Fosun international chairman Guo Guangchang crossed over Baijiu for over a year, and the first transcript was mixed.
On March 17, Shede Spirits Co.Ltd(600702) ( Shede Spirits Co.Ltd(600702) . SH) released the annual report of 2021. The company achieved a revenue of 4.969 billion yuan, an increase of 83.8% year-on-year; The attributable net profit was 1.246 billion yuan, a year-on-year increase of 114.35%.
Compared with Shede Spirits Co.Ltd(600702) , the performance of Jinhui Liquor Co.Ltd(603919) ( Jinhui Liquor Co.Ltd(603919) . SH) does not seem to have the same “Guo Guangchang effect”. The net profit decreased year-on-year for the first time since its listing in 2016 and failed to meet the performance target in 2021. Therefore, the senior management team was fined more than 6 million yuan.
2021 is the first full fiscal year after the “Fosun system” takes over Shede Spirits Co.Ltd(600702) and Jinhui Liquor Co.Ltd(603919) respectively.
Since May 2020, Guo Guangchang has spent over 7 billion yuan, successively taking Jinhui Liquor Co.Ltd(603919) and Shede Spirits Co.Ltd(600702) , and becoming the largest private capital in Baijiu across the border.
Under the Baijiu system, Shede Spirits Co.Ltd(600702) and Jinhui Liquor Co.Ltd(603919) accelerate the nationwide layout, and are willing to compete with the old wine strategy to enter the high-speed development stage. However, whether the rapid growth can be sustained under the pressure of the first line of liquor is the next test. While Jinhui Liquor Co.Ltd(603919) wants to go out of the northwest and go to the whole country, it faces greater difficulties.
Guo Guangchang, the former richest man in Shanghai, has great expectations for the Baijiu sector. How will the story of Shede Spirits Co.Ltd(600702) and Jinhui Liquor Co.Ltd(603919) be interpreted in the future?
medium and high grade Baijiu gross profit rate exceeds Wuliangye Yibin Co.Ltd(000858)
In the first year of Fosun, the revenue of Shede Spirits Co.Ltd(600702) reached 5 billion yuan. Two years ago, the revenue of “Sichuan wine Jinhua” hovered around 2.5 billion yuan for a long time.
“If dealers want to make a lot of money in the future, they will fully graft Tuopai shede with Fosun’s ecological resources to produce multiplier effect.” In April 2021, Guo Guangchang said at the Shede Spirits Co.Ltd(600702) 2021 dealer conference.
From the annual report of Shede Spirits Co.Ltd(600702) 2021, this multiplier effect has begun to appear. For the reasons for the change of operating revenue in 2021, Shede Spirits Co.Ltd(600702) in the annual report, it is mainly due to the company’s continuous promotion of the old wine strategy this year, the further recognition of the old wine quality, the obvious improvement of the number and quality of dealers, the increasing number of loyal consumers and the increase of sales revenue.
Shede Spirits Co.Ltd(600702) owns two core brands of “shede” and “Tuopai”. The company established the old wine strategy in 2019 and proposed to build “shede” brand into “the first brand of old wine category”, focusing on the medium and high-end market. In 2021, the high-end Baijiu contributed more than 80% of Shede Spirits Co.Ltd(600702) ‘s main business. During the reporting period, Shede Spirits Co.Ltd(600702) of medium and high-grade liquor achieved a revenue of 3.874 billion yuan, an increase of 81.94% year-on-year; The gross profit margin was 87.3%, exceeding 84.95% of Wuliangye Yibin Co.Ltd(000858) .
The low-grade liquor represented by Tuopai Daqu also ushered in restorative growth. “Tuopai” was once popular all over the country, but then it was silent for many years. After Guo Guangchang took over, he put forward the slogan of “rejuvenating Tuopai” to create a dual brand operation strategy. In 2021, Shede Spirits Co.Ltd(600702) low-grade liquor revenue was 703 million yuan, with a year-on-year increase of 218.66%, and the gross profit margin increased by 8.13% to 49.8%.
In terms of sub regions, in 2021, Shede Spirits Co.Ltd(600702) provincial sales reached 1.179 billion yuan, accounting for 25.77%; The sales revenue outside the province reached 2.995 billion yuan, accounting for 65.42%. Correspondingly, dealers outside Shede Spirits Co.Ltd(600702) province increased significantly,
By the end of 2021, there were 1785 dealers outside Shede Spirits Co.Ltd(600702) Province, with a net increase of 515 during the reporting period.
Baijiu analyst Cai Xuefei told times weekly that the high growth of Shede Spirits Co.Ltd(600702) comes from the sales growth of high-end products represented by wisdom and willing to sacrifice. With the help of Fosun’s capital, Shede Spirits Co.Ltd(600702) constantly strengthens the IP construction of cultural sacrifice and expands the market in East China and North China. The development of the national market has also brought about an increase in sales and profits, and has a strong capacity for sustained growth.
“After Fosun joined the Shede Spirits Co.Ltd(600702) company, the relationship between manufacturers was straightened out through top-level design, so that dealers could make money by selling willing wine and stimulate the enthusiasm of the sales team, which played a core role in improving the performance in 2021.” Xiao Zhuqing, a Baijiu marketing expert, told the times weekly reporter.
In 2022, Shede Spirits Co.Ltd(600702) still maintains a high growth trend. In the first quarter of 2022, willing to realize the attributable net profit of 460 million yuan to 560 million yuan, an increase of 158 million yuan to 258 million yuan compared with the same period of last year, with a year-on-year increase of 52% to 85%.
Guosen Securities Co.Ltd(002736) research report believes that with the support of old wine strategy, Shede Spirits Co.Ltd(600702) brand growth potential is still sufficient. Considering that there is still large space for nationwide investment promotion layout, the company’s performance is expected to continue to maintain steady and rapid growth and continue to enjoy the bonus of upgrading and expansion of secondary high-end wine.
In Xiao Zhuqing’s view, Shede Spirits Co.Ltd(600702) ‘s future development is mainly faced with two pressures, including the extrusion of the first line of Baijiu channel to the regional brand, the impact of the rise of Maotai flavor on other Baijiu flavor types, and the future growth of the liquor industry is still facing a bigger test.
Jinhui Liquor Co.Ltd(603919) growth troubles
Compared with Shede Spirits Co.Ltd(600702) , Jinhui Liquor Co.Ltd(603919) ‘s performance is not satisfactory.
According to the financial report, Jinhui Liquor Co.Ltd(603919) 2021 achieved an operating revenue of 1.788 billion yuan, a year-on-year increase of 3.34%; The net profit attributable to the company was 325 million yuan, a year-on-year decrease of 1.95%.
On a quarterly basis, Jinhui Liquor Co.Ltd(603919) in the first three quarters of 2021 achieved a revenue of 1.341 billion yuan, a year-on-year increase of 28.31%, and the attributable net profit was 243 million yuan, a year-on-year increase of 53.08%. However, in the fourth quarter, the high-speed performance fell sharply, and the operating revenue was only 447 million yuan, a year-on-year decrease of 34.74%, and the attributable net profit was only 82 million yuan, a year-on-year decrease of 52.61%.
Jinhui Liquor Co.Ltd(603919) said that in the fourth quarter of last year, the epidemic occurred in Lanzhou, Xi’an and other core sales areas, which had a certain impact on production and sales.
In terms of product structure, Jinhui Liquor Co.Ltd(603919) medium and low-grade liquor is heavily affected by the epidemic. According to the data, in 2021, the sales revenue of Jinhui Liquor Co.Ltd(603919) high-end products reached 1.095 billion yuan, an increase of 26.24% over the same period of last year, and the proportion of revenue increased to 62.11%.
The revenue of middle-grade and low-grade products decreased by 19.59% and 45.72% respectively compared with last year.
In addition to the epidemic factors, the performance decline is also related to Jinhui Liquor Co.Ltd(603919) increasing marketing investment. After “Fosun system” became the owner Jinhui Liquor Co.Ltd(603919) after that, the company promoted the reform of “secondary entrepreneurship”, accelerated the nationwide layout, established Shanghai and Jiangsu sales companies, officially laid out the East China market and deeply integrated into Fosun ecology. However, Jinhui Liquor Co.Ltd(603919) as a regional brand, the distribution of the national market must increase the investment in sales expenses.
According to the annual report, Jinhui Liquor Co.Ltd(603919) 2021’s sales expenses reached 278 million yuan, a year-on-year increase of 25.09%, mainly due to the company’s increased consumer interaction and brand building.
Cai Xuefei believes that the decline of Jinhui Liquor Co.Ltd(603919) is due to the limited brand power of Jinhui itself, and the continuous upgrading of product structure and national market expansion require a lot of pre investment. Although Jinhui Liquor Co.Ltd(603919) has significantly upgraded its brand in recent years, as a regional liquor enterprise, the improvement of brand value and the cultivation of medium and high-end products is a long-term project. In the stock pressurized market environment, the channels of first-line famous liquor continue to sink and Jinhui Liquor Co.Ltd(603919) is under pressure, A large amount of pre investment has reduced the profits of enterprises.
It is worth mentioning that this is also the first time since Jinhui Liquor Co.Ltd(603919) 2016 landed in the capital market that the annual net profit decreased year-on-year, the growth rate of revenue hit a new low, and the company’s executives also suffered.
In 2019, Jinhui Liquor Co.Ltd(603919) signed the agreement on performance objectives and rewards and punishment scheme with nine core members of the management team, including Chairman Zhou Zhigang. From 2019 to 2023, the company needs to achieve revenue objectives of 1.62 billion yuan, 1.83 billion yuan, 2.1 billion yuan, 2.5 billion yuan and 3 billion yuan respectively, and the net profit after deduction is 280 million yuan, 320 million yuan, 380 million yuan, 470 million yuan and 600 million yuan respectively.
According to the reward and punishment plan, Jinhui Liquor Co.Ltd(603919) revenue target needs to be 100% achieved, net profit target after deduction reaches 85%, and the senior management team can get corresponding reward and salary. On the contrary, the senior management team will be punished accordingly. In 2019 and 2020, Jinhui Liquor Co.Ltd(603919) achieved the performance target, but failed to achieve it in 2021, and the senior management team was punished.
According to the financial report, during the reporting period, Jinhui Liquor Co.Ltd(603919) long-term employee compensation payable was about 1326500 yuan, a year-on-year decrease of 82.65%, mainly due to the deduction of 6.3177 million yuan from the core management team in 2021, and the amount of deduction has been offset from the accrued but unpaid reward funds. This means that among the Jinhui Liquor Co.Ltd(603919) 9 core executives, the per capita penalty is about 700000 yuan.
Xiao Zhuqing said that Jinhui Liquor Co.Ltd(603919) performance did not achieve the expected goal, the core reason is that Jinhui Liquor Co.Ltd(603919) belongs to the regional brand of Gansu Province, and has appeal only in some regions of Gansu Province, does not fully cover Gansu Province, and lacks the appeal of national brands. In the market expansion outside the province, despite the blessing of Fosun, it has not achieved obvious results.
Jinhui Liquor Co.Ltd(603919) ‘s troubles are not limited to this. If the performance target of 2021 is not achieved, the target of operating revenue of 2.5 billion yuan will be achieved in 2022, which requires a significant year-on-year increase of about 40%. However, the growth of the Baijiu industry is slowing down generally, and the stock market competition continues to intensify. In addition, there is still a risk of repeated outbreak in a small area. Jinhui Liquor Co.Ltd(603919) ‘s goal of achieving high growth is not easy.
Jinhui Liquor Co.Ltd(603919) said in its annual report that in the face of the current development of Baijiu industry and market competition environment, in 2022, the company strives to achieve 2 billion 500 million yuan in revenue, and integrates company resources to empowering the Northwest market, East China market and online business.
“The market structure of Chinese Baijiu has been solidified, and the status of Mao Fen Yang and Lufen Fen rivers is stable. Under the current market environment, there is little chance for the new inbound players to enter the market, and almost no chance of becoming a national brand.” Xiao Zhuqing said.
As for how to complete the performance target of 2022 and promote the national layout, the reporter of times weekly wrote Jinhui Liquor Co.Ltd(603919) , but no reply has been received as of the time of publication.
