What kind of business is bird's nest?
On the one hand, its nutritional value has been controversial and widely criticized by the "IQ tax"; on the other hand, the industry has developed rapidly in recent years, showing a double growth pattern of supply and demand.
Today, in the bird's nest industry, which is growing in controversy, Xiamen Yanzhiwu Bioengineering Co., Ltd. (referred to as "Yanzhiwu") has launched an attack on the A-share IPO.
What are the challenges facing Yanzhiwu, which is seeking to go public this time?
And what kind of industry reality is reflected behind this?
a high-end food
Bird's nest, the saliva secreted by some swifts and swiftlets, is mixed with other substances such as seaweed, plant fibers and feathers to build nests. People take this bird's nest down, select and refine it to become a valuable supplement.
"Precious" has always been with bird's nest. Chinese people have a long history of eating bird's nest, but for a long period of time, bird's nest was mainly used as a precious tonic for a very small number of people, and the industry did not develop into a large scale.
However, in recent years, with the development of the market economy and the improvement of people's living standards, the development of domestic bird's nest consumption has gradually accelerated. According to the data from the White Paper (hereinafter referred to as the "White Paper"), the bird's nest market generally presents a pattern of double growth on both the supply side and the demand side.
Bird's nest has entered the homes of ordinary people, and has also achieved bird's nest brands such as "Yan's House", "Xiaoxian Stew", "Yan Xiaochu" and "Yan Anju".
The House of Yan, which hit the IPO this time, can be described as an old brand in the bird's nest industry.
According to public information, in 1997, Huang Jian, the founder and chairman of Yanzhiwu, established the "Shuangdanma" brand in Xiamen and set up a bird's nest franchise counter, breaking the sales model of bird's nest in pharmacies at that time; in 2002, Yanzhiwu brand should be launched. And Sheng, the first chain store was born in Xiamen.
Before that, Huang Jian worked as a teacher and traveled to Singapore.
Today, more than 20 years later, according to its prospectus, Yanzhiwu has more than 600 offline physical stores in total through direct sales and distribution channels. Its main products include instant bird's nest, fresh stewed bird's nest, dried bird's nest and other bird's nest derivatives.
From 2018 to 2020 and the first half of 2021, Yanzhiwu's operating income was 724 million yuan, 951 million yuan, 1.299 billion yuan, and 707 million yuan, respectively, and the net profit attributable to the parent in the same period was 63 million yuan, 79 million yuan, 120 million yuan and 64 million yuan.
This time, Yanzhiwu plans to be listed on the main board of the Shanghai Stock Exchange, raising 1.019 billion yuan, which is mainly used for ecological industrial park construction, marketing and research and development, and supplementary liquidity.
By selling bird's nests, in 2020 alone, the House of Bird's Nest will have revenue of nearly 1.3 billion. Obviously, bird's nest products are being favored by more people. However, the controversy surrounding the nutritional value of bird's nest has never stopped.
At present, many experts and scholars have pointed out that eating bird's nest is not as good as eating eggs, except that it is expensive, there is no magic.
Bird's nest is deeply questioned by the "IQ tax". This time, the house of swallows is seeking to be listed, and it will naturally face the strict scrutiny of the market.
How does the house of swallows explain the bird's nest?
In its prospectus, Yanzhiwu wrote: "Bird's nest is a rare ingredient that has been eaten in China for hundreds of years. For consumers who have traditionally eaten bird's nest for a long time, eating bird's nest products is more of a dietary habit and a lifestyle, rather than treating it as a 'drug' that cures all diseases." "Bird's nest, as a high-end ingredient, has gradually become an important product to meet the needs of current consumers' consumption upgrades..." "Bird's nest itself has a high In addition to special nutrients such as sialic acid, it also has special meanings such as gift attributes and high-end ingredients, which is also an important reason for the continuous expansion of the current bird's nest consumer market."
In short, bird's nest is just a high-end ingredient.
It is difficult for a brand to build a "moat"
High-end ingredients and gift attributes, the price of bird's nest is naturally not cheap, and the profit margin is not low.
According to the data published in Yanzhiwu's prospectus, during the reporting period, its comprehensive gross profit margins were 51.76%, 48.55%, 48.65% and 51.00%, all around 50%, making almost half of the profits.
However, Yanzhiwu’s net profit is not outstanding. In the first half of 2021, Yanzhiwu’s revenue was 707 million yuan, but the net profit was only 64 million yuan, and the net profit rate was still less than 10%.
So where did all the money in Yan's House go?
Among them, marketing expenses accounted for the "largest". During the reporting period, its sales expenses were 234 million yuan, 308 million yuan, 383 million yuan, and 198 million yuan respectively, and the proportion of sales expenses to revenue was always maintained at about 30%.
Among them, the advertising expenses were as high as 136 million yuan, 187 million yuan, 237 million yuan, and 122 million yuan, accounting for 18.78%, 19.72%, 18.27% and 17.32% of the sales revenue in the same period.
In January this year, the official announcement of the House of Swallows actress Zhao Liying became the brand spokesperson. Previously, the brand's spokespersons also included Carina Lau and Lin Chiling.
However, compared with the high marketing expenses, the research and development expenses of Yanzhiwu seem a bit "shabby".
During the reporting period, its research and development expenses were 13 million yuan, 19 million yuan, 18 million yuan, and 10 million yuan, and the research and development expense rates were 1.80%, 1.97%, 1.36%, and 1.35%, respectively.
"Heavy marketing, low R&D" also makes Yanzhiwu questioned by the industry.
In addition, the current "punk health" young people who "add wolfberry to beer, and Coke to release Codonopsis" are becoming an important force in consuming bird's nest products.
Especially in e-commerce channels, the post-90s generation and millennials have become the main force of bird's nest consumption.
According to the "White Paper on China's Bird's Nest Industry in 2019" released by the National Swallow's Committee, according to the age distribution of e-commerce bird's nest consumers, the proportion of people aged 25 to 34 was as high as 51.95%.
However, it is worth mentioning that many young consumers like early adopters and are willing to try new brands and new products during consumption. They have high brand awareness but low loyalty.
On the other hand, the bird's nest industry is also faced with problems such as low entry barriers, serious product homogeneity, and low market concentration. It is difficult for brands to establish their own "moat".
Zhang Yi, CEO and chief analyst of iiMedia Research, told the Beijing Evening News "Food and Beverage Weekly": "For a company named after bioengineering, the research and development costs are indeed too low, and through the promotion of huge advertising, can they build a brand name? The 'moat' is still a question mark. After the brand has been bombarded by continuous advertising, it is inevitable that there will be a 'fatigue period'. Therefore, for bird's nest brands, it is necessary to increase research and development capabilities, ensure quality, and make breakthrough innovations in products. Really build its own core competitiveness.”
In Zhang Yi's view, the listing of Yanzhiwu should be mainly due to two considerations. On the one hand, the shareholders' interests are maximized.
On the other hand, the core competitiveness of the brand is insufficient, and the company needs to find new growth points. After the listing, the brand may strengthen its own moat through mergers and acquisitions, and at the same time, it can also enhance product diversification and support revenue and net profit.
The business model still needs to be polished
It is worth noting that, compared with other consumer goods, the bird's nest market is still a niche market, and it is less related to the capital market. This time Yanzhiwu seeks to go public, can the capital market pay more attention to the bird's nest industry?
Bao Yuezhong, a new retail expert, told the Beijing Evening News "Food and Beverage Weekly" that compared with the value of some single brands in the food and beverage industry reaching hundreds of billions, the bird's nest industry's market plate of 40 billion is still too small, and it is inevitable Involving the ceiling of enterprise development, the "cake" that a single enterprise can cut is very limited, so it is unlikely that the listing of a certain brand will attract more attention from capital.
For Yanzhiwu itself, even if the listing is successful, it will still face dual challenges from the industry and its own business competitiveness.
At present, the growing market is attracting an influx of more and more practitioners.
According to the white paper, by the end of 2020, there were 15,172 domestic and foreign bird's nest manufacturers and distributors included in the traceability system in my country's market, a year-on-year increase of 39%, of which 15,113 were Chinese enterprises.
Obviously, although the market has become larger for the industry brands, as competition intensifies, it is not easy to get more from it.
In fact, in the fierce market competition, "price war" has been staged.
According to Yanzhiwu's prospectus, during the reporting period, Yanzhiwu's comprehensive gross profit margins were 51.76%, 48.55%, 48.65% and 51.00% respectively. For the previous decline in gross profit rate, Yanzhiwu said that the main reason was 2019. From 2020 to 2020, the manufacturers of fresh stewed bird's nest will strengthen their marketing efforts, and the online bird's nest consumer market will face greater competition pressure.
Specific to the product, it is not difficult to find that the average sales price of Wanyan has dropped from 180.88 yuan in 2018 to 158.86 yuan in the first half of 2021.
The average sales price of fresh stewed bird's nest dropped from 134.55 yuan in 2018 to 51.52 yuan.
In the risk warning, Yanzhiwu also stated that the intensification of competition in the bird's nest market may lead to adverse consequences such as a decrease in the price of bird's nest-related products, an increase in the proportion of sales expenses, and a decline in market share.
In addition, with the listing of a single category of bird's nest, it will naturally bear the risk of future fluctuations in the bird's nest industry.
As we all know, the outbreak of the "Blood Swallow" incident in 2011, the fake and shoddy bird's nest has seriously damaged consumer confidence. The country has restricted the import of bird's nest for two years, and the bird's nest industry has suffered a heavy blow.
In this regard, Yanzhiwu stated in the prospectus that as a consumer goods industry, the bird's nest market is greatly affected by factors such as consumer consumption habits, industry negative news, and industry regulatory policies.
Although the company strictly adheres to quality standards in product production and strictly abides by relevant laws, regulations and regulatory requirements in production and operation, due to the large number of enterprises in the bird's nest industry and the uneven management level, if the operator has serious illegal operations, false propaganda, product Problems such as quality defects, which in turn lead to consumers' distrust in the bird's nest industry, or the relevant competent authorities make major adjustments to industry regulatory policies, or consumers' perceptions of bird's nest products may change significantly, and the bird's nest industry may face greater fluctuations , the company may also be affected and adversely affect the company's operating results.
It seems that for bird's nest enterprises, if they want to seek longer-term brand development, the existing business model still needs to be polished, and listing is not the only solution.
Text/Yang Lin