<h1 class="pgc-h-arrow-right" data-track="1" > Author | Caijing New Media Ouyang Yeping Editor | Jiang Shizhou</h1>
It's another year when the rice dumplings are noisy. "Zongzi brother" Wufangzhai is also looking forward to the opportunity to brush the sense of existence.
At this time in previous years, the long-established Wufangzhai always appeared in a "net red" posture, and made funny advertisements to make everyone happy. This year, what pushed Wufangzhai to the center of the topic was a paper prospectus. On the eve of the arrival of the Dragon Boat Festival, Wufangzhai, which has stepped into the 100-year-old pass, once again hit the "first share of zongzi".
At the moment when most of the old brands are "lying flat", Wufangzhai seems to have never given up its own advanced calculations: impacting A shares, capital blessings, and gorgeous transformation.
Wu Fangzhai said in the prospectus that his next layout focus: "The company urgently needs to increase capital investment to expand production capacity. The use of the funds raised this time also converges on words such as "intelligent" and "informatization".
However, in a fully competitive and rapidly changing consumer industry, Wufangzhai is increasingly feeling the pressure of performance growth. In 2020, Wufangzhai's revenue was 2.421 billion yuan and its net profit attributable to the mother was 142 million yuan, down 3.44% and 12.9% year-on-year, respectively. Wufangzhai, which bears the aura of the champion of the Zongzi category, has "struggled" in the decline channel in terms of revenue and profit.
"Old trees sprout new shoots" is not easy, and the prospectus also reveals the anxiety of Wufangzhai's transformation and expansion period. This long-established brand that specializes in seasonal seasonal food still faces risks such as a single product structure, large seasonal fluctuations, and trapped regional markets.
In an interview with Caijing New Media, a number of industry insiders bluntly said that Wufangzhai has limited room for growth. Some investors have made the following judgment: Under the noisy competition pattern in the consumer industry, Wufangzhai wants to log on to the capital market with its existing body, which is a big challenge and may have a long way to go.
<h1 class="pgc-h-arrow-right" data-track="9" > "100-year-old Internet celebrity" who does not obey the old</h1>
WuFangzhai wanted to tell a new story that belonged to the old brand. From the launch of screen-brushing "sand sculpture advertising", to the joint name and cross-border play of taking the "net red" route, to the construction of automated and intelligent production lines, Wufangzhai frequently shows its heart of "not obeying the old".
Wu Fangzhai wanted to do more, but the reality was very bone-chilling. Due to its single financing means and limited financing scale, Wufangzhai is eager to use capital to achieve market breakthrough. Listing seems to have become the "antidote" to the rapid expansion of Wufangzhai.
In fact, a few years ago, the news of Wufangzhai planning to go public was reported. From 2019 to now, there have been small episodes, Wufangzhai has changed the listing counseling securities company twice in a row, and signed the listing counseling agreement with GF Securities, CICC and Zheshang Securities in turn.
In this IPO, Wufangzhai intends to publicly issue no more than 25.18575 million shares, and intends to raise no more than 1.056 billion yuan, which will be invested in projects such as smart food workshop, digital industry smart park, R&D center and information construction, Chengdu production base transformation and other projects and supplementary working capital.
Needless to say, brand potential energy is the toughest armor of Wufangzhai. Wufangzhai began in 1921 and ranked among the first batch of "Chinese time-honored brand" enterprises in 1992. According to the Ai Media Consulting Report, in the list of Chinese Zongzi brands in the 2020 Dragon Boat Festival, Wufangzhai ranked first, followed by Beijing Daoxiang Village, Zhenzhen Laolao, Zhiweiguan, Sanquan Food, etc.
Tracing the history, Wufangzhai is the overall reorganization of Jiaxing Wufangzhai Zongzi subsidiary, while absorbing Jiaxing Department Store, Jiaxing Meat Center, Jiaxing Brewing, Jiaxing Academy of Agricultural Sciences and 582 natural persons as the joint initiator, in 1998 the establishment of Zhejiang Wufangzhai Business Co., Ltd.
Subsequently, through the transfer of state-owned shares, Wufangzhai was transformed from state-owned assets into private enterprises. It can be seen from the penetration that Li Jianping and Li Haojia father and son each hold 20% of the shares of Wufangzhai Group, thus indirectly controlling the corresponding equity of Wufangzhai and becoming the actual controller of the company.
At present, the main business of Wufangzhai is dominated by glutinous rice food, including zongzi series, mooncake series, meal series, egg products, pastries, etc. By the end of 2020, Wufangzhai has two major production bases in Jiaxing and Chengdu, and has built 474 stores through direct operation, cooperative operation, franchise, distribution, etc., of which the direct-operated store "Wufangzhai" has landed in Jiaxing, Hangzhou, Shanghai, Wuhan and other cities.
From the perspective of performance growth, from 2018 to 2020, The revenue of Wufangzhai was 2.423 billion yuan, 2.507 billion yuan and 2.421 billion yuan, and the net profit attributable to the mother was 96.985 million yuan, 163 million yuan and 142 million yuan, respectively. In the prospectus, Wu Fangzhai attributed the decline in performance to the impact of the epidemic.
During the reporting period, the net cash flow from operating activities of Wufangzhai was about 86 million yuan, 244 million yuan and 362 million yuan respectively, and the ratio of net profit to the net profit in the same period was 0.90, 1.49 and 2.55 respectively.
In recent years, Wufangzhai has deliberately controlled sales expenses, and the sales expense rate has decreased slightly year by year. From 2018 to 2020, the sales expenses of Wufangzhai were about 770 million yuan, 760 million yuan and 690 million yuan respectively, and the three-year sales expense ratio was close to 30%, which was significantly higher than that of Guangzhou Restaurant (603043. SH), Three Whole Foods (002216. SZ), Babi Foods (605338. SH) and other listed companies average (17.61%).
Among them, the sales expense rate of Babi Food is only 5%, which is far lower than the industry average, mainly because it is mainly franchised, the number of directly operated stores is very small, and the cost of store rent is low. Wufangzhai attributed the high sales expense rate to the continuous expansion of business under various sales channels in recent years, and the related expenses such as transportation and storage fees, store rent and service fees were at a high level.
In order to comply with the trend of Internet consumption, Wufangzhai has increased its sales channels on Tmall, JD.com, Ele.me, Meituan and other platforms, and its e-commerce channel sales revenue has increased from 460 million yuan in 2018 to 670 million yuan. Among them, Jingdong is the largest sales channel of Wufangzhai with sales of 120 million yuan, 170 million yuan and 230 million yuan from 2018 to 2020, and the proportion of total revenue increased from 5% in 2018 to 9.5% in 2020.
Behind the above growth is the third-party platform service fee and promotion fee that has risen year by year. During the reporting period, the third-party platform fees of Wufangzhai were 70.1365 million yuan, 70.8059 million yuan and 90.5484 million yuan, accounting for 9.06%, 9.30% and 13.06% of the sales expenses respectively.
<h1 class="pgc-h-arrow-right" data-track="24" > the "Zongzi" market is not big? </h1>
As the big brother of the rice dumpling category, Wufangzhai has produced an average annual output of about 400 million rice dumplings in the past three years. According to the prospectus, the company's Zongzi business revenue in 2020 is 1.64 billion yuan, accounting for 70% of the contribution rate; the mooncake series revenue is 180 million yuan, accounting for about 8%. The growth of the revenue of Zongzi series products is the main reason for the growth of the company's main business income, and there are obvious seasonal fluctuations in sales.
Food industry analyst Zhu Danpeng told Caijing New Media that the product structure of Wufangzhai is too single, which has restricted its profitability.
So, how much imagination space does the "Zongzi" market leave for Wufangzhai?
According to statistics, in 2015, the scale of China's rice dumpling market was 4.916 billion yuan, and by 2019, it grew to 7.337 billion yuan, with a compound annual growth rate of 10.53%. It is estimated that by 2024, the scale of China's rice dumpling market will grow to 10.291 billion yuan. This category track seems to be bright.
"The rice dumpling market is not big." An investor who studies the consumer industry pointed out to Caijing New Media that Zongzi is a low-frequency consumption of solar term food, which relies too much on seasonality, is difficult to create high-frequency scenes, and has limited market capacity. Moreover, today's young people's consumption of traditional solar term foods is not high, and the awareness of long-established brands is not high.
The above investors emphasize that in the increasingly fierce industry competition, low-frequency products cannot compete with high-frequency products.
The decline in the capacity utilization rate of Wufangzhai products is already an indisputable fact. In the past three years, its capacity utilization rate was 121.30%, 84.82% and 60.57% respectively. In 2020, the production capacity of Zongzi series products was 450 million, and the independent production output was 270 million, which was a large decrease from the output of the previous two years. Wu Fangzhai explained that the decline in capacity utilization rate last year was affected by factors such as the new crown epidemic and insufficient recruitment during the Dragon Boat Festival.
Pulling the eye to the capital market, there is no listed company with Zongzi as its main business. In the Zongzi category track, the competitors circled by Wufangzhai are mainly Beijing Daoxiangcun, Sanquan Food, Taoli Bread (603866. SH) and so on. From the perspective of the competition pattern, the data of the national chain store supermarket information network shows that during the Dragon Boat Festival in 2019, the top three brands in the sales of Zongzi in the supermarket channel were Wufangzhai, Sanquan Food and Si Nian, and the sales amount accounted for 30.2%, 21.4% and 16.5% of the supermarket channel, respectively.
In the past year, the price of rice dumplings in Wufangzhai has increased and sales have declined. According to the data, the unit price of rice dumplings in 2020 was 3.68 yuan / 100g, up 15.04% year-on-year; sales were 44.62 millionkg, down 11% year-on-year, with a total of 370 million sold.
Affected by the epidemic, the price increase has not been able to "escort" the steady growth of gross profit margin. In 2020, the comprehensive gross profit margin of Wufangzhai was 44.57%, down 0.86 percentage points from 45.43% in the previous year. Among them, the gross profit margin of zongzi was 46.56%, down 0.34 percentage points from the previous year.
However, Wufangzhai's gross profit margin in the rice dumpling industry is still higher than the average of its peers. According to the data disclosed by Sanquan Foods and Taoli Bread, since 2012, the average level of the rice dumpling industry has fluctuated around 40%, and the gross profit margin of these two companies in 2020 is close to 30%.
Gross margin of comparable listed companies Data source: Prospectus
Song Xiangqian, president of CAV Capital, told Caijing New Media that long-established brands generally face a crux of development, mostly regional products, and it is difficult to form a brand that serves consumers across the country indiscriminately.
Focusing on the Zongzi market segment, there are two outstanding characteristics: first, there are fewer large enterprises in the industry, mainly small and medium-sized enterprises, and there are a large number of small-scale Zongzi manufacturing enterprises in the market that start from small workshops, and the market competition is sufficient; second, there are fewer national brands in the industry and regional brands are more prominent.
From the perspective of the proportion of revenue in various regions, Wufangzhai relies on geography more obviously. From 2018 to 2020, the company's main business income from East China accounted for 63.23%, 61.45% and 55.82% respectively. The North China market is the company's second largest source of revenue, accounting for about 13% of revenue in 2020, while central China, south China and southwest China are all the proportion of "number of you", and the northwest and northeast even account for less than 1%.
Revenue by region Source: Prospectus
From the perspective of the distribution of catering business stores, the direct stores of "Wufangzhai" are mainly concentrated in East China and Central China such as Zhejiang, Shanghai and Hubei, and have not entered the northern market. WuFangzhai said in the prospectus that when opening up new markets in other regions, the company's brand advantage will face challenges in the face of competition from local catering brands.
Wu Fangzhai revealed that in the next three years, it will continue to develop a directly operated Chinese fast food business, focusing on breakfast and meals, and the per capita consumption will fluctuate between 20 yuan and 40 yuan. It is expected to open 8 new ones in 2021, 13 new ones in 2022 and 30 companies in 2023, respectively.
<h1 class="pgc-h-arrow-right" data-track="43" > use data to resist "degradation"</h1>
The long-established brand that wants to change its fate through listing is not only Wufangzhai one.
There are many long-established companies in the queue, and Texas Grilled Chicken, who is more than 300 years old, has also started its IPO journey. According to media reports, in June 2020, Texas Grilled Chicken signed a listing counseling agreement with Guotai Junan Securities and is in the preparatory stage.
The relevant person in charge of a listed company told Caijing New Media that landing in the capital market does not mean that traditional brands can continue to eat the old with that golden signboard, on the contrary, the competitive pressure is very large. "If you want money, you have to live your thinking."
Looking at the A-share market, dozens of long-established brands have rushed to debut, and Guizhou Moutai (600519. SH) and so on in the A shares shine as yesterday, but there are also Quanjude (002186. SZ) is a long-established brand that is whipped by the annual report data. Not to mention the dog that has been defeated in recent years, it has been delisted after only 5 years of listing on the New Third Board.
In Zhu Danpeng's view, the old brands that cannot keep up with the speed of change in the consumer market will inevitably be photographed on the beach.
Song Xiangqian also said that the consumer industry looks like a low threshold, in fact, the competition barriers are very high, because there is always pressure to innovate, and players must have a very strong ability to capture changes in consumer behavior and consumer market. At present, many long-established brands do not have this ability, they are easy to "lie flat" when they achieve a certain scale, lie on the past brand potential, lie on the original consumer cognition, and slowly lose their due competitiveness and vitality, and are beaten up in the cruel business competition.
"A lot of old brands have degenerated because the underlying logic of the feasible set has been lost - the lack of brand refresh factors, the lack of iterative updates of products, especially the lack of respect for consumers and reverence for the market." Song Xiangqian added.
Despite the pressure of performance growth and breakthrough, Wufangzhai seems to stand on the opposite side of "degradation" and is committed to exploring the path of brand rejuvenation and brand appreciation. For example, combined with the precision marketing of big data technology, it is close to young people through taste innovation, IP co-branding, private customization and other methods.
If the main low-frequency products are the weakness of development, now Wufangzhai has opened up new thinking: how to make products move from low frequency to high frequency? This is also a concern of capital.
In order to optimize the company's product structure, Wufangzhai has focused on low-frequency consumption of rice dumplings to develop the market of baked and quick-frozen foods with high-frequency consumption. According to the prospectus, the company's R&D investment increased from 6.9192 million yuan in 2018 to 10.0854 million yuan in 2020. In terms of non-rice dumpling product development, the company adheres to the orientation of Jiangnan dim sum flavor and develops wontons, roasted sales, soup balls, rice balls and other products.
Wufangzhai also mentioned "intelligence" and "informatization" many times, indicating its determination to improve the company's operating efficiency. For example, it is necessary to "further increase the supply capacity of high-end products and seize the future market growth point"; to use big data to upgrade the process of product research and development, design, production and so on, while creating new shopping scenarios and setting up smart stores offline.
An intriguing question is, is listing really the best solution for the old brand to escape the transformation dilemma?