Can I make money than Yili?

After a long period of silence, Li Ziyuan once again returned to the eyes of consumers.

This listing is even more difficult to conceal its ambition and determination to expand and compete for the market.

Li Ziyuan, the dairy company famous for its sweet milk, finally went public in February this year.

In fact, this company was established as early as 1994 and is headquartered in Jinhua City, Zhejiang Province, which is known as the "Hometown of Dairy Cows in the South".
Its sweet milk series products are the same as its slogan "New Fresh Plum Garden".

So from the perspective of the capital market, what is the quality of Li Ziyuan's company? May wish to check it out today.

Can Bieli still make money?

Can Bieli still make money?

Liziyuan is mainly engaged in the research and development, production and sales of milk-containing beverages such as sweet milk and milk beverage series and other beverages, specifically, including milk beverages, compound protein beverages, and milk-flavored beverages.

And if it can be listed on the main board, it must have a relatively good "transcript.
"

According to wind data, from 2016 to 2019, Liziyuan’s revenue was about 453 million yuan, 602 million yuan, 787 million yuan, and 975 million yuan, respectively, corresponding to year-on-year growth rates of 32.

87%, 30.
73%, and 23.
82%; attributable to The net profit of shareholders of the parent company was about 102 million yuan, 90 million yuan, 124 million yuan, and 182 million yuan, respectively, corresponding to year-on-year growth rates of -11.
98%, 37.
98%, and 45.

In addition, the prospectus shows that Li Ziyuan's 2020 operating income is expected to be 1.

062 billion yuan, an increase of 8.
97% year-on-year; the net profit is expected to be 202 million yuan, an increase of 11.

▲Liziyuan's revenue and net profit in recent years; source: wind

From 2017 to 2019 and from January to June 2020, the comprehensive gross profit of Liziyuan was RMB 210,271,900, RMB 294,762,500, RMB 398,116, and RMB 159,098,500, respectively.

The comprehensive gross profit rate was 34.
93%, 37.
45%, 40.
90% and 40.
90%, respectively.
36.

In general, Liziyuan’s previous operating income has maintained a positive increase, and its net profit has been growing positively since 2017 and has maintained an acceleration state, and its profitability has been relatively stable as a whole.

▲Comparison between Liziyuan and its peers; Source: wind (March 8, 2021)

In fact, just looking at the gross profit margin of sales, there is not much difference between Li Ziyuan and other peers (Yili, Mengniu, Yantang, Xin Dairy, Bright), but there is a significant difference in net sales margin.

On March 8, 2021, according to wind, the gross profit margin of Liziyuan and other peers is basically between 30%-40%; in terms of net sales margin, Liziyuan can reach 20.
22%, while other peers are below 10% Among them, Yili is the higher one, which is only 7.
78%.

So, what is the core driving force that makes Liziyuan's performance upward?

So, what is the core driving force that makes Liziyuan's performance upward?

From the perspective of income composition, milk-containing beverages have contributed more than 95% of Liziyuan's revenue for a long time.

In 2017, 2018, 2019 and January-June 2020, the company's milk-containing beverage operating income was 577.
5716 million yuan, 760.
8831 million yuan, 929.
187 million yuan and 409.
742 million yuan, respectively, with an average annual compound growth rate of 12.
37%.

▲The company's main business cost is divided into product composition; source: prospectus

In addition, during the same reporting period, the gross profit of milk-containing beverages accounted for 98.

00%, 98.
72%, 98.
48% and 97.
49% of the company's main business gross profit, respectively, and the gross profit margin was 35.
58%, 38.
19%, 42.
12% and 37.
07%, respectively.

▲The gross profit composition and gross profit rate of the company's main products; source: prospectus

It can be seen that milk-containing beverages are the largest source of Liziyuan’s operating income and the most important factor affecting the overall gross profit margin.
This is also the core driving force of Liziyuan’s performance growth.
Among dairy beverages, the largest product is Liziyuan’s sweet milk series.

According to Li Ziyuan's prospectus, "young consumer groups and youth leisure, nutrition and convenience" is its brand market positioning and orientation, and its target customers are young consumer groups aged 14-35.
At the same time, regarding its core single product sweet milk, Li Ziyuan’s evaluation is that “sweet milk milk beverage series has a special sweet product taste, rich product taste, stable product quality, and moderate product pricing, which have won the goal.
Favored by consumer groups, the company has been selling classic products for more than 20 years.
"

According to its Taobao flagship store information (February 25, 2021), a 225ml bottle of Plum Garden Sweet Milk is 2.
19 yuan, and there are 5 flavors.
From this point of view, the price is indeed moderate, but there are mixed praises and criticisms about its taste.
Some people even point out that it has "a flavor of flavor", "tastes like sugar water" and so on.

▲The composition of main business costs; source: Li Ziyuan prospectus

Taking a closer look at the product ingredients, the main raw materials of Liziyuan's milk-containing beverages include milk powder, raw milk, white sugar, etc.
, and the packaging materials mainly include high-density polyethylene, packaging boxes, etc.
In 2017-2019 and the first half of 2020, raw materials accounted for 40.
51%, 38.
68%, 39.
11%, and 41.
79% of production costs, respectively.
Among them, milk powder accounted for 27.
42%, 30.
14%, 31.
34% and 31.
34% respectively.

Such centralized procurement can indeed reduce the cost of raw materials, but because according to its prospectus, Liziyuan’s milk powder is mainly imported from Fonterra (a well-known dairy company in New Zealand), which means that if the price of raw materials rises sharply in the short term or international trade If the policy has major adverse changes in the short term, it may not be able to respond effectively by adjusting the sales price or changing the milk source supplier in a timely manner, which will adversely affect profits.

Looking at Yili again, its main product is liquid milk, which contributed 81.
75% of revenue in 2019, while the main cost of liquid milk is fresh milk.
According to relevant data, in Yili’s liquid milk business, the cost of raw milk is as high as 60%-70%, packaging accounts for 10%-15%, and auxiliary materials such as sugar + large packages of powder account for about 10%, and the remaining 10% % Is labor and depreciation costs.

▲Yili's main business structure; source: wind

Simply put, the main products of Liziyuan and Yili are not in the same category.
Yili mainly produces liquid milk.
The main raw material is raw milk.
The purchase cost and transportation cost are even higher, and the cost is highly related to the pasture, and the price fluctuates cyclically.
Liziyuan’s large single product is milk-containing beverages, the raw material is mainly imported milk powder, and has a certain degree of substitution.
This is the fundamental reason why Liziyuan's net profit margin can be several times higher than that of dairy companies such as Yili.

Road to expansion

Road to expansion

The lower cost of the product itself is an advantage, but for optional consumer products born in the 1990s, brand promotion and channel networks are also key factors that determine performance.

In terms of advertising, Li Ziyuan chose to be a popular female celebrity as the spokesperson at the time, and placed advertisements on CCTV.
His previous spokespersons include Zhou Xun, Fan Bingbing, Ruby Lin, and now he is Miao Miao.
What is the effect of this? First of all, CCTV is a channel that people will watch.
Secondly, at the time, CCTV represented the authority and could endorse the quality of products to a certain extent, so that the products could be recognized by people.
Therefore, Liziyuan's brand awareness has been opened up.

In terms of channels, Li Ziyuan chose the traditional distribution channels of the sinking market and special channels such as schools, Internet cafes, and breakfast.
The company's products are supplied not only to traditional channels including large supermarkets, chain systems, wholesale departments, small and medium-sized shopping malls and supermarkets, but also to special supply channels including schools, corporate canteens, hotels, and Internet cafes.

Geographically, it is rooted in Zhejiang, with East China, Southwest, and Central China as the key core markets, with three production bases in Zhejiang Jinhua, Jiangxi Shanggao and Zhejiang Longyou as the center, with the assistance of various commissioned processing enterprises.
It is planned to adopt key layouts.
, Radiate peripheral development methods to open up market business.

In recent years, the contribution of the Central China market and the Southwest market has gradually increased.
One rose from 15.
29% in 2017 to 18.
37% in the first half of 2020, and the other rose from 13.
76% to 17.
4%.

▲Product sales area; source: Li Ziyuan prospectus

Up to now, the sales revenue of Liziyuan still mainly comes from East China.
From 2017 to 2019 and the first half of 2020, its main business income was 412,896,600 yuan, 509,962,900 yuan, 590,153,700 yuan, and 243,766,100 yuan, respectively, accounting for 68.
71%, 64.
89%, and 64.
89% of the total revenue from the current period.
60.
67% and 56.
96%.
Although the proportion has shrunk, the income of the region has maintained an upward trend.

In addition, revenues in other regions increased overall.
Among them, the compound growth rate of the Central China market and the Southwest market were as high as 39.
76% and 34.
18% respectively.
At the same time, the revenue contribution of the two regions has also been significantly improved: the Central China market rose from 15.
29% in 2017 to 18.
46% in 2019, and the Southwest market rose from 13.
76% to 15.
31%.

It is worth mentioning that this veteran company has finally found an opportunity for e-commerce to direct its products through online platforms such as Tmall Supermarket, JD Supermarket, Tmall flagship store, JD flagship store, Taobao Enterprise Store and Pinduoduo.
In 2017, the revenue from e-commerce was 5,680,100 yuan, and in 2019, it reached 28,640,700 yuan, with a compound growth rate of 124.
55%, and the contribution from 0.
95% to 2.
94%.

In the first half of 2020, e-commerce revenue has been comparable to the same period in 2018.
According to observations, in the first half of 2020, there was a burst of "Plum Garden" wind on the Kuaishou app.
Relevant information shows that during this period, many fast-handed eateries, narrators, and even beauty bloggers suddenly began to share Liziyuan milk out of the box through short videos or live broadcasts, and even bloggers shared Liziyuan’s sweetness.
Different ways to "eat" milk.
After the unboxing evaluation is completed, the anchor will conduct live sales in his own fast hand.

Relevant information shows that a basic box of sweet milk 10 bottles (450ml per bottle) is a unit, and the price is about 24.
9.
On average, it is nearly three yuan cheaper than a bottle of 6 yuan on the market.
Look at e-commerce platforms such as Taobao.
It is also nearly 1.
5 yuan cheaper.
It is conceivable that Li Ziyuan has really made a blood loss for promotion and product discounts this time.

In 2017, 2018, 2019, and January-June 2020, the company's advertising and publicity expenses were 11.
8777 million yuan, 15.
605 million yuan, 16.
2572 million yuan and 806.
13 million yuan, respectively, accounting for 14.
43% of sales expenses to 18.
47% .
Advertising input methods include CCTV and local advertising, radio stations, and new media promotion.

▲Details of sales expenses; source: Li Ziyuan prospectus

I have to say that Li Ziyuan finally got the hang of it and found an opportunity for short video to bring the goods.
Coupled with this listing, it also proves Li Ziyuan's ambition to return to consumers' vision and expand its scale.

The prospectus shows that the current sales area of ​​Liziyuan has basically covered Zhejiang, Jiangsu, Yunnan, Jiangxi, Shanghai, Henan, Anhui, Hunan, Shandong, Hubei, Sichuan and other places.
At the same time, its business strategy is based on focusing on the development of county markets, consolidating the markets of prefectures, cities, and provincial capitals, and penetrating the markets of towns, towns, and villages downward.

In addition, whether from the past data or the current publicity, the company's operating performance is highly dependent on a single product, and Li Ziyuan's focus is still on sweet milk.
In other words, Li Ziyuan intends to continue to rely on the large single product of sweet milk, and intends to "sink" wider and deeper in the sinking market in the future.

To be able to truly "sink" down, two aspects need to be done well, one is brand promotion and the other is channels.

Brand promotion is mainly about advertising investment.
Li Ziyuan's current publicity methods are more traditional, mainly CCTV or local advertisements.
Short videos have been tested in Kuaishou in the first half of 2020.
In the current Internet age, there have been ways to achieve product promotion and even delivery, including Taobao live broadcast, Xiaohongshu, private domain traffic on other social platforms, and so on.
And Li Ziyuan has not done enough yet.

In terms of channels, "sinking" is mainly carried out through two channels, one is offline and the other is online.

In terms of offline, Liziyuan currently focuses on traditional offline channels, such as schools, Internet cafes, supermarkets, and unit canteens.
Geographically, it gradually reduces its dependence on the East China market and gradually expands its markets in other regions.
At present, the proportion of revenue from other regions led by the Central China and Southwest markets has increased rapidly, and the proportion of revenue in the corresponding East China market has indeed decreased.

At the same time, the use of the IPO fundraising is planned to be mainly used for the two expansion projects of Henan Hebi "104,000 tons of milk-containing beverage production project" and Yunnan Qujing "70,000 tons of milk-containing beverage production project".
After the project is completed and put into production, Liziyuan will add an additional capacity of 174,000 tons/year, and the planned construction period of both projects is 24 months.

The production base close to the regional market has the advantages of reducing product logistics costs, improving the timeliness and stability of product supply, and better meeting market demand.
It is also based on this that Li Ziyuan has achieved great development in the East China generation centered on Zhejiang.
The use of fund-raising for the construction of Henan and Yunnan production bases also means that Li Ziyuan is ready to apply the successful model of developing the East China market to the development of the Central China and Southwest markets.

The previous successful experience has proved that this model is reasonable, but the problem is that each region needs to set up a production base to ensure that it can meet local needs, production and sales, and the construction period of the project base is relatively long.
, The development speed will be slower.

Online, it is an important channel for Liziyuan to deploy the national market, and it is also the fastest path with great potential for development.
However, Li Ziyuan has only begun to invest in building in recent years, and now it contributes less than 5% of total revenue.
It is conceivable that Li Ziyuan has not done enough in this regard.

Back to the product itself

Back to the product itself

In fact, in the short and medium term, the large single product sales strategy that Li Ziyuan has been implementing will help it establish its brand image, expand the market and increase its market share.
However, in the long run, once it encounters consumer preferences, market competition, and legal Changes in market factors such as regulations will have a great impact on business conditions.
Therefore, in order for the performance to provide the support and driving force for sustainable growth, it is very necessary for Li Ziyuan to enrich the product line and optimize the product structure.

Therefore, in addition to the sweet milk beverage series, Li Ziyuan has also introduced to the market "pure milk" yogurt milk beverage, boiled series beverage, "zero fat" lactic acid bacteria beverage.
Walnut and peanut milk compound protein beverage, VD calcium lactic acid beverage, wolfberry and red date milk Flavored drinks, durian milk (stinky milk), flavored yogurt series, etc.

However, from the public data, there is a significant difference between the sales of these products and the sweet milk series.
According to the official flagship store of Liziyuan Taobao, the monthly sales of sweet milk series beverages are 1,000+, durian milk (smelly milk) monthly sales are 100+, walnut and peanut milk compound protein beverages are sold 34, and "pure milk" yogurt milk beverages are sold at 24 months.
, The monthly sales of zero-fat lactic acid bacteria are 11.

▲The changes in the gross profit margin of the main business are affected by the following factors and the quantification of the degree of influence of each factor; source: prospectus

In addition, it is puzzling that the average cost of milk-flavored beverages and compound protein beverages has been gradually reduced in recent years, and the selling prices have gradually increased.
Since the profit margin is increasing, the gross profit margin should be increased.
What we see is that the gross profit margin is decreasing year by year.
Among them, the gross profit margin of compound protein beverages has been reduced from 22.
05% in 2017 to -9.
63% in the first half of 2020, and milk-flavored beverages have dropped from 13.
22% to 8.
74%.

However, in addition to milk-containing beverages with sweet milk as the core, the sluggish sales of other types of beverages and the decline in gross profit margins are objective facts, which also reflect the low market competitiveness of other products of Liziyuan.

▲The gross profit and gross profit rate of different products; source: prospectus

After a long period of silence, Li Ziyuan once again returned to the eyes of consumers.
This listing is even more difficult to conceal its ambition and determination to expand and compete for the market.

Note: All pictures in the article are reprinted on the Internet, and infringement will be deleted!

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