Entering the end of October, most companies have begun to hand over their "report cards" in the third quarter, with some being happy and some being worried.
As a leading company in the baking industry, Taoli bread has also attracted much attention from the outside world as always. However, in the case of "increasing revenue but not increasing profits" for for seven consecutive quarters, some doubts emerged from the outside world, saying that "the baking industry is too difficult."
#1
still has not broken the vicious circle of "increase income but not profit"?
has always been favored by investment institutions
On the evening of October 25, Taoli Bread disclosed its third quarter report, saying that it achieved operating income of 1.822 billion yuan in the third quarter, increased by 25.67% year-on-year; net profit of 132 million yuan, a year-on-year decrease of 33.88%. In the first three quarters, Taoli Bread's revenue was 5.028 billion yuan, a year-on-year increase of 7.81%; and achieved a net profit of 490 million yuan, a year-on-year decrease of 13.8%. It is worth noting that since the first quarter of 2021, Taoli Bread has been in a state of "increasing revenue but not increasing profits" for seven consecutive quarters.
Regarding the reasons for the decline in net profit, Taoli Bread said in its financial report that "it is mainly affected by the epidemic and the continuous high temperature power limit in some regions. The rebate rate, discount rate and terminal delivery service expenses in the reporting period have increased and the increase in the price of some raw materials has led to a decrease in the gross profit margin in this period. The reduction of government subsidies obtained in this period and the investment losses caused by the purchase of commodity futures contracts in this period have been caused." In previous financial reports, factors such as "rise in raw material prices" have also been repeatedly mentioned.
In Nashi's view, the increase in the cost of some raw materials and the increase in terminal delivery service costs are indeed the direct root cause of Taoli Bread's "increasing revenue but not increasing profits". In terms of raw material prices, the prices of raw materials such as flour, milk powder, cream fat, white sugar, yeast, etc. required for their product production fluctuates, which will have a certain impact on the product's gross profit margin level; from the demand side, Taoli bread products are mainly short-term products and have high distribution requirements. Distribution in the epidemic environment has been greatly affected, resulting in a continuous increase in costs.
Zhu Danpeng, vice president of the Guangdong Provincial Food Security Promotion Association, believes that in recent years, many fast-moving consumer goods brands have fallen into a situation of increasing revenue but not increasing profits, which has become a new normal in the post-epidemic era. This has both the impact of the general environment and the adverse factors in the industry, but it is more caused by weak consumer consumption power.
and , general manager of Beijing Jingrui Zongheng Marketing Consulting Company, Wang Haiying, believes that this may be related to some of the investment layouts Taoli Bread is making. For leading companies that have been deeply engaged in the market for many years, Taoli Bread’s own marketing system is relatively mature and there are few major changes in all aspects. In the case of increasing revenue but not increasing profits, it may be more likely to have a certain layout for the future, such as investing in factory construction or optimizing channels. Mr. Wang's view has given a certain explanation for the investment institutions' attitude of "buying" and "increasing holdings" when Taoli Bread is "increasing revenue but not increasing profits".
#2
1 Short-term protection track, Taoli is still the winner
Research Taoli bread first understands the short-term protection bread track.
The types of bread can be divided into short-term insurance, medium-term insurance and long-term insurance according to the shelf life classification. Brands such as Panpan and Daliyuan are mainly long-term insurance bread, which usually lasts more than half a year; brands such as Taoli, Jiadun , and Mankun belong to the short-term insurance category, with a shelf life of within one week. From this point of view, short-save bread is more meal replacement nature, and freshness is especially important. This determines that the moat of short-save bread is channel construction.
As we all know, Taoli currently uses the factory + wholesale distribution model , that is, use centralized logistics to wholesale products to supermarkets or dealers in local and surrounding urban areas, and finally sell them to terminal consumers.This business model has a high degree of production automation, which facilitates regional expansion, scale and channel sinking, reduces the production and distribution costs of Taoli bread, and makes the gross profit of a piece of bread exceed 35%. As of June 30, 2022, the company has established production bases in 22 regions across the country.
However, the disadvantage of this model is that it takes a long time to cultivate dealers in the early stage, and it also needs to build production bases in various places and establish stable cooperation with large supermarkets. These may be a difficult problem for the early Taoli, but they are not a problem now.
First of all, Taoli has 22 production bases in the country . Each factory covers 200 to 300 kilometers around. The bread produced on the same day can appear on the supermarket shelf on the same day.
Secondly, as of June 30 this year, Taoli has more than 310,000 retail terminals and 942 distributors . It has also established good cooperative relationships with large supermarkets ( Yonghui , Walmart , RT-Mart , etc.) and regional well-known supermarket chains ( Hongqi chain , Jiayue chain, etc.).
's advantages in channels and supply chain are not built in a short period of time, and this is also being paid back to the business. In this year's semi-annual report, Taoli pointed out that its growth was 9.06%, mainly due to the continuous consolidation of marketing channels and the opening of new markets. This is exactly why Taoli Noodles are still gaining advantages in the short-term baking track.
Although competition in the external environment is becoming increasingly fierce, Taoli Bread is based on channels and supply chains, and still has a deep moat in the short-term protection track. This shows from Taoli Bread’s financial report that its sales are still growing and its outlets are still increasing, which shows that consumers still recognize Taoli Bread.
Although the prosperous short-term baked food track has nurtured a diverse range of products and brands, and although consumers have more choices, it is undeniable that Taoli bread is still the backbone of baked food.
#3
The future of short-term baking products
Analysis of peach and plum, not only depends on the past and present of short-term baking, but also on the upcoming future of this track .
In recent years, consumers' awareness of baked goods has been increasing. China's baking market has grown rapidly, and it is currently the second largest market in the world after the United States. Overall, the baked food market has grown steadily. According to Euromonitor statistics, the baked food market size in 2020 is expected to reach 256.7 billion yuan, with a CAGR of about 10.9%.
Image source: Sanwan Food Research Society
However, compared with per capita baked food consumption, China still has a big gap with Britain, the United States, Japan and other countries, and the industry has huge room for development. According to Euromonitor data, the per capita baked food consumption in mainland my country in 2020 was 7.3kg, far lower than the per capita consumption in Western developed countries such as the United States, and also lower than the world average of 18.8kg/person, so there is still a large penetration.
Although different regions and cities in China have their own geographical differences and eating habits, such as occupancy of buns and steamed buns in the north, , baking bread is still the best choice in terms of saving time and nutrition.
Also in the downstream structure of the category, about 75% are unpackaged products, such as short-term insurance foods sold directly in baking stores, and 25% are packaged products produced by food industry enterprises, including packaged short-term insurance and medium- and long-term insurance bakery foods. Therefore, the market size of short-term insurance bread for a long time in the future is much larger than long-term insurance.
Nashi believes that short-term baked goods meet consumers' pursuit of healthy diet under consumption upgrades. They have many strongly related scenarios such as breakfast, birthday, holiday, afternoon tea, etc., and will enjoy the rapid growth of categories for a long time. Taoli is still one of the brands remembered by consumers. If you extend the time front, you can find that Taoli Bread’s brand and product strength are still strong in the market.
Taoli 2012-2021 operating conditions
So the temporary decline in net profit does not mean that the development of Taoli bread is in trouble, nor does it mean that the development of short-term baked goods in the Chinese market is hindered.
In the future, whoever can reach the end will be able to eat the largest cake with short-term pastry.
