Written by Xiao Kuro
The increase in the number of head wine companies and the increase of local leading wine companies, it seems that they have all felt the "warm sun" in the post-epidemic era.
Nowadays, every wine company is eager to increase both volume and price, but in the case of overall demand reduction, they must either choose one over the volume and price, or squeeze competing products in different regions or different price bands.
Yanghe shares are now entering an era of "chasing soldiers" and having to "grab food".
This is another era of extreme emphasis on results, with major performance indicators such as operating income and net profit valued by the industry, investors, and the media, and no one cares what is really going on behind these figures.
However, the process is far more important than the result, and the vast majority of people can easily see the result, and only a few people can find the change in the hidden corners.
For the liquor industry, just like the students' grades, each student's good at subjects may be different, and if you want to make a breakthrough in the overall performance, you need to maintain the advantage of the long board while making up for the shortcomings.
Yanghe has long relied on the "blue whirlwind" to become the sales king of the head wine company, but indulging in historical advantages often loses future opportunities, and Yanghe in the 2023 annual report is no longer measurable.
In recent years, Yanghe has continued to build a moat of old liquor, change the quality of channels, and improve the cash content of performance, because only reform can bring development dividends.
1 Has Yanghe's 650,000 tons of old wine begun to be invested?
From the upgraded product Dream Blue 6+ (hereinafter referred to as Dream 6+) in 2018 to the manual class year series in 2024, these 6 years are the 6 years of continuous upgrading of Yanghe's product structure, and the overall tonnage price of Yanghe liquor products has nearly doubled.
In the global consensus of "wine is the fragrance of aging", the reserve of aged wine is the cornerstone of the continuous optimization of the product structure of major wine companies.
In the history of internationally renowned spirits, high-end spirits such as Chivas Regal and The Macallan will distinguish product grades by different vintages such as 12 and 18. In recent years, domestic liquor brands have also appeared to distinguish product grades by marking numbers, but there are endless doubts about the real vintage, which is inseparable from the huge reserve of aged old liquor.
According to the latest 2023 annual report, Yanghe Co., Ltd. has more than 650,000 tons of semi-finished products (mainly base liquor), and the proportion of semi-finished products in inventory is as high as 77.75%, both of which rank first in the list of listed liquor companies.
At the recent performance briefing, Zhang Liandong, Secretary of the Party Committee and Chairman of Yanghe Co., Ltd., responded to investors' concerns about the base liquor, saying that in the industry, there are two statistical methods for the excellent grade rate: one is the quantity of high-grade liquor per 100 kilograms of grain, and the other is the proportion of high-grade liquor in the total output. The internal control standards for premium wines vary from company to company. According to the standard of our company's grading and grading, the output of high-grade wine accounts for more than 60% of the total output.
Data source: Yanghe shares financial reports over the years, chart production: Sanyou Capital
In recent years, the turnover rate of semi-finished products of Yanghe Co., Ltd. has accelerated year by year, reflecting that more aged old liquor has begun to be added to various series of products, and this index is positively correlated with the sales ton price of liquor products.
Zhang Liandong said at the performance briefing that according to the sales assessment, in 2023, the sales of the "Haitian Dream" series, which occupies the middle and high-end main products, will account for more than 70%, of which Dream Blue products will account for more than 30% of the company's sales, and the sales volume of Dream 6+ products will be higher than that of Crystal Dream products.
At the meeting, Zhong Yu, president of Yanghe Co., Ltd., said that "Dream Blue Handicraft Class 10" has been fully listed.
In the future, the proportion of dream blue sales is expected to continue to increase, but the upgrading of product structure will inevitably have an impact on the original distribution system.
2 Transcript of Yanghe distribution system upgrade
Yanghe's Sea Blue is the largest single product in the liquor industry at a price of 100 yuan, and it is like a fish in water in the previous in-depth distribution model, with cumulative sales exceeding 100 million bottles in 2022 since its listing.
However, the wheel of history is rolling forward, the development of enterprises is not advancing or retreating, nostalgia is the resonance of emotional feelings, and the development needs rational market prediction.
At the performance briefing, some investors believed that since 2020, the elimination rate of dealers outside the province has reached about 30%, for example, in 2020, there will be 5,935 dealers outside the province, a decrease of 1,887 that year, and the elimination rate of dealers and dealers in the province is only about 13%.
In this regard, Zhang Liandong believes that the company's dealer structure will remain stable throughout the year in 2023, with no obvious changes, and he sorted out three points:
- The reason for the relatively high elimination rate of dealers outside the province is that with the development of enterprises, some small dealers do not meet the needs of the company's high-quality growth and take the initiative to withdraw;
- Most of the dealers in the province are dealers who accompany Yanghe's continuous growth, and they recognize the company's business philosophy, so the elimination rate is low;
- After the dealer withdraws, the corresponding inventory will be disposed of.
Data source: Yanghe shares financial reports over the years, chart production: Sanyou Capital
In recent years, the financial report shows that the number of dealers in Yanghe has gradually increased since it was greatly reduced in 2021 and reached a stage low, and the average sales of dealers in 2023 have increased by nearly 65% compared with 2020.
Data source: Yanghe shares financial reports over the years, chart production: Sanyou Capital
From the perspective of the structure of dealer scale, the average sales growth of the top five is obvious, with a year-on-year increase of more than 90% in 2023 compared with 2020; The average sales of dealers other than the top five increased by 63% over the same period. Judging from the channel changes in recent years, the trend of gradual upgrading of large and small dealers of Yanghe shares may continue.
At the same time, in order to motivate the sales team, Zhang Liandong said at the performance briefing that sales rewards were set up for the marketing team, and different reward standards were given according to the extent of over-completion of tasks, and the higher the completion rate, the higher the reward standards.
In the 2023 annual report, the average salary of Yanghe sales staff increased by 8.81% year-on-year, and the sales amount of sales staff increased by more than 10% year-on-year, and channel optimization also significantly improved sales efficiency.
In terms of the cash-to-cash ratio and net cash ratio, which represent the cash-making capacity of enterprises, they will increase by 2.6 percentage points and 23 percentage points year-on-year respectively in 2023.
In the face of the industry adjustment period in the past year, major wine companies generally experienced an increase in market inventory and greater financial pressure on distributors, while Yanghe adopted a more pragmatic market strategy. According to the 2023 annual report, the sales volume of its liquor products decreased by nearly 15% year-on-year, and Yin Qiuming, vice president and head of finance, explained at the performance briefing that due to the control of the market inventory of mid-to-high-end liquor in the second half of the year, the supply was contracted.
While subtracting the market supply, as a listed company, the cash dividends distributed by Yanghe to shareholders have not decreased, with the dividend amount increasing by more than 24% for two consecutive years, and the cash dividend ratio is as high as 70%, ranking first among listed liquor companies (excluding special dividends); Even with the addition of special dividends, it is second only to Kweichow Moutai.
Data source: Yanghe shares financial reports over the years, chart production: Sanyou Capital
At the performance briefing, Lu Hongzhen, secretary of the board of directors of Yanghe shares, said that the cash dividend rate increased by about 10 percentage points compared with the previous year, and the company has the ability to maintain and improve the dividend rate in the future under the condition that the company has abundant cash flow and no major capital expenditure arrangements.
As one of the few liquor companies in the head camp except Moutai, Yanghe is more willing to upgrade products or upgrade product structure to gain development space.
In the industry adjustment period, Yanghe shares in the old wine reserves, product structure upgrade quality, distribution system quality upgrade, shareholder return rate has given quantifiable results, in the consumer pay more attention to the "quality and price ratio" consensus, Yanghe is an industry "lone traveler".