Recently, Hengshun Vinegar Industry announced that the company's application for a fixed increase of no more than 2 billion yuan has been approved by the China Securities Regulatory Commission.
In November last year, after Hengshun Vinegar Industry announced a price increase for some products, it issued a capital raising and expansion announcement, and planned to use the proceeds to investment company vinegar, cooking wine, soy sauce, compound seasoning and other businesses. production expansion construction and supporting projects, as well as supplementary working capital. The price increase of
and the fund-raising to expand production have boosted the secondary market's confidence in Hengshun Vinegar Industry, and Hengshun Vinegar Industry's stock price has also risen as a result. However, at that time, there was a point of view that the effects of price increases and fund-raising to expand production would take a long time to appear, and they would have limited effect on improving the performance of Hengshun Vinegar Industry in the short term.
This is indeed the case. After the 2021 financial report was disclosed, Hengshun Vinegar Industry’s stock price also fell. As of July 5, 2022, Hengshun Vinegar Industry's stock price has fallen from a stage high of 26.84 yuan/share in February last year to 12.71 yuan/share.
What happened to Hengshun Vinegar, whose stock price halved? After the private placement is approved, can Hengshun vinegar industry return to its peak?
1. Hengshun Vinegar Industry, which was dragged down by "side business", fell into a quagmire of focusing on one thing and losing sight of the other.
Before 2012, Hengshun Vinegar Industry also encountered the predicament of continued sluggish performance.
According to public information, after Hengshun Vinegar went public in 2001, it successively set foot in automobile trade, biopharmaceuticals, optoelectronic equipment, real estate and other industries, but with little success. It even dragged down the main business for a time, which ultimately led to the company's overall performance. decline.
Since 2012, Hengshun Vinegar Industry has begun to divest its non-main business. After selling the remaining real estate equity in 2014, it will focus on the main business of Hengshun Vinegar Industry, and its performance has been growing rapidly since then.
It is worth noting that around 2014, it was the time when condiment companies such as Haitian Flavor Industry expanded their influence in the soy sauce industry through acquisitions and other measures, while Hengshun Vinegar Industry did not Conduct large-scale acquisitions to further expand its advantages in the vinegar field. This also paved the way for the Hengshun vinegar market to be divided after other condiment companies entered the vinegar industry.
The rapid growth of Hengshun Vinegar Industry’s performance will come to an abrupt end in 2021. According to the financial report, Hengshun Vinegar's revenue in 2021 was 1.893 billion yuan, a year-on-year decrease of 6.45%; the net profit attributable to the parent company was 119 million yuan, a year-on-year decrease of 62.28%, with both revenue and net profit falling. In the first quarter of 2022, although Hengshun Vinegar Industry's revenue increased by 10.43% to 572 million yuan, the net profit attributable to the parent company still fell by 0.75% year-on-year.
The main reason why Hengshun Vinegar Industry's performance has declined and entered a growth bottleneck period is that Hengshun Vinegar Industry's own market has been invaded by giants, and the expansion of other condiment businesses has been slow, resulting in a decline in the company's competitiveness in the entire condiment market.
The market competitiveness is also declining. Hengshun Vinegar Industry is facing a greater crisis than Haitian Flavor Industry.
Unlike soy sauce, the amount and frequency of vinegar used by the public or the catering industry is relatively low, and the market for the vinegar industry itself is not large. Moreover, the threshold for vinegar itself is low, and it is difficult to form the core competitiveness of an enterprise through technical differences, origin factors, etc.
Therefore, Hengshun Vinegar Industry should use its first-mover advantage to increase its market share in the vinegar industry, use its scale advantage and brand effect to seize the minds of users and form a brand moat.
Unfortunately, however, Hengshun Vinegar Industry was dragged down by its sideline business at a stage when it should have been rapidly developing the vinegar industry. After completing their main business, other condiment companies have actively expanded their business boundaries and are committed to establishing a condiment category integrated business matrix.
For example, Haitian Flavor Industry began to build a condiment factory in Suqian in 2014. It acquired Danhe Vinegar Industry around 2017 and officially competed head-on with Hengshun Vinegar Industry. Although Qianhe Flavor Industry has been developing its vinegar business at a slow pace, it directly acquired Hengkang Sauce Vinegar located in Zhenjiang, , and competed with it "at the doorstep" of Hengshun Vinegar Industry, which was extremely harmful and insulting.
In this context, Hengshun Vinegar Industry must not only take into account its own main business and prevent other condiment giants from seizing the market, but also actively expand business lines and promote the business development of rice wine, cooking wine, soy sauce and compound seasonings. The difficulty can be Just imagine.
Perhaps in order to boost capital confidence, Hengshun Vinegar Industry once again began to divest non-main businesses. In December 2021, Hengshun Vinegar Industry announced that it would sell 72% of its equity in Hengshun Rice Industry; in May 2022, Hengshun Vinegar Industry stated that it would divest 51% of the equity in Zhenjiang Hengshun Mall Co., Ltd. According to Tianyancha APP, Zhenjiang Hengshun Mall Co., Ltd. is a wholly-owned subsidiary of Hengshun Vinegar Industry, and its main assets are investment real estate.
In addition, Hengshun Vinegar Industry further acquired the equity of Shanxi Hengshun Vinegar Industry and Hengrun Condiments, showing the positive side of the capital's focus on its main business.
Based on this, Hengshun Vinegar Industry stated at the performance briefing meeting in June 2022 that its future revenue growth point lies in the accelerated in-depth expansion of its main vinegar and wine categories in catering e-commerce channels, as well as its expansion in other categories. The outlook of
is very good and reasonable, but capital may not necessarily pay for it. The halving of its stock price may be the best explanation.
Perhaps for capital, even Haitian Flavor Industry, which completed the condiment category integrated business matrix earlier, cannot conceal its growth decline. Hengshun Vinegar Industry, which has only continued to make efforts in recent years, is not optimistic about its development prospects if it is not particularly eye-catching. What's more, Hengshun Vinegar Industry is currently facing a crisis of focusing on one thing at the expense of another, and the situation is even more difficult than that of Haitian Flavor Industry at that time.
2. The “greedy” Hengshun Vinegar Industry failed in vain?
Since its launch in 2001, Hengshun Vinegar Industry has been struggling. It seems that wherever there is an outlet, it will "exploit".
It is true that the market size of the vinegar industry is not large, but based on the vinegar business, it is also a good business to radiate to other condiment fields. However, Hengshun Vinegar Industry has been "jumping repeatedly", and as of now, it has not yet "understood" the entire vinegar market. Except for the main business area of East China, Hengshun Vinegar's influence in other regions is relatively limited.
Perhaps in order to increase the exposure of the brand, or to show its strategic vision to investors, Hengshun Vinegar Industry has recently begun to cross borders frequently, launching balsamic vinegar flavored ice cream, light vinegar flavored sparkling water , There are also plans to lay out prepared dishes.
Similar to Moutai, behind the Hengshun Vinegar Industry catching up with the trend and launching "strange-flavored" products, perhaps it is not really intending to develop it into a side business, but more to build momentum for the brand. However, unlike Moutai's cross-border ice cream, which is highly sought after, the ice cream and sparkling water launched by Hengshun Vinegar Industry did not cause much splash, the sales volume was not high, and the topic popularity was also slightly weak.
Compared with ice cream and sparkling water that are not related to the main business, Hengshun Vinegar Industry’s prepared dish plan looks more promising and is in line with the general trend of the industry. Haitian Flavors, a condiment company in the same track, also said that the company is actively researching pre-made dishes .
However, it should be noted that the popularity of prepared dishes seems to be coming fiercely, but so far there is still no data to prove that prepared dishes are 100% a good business. On the contrary, some companies have failed after entering the field of prepared dishes. Even The "first stock of pre-made dishes" is delicious and fragrant, and its net profit growth rate has also dropped to single digits. It is not easy for Hengshun Vinegar Industry to develop prepared dishes into the next growth curve.
In addition, although the field of prepared dishes is highly related to condiments, prepared dishes are essentially an heavy asset model. Both the supply chain and marketing logic are very different from the condiments track. Hengshun Vinegar Industry's meager profits may make it difficult to make drastic changes in the layout of prepared dishes.
What’s more critical is that Hengshun Vinegar Industry has entered into prepared dishes without fully understanding its main business. It may repeat the same mistakes and once again fall into the vortex of being dragged down by its main business, making it difficult to extricate itself.
Reference article:
Beijing News: "Cross-border testing of ice cream and sparkling water, Hengshun vinegar still has shackles on its main business breakthrough"
Zebra consumption: "Hengshun vinegar industry returned to 7 years ago overnight: revenue and net profit double decline, the main business has entered a bottleneck period"
Internet Hot List: "Amidst the boom in condiment prices, vinegar companies are struggling to survive"
Kanjian Finance: "Performance has stagnated, the stock price has plummeted by more than 50%, and the "Vinegar King" has emerged What's the problem》
