Do you still believe in “you get what you pay for”?
Editor’s note: This article is from the WeChat public account “China-Singapore Jingwei” (ID: jwview), author: Yan Shu Xin.
The due date is approaching, and expectant mother Meng Nan is in trouble.
Due to physical reasons, Meng Nan cannot breastfeed her upcoming baby. How to choose a good milk powder has become a major problem that currently plagues her.
Meng Nan told Sino-Singapore Jingwei that he had “learned” from multiple mother groups, but the mothers had different opinions. Some recommended domestic milk powder, others madly planted foreign milk powder, and some even said, “Which one is more expensive? Which one”, because “you get what you pay for.”
But is it really “you get what you pay for”? Recently, the vice president of Junlebao revealed the inside story of the industry, saying that the domestic price of five to six hundred milk powder cost only a few dozen yuan. This makes Meng Nan more anxious: what kind of milk powder should I choose for my baby?
01 “The cost is dozens of yuan, the price is five to six hundred”?
Recently, Liu Senmiao, vice president of Junlebao, said at the 20th Maternity, Infant and Child Industry Summit that domestic milk powder is too expensive to sell. It costs tens of dollars to sell for four to five hundred, five to six hundred, but some people still buy it. This remark has aroused the attention of the outside world to the price of domestic milk powder.
▲Liu Senmiao, Vice President of Junlebao, speaks at the 20th Pregnancy, Infant and Child Industry Summit
How expensive is domestic milk powder sold? According to Wind data, as of October 9, 2020, the retail price of domestic brand infant milk powder was 207 yuan/kg, and the retail price of foreign brand infant milk powder was 253.27 yuan/kg.
China-Singapore Jingwei reporter learned that the current infant formula milk powder on the Chinese market can be based on factors such as pricing and formula ingredients.Divided into ultra-high-end milk powder, high-end milk powder and ordinary milk powder. Among them, ultra-high-end and high-end milk powders are uniformly classified as high-end milk powders, while ordinary milk powders can be divided into mid-end milk powder and mid- and low-end milk powder.
According to the previous disclosure of Feihe’s prospectus, the price of ordinary milk powder (referring to the average retail price of paragraphs 1 to 3, the same below) is generally less than 350 yuan/kg, and the price of high-end milk powder is between 350 yuan/kg and 449 The price of ultra-high-end milk powder is 450 yuan/kg or more.
On October 16, China-Singapore Jingwei reporters visited offline supermarkets and maternal and child stores and found that the price of 700-900g infant formula is generally above 300 yuan, including some products such as a2 to Chu and Wyeth Qifu. The price is close to 500 yuan.
It is worth mentioning that Junlebao, which denounces “China’s milk powder is expensive”, has some of its products more than 200 yuan in price. According to the official flagship store of Junlebao, Junlebao Youcui Organic is priced at 235 yuan (3 sections, 565g), and Junlebao Zhizhen is priced at 210 yuan (1 section, 800g).
Compared with foreign countries, domestic milk powder prices are indeed much higher. Taking Japan as an example, Wind data shows that as of September 29, 2020, the retail price of milk powder in Tokyo, Japan is 2,260 yen per can, which is approximately RMB 143.58.
A reporter from Sino-Singapore Jingwei learned from a purchasing agent that on an international e-commerce platform, the average price of a2 infant milk powder is about 231 yuan; the average price of Aita’s US dollar package is about 157 yuan, and the average price of platinum package is about 223 yuan. yuan. On a domestic e-commerce platform, the price of ordinary Aitamei’s infant formula has reached 255 yuan (stage 1, stage 2, 800g).
“The average price of domestic milk powder is basically 2-3 times that of foreign milk powder, or even higher.” Dairy analyst Song Liang said in an interview with Sino-Singapore Jingwei (WeChat ID: jwview).
Song Liang revealed to Zhongxin Jingwei that, under normal circumstances, the production cost of a can of infant milk powder is between 35-80 yuan, and some products will reach 90-120 yuan. “Only production costs, not counting other costs such as circulation and customs clearance.” Song Liang said.
02 Why is domestic milk powder so expensive?
So, why is domestic milk powder sold so expensive? Really, as Liu Senmiao said, when it sells cheaply, consumers dare not buy? Or not exactly.
In a research report, Caitong Securities analyst Liu Yufei pointed out that the high average price of China’s milk powder industry as a whole is determined by multiple factors such as the history and demand of my country’s dairy industry.
On the one hand, food safety incidents have caused multiple rounds of price increases in the industry. Liu Yufei said that with the gradual advancement of consumption upgrades, in the context of the quality and brand upgrade of infant formula milk powder, the price band was originally a trend. However, the occurrence of food safety incidents has made the industry as a wholeThere is a structural shift in demand, and consumers look after foreign brands while neglecting domestic brands. Because infant formula milk powder has higher health and safety requirements, consumers are willing to trade a certain premium for high quality and reliability.
On the other hand, differences in channel layout and profit appeals have also pushed up the price of milk powder in China. According to the 2018 China Shopper Report jointly released by Bain & Company and Kantar Consumer Index, foreign milk powder accounted for 80% of the first- and second-tier markets in 2017. In addition, according to channel research, foreign brands such as Wyeth have a market share of 80-90% in first- and second-tier cities, while only 40-50% in third- and fourth-tier cities.
“Although domestic brands are catching up in recent years, foreign brands are still dominated by offline channels such as maternal and child stores in first- and second-tier cities. Compared with third- and fourth-tier cities, the overall average price in first- and second-tier cities is higher. , Because foreign brands often have higher demands on the profits of the Chinese divisions, so the overall ex-factory price is higher.” Liu Gaofei said.
Song Liang also mentioned that 70% of the milk powder cost is basically the circulation cost, and the production cost only accounts for about 30%. “In the distribution costs, marketing costs have accounted for the bulk, mostly above 60%.”
China-Singapore Jingwei reporter combed Wind data and found that in 2019, Feihe, Beinmate, Ausnutria, Yashili The operating costs of these companies were 4.112 billion yuan, 1.390 billion yuan, 3.203 billion yuan, and 2.145 billion yuan. In the same period, the sales expenses of these companies were 3.848 billion yuan, 1.103 billion yuan, 1.772 billion yuan, and 964 million yuan. The proportion of the cost is 93.58%, 79.35%, 55.32%, 44.94%.
Song Liang pointed out that behind the high price of domestic milk powder is actually a huge profit distribution system, which feeds a large number of people from production to sales to retail. “Domestic whole babyIn the infant milk powder industry, from R&D and design to production and processing to supporting service companies and sales companies, there are about one million people in employment. “
In addition, Song Liang believes that Chinese people’s inertial thinking about products-the more expensive the better, has also encouraged businesses to customize so-called high-end products for consumers to meet their psychological needs.
Chinese food industry analyst Zhu Danpeng also mentioned in an interview with Sino-Singapore Jingwei that the high-end infant formula milk powder is actually the result of the consumer side pushing the industry side. “Nowadays, the threshold of consumer parenting is rising, and the professional knowledge and literacy of parenting are also improving. For companies, it must provide better products to meet and match the core demands of consumers.”
03 Consumer: Do I have to “buy expensive”?
The remarks made by the vice president of Jun Lebao undoubtedly magnified the anxiety of Meng Nan and other expectant mothers and new mothers: Do you want to “buy expensive”?
China-Singapore Jingwei reporter noticed that some consumers continue to hold the “cheap but no good” consumer psychology. “Everyone is scared by the tainted milk powder. I would rather spend more money to keep the children healthy. I don’t know if they are really healthy, but at least it is a kind of comfort.” Beijing consumer Ms. Liu said.
Weibo Netizen @ Yuzhbu Ji also believes, “Children’s matters are nothing trivial, and people don’t know the money. Knowing the goods, I want to try my best to give the child the best. The things that the child imports are still a little more expensive, so I can rest assured.”
However, there are also some consumers who say that they will comprehensively consider the “price ratio” of the product. “I will look at online evaluations. Which product is nutritious, which one is suitable for babies, and the equivalent product, I will definitely choose the cheap and good one, why have to buy expensive.” Tianjin consumer Ms. Wei told Sino-Singapore Jingwei.
Then the question is, what is the difference between milk powders at different prices in terms of nutritional content?
Feihe mentioned in the prospectus that ultra-high-end infant formula milk powder usually contains a variety of high-quality nutrients, such as OPO structural fat, lactoferrin, whey protein hydrolysate probiotics, hydrolyzed whey protein and DHA/ARA, etc., some products are made from fresh milk or even organic milk, and are wet mixed-sprayProduced by the fog drying process; high-end milk powder meets the same high standards as super-high-end infant formula milk powder in terms of protein, fat and other key ingredients. It can be made from fresh milk or imported milk powder; ordinary milk powder is a basic substitute for breast milk, generally dry Mixed process production.
However, in Song Liang’s view, milk powder at different prices is actually not much different. “The basic nutritional supplements are strictly in accordance with the national standards of infant formula milk powder in the People’s Republic of China, so as long as the basic nutritional supplements are guaranteed, the difference is not too great. Of course, we must encourage technological progress, scientific research and innovation, and allow high-end and ultra-high-end milk powder The existence of this is because companies can invest in research and development after making money with these high-end and ultra-high-end milk powders, so they have the ability to add some new nutrients to their products.” Song Liang said.
It is worth mentioning that, according to Song Liang, the price of domestic milk powder has been gradually falling this year. Take high-end and ultra-high-end milk powder as an example. In 2020, 70% of high-end and ultra-high-end milk powder will be in Discount sales According to actual sales, its price has fallen to the mid-range price, which is between 200-300 yuan.
▲On October 16th, a milk powder promotion is going on in a supermarket in Beijing
“Most merchants use disguised price reduction methods, such as buying as a gift, which used to be’buy eight get one free’, buy seven get one free, and now it has become’buy two get one free’, buy three get one free, etc.” Song Liang said.
Zhu Danpeng pointed out that, unlike previous years, high-end milk powder no longer only shows “high price”, but pays more attention to “high quality” and technical content. “It’s not that consumers will pay if companies set a high price. They start to consider the brand’s advantages in milk sources, formulas, and core technologies.This also puts forward higher requirements for enterprises. “Zhu Danpeng said.
“With the improvement of consumers’ awareness of products, as well as more and more symmetrical information in all aspects, consumer behaviors become more rational, the price of domestic milk powder will gradually return to its due value.” Song Liang said.
Text: Yan Shuxin Title Editor: Yan Shuxin, Luo Kun, Zhao Jiaran, Junlebao Vice President Liu Senmiao, speaking at the 20th Maternity, Infant and Child Industry Summit Source: Pear Video Source of screenshots of the chart in the article: Caitong Securities Research Report