, December 1st (China News Finance reporter Xie Yiguan) Recently, "Weilong lost 261 million yuan in half a year" was on the Weibo hot search list.

Some netizens wondered, "I eat Weilong every day, why am I still losing money?"

  What happened to "King of Spicy Strips" Weilong?

Data map: Latiao products.

Photo by Han Zhangyun

Why did the "King of Spicy Tiao" lose so much?

  The news of "Weilong's half-year loss of 261 million yuan" comes from its prospectus disclosed a few days ago.

  After one submission was not approved in the past year and the listing was postponed due to poor market environment, in June this year, Weilong submitted a form to the Hong Kong Stock Exchange for the third time and passed the hearing of the Hong Kong Stock Exchange.

  Weilong's latest prospectus shows that in 2019, 2020, 2021 and the first half of 2022, its net profit will be approximately 658 million yuan, 819 million yuan, 827 million yuan and a loss of 261 million yuan, respectively.

  Why did the steady growth of performance come to a halt in the first half of 2022?

Weilong explained that this is due to the impact of a one-time share-based payment related to the previous investment, and the operating performance in 2022 will be affected by this.

  It is understood that in May 2021, Weilong had completed the Pre-IPO round of financing. This round of investors was jointly led by CPE Yuanfeng and Hillhouse, followed by Sequoia China, Tencent, and Yunfeng Fund.

  According to the prospectus, in April 2022, Weilong entered into a supplementary agreement to the share purchase agreement with the controlling shareholder and CPE and other investors. Weilong issued and sold a total of approximately 158 million ordinary shares to these investors at a consideration of approximately US$1,576.27. .

According to relevant accounting standards, this type of share issuance has incurred a one-time share-based payment expense of 629 million yuan, which is deducted from the 2022 consolidated income statement.

  This also means that without this large payment, Weilong should continue to be profitable in the first half of this year.

Revenue declines, Weilong encounters "sequelae" of price increase

  In addition to the loss of profits in the first half of the year due to the impact of large payments, Weilong's revenue in the first half of the year also declined.

  According to the prospectus, from 2019 to 2021, Weilong's total revenue will be approximately 3.385 billion yuan, 4.12 billion yuan, and 4.8 billion yuan.

However, in the first half of 2022, Weilong's revenue decreased by 1.8% to 2.261 billion yuan from 2.303 billion yuan in the same period last year.

  As far as the disclosure is concerned, this is mainly due to the decrease in sales revenue of seasoned noodle products.

In the first half of 2022, the revenue of Weilong seasoned noodle products was 1.341 billion yuan, a year-on-year decrease of 4.3%.

  The main reason for the decrease in sales revenue was the decrease in sales of seasoned noodle products.

Weilong explained this as: Due to the epidemic factors and the latest product upgrades for major product categories with new packaging, production processes, formulas or specifications in the first half of the year, it took customers a certain amount of time to respond to the price adjustment, so the sales volume was affected. Temporary effects.

  In the first half of this year, due to rising raw material prices, Weilong raised prices twice.

A netizen commented, “It used to be 2 yuan a pack, but later it increased to 3 yuan, and then it was 5 yuan.” Another netizen said, “It’s too expensive, and I can’t afford it now.”

  A reporter from Zhongxin Finance noticed that in many supermarkets and online retail platforms in Beijing, the price of Weilong’s flagship product, gluten (spicy strips) has risen to more than 5 yuan. Although some supermarkets and platforms will have promotional activities, the promotional price Also close to 5 yuan.

Data map: Weilong products on the shelves of a supermarket.

Photo by Zuo Yukun of Zhongxin Finance and Economics

Or need to get rid of "spicy stick addiction" as soon as possible

  Under the fluctuation of international bulk commodity prices, the cost of food raw materials and packaging has risen in recent years, which has brought pressure on food companies.

Not only Weilong, but Mala Prince, also a Latiao company, also announced a price increase in the first half of the year.

Other food companies, such as Ganyuan Foods, Dali, Liziyuan, and Qiaqia Foods, have also announced price adjustments.

  Behind the price increase of Weilong products is the increasing marketing expenses year after year.

According to the prospectus, from 2019 to 2021, Weilong's promotion and advertising expenses will be approximately 31 million yuan, 47 million yuan and 79 million yuan respectively.

Even in the first half of the year when raw material costs were under pressure, the cost was still as high as 37 million yuan.

  While Weilong increased his marketing and created topics, there were also "rollovers".

In March this year, Weilong Latiao sparked heated discussions on the Internet because of the slogans on the outer packaging of some Latiao products containing "Yuema", "Thief Da" and "Tough".

Topics such as "Weilong Latiao packaging is accused of being vulgar and borderline" have been trending on Weibo.

  In addition to marketing and price disputes, in the eyes of industry insiders, although Weilong is the "boss" in the field of spicy noodles, it has not built a "moat" and competitors continue to enter the market.

Although it has been committed to product diversification in recent years, it still cannot get rid of the "spicy stick addiction" in terms of revenue.

  Zhu Danpeng, an analyst in the food industry, told the reporter of Zhongxin Finance that Weilong's current core product is still spicy noodles, and the product structure is not rich enough.

"Judging from the market share of Latiao products, there is no problem with Weilong's industry status, but if Latiao takes too much of its main business, there is a risk of sustainable development, which will affect the company's profit margins."

  Zhu Danpeng believes that Weilong needs to add new categories to improve the matrix, develop high-end and healthy snack product layout, and get rid of the impression of unhealthy and low-end snacks.

"At present, Weilong is also making some strategic adjustments, including the entire product matrix, the quality of dealers, and the entire marketing system. On the whole, it is also improving the valuation of future listings." (End)