Yangtze River Business Daily reporter Zhang Lu
Under the emphasis on marketing and light research and development, the "first share of bird's nest" Yanzhiwu (01497. HK) is in the midst of growth difficulties.
Recently, Xiamen Yanzhiwu Bird's Nest Industry Co., Ltd. (hereinafter referred to as "Yanzhiwu") released its first annual report card after listing. In 2023, the company will achieve revenue of 1.964 billion yuan, a year-on-year increase of 13.54%; The net profit was 212 million yuan, a year-on-year increase of 2.8%.
It is understood that Yanzhiwu was established in 2014, as the head bird's nest brand, Yanzhiwu attaches great importance to the marketing and promotion of its products, and has invited Carina Lau, Lin Chiling, Zhao Liying, Jin Chen, etc. as spokespersons in recent years.
However, under the high marketing expenses, the company's profit margins have been eaten up a lot.
According to the financial report, from 2020 to 2023, Yanzhiwu's sales and distribution expenses will accumulate nearly 1.8 billion yuan, about 2.62 times the total net profit in the past four years, and its R&D expenditure will account for about 1.3% of revenue in the same period.
The Yangtze River Business Daily reporter noticed that from the external environment, the competitive pressure faced by Yanzhiwu is also increasing. In recent years, a number of brands such as Xiaoxian Stew, Yanzhichu, and Yanxiao Kitchen have entered the market and grown rapidly, carving up the market share of the bird's nest track, which will definitely have a certain impact on the business of Yanzhiwu.
From the perspective of the secondary market, on the first day of listing on December 12, 2023, Yanzhiwu's share price once fell below the issue price, and finally closed at HK$9.70 per share, with a market value of HK$4.5 billion. As of the close of trading on May 10, 2024, Yanzhiwu closed at HK$8.75 per share, with a total market capitalization of HK$4.073 billion.
Gross profit margin of 50%, net profit margin of only 10.77%
According to the data, Yanzhiwu was established in 2014, and on December 12, 2023, Yanzhiwu was listed on the Hong Kong Stock Exchange, becoming the "first bird's nest stock".
In recent years, with the increasing demand of consumers for health and wellness, nourishing products such as bird's nest have become popular in the consumer market, and the revenue of Yanzhiwu has also been growing.
From 2020 to 2022, Yanzhiwu achieved operating income of 1.301 billion yuan, 1.507 billion yuan and 1.730 billion yuan respectively, with a compound annual growth rate of 15.3%.
In the same period, the gross profit margin of Yanzhiwu was 42.7%, 48.2% and 50.8% respectively. In 2023, the company's revenue will increase by 13.54% to 1.964 billion yuan, with a gross profit margin of 50.7%.
According to the Frost & Sullivan report, from 2020 to 2022, Yanzhiwu has been the world's largest bird's nest product company in terms of retail sales for three consecutive years. In 2022, Yanzhiwu's market share in China's bird's nest market was 5.8%, close to the combined market share of the second to fourth place.
According to the financial report, in 2023, the revenue of pure bird's nest, the core product of Yanzhiwu, will increase by 9.53% year-on-year to 1.794 billion yuan, but the proportion of revenue will decline, from 94.7% in 2022 to 91.3% in 2023.
At the same time, in 2023, the company's "bird's nest+" and "+ bird's nest" product revenue will be 142 million yuan, an increase of 94.2% year-on-year, and the proportion of total revenue will increase from 4.2% in 2022 to 7.2%.
However, even though the total revenue is close to 2 billion yuan and the company's gross profit margin is as high as 50%, the net profit level of Yanzhiwu is not high. From 2020 to 2023, Yanzhiwu's net profit will be 123 million yuan, 172 million yuan, 206 million yuan and 212 million yuan respectively, of which the year-on-year growth rate of net profit from 2021 to 2023 will be 39.84%, 19.77% and 2.8% respectively, which shows that its growth rate has slowed down significantly, and its net profit margin is 9.5%, 11.4%, 11.9% and 10.77% respectively.
However, it is worth mentioning that Yanzhiwu fell on the expansion of stores last year. In 2023, there will be 743 offline stores, an increase of 39 from the previous year, of which dealer stores are the mainstay.
Although the offline continues to expand, more of Yanzhiwu's revenue is displayed in online channels. According to the financial report, as of December 31, 2023, Yanzhiwu has 27 self-operated online stores and 18 dealer online stores on mainstream e-commerce or social media platforms such as JD.com, Tmall, and Douyin.
In 2023, Yanzhiwu's online channels will achieve revenue of 1.104 billion yuan, an increase of 17.7% year-on-year from 2022, accounting for 56.21% of the annual revenue, a further increase from 54.22% in 2022.
Emphasizing marketing over R&D has been repeatedly controversial
In fact, the rapid rise of Yanzhiwu is largely due to its huge investment in advertising and promotion.
In recent years, on the one hand, the company has "spent a lot of money" to invite stars Carina Lau, Lin Chiling, Zhao Liying, Jin Chen, etc. as spokespersons of the past generations; On the other hand, Yanzhiwu has successively settled in well-known business districts, shopping malls and other traffic gathering places across the country, and TV advertisements and title sponsorships are flying all over the sky. Therefore, Yanzhiwu has been mired in doubts such as "excessive marketing expenses" and "false publicity" over the years.
According to the prospectus and financial report, from 2020 to 2023, Yanzhiwu's sales and distribution expenses will reach 318 million yuan, 399 million yuan, 504 million yuan, and 563 million yuan respectively, with a total of 1.784 billion yuan in 4 years, which is about 2.62 times the total net profit in the same period.
It should be noted that the sky-high advertising costs bring a very high exposure rate to Yanzhiwu, and as a food company with "health care" and "health" as its selling points, its investment in R&D expenses is somewhat dwarfed by marketing expenses.
According to the financial report, from 2020 to 2023, Yanzhiwu's R&D expenditures will be 17.7 million yuan, 19 million yuan, 24.3 million yuan, and 26.4 million yuan respectively, only 5% of the sales expenses in the same period, and the proportion of R&D expenses in revenue will only be 1.38%, 1.26%, 1.39% and 1.34% respectively.
This data reflects that Yanzhiwu relies more on advertising investment to drive sales, and significantly underinvests in product research and development and innovation. Although this strategy can bring benefits in the short term, in the long run, it is difficult for products that lack core competitiveness to gain a foothold in the market.
On the other hand, when it comes to bird's nest, the first reaction of the vast majority of people is "lady tonic", and the second reaction is "IQ tax". This also reflects the chaos of its savage growth - it has been circulating in the market for many years, and there are still many doubts about whether bird's nest can achieve miraculous health care effects and whether it is worthy of the price.
In May 2021, Yanzhiwu put out advertising slogans such as "I heard that it is better to eat bird's nest when pregnant", which aroused doubts about its "exaggerated publicity". In this regard, Li Youquan, executive director and president of Yanzhiwu, said that the advertisement of Yanzhiwu never directly said that bird's nest has any effect, so there is no consumer fraud, "if consumers have their own feelings and understanding through advertising, we can't influence them."
This statement has aroused heated discussions in the outside world. Many people believe that there are many hints about health benefits in the advertising of Yanzhiwu.
In addition, in recent years, Xiaoxian Stew, Zhengdian Bird's Nest, Yan'anju, Yanfu and other consumer brands of the same type have launched close hand-to-hand competition with them, and pharmaceutical companies such as Tongrentang and Dong'e Ejiao have entered the market one after another.
Among them, Xiaoxian stew is regarded as the biggest competitor of Tsubame House. It is reported that since March 2015, Xiaoxian Bird's Nest has completed five rounds of financing, and there are many "star" capital parties standing behind it, such as IDG Capital, CMC Capital, Zhengxin Valley Innovation Capital, Amber Capital, etc.
In the eyes of industry insiders, Yanzhiwu's revenue growth is highly correlated with marketing efforts, and it lacks differentiated competitive advantages. In the future, how to continue to strengthen its competitive barriers in R&D, channel construction and product innovation is an urgent challenge after its listing.
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