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For the promotion of the mineral water project, although the brand expects it to further optimize the product structure and enrich the company's product matrix, we also know that the development of new sectors needs to go through a process from scratch, and it is still difficult for JuneYao to compete with the existing mineral water leaders in a short period of time. In addition, JuneYao especially needs to pay attention to the fact that because the company's original business market share is not high, in the process of developing new business, it is necessary to avoid the situation that the main business of the brand is not strong and the side business is too weak, which may result from the diversified layout.
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Text: Hailey Jiang
Source: Foodaily Daily Food (ID: foodaily)
On December 7, JuneYao Health, the "first share of lactic acid bacteria", officially announced the establishment of a mineral water business. The company said that with the formal implementation of the mineral water project, the product structure of JuneYao Health will be optimized, and mineral water is expected to become the "second curve" of JuneYao's healthy growth.
This perennial stable room temperature lactic acid bacteria beverage market top three, only listed for three months of "lactic acid bacteria first stock", now why come to grab the business of Nongfu Spring? Is it that its own business development is difficult to break through bottlenecks, or do you want to develop Xinjiang in a two-pronged manner? And how big is the mineral water market that brands are red-eyed and cross-border? What is the market left for JuneYao?
The birth and development of the first stock of lactic acid bacteria
JuneYao Group entered the dairy and milk beverage industry in the 1990s, and gradually became a well-known brand in the industry, and was one of the earliest enterprises in China to develop and produce long-term sterilized milk in plastic bottles. On August 18 this year, the subsidiary JuneYao Health was listed on the Shanghai Stock Exchange, becoming the "first stock of lactic acid bacteria", mainly engaged in the research and development, production and sales of ambient lactic acid bacteria drinks, and successively launched other health drinks.
Pulling the time back to 2011, JuneYao Health began to strategically enter the ambient lactic acid bacteria beverage market, and then launched the "Flavor Power" room temperature lactic acid bacteria series of products. Facts have proved that the launch of this series has laid the foundation for the brand's popularity and influence, and the series has gradually developed into the company's main business.
Image source: Google
In this regard, Wang Junhao, president of JuneYao Group and chairman of JuneYao Health, once said: "In 2011, we began to cultivate the single product of room temperature lactic acid bacteria, and went to success and entered the blue ocean, so we have the successful experience of creating blue ocean goods, this experience is very valuable, and in the next 3 to 5 years, we will also copy this successful model, that is, we copy our own model, which I think is very confident." ”
For the future prospects of the company's brand-related diversification development, Wang Junhao also placed his hopes on it, saying that the next brand will still work healthy drinks, form diversification, form multiple single products from one commodity, and eventually form a cluster of big health drinks.
So we see that around the room temperature lactic acid bacteria, JuneYao Health has successively launched the "Qimengxing" series of lactic acid bacteria drinks, JuneYao sweet milk milk drinks, "Qin" drinking milk drinks, JuneYao 6 kinds of nut plant protein drinks, and "flavor power" prebiotic milk drinks in recent years, constantly enriching the company's product line, some of which have also achieved good results.
Image source: JuneYao official website
According to Euromonitor International data, in 2019, in the sales of Chinese mainland ambient lactic acid bacteria beverage market by retail sales, JuneYao Health ranked first, with a market share of about 15.1%. And according to multi-party information statistics, the current domestic room temperature lactic acid bacteria beverage market has gathered more than 100 large and small brands, but JuneYao Health's market share has been stable in the top three.
Relying on OEM and single product structure, JuneYao may encounter development difficulties
When the company was listed in August, Wang Junhao made it clear that the company's medium- and long-term strategic goal was to build the brand's milk-containing beverages into the first brand in the milk-containing beverage industry and occupy a leading position in the national milk-containing beverage industry.
However, the actual data shows that since the listing of JuneYao Health, the net profit of revenue has continued to decline, and in the first three quarters of 2020, the net profit of JuneYao Health was about 197 million yuan, down 33.84% year-on-year.
So, what is the reason for this when the bold words are soon out and enter new fields?
In fact, JuneYao Health wants to become the "first brand in the milk beverage industry" is not an easy task, in addition to solving the production capacity problem through listing fundraising, the brand itself still inevitably faces inherent problems such as a relatively single product structure and regional restrictions.
1, too dependent on the foundry model
Due to production capacity restrictions, JuneYao Health adopts a production mode that combines foundry and free factory, but the dependence on foundry is relatively high. For example, according to the prospectus disclosure data, from 2016 to 2018, the foundry output of JuneYao Health "Flavor Power" room temperature lactic acid bacteria beverage accounted for 65.37%, 62.81% and 39.96% of the total output of the product, respectively, which shows that the foundry actually undertook the important output task of JuneYao health drinks.
2. Focus on the category of lactic acid bacteria, and the product structure is single
Compared with various dairy comprehensive brands, JuneYao Health focuses more on the lactic acid bacteria category, and since cutting off the pure milk business in 2004, JuneYao Health's revenue has mainly relied on lactic acid bacteria drinks "taste power" single products for a long time. This point is also clearly explained from the prospectus: from 2017 to 2019, JuneYao Health's revenue was 1.146 billion yuan, 1.287 billion yuan and 1.245 billion yuan, of which the "Flavor Power" room temperature lactic acid bacteria beverage plastic bottle series accounted for 97.53%, 96.51% and 89.48% of the main business revenue, respectively.
3. Due to geographical restrictions, the global layout cannot be realized
JuneYao Health said that considering factors such as logistics convenience, the industry generally carries out the decentralized layout of multiple production bases, and chooses to build factories in areas where consumption is concentrated or entrust processing plants nearby for production. However, the brand power of JuneYao Health is still mainly concentrated in the southern Jiangsu and Zhejiang regions, and it is still relatively weak in the northern region, so the entire channel system is also biased towards the south, and it is impossible to systematically layout the country in a short period of time.
4, giants compete for food, Yakult and other overseas brands to increase the layout
Although JuneYao Health has become the "first stock of lactic acid bacteria", the lactic acid bacteria track it is in has long been very crowded. As introduced above, there are currently more than 100 brands in the domestic ambient lactic acid bacteria beverage market, and the top three brands in terms of market share are Yili, JuneYao and Haocaitou, and the total market share of these three brands has reached 46.3%.
However, in recent years, overseas giant brands like Yakult, which also specialize in lactic acid bacteria drinks, are also constantly increasing the Chinese market and grabbing the market for room temperature lactic acid bacteria. Foodaily understands that Yakult already has 49 branches in Chinese mainland. In addition, for the lactic acid bacteria market, Mengniu has also focused on developing the third- and fourth-tier city markets since 2018, increasing freezers, strengthening cold chain construction, and increasing the number of vehicles and business personnel.
A series of factors suggest that JuneYao may be able to try to find new growth opportunities and reverse the current embarrassing situation. They, on the other hand, have chosen to target the mineral water/bottled water market, which is hot this year.
The first share of lactic acid bacteria starts again, how many opportunities do the mineral water market leave them?
According to JuneYao Health, they hope that the formal implementation of the mineral water project can further broaden the company's product line on the basis of the original main product, the room temperature lactic acid bacteria beverage, so that the product structure will be optimized to seek new business growth points, and the brand regards mineral water as the "second curve" of JuneYao's healthy growth.
The bets are certainly not cheap, but how big is this mineral water market? Why have dairy and leisure snack giants like Yili and Hollywood entered the market in the past two years?
1. In 2019, the scale of China's bottled water market exceeded 200 billion
According to Euromonitor consulting statistics, from 2013 to 2018, the sales scale of bottled water in China has increased year by year, from 106.92 billion yuan in 2013 to 183.09 billion yuan in 2018, with an average annual compound growth rate of 11.8%, which has become the largest subdivision of the soft drink industry. And in 2019, the market size exceeded 200 billion yuan, and it is expected to continue to grow.
Among them, the proportion of natural mineral water in the overall share of bottled water shows an increasing trend. From 2014 to 2019, the compound annual growth rate of natural water and natural mineral water market size was 24.8% and 18.4%, respectively, and the market size in 2019 reached 37.2 billion yuan and 15.1 billion yuan, respectively.
2. The demand for high-end bottled water in China is heating up
According to Nielsen data, in 2018, the growth rate of China's natural mineral water and soda market was 17% and 20% respectively, which was higher than the growth rate of drinking water and pure water market.
In July 2019, Tmall and Nielsen released the "2019 Tmall High-end Water Trend Report", which shows that from July 2018 to June 2019, the average monthly turnover growth rate of high-end water on the Tmall platform was 130%, and the average monthly consumer growth rate was as high as 180%; the main consumer group was 25 to 34-year-old families with children, which is the most consuming 90/95 population at present, and they are willing to pay more premiums for better quality bottled water, such as water quality, It has a certain degree of health function, targets different segments of the population, and so on. Therefore, where there is a big demand, there is a big opportunity.
3. There is room for unit price increase in bottled water in China
According to Euromonitor international data, from 2010 to 2018, the unit price of bottled water in China continued to increase, and in 2018, the unit price of bottled water was 4.1 yuan / liter, that is, about 2 yuan / bottle (assuming a single bottle capacity of 500ml), but this data still has about 60% room for improvement in terms of the average price of bottled water in Taiwan, Japan and other regions. But it's attractive for brands to choose a new track area.
4, bottled water is very profitable
The boom in the listing of Nongfu Spring has made Zhong The richest man in China for a time, and has also generated great interest in the huge profit margin of bottled water inside and outside the industry. Some people have calculated that for every bottle of water sold for two yuan, Nongfu Spring can net 1 yuan2, and the gross profit margin is as high as 60%.
The lucrative profits attract more players to the market. According to the data, there are currently 64,000 mineral water-related enterprises in China, and the annual registration volume of related enterprises has risen in the past decade, with 7,393 newly registered in 2019, an increase of 103% over 10 years ago. In the first half of this year alone, there were 3929 newly registered enterprises in the mineral water industry, an increase of 8.5% year-on-year.
However, we also have to look at this market objectively, doing mineral water business is not as easy as imagined, and not every water brand can become Nongfu Spring. Because in this track, catching up, surpassing, falling behind is something that happens from time to time.
For example, Yili, which was once known as "the first mineral water brand in China", as one of the earliest mineral water brands in China that began to involve the bottled water business, because the time of entry was relatively early, coupled with its own advantages, it quickly seized a lot of market share, and had been shoulder to shoulder with Yibao and Baishishan. However, since the acquisition of the Yili brand by the French Danone Group in 1998, Yili has embarked on the road of no return step by step, and finally was sold back to domestic enterprises by Danone in June this year, but at this time, Yili has no competitiveness to speak of.
Another example is Evergrande Ice Spring, which was launched in November 2013 by Evergrande Group, one of the top real estate tycoons in China, and declared that it has entered the high-end mineral water market. Although it quickly became popular at that time because of Evergrande's AFC Champions League victory and the label of "unaffordable water", it was also a flash in the pan after all, with a loss of 4 billion yuan in three years.
As the industry professionals said: to find a suitable, safe and clean water source, you must go through more than a dozen links such as exploration, testing, and certification in the early stage; after putting into production, in addition to paying more than a dozen taxes, you must also consider transportation costs. This is only the first step, the next market development, no huge capital investment can not work, under the squeeze of large brands, small brands are difficult to highlight the siege.
brief summary
For the main business of JuneYao Health, the current competition pattern in the milk-containing beverages, especially the ambient lactic acid bacteria beverage industry has not yet been fully formed, and there are many brands and low market concentration, and the competition is fierce. But we still expect JuneYao to achieve its ambitions and truly become a leader in the milk-containing beverage industry.
For the promotion of the mineral water project, although the brand expects it to further optimize the product structure and enrich the company's product matrix, we also know that the development of new sectors needs to go through a process from scratch, and it is still difficult for JuneYao to compete with the existing mineral water leaders in a short period of time.
In addition, JuneYao especially needs to pay attention to the fact that because the company's original business market share is not high, in the process of developing new business, it is necessary to avoid the situation that the main business of the brand is not strong and the side business is too weak, which may result from the diversified layout.
Resources:
1. Beijing Business Daily: JuneYao is listed, who is "sour" in the lactic acid bacteria market?
2. Prospective Industry Research Institute: Analysis of the market status and development prospects of China's bottled water industry in 2019