Yesterday, the fifth day of May (June 14), was the traditional Dragon Boat Festival. Prior to this, Wufangzhai, known as the “first share of rice dumplings,” had officially disclosed the pre-disclosure draft of the prospectus on June 4 and planned to be listed on the main board of the Shanghai Stock Exchange, which is expected to make up for the gap in the A-share market in this segment.

According to the prospectus, more than 70% of the income comes from rice dumplings. Wufangzhai will sell more than 366 million rice dumplings in 2020. This listing plans to publicly issue no more than 25.18575 million shares, with a total planned fund-raising of 1.056 billion yuan. The sponsor is Zheshang Securities.

ONE

China's time-honored brand "Wufangzhai"

More than two thousand years ago, Qu Yuan and Wu Zixu left immortal legends, and their family and country sentiments were translated into the custom of eating rice dumplings during the Dragon Boat Festival and passed down to future generations. More than 600 years ago, "Kingswood Fine Point" created the Jiangnan dim sum genre and became famous in China. Among them, Zongzi has been popular among the people of Jiaxing since the late Qing Dynasty.

In 1921, Zhang Jinquan, a businessman from Lanxi, Zhejiang, carried a burden to sell "Wufangzhai Zongzi" in the old town of Jiaxing, opening a historical chapter of the time-honored brand.

In the 1940s, Wufangzhai Zongzi was known as the "king of Zongzi" for its characteristics of "glutinous but not paste, fat but not greasy, fragrant and delicious, moderately salty and sweet". In 1956, a public-private joint venture, the three "Wufangzhai" and "Fragrantzhai" "Rongji", "Huji" and "Qingji" were combined into one "Jiaxing Wufangzhai Zongzi Store". After another half-century of changes, Wufangzhai adheres to the principle of quality, and has created a well-known gold-letter sign, which has also become a city card of Jiaxing.

Founded in 1921, Wufangzhai was recognized as a well-known trademark in China by the National Trademark Office in 2004, and it was the first batch of "Chinese Time-honored" enterprises in the country. Statistics from relevant data show that the total share of Wufangzhai’s rice dumplings in the domestic market reached 30.2% (data for 2019), which is far ahead of Sanquan and Miss’s 21.4% and 16.5%.

Competition in the zongzi market is fierce, but the gross profit margin is not low. From the data disclosed by listed companies, since 2013, the industry's average gross profit margin has fluctuated around 40%. Among the A-share companies selling rice dumplings, Taoli Bread, Sanquan Foods, and Huangshanghuang were named rivals by Wufangzhai.

TWO

The first stock of A-share rice dumplings will be born soon

In this huge market of China, any subdivided industry can make a big business. The same is true for the zongzi, which everyone is going to collectively "try early" soon.

No, the first share of A-share rice dumplings is coming.

On June 4, Zhejiang Wufangzhai Industrial Co., Ltd. ("Wufangzhai" for short) disclosed its IPO prospectus and planned to land on the main board of the Shanghai Stock Exchange to raise funds of 1.056 billion yuan, mainly for capacity construction and informatization upgrades.

At present, the company has formed a product group with rice dumplings as the leading factor, which integrates moon cakes, glutinous rice balls, pastries, egg products, and other rice products. Among them, Zongzi, the core business, has a market share of more than 20% in the Chinese market in 2020, making it the top trader in the Chinese Zongzi market.

The sales of Wufangzhai Zongzi from 2018 to 2020 are 411 million, 408 million, and 366 million, respectively. The operating income generated by the company's zongzi business in recent years was 1.502 billion yuan, 1.609 billion yuan, and 1.644 billion yuan.

During the reporting period, the company's operating income was 2.423 billion yuan, 2.507 billion yuan, and 2.421 billion yuan, and net profits attributable to the parent were 96.985 million yuan, 163 million yuan, and 142 million yuan. From 2018 to 2020, the company's gross profit margin was 45.24%, 45.43%, and 44.75%, and the net profit margin was 4.0%, 6.50%, and 5.87%, respectively.

The company's revenue and net profit both fell last year, which may indeed be related to the epidemic. However, in view of the performance from 2018 to 2019, the growth problem has been around for a long time.

As the boss of the zongzi market, why is this so?

THREE

Zongzi market is small and competition is high

Consumption upgrades in recent years have made rice dumplings, which were originally only regional products, become nationalized. However, there are many challenges to make this niche product in the national market continue to be upgraded to a mass product.

Except for a few areas in Jiangsu, Zhejiang and Guangdong, where there is a habit of eating zongzi all the year round, zongzi is still an ultra-low frequency consumer product in most markets. Many places do not even have a dietary tradition of eating glutinous rice.

This is the biggest problem-even if Wufangzhai sits firmly on the top of the zongzi market, after all, the total scale of China's zongzi market in 2020 will be less than 8 billion yuan.

FOUR

Expand product line and establish 473 stores

How to do? For the core business, Wufangzhai started internally.

In recent years, the company has increased its outsourcing of its core product Zongzi. From 2018 to 2020, the outsourcing output will be 49,462,800, 55,051,700, and 90,881,200, accounting for 11.66%, 13.40%, and 90.882 million of the company's total output. 25.01%.

The impact of outsourcing on the company's cost control is first manifested in the small number of employees. During the reporting period, the total number of employees of the company was 4,521, 4,193, and 4,009, respectively. In two years, the business volume has not changed much, but the total number of employees has dropped by 11.32%.

The core business foundry has led to a sharp decline in the company's capacity utilization rate of the rice dumpling business in recent years, which were 121.30%, 84.82%, and 60.57% during the reporting period.

It is worth mentioning that, in the context of declining sales and serious overcapacity, the company still plans to use most of the IPO funds to expand production capacity. After the construction is in place, the annual output of zongzi can increase by 100 million. Why is this again?

In addition to increasing outsourcing of core business and increasing self-operation in channels (stores and e-commerce), Wufangzhai's biggest change in recent years has occurred in business layout-the company has gradually moved from rice dumplings to large food products.

Wufangzhai is not only the leader of the zongzi market, but also the product line has expanded to moon cakes, glutinous rice balls, pastries, egg products, and other rice products.

At the same time, the company is no longer limited to the food processing business, but also involved in the catering business. In recent years, the restaurant chain Wufangzhai has begun to deploy in key markets such as the Yangtze River Delta and Wuhan. It not only sells Wufangzhai's products, but also various snacks and meals. As of the end of December 2020, the company has established 474 stores through direct operation, cooperative operation, franchising, and distribution.

How does the old picture brand break through the ceiling and usher in new opportunities?

However, with the intensification of market competition, new brands are emerging in an endless stream. Especially in recent years, the pattern of the catering industry has become more refined and diversified. Sought after.

On the contrary, the time-honored brands that pay attention to heritage and taste are gradually declining. Some time-honored brands seem to have been submerged by the torrent of the times and are gradually declining. For Wufangzhai, although they are still developing steadily, they are under the impact of the times. , The development is still not ideal.

It is not difficult to see that in addition to production expansion, Wufangzhai focuses on digital upgrades and innovations, and digitalization is precisely the key word in the development of catering in recent years. From this direction, it is not groundless to rejuvenate and transform itself. .

Looking at the entire market, it is not only Wufangzhai that has encountered this problem, all the time-honored brands seem to be trying to reform themselves to cater to this younger market.

Recently, many time-honored brands have declined in reputation. The industry insiders analyzed the reasons, and it was mainly questioned from the aspects of product quality, price service, and lack of innovation.

The time-honored brand seeks to go public, but also to break through the current situation and seek new development directions. For Wufangzhai, can it break through the ceiling and usher in new development opportunities?

Summarize

Many people believe that for Wufangzhai, it has certain product and brand advantages. The retail-oriented Wufangzhai, unlike other time-honored brands, does not have a significant decline in reputation. On the contrary, Wufangzhai has formed a high reputation among the masses of consumers. With the golden signboard, it can help time-honored enterprises to expand in products, channels and consumption.