Spicy strip companies go public for speculation or potential? The number of new companies in spicy strips does not increase but decreases, and it is difficult to get rid of the "junk food" label

Public Company Watch

The spicy strip industry is quietly changing. The latest data shows that from 2020 to March 2023, the number of new spicy strip enterprises in China has decreased year by year. On the one hand, the number of new enterprises of spicy strips does not increase but falls, and the "junk food" label is difficult to get rid of; On the other hand, spicy strip companies are still struggling to seek listing and financing. The industry believes that most spicy strip companies have relatively single products, and high performance growth is difficult to sustain, so they have to rely on the capital market in order to enhance their comprehensive strength in all aspects.

Text, table/Guangzhou Daily all-media reporter Zhao Fangyuan

Weilong broke on the listing, and the single product had to rely on capital

The number of new spicy strip enterprises in China is decreasing year by year. Enterprise investigation data shows that there are 2613 spicy strip-related enterprises in China. From 2020 to March 2023, the number of new spicy strip-related enterprises in China was 3, 871, 563 and 481 respectively.

However, companies related to spicy strips are still struggling to go public and raise funds. In December last year, Weilong officially landed on the Hong Kong Stock Exchange, but its road to listing was full of twists and turns. In 12, Weilong twice submitted a prospectus to the Hong Kong Stock Exchange and passed the listing hearing in November of that year. In May 2021, Weilong resubmitted the prospectus after the listing application materials expired, passed the listing hearing in June, and updated the prospectus again on November 11 before successfully landing on the Hong Kong Stock Exchange. Before listing, Weilong was favored by capital, and its valuation soared to 2022 billion yuan. However, the listing was eventually completed with a valuation that shrank by 5%, with an issue price of HK$6.11 per share and a market value of about HK$23.600 billion. On the first day of listing, Weilong's share price broke through and closed at HK$10.56 per share, down 248.27%. As of the close on March 10 this year, Weilong closed at HK$02.5 per share, up 11.3%.

"On the whole, most spicy strip companies have relatively single products, so they have to rely on the capital market." Zhu Danpeng, an analyst in China's food industry, said that taking Weilong as an example, in order to realize its "five strategies" layout of multi-brand, multi-category, multi-scenario, multi-channel and multi-consumer groups, it must rely on the capital market to enhance its overall comprehensive strength, anti-risk ability and resource and capital utilization ability.

The high growth of performance is difficult to sustain, and Weilong lost net profit in the first half of last year

The retail sales of China's spicy snack food industry increased from RMB2016.1139 billion in 2021 to RMB1729.8 billion in 7, with a compound annual growth rate of 2021.2026%. The Frost & Sullivan report predicts that retail sales of China's spicy snack food industry will grow at a compound annual growth rate of 9.6% from 2026 to 2737, reaching <>.<> billion yuan by <>. Despite the considerable market size and growth prospects, in recent years, with the rise in raw materials, food safety issues, and the diversification of young customer groups, many spicy strip companies have not been able to sustain their previous high growth despite announcing price increases.

Taking Weilong as an example, the prospectus shows that from 2019 to 2021, Weilong's total revenue was 33.8 billion yuan, 41.2 billion yuan and 48.6 billion yuan, and the net profit was 6 million yuan, 8 million yuan and 2 million yuan respectively. In the first half of 8, the total revenue reached 3.2022 billion yuan, down 22.6% year-on-year; Net profit was a loss of 1 million yuan, compared to a net profit of 8 million yuan in the same period of 2.

Specifically, in the first half of 2022, the sales of Weilong seasoned noodle products, vegetable products, soy products and other products have declined to varying degrees.

At the same time, food safety problems are frequent, and foods that use food additives beyond the scope and limit also make it difficult for spicy strips to get rid of the label of "junk food" for a long time. On the black cat complaint platform, a search with "spicy strips" as a keyword, a total of 2079 results, most of the problems are related to product leakage, deterioration, eating foreign matter, etc.