The market value of Feihe surpassed Mengniu for six months, why is it so favored

In 2018, actress Zhang Ziyi held an advertisement for Feihe milk powder and "walked" into the e-commerce elevator TV station.

In 2019, "More suitable for Chinese baby physique" won the top three of the top ten popular advertising slogans that year.

Image source @Visual China

In 2020, Feihe's market value will surpass Mengniu for the first time, reaching a peak of 165 billion Hong Kong dollars.

At present, the market value of Feihe has firmly ranked second in domestic dairy companies, second only to Yili.

Everything sounds so beautiful.

Since its privatization and delisting in 2013, and six years later, it has made a comeback as "the first dairy company listed in the history of the Hong Kong Stock Exchange", and Feihe has become a "winner in life".

But is this worry-free? The actual situation is that foreign-funded milk powder still occupies half of China, and Feihe is still a "younger brother"; Feihe's online share barely ranks in the top five, and its market share is less than half of the first place.
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From three perspectives, we will lead readers to see the troubles behind Feihe's pride:

1.

What are the obstacles to Feihe's future performance growth?

2.

Why is it difficult for Feihe online channels to stand out?

3.

What are the opportunities and challenges for the milk powder industry?

The debate on the true and false prosperity of super high-end large single products

The debate on the true and false prosperity of super high-end large single products

I have to admit that Feihe is a miracle in the baby powder industry.

At the beginning of 2017, Feihe was only a small company with a market share of 4.
4% of baby powder.
By the third quarter of 2020, its market share has reached 17.
2%.
.
Such rapid development is inseparable from Feihe's layout in the high-end (including high-end and ultra-high-end) infant powder market.

The financial report shows that as of the first half of 2020, high-end milk powder accounted for more than 80% of Feihe's total revenue structure.

Among them, the ultra-high-end large single product Star Feifan has revenue of more than 7 billion in 2019, accounting for 56.
35% of Feihe's total revenue.

Although Xingfeifan's achievements are very impressive right now, it is a bit difficult to only rely on this large single-product IP to knock on the doors of first- and second-tier cities.

After all, Feihe was conceived in the painful period of domestic milk powder.
Starting from the third and fourth tiers, most of the regions with an absolute advantage in market share are lower-tier cities; however, according to Dongxing Securities, Feihe’s market share in first- and second-tier cities is only 6 Around %, the foundation is really weak.

At that time, foreign milk powder soared after the melamine incident and swallowed the share of domestic milk powder.

Among them, high-end foreign fans have the characteristics of an early layout in first- and second-tier cities and a solid customer base.
Wyeth's ultra-high-end Kaifu series entered the Chinese market in 2011.

Although Xingfeifan has overcome all obstacles and surpassed many "China Pass" items, "one enemy three" is still not easy.

Although 2018 was the fastest growing year in Xingfeifan's history, sales doubled, but according to the data of the "milk powder circle", Xingfeifan only ranked fourth in the big single product list, and the top three are still being fanned by foreign investors.
occupy.

Among other large single products with more than 5 billion yuan, foreign-funded Abbott Jingzhi and Mead Johnson Lan Zhen are also on the list, and there are obviously more categories on the list than domestic milk powder.

Convergence of milk powder formula may be the last straw that overwhelms Xingfeifan: major factories have similar formulas and high-end milk powder can not escape the fate of being replaced by similar products from other brands.

The milk powder market can continue to turn without anyone else.
Therefore, Feihe's single ultra-high-end large single product is relatively more susceptible to the impact of the macro economy and consumption levels.

Over-reliance on a single large single product is risky, all in Xingfeifan needs to be cautious.

In addition to the risks in the revenue structure, the "false prosperity" of gross profit margin is actually closely related to large single products.

From the official website of Feihe, we can see that in addition to the common fortified formulas, each segment of Xingfeifan also has “featured” fortified formulas—addition of OPO structured fat, hydrolyzed protein, etc.
, and the cost is significantly higher than that of general fortified formula milk powder (high-end formula).
, Ordinary infant powder).

The cost is high, and the gross profit is also outstanding among the various milk powders of our own.
How much money is spent on the brand premium for each can of Xingfeifan.
We do not (experience) know (know) but (belly) know (clear) .

The increase in Feihe's overall gross profit margin is not due to the reduction of overall costs due to any new technology, nor is it arbitrarily increasing prices, but the result of continuous leaning of revenue to high-margin products such as Xingfeifan.

However, large single products do not only bring "prosperity", they are also "golden swallowing beasts" that have been overlooked.
Taking 2019 as an example, Feihe's gross profit margin was as high as 70%, but the expenses during the period were half.
Of Feihe's 13.
7 billion revenue in 2019, 3.
85 billion was used for advertising, and the sales expense ratio was as high as 28%.
However, these large-scale expenditures have not been converted into sales in first- and second-tier cities as expected.
According to the milk powder consumption white paper jointly issued by the Maternal and Child Research Institute and Meiyou, the first- and second-tier cities, which is the market that Feihe most urgently wants to enter, its brand Attention (number of active searches) was overwhelmed by foreign companies' love of beauty, even slightly lower than the domestically produced biostime.

Data source: Meiyou, Maternal and Child Industry Observation, Maternal and Child Research Institute

Another set of data can also reflect the unsatisfactory results of Feihe advertising.
In terms of the gap between awareness and purchase intention, mothers’ awareness of Feihe is 17.
9% higher than the final purchase rate.
In other words, everyone has heard of Feihe but when it comes to placing an order and paying, it is 17.
9%.
The people gave up Feihe.
And the recognition rate of loving him is less than 5% higher than the final purchase rate, which means that people who have heard of loving him have basically placed an order, and only 5% of people did not place an order.
Although Feihe's advertisements are all over the world, the gap in the cognitive conversion rate still reflects to a certain extent that Feihe's education on the market is not yet able to dominate the milk powder industry.

In fact, market education has always been a problem in the milk powder industry.
Nowadays, milk powder of the same grade (especially high-end, where the research and development of ingredients are almost synchronized) does not have much research and development gap between brands, and milk powder is a cyclical business.
A wave of children grow up to three years old, and those who come to buy milk powder change to a wave of mothers.
In this cycle, market education never ends.

Even if you work hard to market like a flying crane, you can't confidently confirm when the market education for high-end milk powder will be considered successful.

Next line brother or online brother?

Next line brother or online brother?

If you don't talk about it, it's not black.
Feihe's offline channels are really excellent.

The factory takes root in Heilongjiang, the "golden milk source belt", from the sinking of the market to now the state-owned milk powder brother, Feihe, this is the inspirational story of the light of domestic production.

Moreover, Feihe also relies heavily on the dealer’s contribution to revenue (87%, mid-2020 data), so its dealer management policies are complete, such as real-time monitoring of the gap between dealers’ inventory and inventory to prevent inventory accumulation and strict non-compliance.
Allow credit sales, supervise cannibalization to avoid conflicts of interest among dealers, etc.

In the age when maternal and infant stores became the main force in milk powder sales, Feihe also quickly launched a series of products exclusively for maternal and infant products.
However, ordinary stores will use the brand effect of foreign fans to attract customers for traffic.
In this case, Feihe chooses to reduce discounts, increase customer unit prices ("high-end strategy"), and then use revenue to reverse the education market, which has also achieved certain results.
.

Data source: Maternal and Child Research Institute

Compared to the offline rush all the way, Feihe's online performance is not as optimistic as offline.

After the melamine incident in 2008, foreign milk powder took the opportunity to enter the Chinese market.
The online market is favored by foreign brands because it does not require channel resources and is low in cost.
In the past few years, brands such as Nestlé (Wyeth), Danone, and Mead Johnson have occupied the front row of online shares.

As foreign milk powder has laid a solid foundation online, when domestic milk powder gradually recovers from the impact of the incident, the online share has already been handed over.
Statistics from the Maternal and Child Research Institute in 2019 show that the new "net celebrity" Aitamei (a high-end milk powder owned by Danone), which has just become popular in the past five years, is firmly on the top with a share of 14.
35%.
Small distance.

Feihe's online share in 2019 is only ranked sixth, accounting for less than half of the love of his beauty.

Data comes from the Internet

Affected by the epidemic in 2020, customs and transportation policies have become more stringent, making it more difficult for foreign milk powder to enter customs, which has brought new hope to local brands such as Feihe.
According to the data in the first half of the year, Feihe's growth rate is gratifying, reaching 105.
5%, and its scale and ranking have increased.
In addition, although Feihe actively organized online live broadcasts and hundreds of thousands of seminars during the epidemic, the online publicity efforts were full.
It's a pity that Feihe's share is far from enough to shake the position of the Big Three: Aitamei, Mead Johnson, and Mi Su Jiaer.

And from the following 2020 Double Eleven milk powder e-commerce milk powder price list, we can see the two sides of the coin-because foreign milk powder companies spend far less money on offline channel maintenance than domestic milk powder, so they spend money online.
The discount of high-end large single products such as Aitamei, Wyeth Kaifu, and Mei Su Jiaer is more than 100 yuan, which is far greater than that of Feihexing Feifan, Junlebao and other offline super-branched domestic milk powders.

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