Edit | Yuer Lake
Produced by | Chaoqi Network "Yu See Column"
There is still more than a month to go before the Dragon Boat Festival, but zongzi has appeared in many markets. In particular, the emergence of e-commerce platforms has allowed the public to get rid of the restrictions of festivals and realize the freedom to eat zongzi. The small zongzi has exploded into strong business opportunities in the new consumption era, and the century-old Wufangzhai that we are familiar with has successfully landed in the capital market.
Recently, Wufangzhai released its 2023 annual report, during the reporting period, Wufangzhai's revenue was 2.635 billion yuan, a year-on-year increase of 7.04%, and the net profit attributable to the parent company was 166 million yuan, a year-on-year increase of 19.74%. The double increase in performance has really made many investors shine. At the same time as the release of the 2023 annual report, Wufangzhai also announced the financial report for the first quarter of 2024, but this report is difficult to have bright spots.
In the first quarter of this year, Wufangzhai's revenue was 207 million yuan, a year-on-year decrease of 4.13%, and the net profit attributable to the parent company was -69.759 million yuan, an increase of 9.11% year-on-year. The first quarter of each year seems to have become a long-standing problem in Wufangzhai. It is no wonder that many netizens laughed that Wufangzhai's annual performance was supported by the second quarter. Although it is ridiculous, it also shows that Wufangzhai, which relies on zongzi to fight the world, has not yet gotten rid of the curse of "festival".
Performance has encountered a bottleneck, and "out of the circle" has not been "out of bounds"
In August 2022, Wufangzhai was successfully listed on the Shanghai Stock Exchange and became the "first stock of zongzi". For a century-old brand, being able to land in the capital market is undoubtedly another new life. However, Wufangzhai's performance after listing was somewhat unsatisfactory, especially in the year of listing, Wufangzhai's performance declined.
In 2022, Wufangzhai's revenue will be 2.462 billion yuan, down 14.87% year-on-year, and the net profit attributable to the parent company will be 138 million yuan, down 28.53% year-on-year. Although Wufangzhai's performance has improved in 2023, with revenue and profit growth, looking at its financial data in the past 6 years, Wufangzhai's growth rate is extremely slow.
In 2023, Wufangzhai's revenue will be 2.635 billion yuan, an increase of only 212 million yuan from 2018, and the compound growth rate of revenue in 5 years will only be 1.69%. At the profit level, although Wufangzhai is stable and improving, its profitability is actually not outstanding.
Looking at the financial reports of the past two years, it is not difficult to find that Wufangzhai only has a profitable net profit in the second quarter, and the net profit in the first, third and fourth quarters is in a state of loss. To add insult to injury, the comprehensive gross profit margin of Wufangzhai has been declining in recent years. In 2018, its consolidated gross profit margin was 45.24%, and in 2023, this value has dropped to 36.8%.
Judging from the revenue and profit data, the development of Wufangzhai has already entered a bottleneck period. But on the other hand, in the consumer market, Wufangzhai's fame is getting more and more prosperous. It has co-branded with brands such as Mixue Bingcheng, Three Squirrels, Wuling, Luxihe, Disney, etc., and has won the love of young people through creative advertising and marketing.
It is no exaggeration to say that the current Wufangzhai is hard to believe that it is a century-old name. However, the "out of the circle" in the consumer market has not let its products "out of bounds".
In 2023, Wufangzhai's revenue in East China will be 1.288 billion yuan, accounting for 50.14% of the revenue, much higher than that in the southwest, northwest and northeast regions. In recent years, the three major regions of East China, North China and Central China have contributed nearly 70% of Wufangzhai's revenue.
It can be said that whether it is before or after the listing, the sales geography of Wufangzhai has not been solved. Although online e-commerce can solve the regional problem of products to a certain extent, the full variety of zongzi can bloom offline in life.
Judging from the number of dealers, Wufangzhai is not very active in laying offline channels outside East China. In 2021, the number of dealers in Wufangzhai excluding East China will be 191, and in 2023, this data will be 211, an increase of only 20 in two years. Wufangzhai's offline base is still mainly concentrated in the East China market.
It is not difficult to understand why Wufangzhai's performance is difficult to develop rapidly. The channel construction of several other regions has not kept up, and it is obvious that its performance cannot be improved by leaps and bounds only by relying on online efforts. Of course, the construction of national channels did not happen overnight. To solve the bottleneck of the industry, it is not realistic to rely on channels, not to mention that before the channel, Wufangzhai has to get rid of the shackles of "zongzi".
The industry relies on zongzi, and diversification has not been effective
As we all know, Wufangzhai's fist product is zongzi. In 2021, the revenue of its zongzi products was as high as 2.007 billion yuan. Although the performance has declined in recent years, the revenue scale of zongzi products has been maintained at about 1.7 billion to 1.9 billion yuan, accounting for nearly 70% of the revenue.
There is no doubt that the future performance of Wufangzhai is nothing more than zongzi products. If the zongzi are sold, the performance of Wufangzhai will definitely rise. But once the zongzi are unsalable, the performance of Wufangzhai can be imagined. So is zongzi a good business? Probably not.
According to the data, the market size of mainland zongzi in 2021 will be about 8.4 billion yuan, and it is expected that the market size of mainland zongzi will exceed 10 billion yuan this year. While the market is expanding, competition is also becoming more pronounced.
First of all, the technical threshold for the production of zongzi is very low, and zongzi is also a commodity with a low consumption threshold. In other words, there is no moat in the zongzi market. Therefore, when consumers buy zongzi, they are actually buying the brand.
There is no doubt about the brand power of Wufangzhai, but with the strong rise of time-honored brands such as Zhenzhen Lao Lao and Zhiweiguan, Moutai, Starbucks, Bulgari and other brands have crossed over the border, and Wufangzhai's life is not easy. Although its position in the zongzi market occupies the first gear, there is not much room for improvement.
Secondly, zongzi has a very obvious festive attribute. Therefore, it can be seen that the revenue structure of Wufangzhai has a very obvious seasonality. In the first quarter of each year, Wufangzhai must prepare in advance for the Dragon Boat Festival in the second quarter.
It can be said that in the first half of each year, Wufangzhai is running at full capacity, and even has to complete the production of zongzi through outsourcing. But when the Dragon Boat Festival passes and enters the second half of the year, the production capacity of Wufangzhai is idle. Every year will experience such a cycle of production capacity, from the production capacity level, Wufangzhai this way of operation is extremely unhealthy.
Of course, in order to alleviate the production capacity problem and get rid of the dependence on zongzi, Wufangzhai has also developed moon cakes, meals, egg products and pastries and other businesses. To this day, however, the development of these businesses has been tepid.
From 2021 to 2023, the revenue of Wufang Ramadan mooncake products will be 220 million yuan, 239 million yuan and 228 million yuan respectively, and the revenue growth rate has been very slow. What's more, moon cakes, like zongzi, have strong festival attributes, which is not of much help to the adjustment of the industrial structure.
The food business of Wufangzhai has long been much worse than before after three years of epidemic impact. As for the egg products and pastry business, it can only be said that it is standing still, and the revenue scale in the past three years is about 260 million yuan.
From the perspective of development ideas, Wufangzhai wants to improve the industrial structure through diversification and reduce dependence on the zongzi industry. However, now it seems that the results of diversification have had little effect, but have made Wufangzhai's performance more dependent on zongzi. In essence, diversification may not be the optimal solution for Wufangzhai, and the lack of a second curve is its biggest industrial problem.
A new core is needed for industrial transformation
At the end of 2022, Wufangzhai opened its first festive souvenir shop in Jiaxing, providing catering services such as breakfast, lunch and dinner, afternoon tea, and supper, and the store also provides Western-style bakery products such as egg tarts and croissants. At the same time, Wufangzhai also began to lay out the quick-frozen track, launching quick-frozen rice balls, quick-frozen dumplings and wontons and other products.
In the popular prefabricated food track, Wufangzhai has never been absent. A central kitchen was built in the Jiaxing production base to produce finished and semi-finished cooking packages for catering enterprises. The intention of developing new industries such as baking, quick-frozen and prefabricated dishes is very obvious, which is to find the second curve and create a new industrial model of "new retail + light catering".
However, it is doubtful that whether it is baking, prefabricated dishes and other businesses, or catering + retail models, they cannot be called "new cores".
The three major tracks of freshly baked, quick-frozen and prefabricated dishes are not only seriously homogeneous, but also obvious to all. Wufangzhai has tried in these three major areas, although it has enriched the diversity of products, explored more consumption scenarios, and further weakened the influence of zongzi, but it is still unknown whether it can "get out of the circle" in the consumer market.
From a strategic point of view, Wufangzhai's development of new businesses such as baking and quick-freezing is also paving the way for its integrated new industrial model of "light catering + new retail", but whether this road can go through and whether it can become a new growth point for its performance in the future remains to be verified by time.
This is because if you take the route of "light catering + new retail", it will be a very big test for offline channels and cold chain transportation. As of December 31, 2023, Wufangzhai has 112 offline directly-operated stores, mainly concentrated in Jiaxing, Hangzhou, Shanghai and other East China regions.
In terms of the number of stores, the advantages of Wufangzhai are not obvious, and the "light catering + new retail" model is only limited to Jiangsu, Zhejiang and Shanghai to test the water promotion. What's more, this business model is not unique to Wufangzhai, and Babi Food and Yiming Food are also following a similar path offline.
The difference is that there are more than 5,000 offline stores of Babi Food, and there are more than 2,000 offline stores of Yiming Food. Judging from the development history of Babi Food and Yiming Food, the "catering + new retail" model does work, but the premise is that the offline channels must be wide in order to achieve qualitative changes in performance.
It is worth noting that in this mode, although it is ostensibly facing the C-end group, in fact, if you want to get through the "catering + new retail", you must open the B-end market, and Babi Food is the best example, which is a new challenge for Wufangzhai.
As of the end of 2023, the revenue of Wufangzhai's catering business is only 148 million yuan, an increase of only 4.78% compared with 2022. It can be seen that Wufangzhai's "light catering + retail" is still in its infancy, or in this new business, Wufangzhai is a little lacking in confidence. It is still too early to say whether it can become its second curve.
epilogue
The renewal of time-honored brands is always a commonplace topic, and Wufangzhai is constantly hot under the new marketing, and the products are deeply loved by consumers. But the more this is the case, the deeper the binding between Wufangzhai and zongzi becomes. This has also caused its industrial model to fall into an unhealthy cycle of development.
Getting rid of the influence of zongzi is something that Wufangzhai must do. But before that, there are still many problems solved by Wufangzhai, the first is to create explosive single products and cultivate new industries, only in the product has eyebrows, then Wufangzhai's "zongzi" dilemma will naturally be solved.