fee can also be paid in installments for 3 years.
The price of the "volume" franchise policy is that the company's profitability will not only continue to be squeezed, but also with the addition of franchisees, a large amount of the company's liquidity will also be occupied. In particular, the franchise fee of 49,800 yuan of Shanghai aunt can only be fully recovered within 3 years, and the requirements for liquidity are higher.
(3) "Volume" supply chain
The business core of the franchise model lies in the management of franchisees and supply chains, so now tea companies that rely purely on franchise expansion are vigorously extending and improving their supply chain capabilities.
The supply chain of ready-made tea is mainly composed of three core links: raw material self-production/procurement, production, warehousing and logistics.
At present, the supply chain of Mixue Bingcheng has basically achieved independence, and it is the best among the four.
Mixue Bingcheng purchases raw materials from 35 countries on six continents around the world, and at the same time extends the procurement network to the upstream to establish a cooperative planting base for raw materials. The five production bases in Henan, Hainan, Guangxi, Chongqing and Anhui have an annual comprehensive production capacity of about 1.43 million tons, with sufficient production capacity. 60% of the beverage ingredients provided to franchisees are self-produced, and 100% of the core beverage ingredients are self-produced.
At the same time, it has an independent warehousing system and exclusive distribution network, mainly through cooperation with local distribution service providers to provide distribution services, in more than 90% of the domestic county-level administrative divisions can be reached within 12 hours, more than 90% of the domestic stores to achieve cold chain logistics coverage.
In contrast, Gu Ming, Tea Baidao, and Shanghai Auntie are not involved in the self-production of raw materials, and the existing production lines can only meet a small part of the required production capacity, and the distribution is basically operated by third-party logistics companies, and only the autonomy of warehousing is the highest.
Rucha Baidao currently has a total of 22 multi-temperature warehouses (17 central warehouses + 5 front warehouses) with a total area of 80,000 square meters, Gu Ming operates 21 warehouses with a total construction area of more than 200,000 square meters, and two fresh produce warehouses and all front-end cold chain warehouses in the Shanghai Auntie supply chain are operated by third parties.
Through the comparison of brand voice, franchise policy, supply chain construction and degree of autonomy, it can be found that in addition to the franchise policy, Shanghai Auntie still has a hard time, and the other two are all down.
In fact, whether it is "volume" marketing to enhance brand awareness, "volume" franchise policy to attract franchisees or construction of supply chain, it is essentially "rolling" money, which undoubtedly makes it difficult for the Shanghai aunt with the tightest liquidity among the four.
3. "Lack of money"
First of all, Aunt Shanghai's "hematopoietic" ability is the worst of the four.
Compared with the gross profit margin and net profit margin from 2021 to the first three quarters of 2023 (Chabaidao is the data for the whole year of 2023), Shanghai Auntie is the one that has improved the fastest. But even so, under the premise of a gross profit margin of 31%, the net profit margin of Shanghai Auntie is only 13%, which is much lower than the other three.
(Source: Prospectus)
Secondly, the "surplus grain" on the account of the Shanghai aunt is also the least.
By the third quarter of 2023 (the data disclosed by Tea Baidao at the end of 2023), the operating cash flow of Mixue Bingcheng will be 3.092 billion yuan, Gu Ming and Tea Baidao will be 1 billion yuan+, while Shanghai Auntie will only have 436 million yuan.
The balance of cash and cash equivalents at the end of the period was 3.759 billion yuan in Mixue Bingcheng, 1.857 billion yuan in ancient tea, 716 million yuan in tea Baidao, and only 289 million yuan in Shanghai.
(Data source: choice data)
Therefore, listing and fundraising has become the fastest shortcut for Shanghai aunts who are "short of money" to solve liquidity.
According to the information, Shanghai Auntie plans to raise $300 million to enhance brand awareness, supply chain construction, strengthen digital empowerment capabilities, and expect to gain more liquidity to cope with more fierce competition in the future.
(Image source: public information)
Paradoxically, the "most money-deficient" Shanghai aunt is the most lacking of strength among the four IPO tea companies.
If Shanghai Auntie can't quickly raise funds to improve the brand's voice, scale and supply chain capabilities, then there will be fewer and fewer franchisees to come and retain. If the growth of the franchise business cannot be guaranteed, there is no way to talk about future performance growth, and the probability of IPO success is even more slim.
In today's freshly made tea track that will be swept to death if it is not done well, Aunt Shanghai seems to have fallen into a paradox.
Disclaimer: The content of this article is for reference only, the information in this article or the opinions expressed in this article do not constitute any investment advice, readers are advised to make investment decisions with caution. ❥ Thank you for your likes, favorites, and encouragement!
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