Image source @ Visual China
Wen 丨 Guan Tide New Consumption (id: tidesight), author 丨 Wang San, editor 丨 shiso
When the saying that "takeaway beats instant noodles" is ruthlessly debunked by the home economy, the giant still stands on the top of the mountain.
On August 23, Master Kong released his interim results for the year ended June 30, 2021. According to the report, Master Kong achieved operating income of 35.396 billion yuan in the first half of the year, an increase of 7.47% year-on-year; gross profit was about 10.992 billion yuan, and net profit was 2.04 billion yuan.
At present, internet red catering is popular, capital is hunting new consumer brands, internet red hot pot, snacks, milk tea are popular, the last kilometer of the community is crowded with small noodle restaurants, fast food noodles in the supermarket to divide the most eye-catching shelves, instant noodles seem to be able to survive in the cracks.
Can a bowl of braised beef noodles and a bottle of iced black tea build the strongest fortress for Master Kong?
In the "home economy" triggered by the epidemic last year, the instant noodle industry has spent a glorious period of "returning to the light".
When "stay-at-home" became the norm, the logistics and takeaway industries slowed down, and instant noodle-based fast food became a must-have, and it also became one of the few categories in the food industry that was not affected by the epidemic and was boosted.
Although Master Kong's instant noodle business has maintained positive growth, the growth rate has slowed down, and instant noodles are really not easy to sell.
According to the data, in the first half of this year, the overall revenue of Master Kong's instant noodle business was 12.722 billion yuan, accounting for 35.94% of the group's overall revenue; net profit fell by 47.1% year-on-year to 896 million yuan. In the same period last year, the overall revenue of Master Kong's instant noodle business was 14.91 billion yuan, an increase of 29.16% year-on-year, and the net profit was 1.694 billion yuan, an increase of 93.54% year-on-year.
"Home economy fever, healthy diet continues to popularize, coupled with the Internet celebrity fast food such as snail powder, self-heating rice, self-hi pot alternately occupy the minds of consumers, "unhealthy" instant noodles business data decline in the reasonable.
According to Nielsen data, in the first half of 2021, the overall sales volume of the instant noodle industry fell by 7.7% year-on-year, and sales fell by 7.3% year-on-year. However, although the growth of the instant noodle industry has slowed, neither braised beef noodles nor Lao Tan sauerkraut noodles have become history.
As early as 2010, as the largest consumer of instant noodles, China's instant noodle industry has shown a downward trend year after year. According to the World Instant Noodles Association (WINA), from 2013 to 2017, the demand for instant noodles in the Chinese market fell from 46.22 billion to 38.96 billion, a cumulative decline of about 15.7%.
Also subject to the downturn in the industry, Master Kong suffered three consecutive declines in revenue from 2014 to 2016.
The turning point came in 2017, when Master Kong closed the factory in a large area, cut off the low-priced noodle product line, and focused on consolidating the market position of the dominant products, achieving a bottoming out.
In the first half of 2019, it was mentioned in the financial report that the sales of Master Kong's high-priced bag noodles and container noodles have increased, while the sales of medium-priced bag noodles and crisp noodles have continued to decline, and the decline in dry noodles has reached 19.21%.
At the same time, Master Kong also caught up with the express train of new retail. The relevant person in charge of Master Kong once said, "Strengthen cooperation with new retail such as Ali, JD.com, Suning Tesco, and increase penetration in emerging growth channels such as e-commerce, convenience stores, and special channels such as catering, parks, and trains/high-speed rail." ”
In addition, Master Kong has accelerated the digital layout in the process of transformation, introducing artificial intelligence and big data, including the promotion of the self-developed intelligent channel online management platform "Master Tong" system to help the instant noodle business cope with the impact of takeaway and other industries.
The report of the World Instant Noodles Association mentioned that since 2013, due to the rapid rise of the takeaway industry, China's instant noodle market has shown a downward trend, but in recent years, relying on the development of high-end instant noodles market, the domestic instant noodle market has gradually picked up.
"Price increases" are one of the secrets. Not only Master Kong, but also instant noodle brands such as Unity, Immai Lang, and Baixiang have also launched high-end products, subtly rewriting consumers' perception of instant noodles.
Reflected in the market level, the most intuitive feeling of consumers is that the price of instant noodles continues to rise, and the way of eating is also changed from the "seasoning package + hot water brewing" to the ritual-filled "original soup + multi-ingredient + boiled noodles".
However, Master Kong still occupies 40% of the instant noodle market, and "not being able to sell" is not the core problem of traditional brands.
The instant noodle industry is still strong, but it does not mean that the dominance of the instant noodle business within master Kong Group is still strong.
Judging from the financial data for the first half of 2021, Master Kong's current hidden danger lies in the decline in net profit, and the instant noodle business seems to be the biggest factor dragging down the group's profit.
According to the financial report data, Master Kong's net profit attributable to his mother in the first half of the year was 2.035 billion yuan, down 14.50% year-on-year. The company explained that it was affected by the year-on-year decline in gross profit margin and the year-on-year increase in distribution cost ratio.
In the first half of this year, the gross profit margin of Master Kong's instant noodles business decreased by 6.46 percentage points year-on-year to 23.89%. Master Kong said that the main reason for the decline in gross profit is excessive cost expenditure, such as an increase of 50 million yuan in administrative expenses, as well as the cost of rising raw material prices.
Another instant noodle giant unified, the first half of this year's net profit also fell by 20.4% year-on-year, also facing the situation of "increasing revenue without increasing profits", and also listed the price increase of raw materials as one of the reasons.
Rising raw material prices have begun to affect many industries. Due to the spread of the international epidemic and the impact of bad weather, the supply side and demand side of wheat and palm oil have been out of balance, resulting in short supply and rising prices. This is a chain reaction caused by the vibration of the source of the industrial chain under the trend of economic globalization.
For example, in South Korea, where the per capita consumption of instant noodles is the highest in the world, a number of representative instant noodle products have successively raised product prices. Among them, the most representative enterprises such as golden ramen and xin ramen said that the reason for the price increase was that the prices of major raw materials such as wheat and palm oil continued to rise sharply, and the overall income of enterprises continued to deteriorate.
Compared with the domestic market, instant noodles have a similar role in South Korea, but the meaning is completely different. There are more Korean ramen restaurants, and instant noodles are also a must-have food for many families. CCTV Finance mentioned in the report that the price increase of instant noodles is expected to trigger a collective increase in the price of processed foods in South Korea, which has become a signal for South Korea's price increase in the second half of the year.
In China, the impact of the price increase of instant noodles will not be as serious as in South Korea, but it will indeed have a substantial impact on enterprises whose main business is instant noodles.
China Grain and Oil Information Network mentioned in a number of "daily market summaries" at the end of August that the current domestic wheat prices are generally stable, but the current traders are in a state of dilemma between purchase and sale, with no profit at high prices and low prices. Globally, wheat production has been reduced in some countries due to bad weather, so supply and demand are still tight.
In terms of palm oil, according to the multi-day data of China Grain and Oil Information Network, the current domestic palm oil spot market still has an upward trend.
Raw material prices rise, to the rise in product prices, there is often a certain delay, the current wheat prices fell but the dilemma of purchase and sale, palm oil is still rising in price, the entire instant noodle industry is still facing greater uncertainties.
In order to alleviate the cost pressure, Master Kong said that he plans to increase the ex-factory price and retail price of large-packaged barrel and bagged instant noodle products, an increase of about 7%-12%, and the revenue of these two types of products in Master Kong's instant noodle business accounts for about 15%.
The price increase strategy can increase the growth of net profit in the short term, but it is obviously not a long-term solution.
In addition, the instant noodle industry is becoming more and more "volume" in terms of health and high-end. For example, Imabari launched the non-fried "Old Fan Jia Noodle Noodle Series" instant noodles; Master Kong launched high-end noodles with beef nuggets, "Express Noodle Restaurant" and "Speed Cooked Noodles", "Speed Self-heating Noodles" and so on.
Entrepreneurs always have enthusiasm for the small matter of "eating noodles", and this year's capital also loves "noodles".
CCTV Finance reported that in the first half of this year alone, at least 8 noodle chain brands obtained financing, with an amount of more than 1 billion yuan. Among the number of catering stores in the country, the number of snack fast food stores accounts for the highest proportion. Among them, flour noodles account for more than 20%, and the number of stores has reached nearly one million.
Behind these "faces", there are not only well-known investment institutions such as Sequoia Capital, Shunwei Capital, and GSR Venture Capital. Jin Noodle Hall, Ramen Noodles, and Fulao Noodles have become sought-after investment objects, and even chain restaurants such as Haidilao have also entered the market with high profiles, and Lu Zhengyao's latest entrepreneurial project is also a small noodle.
The instant noodle business is not ideal, but I never expected that Master Kong's beverage business is still "hegemonic".
According to the financial report, in the first half of 2021, Master Kong Beverage Division achieved an overall revenue of 22.276 billion yuan, an increase of 26.45% year-on-year, accounting for 62.93% of the group's overall revenue; the net profit margin was 1.182 billion yuan, an increase of 41.04% year-on-year.
From the perspective of the overall revenue proportion and its own growth rate, the beverage business has gradually become the driving force for the development of Master Kong Group.
Nielsen data shows that the overall sales volume of the beverage industry in the first half of 2021 increased by 15.7% year-on-year, and sales increased by 17.6% year-on-year. The growth rate of Master Kong's beverage business exceeded the average growth rate of the market, and its own net profit growth rate also exceeded the revenue growth rate.
The cost-effective demand for ready-to-drink also prompted Master Kong's ready-to-drink tea (including milk tea) to reach 42.1%, ranking first in the market; juice sales accounted for 17.5%, ranking second in the market; packaged water sales accounted for 6.2%; ready-to-drink coffee sales market share of 12.1%, ranking second in the market.
At present, Master Kong's hegemonic position in the field of bottled beverages is difficult to shake. However, the era of a single product in the world is already a thing of the past, and multi-line layout and intensive cultivation are the mainstream of the current beverage market.
Since 2020, Master Kong has begun to increase the layout of sugar-free and low-sugar products. Three kinds of tea products with the main sugar-free concept have been listed successively, such as the sugar-free version of iced black tea. It was mentioned in the financial report that Master Kong's low-sugar tea beverage products have accounted for nearly 30% of the sales share of tea drinks.
Although the traditional bottled juice was snubbed by the market, PepsiCo Cut the Juice business, and Huiyuan Juice was bankrupt and delisted, Net Red brands such as Xicha and Naixue began to seize the bottled beverage market.
For example, since 2019, Xicha has begun to lay out the research and development of bottled beverage products with the sparkling water category as the starting point, and introduced the war into the hinterland of bottled beverage giants such as Master Kong. In July 2020, Heytea launched grape-flavored sugar-free sparkling water products, and in June this year, it launched a series of juice tea products.
In addition to the continuous competitive pressure of other brands at the new product level, there are also shortcomings in Master Kong's beverage business, such as bottled water.
In 2004, Master Kong began to enter the bottled water market. In the 2007 semi-annual report, it was mentioned that its mineral water had a national market share of 17.3% in June of the same year, becoming the first place in the bottled drinking water market for the first time. Until 2008, Master Kong's bottled water still ranked first with a market share of 25%.
But Master Kong seems to have ignored the "diversity" of this part of the business, and did not expect that the colorless and odorless pure water could be played out. The popularity of products such as "cool white open" and "drinking boiled water", as well as the high-priced brand Baishishan from being unknown to ranking among the top ten, all reflect the transformation of the bottled water market to refinement, high-end and health.
It was not until May 2020 that Master Kong began to enter the cooked water market and launched a new product "drink boiled water", at which time the market share of Master Kong bottled water has fallen to the fourth place.
In the beverage market, the first brands to make explosive products are more explosive. Even the brand with the largest market share cannot always eat the old money, and the change in the ranking of the bottled water market is a clear example.
Among the bottled beverage products that helped Master Kong occupy the first place in market share in the first half of this year, old products such as iced black tea, green tea, and rock sugar Sydney are all great contributors, but these products were launched around 2011.
In the wave of high-end and health in the beverage industry, Master Kong is waiting for the next explosive product.
Since the development of the first package of instant noodles in Tianjin in 1992, Master Kong has always regarded instant noodles as his core business. In the past three decades, this package of instant noodles has experienced health questions, been satirized by "only using one cow all year round", and also withstood the dimensionality reduction of emerging industries such as takeaway.
At present, Master Kong and the unified financial report both reveal a changing trend: beverages are replacing the status of instant noodles as the most profitable business.
However, the instant noodle market and the bottled ready-to-drink market tend to be saturated, and the industry continues to "high-end volumes", and it is not easy to maintain the sustained growth rate of the two major business sectors. Mixed emotions may be the best annotation of Master Kong's semi-annual report.
After all, for consumer brands, many internet celebrity products are short-lived, and it is the best to live in the end.