Recently, Ziyan Food announced its 2023 annual report and first quarter financial report.
According to the data, Ziyan Food achieved an operating income of 3.55 billion yuan, a year-on-year decrease of 4.46%, and a net profit of 332 million yuan, a year-on-year increase of 49.46%. In the first quarter of 2024, the operating income was 695 million yuan, a year-on-year decrease of 8%, and the net profit was 53.964 million yuan, a year-on-year increase of 20.87%.
The increase in profitability was achieved despite this decline in revenue, mainly due to the reduction in raw material costs and the decline in the number of stores.
According to the financial report data, the total number of Ziyan Food's stores nationwide in 2023 will reach 6,205, a year-on-year increase of 8.96%. Ziyan Food's stores reached 6,137 on June 30, 2023, a net increase of 442 stores from the end of 2022, but according to the data as of September 7, 2023, Ziyan Food decreased by nearly 300 stores in three months.
As the "No. 1 stock of lo-mei for food" in the past, Ziyan Food used to be the fastest-growing company in revenue among the four listed lo-mei food companies, why did its performance suddenly change its face in 2023?
01. It is urgent to improve the efficiency of store operations
If we specifically analyze the financial report, Ziyan Food's total revenue in the first quarter of 2024 decreased by 8.00% year-on-year, operating costs decreased by 10.05% year-on-year, and expenses decreased by 1.39%, and the net profit attributable to the parent company increased by 20.87% year-on-year after deducting operating costs and various expenses.
Compared with previous years, the price of raw materials of Ziyan Food has fallen this year, and the price of its raw materials has approached the range of previous years, while the company has achieved cost reduction and efficiency increase by optimizing the supply chain and improving production technology.
However, compared with the performance of previous years, Ziyan Food's net profit from 2020 to 2022 will be 358.7 million yuan, 327.6 million yuan, and 221.8 million yuan respectively, and the net profit in 2023 will not return to the level of 2020.
At the same time, compared with previous years, Ziyan Food's product revenue has decreased.
As the main fresh goods (including husband and wife lung slices, poultry products, vegetarian products, etc.), Ziyan Food will bring an operating income of 3.004 billion yuan in 2023, a year-on-year decrease of 1.71%, and the operating income of prepackaged and other products will decrease by 5.72% year-on-year.
Among them, "husband and wife lung slices" contribute almost one-third of Ziyan Food's total revenue, and the price of beef is a raw material that will drop significantly in 2023, and there is no sign of price recovery so far.
It is worth noting that the number of Ziyan Food's stores has fluctuated greatly in the past year, and the number of Ziyan Food's stores decreased by nearly 300 between June and September last year.
In other words, the common problem faced by Ziyan Food and the lo-mei chain brands with a large number of franchised stores is how to improve the operational efficiency of the stores.
At the beginning of this year, Ziyan Food simplified the process of the brine supply chain, opened up the digital management of the whole chain from raw materials to finished products, and completed the unified marinating of the left and right products in the central factory, and then distributed them in a unified manner to ensure stable supply, so as to ensure that the products purchased by consumers have stable quality and fresh taste.
At the same time, Ziyan also kept up with current affairs and began to deepen the road of digital advancement, applying digital control technology to product production, product transportation, store sales and so on.
Throughout 2023, Ziyan Food has also introduced modern electronic information management systems such as SAP-ERP system, sales middle platform system, OA system, TMS system, and WMS system in the food industry in terms of management, and improved the company's operational efficiency through continuous digital application exploration, cross-regional market forecasting, and timely feedback to production, R&D and procurement.
In order to get out of the dilemma of "opening stores and closing stores quickly", Ziyan Food has really implemented digitalization.
In 2023, the specific store closure cities include Shanghai, Nanjing, and Suzhou, and the average sales of a single store will drop significantly, so Ziyan Food has put forward the main task in 2023, which is to reduce the store closure rate and reduce the store closure rate to the level before 2020.
In addition, Ziyan has also set up an overseas business department, for the first batch of personnel to develop overseas markets for business management, simulation and other aspects of training, has signed an agency agreement in Australia, and reached a strategic cooperation with Dahua Group and Chuangfeng Group in the US market.
In the increasingly competitive environment of China's lo-mei market, going overseas is indeed the only choice for Ziyan.
02. The embarrassing positioning of the second child
Ziyan Food has always been in the second position in China's lo-mei food market.
According to Red Meal Big Data, the size of the mainland lo-mei market in 2021 will be about 314 billion yuan, a year-on-year increase of 9.5%, and in 2022, the market size is expected to expand to 352.6 billion yuan, a year-on-year growth rate of about 12.3%.
In China's lo-mei food market, Juewei Duck Neck, Huang Shanghuang, Zhou Heiya, and Ziyan Food have been competing for market share on the same track for a long time.
In terms of revenue, Juewei Food has been riding the dust and sitting firmly on the Iron Throne, with its 2022 performance forecast alone reaching 6.6-6.8 billion yuan, and continuing to maintain positive growth.
In contrast, Ziyan Food ranked second, the fastest growing brand among the 4, and the revenue of Zhou Heiya ranked third in the same period, at 2.34 billion yuan, and the fastest decline rate among the 4, down 18.3% year-on-year, it is worth noting that the decline in Zhou Heiya's revenue has already begun, since its listing on the Zhou Black Duck Hong Kong Stock Exchange, it has harvested a revenue highlight moment in 2017.
However, during the period from 2018 to 2020, Zhou Heiya's revenue continued to grow negatively, and after recovering in 2021, it declined again in 2022, and at the same time, the revenue of Huangshanghuang, which has the least revenue among the four, fell by 16.46% year-on-year in 2022.
It is undeniable that the 4 lo-mei companies have shown a very obvious downward trend, the most obvious thing is Zhou Black Duck, followed by Huang Shanghuang, Ziyan has performed better than its peers, which is also due to the credit of the large single product "Husband and Wife Lung Tablets".
Lo-mei products have been developed in the mainland for many years and have entered a very stable stage of development, but with the continuous changes in the mainland's consumer market, many investors have begun to look for new investment opportunities, and instead set their sights on other emerging categories and popular tracks, such as tea and coffee.
This has also led to the fact that the capital's investment enthusiasm for lo-mei has begun to cool down year by year.
Relevant data shows that in the past three years, the financing events disclosed by the lo-mei category have decreased year by year, and there will only be one financing event in the whole of 2023.
Despite the bad environment, Ziyan Food is still expanding against the trend, which also makes the risk-taking distributors miserable.
In 2022, the revenue of the distribution model under Ziyan Food's main business will be as high as 3.136 billion yuan, accounting for 87.91% of the income of the main business members.
Ziyan Food's franchise method is very different from the other three.
Juewei Food and Huang Shanghuang mainly adopt the way of franchising, with a single franchise store directly joining, directly responsible for store training, management and supervision, and directly selling to franchised stores, while Zhou Heiya is mainly directly operated stores, with a higher gross profit space, but it is more likely to be affected by the market situation, and has begun to gradually open up franchises in recent years.
In contrast, Ziyan Food adopts a distributor model, which means that Ziyan Food Company will transfer a certain profit margin, and these distributors also need to bear a lot of publicity and promotion, store management and other expenses, therefore, Ziyan Food's gross profit margin is relatively lower than the industry average.
Due to the rapid expansion, it is not easy for newly franchised stores to make money, and from 2020 to 2021, the average sales amount of Ziyan Food's single store decreased by 8.42% and 3.3% year-on-year, respectively.
Although the franchise fee is not high, the number of franchised stores is still increasing, and on the other hand, there are not a few people who quit without making money.
Although the development of the lo-mei track has been relatively mature, there are still many pain points, including fierce homogenization competition, obvious regional characteristics, weak rigid demand attributes, etc., and head brands like Ziyan Food are facing problems such as growth difficulties and low operating efficiency.
On the whole, it is not that Ziyan Food "can't sell", but that the industry can't push it, just like the sentence we are familiar with, all products are worth being redone, if Ziyan Food remakes products according to the way of new consumption, will there be different results?
Reference:
Ziyan Food is finally looking forward to the reduction in the cost of meat, but it "can't be sold" - 36 Krypton's friends
Lo-mei Category Development Report 2024: After the "Super Duck Cycle", the Lo-mei track will be expanded again - Red Meal Think Tank