Author | Li Jinglin
Mao Geping, who makes all the girls on the Internet want to "send their heads", is about to land on the secondary market with his own beauty brand.
On October 21, according to the disclosure of the Securities Regulatory Commission, Mao Geping Cosmetics Co., Ltd. will be successful, and it will be on the main board without accident, and the A-share market is about to usher in the "first share of national tide makeup".
As early as December 2016, Mao Geping had a listing plan and submitted a prospectus. However, the review was abruptly terminated after a year. Mao Geping's suspension of review status was remarked by the CSRC as "Situation 4", that is, "the issuer took the initiative to request the suspension of the review or otherwise caused the review work to be unable to be carried out normally." This also seems to mean that it is Mao Geping himself who pressed the IPO pause button.
This suspension is five years, so that after this meeting without warning, Mao Geping's prospectus data has not been updated, still stuck in 2017. In the past five years, the domestic beauty market has also undergone tremendous changes driven by e-commerce. The accelerated influx of capital has also made the beauty cake bigger and bigger.
MGPIN brand products Source: Mao Geping Weibo
According to ai media network data, the domestic cosmetics industry investment and financing events increased from 15 in 2019 to 46 in 2020, and by 2021, it took only eight months to exceed the data of the previous year, and the investment and financing events that occurred reached 49, raising a total of 5.66 billion yuan, with an average single investment amount of about 115 million yuan.
During this period, the rise of new brands accelerated. In November 2020, Perfect Diary successfully went public in the United States five years after its establishment, and behind it stood a number of well-known investment institutions, such as Zhen Fund, Hillhouse Venture Capital, Gaorong Capital, cmc Capital, etc.
Founded a little later, GMV once surpassed the perfect diary and became one of the best-selling brands in the national tide of beauty. According to the late post, Huaxizi's team has been in contact with Hillhouse Capital and Sequoia Capital.
Back in 2017, when Mao Geping mentioned in the prospectus that the main competitor of his brand was a big name from overseas. However, with the passage of time, when the market is moving, domestic beauty is suddenly emerging, and Mao Geping's opponents are more.
Today's Mao Geping brand, where are the advantages and disadvantages in the market? Pulling aside the five-year-old data, we can still find some clues.
First, let's look at the revenue side. According to the prospectus, from 2014 to the first half of 2017, Mao Geping achieved revenue of 279 million yuan, 321 million yuan, 343 million yuan and 201 million yuan, and net profit attributable to the mother of 47.1126 million yuan, 54.6247 million yuan, 53.3197 million yuan and 35.6197 million yuan. In addition to a slight decline in net profit in 2016, Mao Geping's operation basically maintained an upward trend.
According to the data released by the National Enterprise Credit Information, between 2018 and 2020, Mao Geping's sales continued to rise, at 389 million yuan, 556 million yuan and 730 million yuan, respectively. Overall, after 2018, Mao Geping entered a stage of relatively rapid growth. In 2015 and 2016, its revenue growth rate was 15.05% and 6.85%, respectively, and by 2019, Mao Geping's revenue growth has reached 42.93%.
In terms of net profit, during the period from 2018 to 2020, it was 0.82 billion yuan, 126 million yuan and 175 million yuan respectively, of which the net profit in 2019 and 2020 increased by 53.66% and 38.89% respectively year-on-year.
However, compared with the new consumer brands that have emerged, Mao Geping has a huge gap in revenue. Perfect Diary's parent company, Yixian E-commerce, reached 7.23 billion yuan in 2020, almost ten times the revenue of Mao Geping.
Mao Geping's main business focuses on two aspects, including the production, research and development, sales of makeup and skin care products, and makeup skills training. Among them, at the brand level, the brand "mgpin" named after the founder is the core brand of the company. Mgpin takes the high-end, light luxury positioning, according to the prospectus, the proportion of revenue contributed by the brand, basically maintained at more than 70%, is the absolute pillar of revenue.
Revenue of Mao Geping's business lines Image source: Prospectus
In addition, Mao Geping also has a brand positioned at female consumers in second- and third-tier cities, "Love Forever", from 2014 to the first half of 2017, the brand's revenue was 46.65 million yuan, 50.63 million yuan, 37.15 million yuan and 22.07 million yuan, accounting for only 17.42% of the total revenue at the highest.
The two brands also have differences in sales channels, mgpin is mainly based on the direct sales model of high-end department stores, and Zhiai Life has chosen the dealer model, as of June 2017, there are 31 dealers in cooperation.
Until at least 2017, Mao Geping's main distribution channel was offline. As of June 30, 2017, mgpin had a total of 135 department stores nationwide. The revenue from e-commerce channels only accounts for about 2% of Mao Geping's total revenue.
Indeed, in the early popularization stage of makeup products, consumers were mainly concentrated in first- and second-tier cities, and high-end brands were mainly concentrated in department stores. Offline is not only the main sales channel, but also the main position to build brand image and attract customers, but in the five years since Mao Geping's financial data stopped, the domestic beauty market is being profoundly changed by e-commerce channels.
According to euromonitor data, the proportion of e-commerce channels in China's cosmetics market has increased rapidly from 2.6% in 2010 to 38% in 2020, becoming the largest channel, while offline supermarkets, department stores, and professional channels account for 17.9%, 16.7%, and 17.6% respectively. Online has indisputably become the main front for the sale of beauty products.
Hua Xizi relied on Li Jiaqi to play the brand image source network
The emergence of new consumer brands has also changed the traditional way of playing in the beauty industry. Taking Perfect Diary and Huaxizi as examples, the two generations of "Light of Domestic Goods" are brands that started online. Relying on the dividends of emerging content platforms, Perfect Diary has entered the explosive period of the brand since 2018. Hua Xizi is closely related to the live broadcast with goods outlet, relying on Li Jiaqi's live broadcast to continuously refresh sales.
Two new consumer brands have personally demonstrated domestic beauty - through online marketing or big anchors to achieve brand breakthroughs, and quickly seize the user's vision and mind. According to the perfect diary prospectus, in the third quarter of 2020, its offline stores have opened to 163, but offline revenue is less than 10% of the total revenue.
In the past five years, new channels, new users, and new playing methods have completely changed the situation of the beauty industry, and Mao Geping has also changed the "old yellow calendar" based on offline and begun to transform to online.
According to the data of Wanlian Research Report and Kaiyuan Securities Research Report, in the first half of 2021, Mao Geping's sales in the Tmall flagship store alone reached 130 million yuan. Compared with the online channel revenue of 3.4427 million yuan in the first half of 2017, the increase was as high as 3723%. If we roughly calculate the sales of 730 million yuan in 2020, Mao Geping's online revenue has accounted for more than 35%.
The pace of evolution is obvious, but in horizontal comparison, the gap between Mao Geping and Mao Geping is still obvious. According to the data released by Wanlian Securities, from January to May 2021, the sales of Mao Geping's Tmall flagship store were 102 million yuan, while the sales of Huaxizi in the same period were 1.39 billion, Perfect Diary was 1.077 billion, and Polaria also reached 499 million yuan. Mao Geping, who started late on the line, was thrown away a lot of distance.
Unlike the upstarts, Mao Geping's investment in marketing is not so fierce. Prior to 2017, the company spent extremely little on advertising and publicity. According to the prospectus, the expenditure on advertising expenses and business promotion expenses during the reporting period was 11.32 million, 11.42 million, 14.41 million and 7.94 million, respectively, and the proportion of this part of expenditure was only about 4% of the receivables.
In contrast, from 2018 to 2020, the expenditure of Yixian E-commerce in sales and marketing expenses was 309 million yuan, 1.251 billion yuan and 3.412 billion yuan respectively, accounting for 48.69%, 41.28% and 65.24% of the revenue in the same period, respectively, with a huge disparity.
This is related to Mao Geping's thinking of focusing more on mining the value of personal IP. As we all know, Mao Geping is Liu Xiaoqing's royal makeup artist, and his personal IP value has long been recognized by users. The Mao Geping brand has also formed a deep binding with its personal IP, so it has become the marketing path chosen by Mao Geping through its own IP effect to the brand.
Mao Geping was stationed in Xiaohongshu and B station respectively
Even in recent years, when doing marketing on emerging content platforms, Mao Geping still follows this line of thinking. In May 2020, Mao Geping personally settled in station b, and so far has released 11 video content, gaining more than 820,000 fans. In terms of marketing strategy, Mao Geping has taken a different path from other brands.
Under the wave of new consumption, marketing has become an important means for brands to quickly seize the market, through large-scale investment to shape the explosive model, in a short period of time to seize the attention of consumers. However, for consumer brands, explosive models are easy to obtain, and the construction of brand power is often a long-term process, and continuous investment in research and development and improvement of product quality may be more critical factors.
Research and development is the weak link of many new and old domestic beauty brands, and Mao Geping's research and development expenses account for less than 1% of revenue.
Mao Geping made it clear in the old version of the prospectus that the company has not yet built its own cosmetics production line, and the products mainly rely on the outsourcing processing mode for production. The proposed funds raised through the IPO of 512 million yuan will be used for channel construction and R&D center construction.
Mao Geping R & D expenses as a proportion of revenue Source: Prospectus
Through the prospectus, the problem is clearly laid out. As of June 2017, of the total 1321 employees, only 15 R&D personnel, accounting for 1.14% of the total employees.
It should be known that the mgpin brand is positioned in the middle and high-end, and when the brand is positioned, the main competitor is also an overseas big name, and L'Oréal's research and development expense rate in 2020 will reach 3.44%.
From the cost point of view, Mao Geping's main inputs are concentrated on the procurement of raw materials and foreign contracts and purchased products, which is highly dependent on suppliers' production mode, but also invisibly brings risks to the brand, from production to delivery of all aspects, autonomy can not be completely guaranteed.
However, from another point of view, the foundry production model has reduced the cost input of the brand to a certain extent, which also allows Mao Geping to obtain a very high gross profit margin.
During the reporting period, the gross profit margin of Mao Geping Company remained stable at around 80% (81.5%, 79.7%, 78.22%, 78.88%), and the overall level was higher than that of other brands in the industry. At that time, L'Oréal's gross profit margin was around 71%, and Shiseido's gross profit margin was slightly higher, but it was also around 75%.
Comparison of gross profit margins of Mao Geping's product lines Source: Prospectus
If different product lines are subdivided, the high-end mgpin brand has made a major contribution in it, and since 2014, the gross profit margin has been 87.21%, 86.36%, 85.03% and 85.95% respectively.
The simple division of business and the small number of product lines are also one of the reasons for its high gross profit margin. L'Oréal covers more than 30 sub-brands, products involving beauty, personal care and other fields, covering a wider range of consumer groups, compared to Mao Geping mainly rely on high-end series to drive sales, the average gross profit margin will naturally be pulled down.
In the current Chinese consumer market, the advantages and disadvantages of the OEM model are prominent. For brands, the key is to choose different strategies according to their own development.
Perfect Diary also started by relying on the FOUNDC model. Due to the accumulation of overseas cosmetics brands for many years, the domestic supply chain has developed relatively mature, and domestic brands can use this convenience to achieve rapid growth. According to the Yixian e-commerce prospectus, Perfect Diary only takes six months from the concept of the new product to the development and launch, which is far lower than the 7-18 months usually required by international brands.
However, there are still certain risks in the OEM model, whether in the quality link or long-term cost management, there are uncertainties, bringing unforeseen risks to the brand. On the road of upgrading and expansion, many brands have also begun to choose to build their own factories. In 2019, Li Ning, a domestic shoe and apparel brand that has insisted on outsourced production for 30 years, began to invest in the construction of R&D and manufacturing supply bases. Yuanqi Forest also invested 5.5 billion yuan in this year to build factories in Anhui, Tianjin, Guangdong and other places.
Li Bing, general manager of Yuanqi Forest Production Center, once said: "From 2018 to 2020, we have encountered many production and supply interruptions in a row. At that time, the scheduling of products was decided by the foundry, and once the foundry production plan changed, it would lead to a disconnect in the production of our products. This sentence is also enough to represent the dilemma of consumer brands in the OEM model.
After five years of re-listing, Mao Geping maintained a relatively stable revenue situation. Times have passed, and the current Mao Ge plane is facing more new pressures, but the opportunities have also changed compared to 5 years ago, and perhaps with the help of listing, they can find new breakthrough points.