domeet webmaster

Can the flying crane with the banner of “more suitable for Chinese baby’s physique” restore consumers’ confidence in domestic milk powder? After the market value surpasses Mengniu, can Feihe stabilize the “leading throne” of the dairy industry? With the rapid decline in the birth rate of the population, what is the biggest problem that plagues Feihe?

1, the new dairy giant

China’s new dairy giant is rising.

AC Nielsen released data at the end of 2019. As of September 30 of that year, Feihe has become the number one brand in the Chinese infant milk powder market, with an overall market share of 11.9%.

The rise of the flying crane has long been a sign. In 2018, Feihe became the first domestic milk powder company with a revenue of over 10 billion yuan.

Looking at the long-term span, Feihe has continued to grow in recent years. From 2016 to 2019, Feihe’s revenue was 3.724 billion yuan, 5.887 billion yuan, 10.392 billion yuan, and 13.722 billion yuan, and net profit reached 406 million yuan, 1.160 billion yuan, 2.242 billion yuan, and 3.935 billion yuan, respectively.

In the capital market, Feihe staged a “contrarian reversal” drama.

On November 13, 2019, Feihe made its debut as “the first dairy company with the highest market value in the history of the Hong Kong Stock Exchange. It is embarrassing that Feihefu encountered investors “voting with his feet” as soon as he went public to close the market, and then fell for several consecutive days. It is worth noting that Feihe’s issue price of HK $ 7.5 / share is already the lower limit of the guide price range.

From this point of view, Hong Kong stock investors do not seem to be optimistic about Feihe.

To make matters worse, Feihe encountered short selling by independent accounting research firm GMT Research in just 7 trading days. GMT questioned the rapid growth of Feihe’s income, profitability, and holding a lot of cash without dividends. He believed that Feihe’s transformation was too fast to explain, and there were fraudulent features. Investors were advised to avoid it.

However, this short sale unexpectedly became the starting point for Feihe’s stock price to take off. After Feihe issued a clarification announcement and resumed trading, its share price swept away and began to rise steadily. In addition to being included in the stimulus factors such as Hong Kong Stock Connect and 2019 performance growth, Feihe’s market value quickly surpassed dairy giant Mengniu and took the throne of the Hong Kong stock dairy industry’s market value.

As of the close of April 29, the market value of Feihe has reached HK $ 144.363 billion, followed by Mengniu ’s market value of HK $ 108.823 billion, a difference of HK $ 35.54 billion.

In terms of revenue, the two are not in the same order of magnitude. In 2019, Feihe ’s revenue was 13.722 billion yuan, which was only a little over one-fifth of Mengniu ’s 79.03 billion yuan in revenue; but in terms of net profit, The difference between the two companies is not too big. Feihe’s net profit is 3.935 billion yuan, which is only less than 200 million yuan less than Mengniu’s.

This dairy company, which was established in 1962, has finally taken off at an age close to the year of the flower.

2. The mystery of rising

In the eyes of Zhu Danpeng, an analyst of the Chinese food industry, Feihe ’sHigh growth means that the development of domestic milk powder has reached a new height.

The melamine incident in 2008 caused domestic milk powder to fall to the bottom overnight. Many brands fell. The domestic milk powder that originally held 65% of the market share quickly fell to 20% after the incident broke out. Feihe is one of the few “survivors” who did not involve melamine and was able to survive.

Leng Youbin, chairman of China Feihe, later recalled: “After the melamine incident, because we were one of the few dairy companies in China that did not involve melamine, our stock price rose from more than one dollar to more than 40 US dollars. “

The domestic milk powder industry has been hit hard and quickly entered the stage of reshuffling.

Under a series of policies such as the national milk powder formula registration system, domestic brands such as Feihe gained development opportunities, and their overall market share also recovered. Nielsen data shows that the market share of domestic milk powder in 2018 increased from 40.7% in 2017 to 43.7%, and the sales growth rate increased from 14.5% in 2017 to 21.1%.

Zhu Danpeng analyzed “Bullet Finance” that the rapid development of Feihe has benefited from the country’s support for domestic milk powder and the improvement of the overall level of China’s milk powder industry chain, relying more on Feihe’s unique industry chain internally Advantages, product power of high-end products, channel power, team landing ability and customer support.

“Feihe ’s landing ability is very strong. More than 500,000 road shows a year, the brand reputation of domestic milk powder and the popularity of Feihe are greatly improved, and the education of Chinese mothers is also in place.” Zhu Dan Peng further said.

“In recent years, most domestic milk powders have achieved relatively good development. In addition to Feihe, there are Junlebao and Aoyou. Feihe has grasped its own time point better and the overall brand tone is also higher. “New retail expert Bao Yuezhong summarized” Bullet Finance “that Feihe has done a good job in three areas, and has achieved a rapid rise.

First of all, Feihe has done a good job in brand promotion. “Feihe has seized the ascending channel of domestic milk powder, and the overall tone is more reasonable in brand promotion, the overall brand image has been raised, and a better development goal has been achieved.”

Secondly, Feihe ’s channel construction is relatively complete. “From the perspective of my investigation, Feihe has done a relatively good channel system in maternal and child stores and milk powder franchise stores, and has built a relatively complete channel system.” “Bullet Finance” consulted Feihe’s 2019 financial report to understand By then, it mainly sells products through more than 1,800 offline customers across the country, covering more than 109,000 retail outlets.

Once again, Feihe’s customer service system has done a good job. “In terms of operating users, Feihe has taken a step forward compared to other enterprises, and consciously did more work in serving target users and key users. During the epidemic, Feihe also launched corresponding measures.”

Policy support + peer support + own efforts, this “three-pronged approach” allows Feihe, which is located in the northeast corner, to grow from a local dairy enterprise to a dairy giant in the country. However, this does not mean that Feihe can sit back and relax.

3. Feihe hidden worries

In addition to the rapid growth of Feihe, we were able to get a glimpse of the importance of brand building for corporate development, but at the same time witnessed how Feihe was caught in controversy.

In 2015, Leng Youbin, Chairman of China Feihe, once invited a consulting company to reorganize Feihe ’s strategic plan, determine the marketing strategy of “more suitable for Chinese baby ’s milk powder”, and compare brand positioning with domestic and foreign milk powder Make a clear distinction and form differentiated competition.

Later, Feihe was highly bound to marketing giant Focus Media, hired international movie star Zhang Ziyi as a spokesperson and more than 500,000 face-to-face seminars a year, gradually increasing Feihe’s brand awareness.

In terms of product structure, Feihe has successively launched products such as ultra-high-end Xingfeifan, high-end Zhen Aipu product series, and ultra-high-end Zhen nai organic, etc., to create a high-end brand positioning. The brand-new positioning and unique play style have paid off in just a few years-in 2019, Feihe ’s high-end infant formula milk powder product line achieved revenue of 9.412 billion yuan, accounting for 68.6% of total revenue.

There is no doubt that the heavy investment in brand building has also made Feihe’s marketing expenses high.

From 2016 to 2019, Feihe’s sales and distribution expenses increased from 1.369 billion yuan to 3.848 billion yuan, and each year is about 30% of annual revenue. The total sales and distribution expenses in 4 years are as high as 11.017 billion yuan. 32.67% of total revenue in 4 years. This is in stark contrast to Feihe ’s R & D investment of more than 100 million yuan per year. The outside world believes that Feihe “emphasizes marketing but defies R & D”, and doubts its development towards high-end or insufficient stamina.

However, Zhu Danpeng holds a different view on this. He believes that the emphasis on marketing or R & D is not clearly defined. The different development stages of an enterprise have a focus on the marketing and R & D sides. When the formula reaches a certain advanced level, the enterprise will focus on marketing; when the competitors catch up, the enterprise will re-do some innovations and upgrades, which is a dynamic process.

Bao Yuezhong also bluntly said to “Bullet Finance”: “Milk powder is not a category that mainly depends on research and development. Its research and development is mainly to develop a formula for different infants and young children. But generally speaking, the development of milk powder products does not Unlike other products that iterate so fast. As a milk powder company, the core issue is marketing, and then quality assurance. From the industry situation I investigated, it is not the primary task of milk powder companies to quickly and continuously develop new products. . “

But Feihe ’s worries remain—increasing sales and distribution expenses have not been able to achieve the same high growth.

In 2019, Feihe ’s sales and distribution expenses reached 3.848 billion yuan, and its revenue and net profit increased by 32.04% and 75.47% year-on-year respectively. In other words, Feihe may have encountered growth bottlenecks.

In terms of income structure, Feihe still has the problem of “single profit point”, and its performance is highly dependent on infant formula milk powder products, which is equivalent to Feihe “only one weapon” when facing many competitors.

Taking 2019 as an example, Feihe ’s infant formula product series accounted for 91.4% of the total revenue, and other dairy products and nutritional supplements accounted for only 8.6%.

Picture / China Flying Crane Announcement

Feihe first made a “rural surrounded city” strategy for third- and fourth-tier cities, making it slightly less competitive in first- and second-tier cities controlled by imported milk powder. Feihe’s further expansion in the high-end market is obviously a big obstacle.

The strong rise in the field of milk powder has made Feihe a new dairy giant, but the capital market needs more growth stories. For Feihe, whose current growth rate is declining and whose profit point is single, how to tell the next capital story is particularly important.

4. The collective predicament of domestic brands

Consumers ’confidence in domestic milk powder still needs to be strengthened, and the decline in the birth rate of the population is also a real problem facing domestic milk powder brands such as Feihe.

“As a treasure mother of two children, I have never given domestic milk powder to my children.” Reader Zhang Ting (pseudonym) said in the discussion of the development of the milk powder industry in the “Bullet Finance” reader group.

This is not only related to the devastating impact of the melamine incident on people ’s trust in domestic milk powder. In recent years, domestic milk powder brands have shifted to high-end and increased prices, which has also caused some consumers to call them “ca n’t afford”.

“Some domestic milk powders are more expensive than foreign milk powders,” reader Xie Linlin (pseudonym) said: “The Swedish milk powder that my baby eats when he was a child is subsidized by the Swedish government. The 800g price is only more than one hundred yuan. .Domestic milk powder Feihe Xingfeifan series is not cheap, more than 300 yuan per can. “

“This has fallen into the misunderstanding of the” foreign moon must be rounder than China, and foreign products must be more expensive than China “, which also highlights the lack of confidence of the people in domestic production (milk powder).” Zhu Danpeng According to “Bullet Finance”, the transformation of high-end is an inevitable result of the improvement of the overall industrial structure of China’s dairy industry. Nowadays, the domestic milk powder’s overall materials, management and other aspects have been comparable to those of foreign products, and it is even better. The detection rate of domestic milk powder is no problem.

“At present, the overall price composition system of domestic milk powder is flawed, the product cost is not particularly high in the price system, and the marketing and channel expenses account for a very high proportion, probably accounting for more than half. In these years, the milk powder industry Competition is fierce. Many companies basically rely on increasing investment in marketing and channels to promote their own development. Finally, they can only offset costs by increasing prices and dilute their investment in marketing and channels. “Bao Yuezhong said frankly to” Bullet Finance “.

Although the momentum of domestic milk powder’s resurgence is already obvious, in first- and second-tier cities, foreign brands are still strong. The domestic milk powder is in a fierce internal battle, and it has to fight against the impact of imported milk powder. It has also encountered the “black swan” of the decline in the birth rate of the Chinese population, and the industry is generally under pressure.

“Falling birth rate means that milk powder companies will have more and more difficulties in obtaining flow. In the entire consumption of infants and young children, milk powder is a major demand product, which may account for 30 to 40 percent or even higher. But Infants and young children also have needs for food supplements, supplies, etc. Therefore, milk powder companies can use milk powder as a major marketing and customer acquisition method and shift their focus to satisfyFor some other needs of infants and young children, do some category expansion. “Bao Yuezhong suggested.

How can domestic milk powder seek a new growth pole under the difficulties of growth bottlenecks, single profit point, difficulty in breaking through the high-end market and difficulty in improving domestic reputation? With the decline in the birth rate of the population, the infant milk powder market in China is gradually entering the cold winter. For domestic milk powder such as Feihe, a test of life and death may have just begun.