(Report Producer/Author: Debon Securities, Hua Xiaowei, Deng Zhougui)
1. Shuijingfang: Chuanjiu Jinhua
promoted by local resources and multinational companies 1.1. Historic Sites launched Shuijingfang, not changing its original intention to chase high-end
1.1.1. It belongs to the same vein as Quanxing, and Shuijingfang high profile was born and became popular
Shuijingfang, formerly known as Quanxing The original leading product Quanxing Daqu has a profound history and a pure wine pedigree. Quanxing Daqu is not only one of the six golden flowers of Sichuan wine, but also one of the top eight famous wines in China. It has won awards in the Chinese famous wine competitions held in 1963, 1984, and 1989. Profound brand heritage, high-quality products and affordable prices, supplemented by Quanxing Group’s unique football marketing, Quanxing Daqu became popular all over the country. At its peak in the late 1990s, sales exceeded 1.5 billion yuan, second only to Wuliangye. , and in 1998 through the equity transfer and asset replacement method of substantial reorganization of Sichuan Pharmaceutical to achieve listing. Subsequently, the industry began to usher in an adjustment phase. The Asian financial crisis in 1998 and the liquor industry as a whole were affected. In 1999, the 315 party event was affected by Quanxing Daqu. In 2001, the liquor consumption tax was levied on the low-priced Quanxing Daqu. Even worse, the sales volume of Quanxing Daqu Liquor has been shrinking year by year, and the company is facing a situation where the small operating profit turns to a small loss. In 2002, Quanxing Group began to restructure. Through an employee trust stock ownership plan, a wholly state-owned company authorized to operate was restructured into a private limited liability company with a diversified shareholding structure.
launched the ultra-high-end brand Shuijingfang with the help of historical relics excavation, which was brilliant at the beginning of the market. In 1998, when the Quanxing Distillery was rebuilt, it was discovered that the wine-making monuments in Shuijing Street were discovered. In 1999, under the direct leadership of the Sichuan Provincial Department of Culture and the Chengdu Municipal Bureau of Culture, archaeological excavations were carried out to excavate what has been discovered throughout the country and the world so far. The oldest and most well-preserved baijiu winemaking site, known as the " Chinese baijiu first workshop", was later named one of the "99 new archaeological discoveries in China". Using archaeological excavations, Quanxing Distillery took advantage of the trend to launch the iconic ultra-high-end product Shuijingfang, with a retail price of more than 700 yuan, far exceeding Wuliangye and Moutai, which were in the price range of 300-400 yuan at that time. The new product is beautifully packaged, using a paper-wood structure package composed of a hexagonal carton and a wooden base, and won the "Mobius" Golden Cup Award, which represents the highest achievement of international advertising art creativity. In terms of marketing promotion, Shuijingfang cooperated with the professional advertising company Guangdong advertising company to launch a series of TV advertisements such as "Lion Wake Up Chapter" and "Wind Cloud Chapter", targeting "China's No. 1 Workshop" and targeting Hong Kong, Guangdong, and Sichuan. Carry out key marketing in other places. The launch of Shuijingfang provided huge profits to channels and terminals, and catered to the consumer psychology of consumers seeking novelty and differences in the context of new consumption. It was a great success: 111 tons were sold immediately after the launch in 2000, and an operating income of 55 million yuan was achieved. The price reached 500,000 yuan/ton, and the operating income in 2001 further reached 185 million yuan, a year-on-year increase of 236%.
high-end price band Intensified competition, the price of Shuijingfang is gradually being overtaken by other famous wines. The market feedback brought by Quanxing’s unprecedented launch of the Shuijingfang brand attracted other wine companies to launch high-end new products, such as Luzhou Laojiao launched Guojiao 1573 , Jiannanchun launched Dongfanghong, etc.Consumers have more choices in high-end/ultra-high-end prices, and Shuijingfang is no longer "outstanding" and faces a more fierce market competition environment. From the perspective of the brand's own operation, the price of Shuijingfang is becoming more and more transparent in the process of moving towards large circulation, and the sales momentum of dealers has weakened. At the same time, there are price conflicts and localized goods in some markets. As a new brand, Shuijingfang's brand power is not as good as Moutai and Wuliangye. The growth momentum of old-brand high-end wines has slowed down after the channel thrust has weakened, and prices have gradually been caught up by other famous wines around 2005. In order to continue to occupy the commanding heights of prices, the company once again launched a new collection of higher prices, but the market environment has been very different from before. The collection did not cause the same sensation as when Shuijingfang was launched, and the company was involved in diversified businesses such as real estate. The development of chemistry disperses the energy of the main business.
1.1.2. Diageo has increased its holdings many times, and the management team has gradually gotten in place.
Diageo began to invest in Shuijingfang since 2006. After more than ten years of holdings, it has become the controlling shareholder of Shuijingfang. In 2006, the international wine giant acquired a 43% stake in Quanxing Group, the major shareholder of Shuijingfang, and became the second shareholder of Shuijingfang, starting the process of acquiring Shuijingfang. In 2008, Diageo increased the shareholding ratio of Quanxing Group to 49%. After that, it divested Quanxing Winery to clear the policy obstacles to the acquisition, and again acquired 4% of Quanxing Group's equity. So far, Diageo has become the controlling shareholder of Quanxing Group. From 2018 to 2019, Diageo once again acquired the shares of Shuijingfang in the form of tender offer. By 2019, it will hold approximately 63% of Shuijingfang's shares. Shuijingfang has also become the only listed liquor company in China that is controlled by foreign capital.
After Diageo officially entered Shuijingfang, it gradually introduced the senior management team. Since 2010, Shuijingfang has undergone a total of 5 general manager replacements. From the background of the general manager, it can be seen that Diageo is more localized in hiring the general manager, and the Chinese and foreign management teams have gradually become in place.
Ke Mingsi era (2010-2013): Ke Mingsi is the first foreign manager,After taking office, he devoted himself to improving the comprehensive management ability of Shuijingfang, and proposed a number of management changes in terms of internal control and efficiency. Ke Mingsi strategically proposed the "Top Three in Chinese Liquor" and launched a series of ultra-high-end products, focusing on marketing and ignoring channel construction. During his tenure, Shuijingfang's performance was mediocre, and the growth rate of liquor business income lags behind the average level of listed companies. He resigned after deep adjustment of the industry.
Rice Times (2013-2015): Rice is the second foreign manager with rich experience in the food industry. After taking office, he proposed to "sell liquor like fast-moving consumer goods" and set out to adjust the Shuijingfang marketing system. Due to industry adjustments, the total generation withdrew, in order to stabilize prices, rice made an exception to recover the total generation inventory, replaced the original total generation model with a flat model, and increased the construction of KA channels and e-commerce channels. But at this time the industry is in a stage of in-depth adjustment, and a series of changes still cannot stop the company's downward trend.
Fan Xiangfu era (2015-2019): Fan Xiangfu is the first "local" head. After taking office, he launched a new edition of collections and jingcui, focusing on products above 300 yuan, maintaining the high-end image of the brand, and adjusting the brand positioning to "600 years, Every cup is a living inheritance." Abandoning the flattening strategy in the channel model, implementing the model of combining the new chief generation and the chief generation, and strengthening the construction of terminal stores, superimposing the industry recovery, the company has achieved restorative growth.
Wei Yongbiao Times (2019-2020): continues to optimize the construction of core stores, actively controls goods during the epidemic, cancels some task assessments, and provides assistance to dealers and stores to make the company's smooth transition.
Zhu Zhenhao era (2021-): Zhu Zhenhao officially took office 282 days after acting as general manager in July 2021. Zhu Zhenhao has beer and foreign wine work experience and has served as director of Shuijingfang since 2015. He has a deep understanding of liquor and the company. , It is expected to be familiar with the business in a relatively short period of time and propose targeted reform measures. The new commercial director Jiang Wei is a first-line salesperson and has rich sales experience. The combination of general manager Zhu Zhenhao and commercial director Jiang Wei is expected to bring the operation closer to the market.
1.2. The product focuses on the sub-high-end price segment, and the expansion project of Qionglai lays the foundation for future development.
focuses on mid-to-high-end products with clear positioning. Shuijingfang’s flagship product, Zhenniang No. 8 and well-mounted equipment, are priced at 300-600 yuan, and the card ranks second high. It will contribute about 90% of operating income in 2020. The main competitors are Jiannanchun, Pinwei Shede, Yanghe Dream 3 and so on. Jingcui and Diancang Master are high-end products of Shuijingfang, which play a role in boosting the brand image. The current revenue is relatively low. The main competitors are Wuliangye and Guojiao 1573. Mid-range products include Xiaoshuijing, Tianhaochen and other products, priced below 200 yuan, accounting for relatively low revenue.
The large amount of low-end wine produced during the production process is mainly sold in the form of bulk wine. Due to the technological characteristics of luzhou-flavor liquor , a large amount of low-end base liquor will be produced during the production process, and the output of high-quality liquor is relatively low. The company's brand positioning is a high-end aromatic brand, and the large-scale sale of low-end wines is detrimental to the brand image, and competition for low-end wines is fierce. Therefore, the company mainly deals with low-end base wines in the form of bulk wine sales based on its own situation.
develops a variety of regional exclusive products to meet the needs of local consumers. Taking the Jingtai Silk Road Edition as an example, Shuijingfang selected 9 landmark provinces and cities on the Silk Road: Henan, Hunan, Sichuan, Beijing, Zhejiang, Jiangsu, Shanghai, Fujian and Guangdong, and incorporated local signs with obvious regional characteristics into the Jingtai In the packaging, for example, the Zhejiang version burned pictures of Hangzhou's Longjing tea, West Lake, and the famous painting "Fuchun Mountain Residence", and the Sichuan version burned pictures of Dujiangyan and Leshan Giant Buddha, which aroused the resonance of target consumers. In response to the characteristics of Jiangsu consumers who like to drink low-alcohol liquor, Shuijingfang has specially launched Jingtai 12 in the Jiangsu market. The alcohol content of Well Terrace 12 is 42 degrees,The taste presents the characteristics of "three sweets and three soft", which fully meets the needs of consumers in Jiangsu. The development of regional exclusive products makes the products more local characteristics, and also facilitates the design of different channel policies according to the market development status.
The Qionglai project has a long-term plan and is expected to add 20,000 kiloliters of raw wine production capacity. In 2020, the design capacity of the company's headquarters finished wine is 10857 kiloliters, the actual production capacity is 8161 kiloliters, the inventory of semi-finished wine (including base wine) is 39460 kiloliters, production and sales are basically balanced, and the base wine inventory is abundant. The Qionglai whole industrial chain base project planned in 2018 has started construction. After the completion of the project, it will increase the production capacity of 20,000 kiloliters of raw wine and the storage capacity of 40,000 kiloliters.
1.3. Employee stock ownership plan to improve the company's incentive mechanism
In 2019, the company launched a stock incentive plan, but due to the epidemic, it did not reach the unlock target. In 2019, the company launched the restricted stock incentive plan , granting 242,200 restricted stocks to 13 core backbones, which were unlocked in two installments. The first unlock condition is that the average growth rate of operating income in 2019 and 2020 is not less than 110% of the average level of the benchmarking company (the top ten baijiu listed company in A-share revenue in 2018). In the first half of 2020, the epidemic hits, and the shrinkage of sub-high-end wine consumption scenes will be more affected. The company's inventory control will affect operating income. The actual growth rate of revenue in 2019 and 2020 will be 56.38% of the corresponding average level, which is less than 110%. Although the core backbone has been granted restricted stocks, the conditions for unlocking have not been met. The conditions for the second unlocking depend on the revenue growth rate from 2019 to 2021, and it is expected that unlocking will be more difficult.
will re-launch the share repurchase plan in 2021, which will all be used for employee stock ownership plans. March 2021,The company launched a pre-plan for share repurchase. In August 2021, it will increase repurchase efforts. The new plan intends to use 59.5 to 119 million yuan of self-raised funds to repurchase shares. The repurchase price does not exceed 130 yuan per share, subject to the lower limit of the repurchase amount. It is estimated that the number of shares repurchased this time is about 457,700 shares, and the repurchased shares will be used to implement the employee stock ownership plan. The remaining 72,800 shares repurchased by the company for equity incentives in 2019 will also be used for employee stock ownership plans. The share repurchase is still being implemented, and the scope of employee shareholding and incentive methods have not yet been determined. However, the amount of share repurchase this time is larger than the previous stock incentive plan. It can be expected that the scope of implementation will be wider, the incentive effect will be better, and it will be more beneficial. Fully mobilize the enthusiasm of employees and improve the company's incentive mechanism.
1.4. Financial analysis: stable performance and continuous improvement in profitability
The revenue and net profit attributable to the parent have grown steadily. In 2020, due to the impact of the epidemic, there will be a slight decline. Benefiting from the overall recovery of the industry and the effectiveness of the company's internal and external reforms, Shuijingfang has maintained steady growth in revenue and net profit attributable to its parent in recent years, with a compound growth rate of 44.37% in revenue from 2016 to 2019 and a compound growth rate of 54.26% in net profit attributable to its parent. The first half of 2020 was greatly affected by the epidemic, and gradually returned to normal in the second half of the year. The annual revenue fell by 15.1% year-on-year, and the total revenue was 3.006 billion yuan. In 2021H1, the company achieved revenue of 1.837 billion yuan, a year-on-year increase of 128.44%, and net profit attributable to its parent was 377 million yuan, a year-on-year increase of 266.01%. As consumption upgrades continue, Shuijingfang's distribution network has expanded throughout the country. It is expected that revenue and profits will remain in the next few years. Can maintain double-digit growth.
Sales expenses remained high, and the increase in gross profit margin led to the increase in net profit margin. company sales expense ratio has maintained a high level in recent years. The sales expense ratio in 2020 is 27.97%, ranking third among listed liquor companies. Sales expenses are mainly used for national and local advertising expenses. As Shuijingfang focuses on mid-to-high-end products and low-end products account for a low proportion, the company's gross profit margin is relatively high, reaching 84.19% in 2020.And in recent years, it has maintained an upward trend, the superimposed management expense ratio has fallen, and the net profit margin has increased from 19.11% in 2016 to 24.33% in 2020.
2. Diageo brings international experience and empowers Shuijingfang
2.1. Diageo: M&A integration makes the world's largest spirits giant
Diageo is the world's number one Liquor company owns more than 200 well-known brands. Diageo is from the UK and is the world’s largest spirits giant. Its business spans , distilled spirits, wine and beer. It is listed on the New York and London exchanges, and has more than 150 factories in more than 30 countries around the world. , Products are sold to more than 180 countries. Diageo brings together a series of outstanding brands, including whisky series such as Johnnie Walker, J&B, Windsor; Smirnoff, Cîroc , Ketel One and other vodka series; and Baileys, Captain Morgan, Tanqueray, Guinness and Shuijingfang, among which Johnnie Walker ) And Smirnoff (Smirnoff) are two of the world's four major international spirits brands (in terms of retail sales, IWSR, 2020).
Acquire large-scale mergers and acquisitions, and integrate superior resources to enhance the profitability of M&A brands. Diageo was formed in 1997 by the merger of Guinness and Grand Metropolitan. Guinness is mainly engaged in spirits and beer business, and Grand Metropolitan started from the hotel industry.Entered the wine industry through the acquisition of a number of wineries. In 2000, the company divested Burger King (Burger King) and Pillsbury (food manufacturing related companies) to focus on the high-end beverage business. Over the next 20 years, Diageo continued to expand through mergers and acquisitions. The categories of mergers and acquisitions included , tequila, rum, beer, RTD (ie drinking) and other alcohols. The markets where the acquired brands are not only include Europe and the United States. Other developed countries, including emerging economies such as Asia and Africa. Diageo has sufficient cash flow and rich brand management capabilities. The brands acquired by Diageo often have a certain degree of influence in the local area. With the help of Diageo's superior resources, the acquired brands can fully release their development potential and promote the rapid development of Diageo.
The compound growth rate of Diageo's revenue for fiscal year 1997-2021 is about 0.05%, and the compound growth rate of net profit is about 6%. Since Diageo divested its non-core business in the early stage of its development, its current revenue has not grown much compared to the beginning of its establishment, and its net profit has grown at a CAGR of approximately 6% from the 1997 fiscal year to this year. Diageo’s revenue is mainly contributed by North America, Europe, Turkey, and the Asia-Pacific region, and its revenues in fiscal 2021 accounted for 37%/18%/17%, respectively. In terms of brands, Shuijingfang and Don Julio (Don Julio) grew faster among all brands, with a compound growth rate of 52% and 36% in the 2014-2021 fiscal year, respectively. In terms of categories, Scotch Whisky is still Diageo’s largest category, accounting for approximately 23% of its revenue in fiscal 2021. liqueur and beer account for 16% and 15% respectively. In recent years, Diageo has been actively deploying ready-to-drink brands. , RTD business accounted for 7% of revenue.
pursues "doing the right thing in the right way" and is committed to managing and developing business in accordance with the highest compliance standards. Diageo attaches great importance to compliance and integrity management,The Code of Business Conduct is listed in 20 languages around the world, and mandatory global training is conducted on the global policy of the Code of Business Conduct every year. Each market has a targeted training plan. New employees who join Diageo must complete the training. With the support of a standardized corporate governance structure, robust risk control, and compliance and ethics programs, employee behavior is relatively standardized. In cooperation with third parties, Diageo will conduct risk assessments against bribery and corruption, money laundering, tax evasion and other behaviors that may damage the company's reputation, and set up a global business integrity team to be responsible for central supervision and regular monitoring of changes in cooperation. In response to violations, Diageo encourages employees and third parties to report problems. The confidential reporting service SpeakUp provides support 24 hours a day, 7 days a week, managed by an independent external company. The report is forwarded to Diageo's global risk and compliance team, and the company responds according to the severity of the violation. deal with.
attaches importance to consumer experience and launches customized products in many places. Diageo keeps innovating to ensure that the brand is in a leading position, adapts to new consumer trends by fine-tuning product packaging and taste, and launches personalized products to meet the diverse needs of consumers everywhere. In the United States, Diageo launched vodka printed with the American flag to cater to American consumers; in the face of the decline in American rum consumption, it changed the configuration of "Captain Morgan" rum and reduced its dependence on Coke; the American drama "Power of Power" After the "Game" hit, Diageo cooperated with HBO to launch a limited edition of Johnnie Walker White Walker, and later released bourbon , a collaboration with the American drama "The Walking Dead". In China, Diageo’s whiskey gift boxes highlight Chinese elements. The brand Sugden’s "Five Elements Boarding" gift box pays tribute to traditional Chinese culture; the Johnnie Walker Blue Label "Century Huazhang" special edition has traditional Chinese architectural elements printed on the bottle. , To pay tribute to the 600th anniversary of the Forbidden City. The penetration rate of of foreign wine in China is relatively low. Diageo stimulates consumer interest through marketing and promotion methods combined with Chinese elements, and at the same time carries out a large number of consumer education activities to cultivate consumers: Since 2017, Diageo has held 13 whiskeys in China Summit,The Diageo Whiskey Academy covers more than 15,000 people.
2.2. Diageo empowers management and upgrades Shuijingfang's business model
After Diageo entered the Shuijingfang, it carried out a number of reforms in management for Shuijingfang: established guidelines for internal control: Informatization improves the level of internal control and operating efficiency; standardizes product production and development processes through the Ginkgo project, establishes a scientific and systematic product quality control system, and improves the management level of workshops and warehouses; newly establishes compliance supervisors and legal supervisors to strengthen compliance and legal affairs Aspects of management and so on. These measures narrowed the management gap between Shuijingfang and the first-line brands, and laid the foundation for further improvements in the future.
In recent years, Shuijingfang has further improved its compliance and internal control. Diageo’s advanced management is also reflected in Shuijingfang. Shuijingfang promotes the compliance culture of "doing the right thing the first time" , through online courses, screensaver promotion, email promotion, WeChat push and on-site training, etc. To conduct compliance promotion in various ways, the company’s business management department, internal control and legal affairs department, internal audit department and audit committee constitute the company’s "three lines of defense." The solid advancement of these tasks enables employees' businesses to operate within a legal, compliant, and reasonable scope, and the refined management methods ensure the company's steady growth.
3. The structural growth trend of liquor is obvious, and the sub-high-end liquor ushered in a new round of expansion
3.1. The industry is structurally prosperous, and the sub-high-end liquor space is highlighted
The liquor industry continues the trend of volume and price increase, Wine companies with certain brand power fully enjoy the consumption upgrade bonus. After the rapid expansion of the "Golden Decade", the output of liquor reached a peak of 13.58 million tons in 2016, and then began to grow negatively.The current output has dropped to about 7.41 million tons, and it is expected that the future output will maintain a steady and slight downward trend. Due to the change of consumption concept, the frequency and amount of alcohol consumed by consumers have decreased, and the demand for high-quality liquor has increased. Liquor companies with a certain brand power can enjoy the bonus of consumption upgrade. The price is manifested as the ability to increase the price of national famous liquors. Local wine: Since 2015, the wholesale price of national famous wine has increased by more than 30%, while the wholesale price of local wine and base wine has only increased by about 5% to 7%. From the perspective of the number of liquor companies above designated size, the number of liquor companies above designated size will be reduced to 1,040 in 2020, a decrease of 538 from 2016. Under the Matthew effect , the influence of leading companies will become more obvious.
From the perspective of price, the price of high-end wine has moved up, and the space for sub-high-end wine is highlighted. The price of high-end liquor has opened the ceiling for sub-high-end liquor, and has also increased consumer acceptance of liquor prices. The price difference between high-end wine and the sub-high-end price benchmark Jiannanchun has broadened the sub-high-end price band, giving birth to a new price band. In 18 years, the growth rate of retail consumption slowed down, and the performance of liquor was weak. After the sub-high-end price increase, the market feedback was not good. In 19 years, the price of high-end liquor rose sharply. However, during this period of demand pressure, most of the major wine companies have reached an agreement on the volume and price strategy, paying more attention to price control, and laying the foundation for the overall upward price of sub-high-end liquor after the epidemic.
High-end liquor prices stabilised and rebounded first, highlighting the space for sub-high-end prices.
The 18-year industry differentiation growth trend has appeared. The sub-high-end competition is fierce, and the high-end prices have gone up while the sub-high-end prices have basically not increased. The reason: the cost competition of wine companies and the loss of channel profits.
During the demand pressure period in 2020, most of the major wine companies have reached an agreement on the volume and price strategy, and pay more attention to price control: wine companies have reduced costs and increased channel concentration.
From the perspective of volume, the structural growth trend of the sub-high-end industry remains unchanged. Jiangsu Province is economically developed,Liquor consumption levels and grades are ahead of most provinces in the country. Jiangsu Province has expanded its capacity rapidly in the price range of 400-600 yuan in 2019. It is expected that the rapid expansion of sub-high-end consumption across the country is expected to come. From 2015 to 2020, the compound growth rate of sub-high-end liquor revenue will reach approximately 31%. Assuming a neutral expectation to maintain a growth rate of 14% in the next five years, the scale of sub-high-end liquor is expected to exceed 140 billion yuan in 2025, and there is about 70 billion yuan for expansion. . The 2020 epidemic has caused a shrinking consumption scene. Mainstream manufacturers have used control measures to digest inventory. After demand gradually resumes, the channel inventory cycle restarts, and the sub-high-end wine has higher income elasticity under low inventory.
The sub-high-end market in East China takes the lead in expanding capacity, and the price range of 400-600 yuan has become the mainstream in 2018. Jiangsu is a major liquor-consuming province, with a high level of economic development and great potential for residents' consumption. The level and grade of liquor consumption are higher than the national average, and it is in the forefront of high-end products in the country. Comparing the distribution of liquor price bands in Jiangsu Province around 2010 and 2018, the price band of less than 300 yuan has been saturated with stable volume and price increase, and the price band of 400-600 yuan has risen rapidly with volume and price, and has gradually become the mainstream. . Due to the first-mover advantage rooted in history, Jiangsu Province has a high barrier to entry for foreign wines. Sujiu has the exclusive advantage of consumption in the province. Yanghe and Jinshiyuan are the local wine leading brands with the largest market share in the province. Strong brand power and channel power have benefited first in this round of liquor consumption upgrade in Jiangsu. Yanghe Mengzhilan M6 and Jinshiyuan Guoyuan have a price range of 400-600 yuan for four card slots, fully enjoying the sub-high-end expansion dividends in recent years, and revenue growth has been rapid.
Sub-high-end liquor expansion tide will occur in more provinces, and leading enterprises will seize a larger share. Under the stimulus of consumption upgrade trends and expansionary fiscal policies, the expansion of sub-high-end liquor will occur in more provinces, and the industry is expected to enter a new round of expansion. sauce hot background,Most sauce wine brands position their prices at the sub-high end, and the sub-high end is driven internally and externally, which will fully benefit from it. During the expansion process, liquor companies that actively deploy the sub-high-end price range will fully enjoy the price band upgrade bonus. Under the influence of the new crown epidemic, sub-high-end liquor squeeze competition has intensified, and sub-high-end well-known brands are expected to seize a larger market share in the sub-high-end expansion wave by virtue of their brand, channel and marketing advantages.
3.2. Pure sub-high-end wine, fully enjoy the industry beta
Shuijingfang was positioned as a high-end brand at the beginning of its launch. During the industry adjustment period, prices fell, and the products mainly fell in the sub-high-end price band, during which the company tried to launch Low-end product, but the effect is not good. After 2017, the company has strategically focused on mid-to-high-end products, determined to stop making low-end products, and raise prices for core products. By 2020, the company's sub-high-end product revenue will account for approximately 92% of its revenue. The excellent product structure enables Shuijingfang to fully enjoy the growth brought about by the expansion of the industry in the sub-high-end expansion tide.
4. With both internal and external repairs, Shuijingfang ushered in a golden age
4.1. Deeply explore brand value and focus on consumer cultivation
Brand promotion is built around "dual heritage" and has a diversified layout Improve consumer reach. Shuijingfang is a "dual heritage" liquor enterprise with both tangible cultural heritage (Shuijing Street Distillery Site) and national intangible cultural heritage ( Shuijingfang Liquor traditional brewing techniques). The rich historical and cultural connotation is Shuijingfang's advantage. The brand promotion of Shuijingfang mainly revolves around the "dual heritage". In 2017, it exclusively named the CCTV National Treasure Program. National Treasures is a large-scale cultural expo exploration program. The core audiences are more interested in things with cultural connotations such as national treasures and cultural relics. Shuijingfang is embedded with the label of "dual heritage", which is highly compatible with the program. In addition to national advertising on CCTV programs, Shuijingfang has also increased consumer reach through diversified layouts such as Shuijingfang Museum , "Intangible Heritage Experience", and high-speed rail treasure number.Let Shuijingfang be associated with history and culture, consistent with the brand positioning of "600 years, every cup is a living inheritance", and the brand promotion is consistent.
Brand launch activities enrich the consumer experience. Shuijingfang’s new products will be promoted in the form of large-scale tasting sessions when they are launched (one seat is for the collection master edition, and the banquet is for the elite), as well as museum visits, return to the factory and other activities. These landing activities enrich the consumer experience Feel. In 2021, the company and the Rolex Shanghai Masters reached a strategic cooperation, which will help to reach more high-end consumers and provide better services.
4.2. Focus on the core market again and expand the second and third tier cities with a mushroom strategy
After 2016, it will gradually expand from the 5 core markets to the 15 core markets. Prior to 2016, the areas with better sales of Shuijingfang were mainly Jiangsu, Henan, Hunan, Sichuan, and Guangdong. In the second half of 2016, five new sub-core markets were added to the original five core markets, namely Zhejiang and Beijing. , Shanghai, Tianjin, Fujian. In the second half of 2017, five more emerging core markets (Hebei, Shandong, Jiangxi, Shaanxi, and Guangxi) will be added. So far, the "5+5+5" market strategy has basically taken shape.
In 2020, we will focus on the eight more important markets and concentrate resources to cultivate key provinces. In 2020, the company will further identify the eight most important markets among the original 15 major markets, namely Jiangsu, Henan, Hunan, Sichuan, Guangdong, Hebei, Shandong, and Zhejiang. These markets have a good consumption base and have a high degree of recognition of the Shuijingfang brand. In 2020, the eight core markets accounted for 58% of their performance, which constitutes the basic sales volume of Shuijingfang. Good management of the eight core markets can not only contribute to sales growth, but also maintain the stability of the national value chain. Focusing on the eight major markets and improving the core market focus can better concentrate superior resources.Make the core market more sufficient personnel and policy support, and promote the accelerated growth of the core market.
In the eight major markets, cities are used as the unit to focus on development, and different cities select different products to make breakthroughs. The eight major markets have different levels of economic development. For example, Jiangsu has a high level of economic development. Due to historical reasons, Zhenjiang No. 8 has a high proportion in the Jiangsu market. If the product structure cannot be upgraded in a timely manner, it will be gradually eliminated after the consumption upgrade. , Henan and other provinces have relatively low consumption levels, and Zhenniang No. 8 still has some room for growth in the future. Shuijingfang selects core products in different price ranges in different cities to make breakthroughs, avoiding simple operations across the country, and being more flexible in responding to changes in the market environment.
uses mushroom strategy to expand opportunistic markets, so that resources can be optimally allocated and utilized. Shuijingfang still has a large gap in many areas, and the market space is large. For these markets with great growth potential, Shuijingfang’s market strategy is to quickly follow up the surrounding markets when sales in a region grows rapidly. To avoid the problem of excessive expenses caused by full roll out, but also to accurately grasp the market opportunities.
4.3. The combination of new and old generations has resulted in a steady expansion of the dealer network. The single general generation model adopted by Shuijingfang before the in-depth adjustment period of liquor can use the resources of the general generation to expand the market, but when the industry suffers volatility, the ability to resist risks is weak: the general generation of Beijing, Wuhan, Guangdong, Sichuan and other places withdrew from 2013-2014. There was a large amount of inventory on hand before the withdrawal of the general agent. If the company does not recycle, it will easily sell a large amount of goods in the market and break down the price. The company finally chose to repurchase the general agent inventory, which has reduced the revenue of about 80 million yuan in 2013, resulting in the company's performance. Large fluctuations. It can be seen that once the cooperative general generation exits under the single general generation model, a channel vacuum will be formed in a short time.The construction of new channels takes a certain amount of time. During the channel construction period, competitors are likely to grab market share. After 2013, the company began to explore new channel models.
After 2013, the company tried to replace the original general model with flat distribution and cooperation with other companies, but the effect was not good. The company once tried to implement a flat direct sales model in the exit area of the general agent. The company built its own channels and dispatched sales personnel to carry out marketing activities. Although the sales channels of the flat direct-sales model are further sinking and the market is more refined and operated, the construction period is longer, and the investment in personnel and costs is large. The model of cooperation with other companies requires payment of a certain fee to partners, and expands the market with the help of a partner network, which has a strong dependence on partners and weaker control capabilities of the factory.
began to implement the new generation model in April 2016. After optimization in recent years, the new generation model has become more mature. The difference between the new general agent model and the general manager’s model is that the general manager has to manage the market, expand dealers and stores, and the general agency invests more. The agent is responsible for warehousing, distribution and other work. In terms of prices, the new and bosses have the same price system and the same gift policy. Since the bosses are responsible for the development work and the cost is relatively large, the bosses get more cost support.
The model of combining new and old CEOs is suitable for the current actual situation of the company. 's current size is still small, with revenues of less than 100 million yuan in many provinces. With the help of the general agency, the company can quickly expand the market and reduce sales expenses. According to the development of different regions, the scope of responsibility of the general agent and the manufacturer's business will also be fine-tuned. If the new general agent has the ability to operate in the market, it can also assist in market development and management to fully mobilize the manufacturer's resources.
4.4. The terminal core store project is upgraded again, streamlining the process and improving efficiency
Tobacco hotels are still the main circulation sales channel. Take Beijing as an example. In 2018, there were nearly 30,000 smoking hotels, of which nearly 10,000 were famous smoking hotels. The sales of tobacco hotels accounted for 70% of sales. Other channels such as shopping malls, hotels, group purchases, e-commerce, etc. The proportion is still low. As the last link of sales, the tobacco hotel is not only a place for shipments, but also plays a role in brand communication. To a certain extent, the tobacco hotel owner can influence customers' consumption choices.
Since 2016, Shuijingfang has carried out core store projects, providing consumer promotion plans for core terminal stores, and strengthening dialogue and incentives with consumers at the terminal level. Shuijingfang's core store project has undergone 5 upgrades and changes. From 2016 to 2018, we focused on expanding the coverage of core stores, setting different levels for stores based on store tasks, and introducing information systems for management. After 2019, focus on increasing the output of a single store, and realize the conversion from low-level stores to high-level stores through accurate cost placement (the sales gap between high-level stores and low-level stores is more than 5 times). At present, ordinary stores and low-level core stores still account for a relatively high proportion of terminal stores, and store upgrades can still bring substantial sales growth to the company.
The advantage of Shuijingfang's expansion of terminal stores is that the assessment is more refined and the team execution is more in place. 's terminal store project has been imitated and copied by a large number of friends since its launch. Compared with other manufacturers, the Shuijingfang core store project was launched earlier and the number of optimization upgrades is greater. Shuijingfang’s similar FMCG model has more refined indicator evaluation, while other manufacturers’ evaluation indicators are often more extensive, and team execution is not as good as Shuijingfang’s implementation.
Foreign holdings pay more attention to compliance and internal control, and the new management finds a balance under the premise of compliance. As a global leader in spirits, Diageo attaches great importance to compliance issues, and the overall operation of Shuijingfang is more standardized. However, the excessively long process makes the expense write-off cycle of several months and reduces the enthusiasm of store sales. It is more willing to sell products at naked prices and is unwilling to invest. cost. For this reason, the company proposes to simplify the operation and greatly shorten the verification process,Under the premise of compliance, try to simplify the process and solve the problem of untimely payment of fees.
Strengthen banquet promotion support and increase the proportion of group buying business. Company learns from the industry leader Jian Nanchun in the promotion of banquets, and makes improvements according to its own situation: the banquet investment is divided into B-end and C-end investment, and the B-end rewards the recommended core stores in the form of table fees and table fees. C It is expected that the marketing of banquet scenes in fiscal year 2022 will increase by more than 30%. The base of group-buying business is still low. The company encourages distributors to increase the proportion of group-buying business, increasing group-buying personnel at the company level, and increasing the requirements for group-buying business. In terms of activities, the activities of "famous wine entering famous enterprises" and "enterprise engraving" are carried out, and certain preferential policies are given to large-volume group buying enterprises. Banquets and group purchases are relatively weak links in Shuijingfang. A series of targeted policies can help the company make up for shortcomings and improve the consumption scene.
5. Increase investment in high-end wine and build new growth poles
5.1. Establish a high-end brand sales company, and start a new chapter in high-end
In the past: the progress of high-end wine is lagging behind, and dealers are not very enthusiastic about promotion. Although Shuijingfang has high-end wine genes, its current products are mainly sub-high-end products. The collection and Jingcui, which represent high-end wines, have only about 200 million yuan in revenue, and have seen negative growth in recent years. The reasons why distributors are not actively promoting high-end products: First, the sales of high-end wines are low, and the popularity is not high. The operation of high-end products requires a lot of time and energy. It is not as profitable as running products such as Zhenniang No. 8; second, the value chain is unstable. There is a phenomenon in which dealers put expenses into product prices.
Now: Increase investment in high-end wines, set up a high-end brand business department internally, and set up a high-end wine platform company externally to promote channel changes. The company has increased its investment in high-end technology and proposed that the profit growth rate can be slower than the revenue growth rate. The year-on-year revenue growth target for 2021 is +43%, and the year-on-year growth target for after-tax net profit is +35%. Marketing expenses will be used for high-end products,Brand investment is more active. As high-end wine and sub-high-end wine are played differently, the company changed its organizational structure and established a high-end brand business department, which is operated by a dedicated high-end wine team. The high-end wine distribution model has also been adjusted accordingly: the company supports the provincial agent to establish a sales company with the existing provincial agent as the main body, and the distributor participates in the dividend distribution as a shareholder. The distributor's subscription amount is divided into two levels of 3 million and 6 million, and the total registered capital is 1.02. In the future, we will consider absorbing partners who have contributed a lot to the operation of high-end wine, which will help attract more high-quality distributors to sell Shuijingfang's high-end products.
5.2. High-end wine drives the improvement of the structure, and the platform business model is expected to open the investment window
High-end brand sales companies have successful experience in the industry that can be used for reference. In the past, the successful operation of Guojiao 1573 and Neishin Liquor proved that there was no problem with the business model of the high-end liquor platform company, and the sales volume of the platform company increased rapidly in the few years after its establishment. Shuijingfang already has successful experience in operation that can be referred to, and we can expect to start related work more quickly. Although the current proportion of high-end wines is low and does not contribute much to performance in the short-term, the operation of high-end wines is a long-term process. After rationalizing the relevant mechanisms, it will naturally burst into strong vitality.
With reference to other wine companies, the success of high-end wine will also lead to breakthroughs in sub-high-end core products. Fenjiu has positioned the blue and white 30 Fenjiu·Renaissance version as a single product with a price of 1,000 yuan. After changing the previous high-end only image products, it has driven the approval and sales of sub-high-end blue and white 20 products to increase significantly. Jiugui Liquor established an internal reference company to provide more incentives to distributors, and at the same time, it also increased dealers' enthusiasm for the sale of sub-high-end Jiugui Liquor series. Jiugui Liquor grew in volume through investment exchange. The growth of the blue and white series and the Jiugui series is due to the company's own reforms. However, the price of the liquor industry is the lifeline. It is easy for consumers to associate high-end products with the brand. Doing a good job of high-end products can lay a good brand foundation for the second-tier products.
The high-end product channel reform provides operational experience for future manufacturers’ model adjustments and optimizations, and it is expected to attract more large and superior merchants. The market environment is constantly changing,The growth stage of an enterprise will also be different, and the relationship between manufacturers needs to be continuously adjusted and optimized according to the competitive environment. Sub-high-end products are currently the core of Shuijingfang. The proportion of high-end products is low, and the overall impact is small. First, the high-end products are separated from the original general generation system and reformed. It can also provide operational experience for future manufacturer model optimization. The investment and the high profits of high-end liquor will cultivate more excellent merchants, and at the same time, it can also open the channel for investment promotion.
6. Risk warning
The demand expansion for the sub-high-end price band is less than expected. Shuijingfang sub-high-end price belt products account for a high proportion. If the sub-high-end industry expands less than expected, it may affect the company's revenue and profit growth.
Sub-high-end price competition intensified. The sub-high-end industry has expanded significantly. In recent years, the country’s famous wines, real estate wines, and sauce wines have increased the layout of the sub-high-end. If the sub-high-end competition intensifies, it may cause the company's revenue and profits to slow down.
The effect of channel reform is not as good as expected. Shuijingfang has established a high-end brand sales company with provincial agents as the main body, adjusted the sales model of high-end wine channels at Dian Zang and above, and needs to pay attention to the risks of channel changes that are less than expected.
(This article is for reference only and does not represent any of our investment advice. For relevant information, please refer to the original report.)
Selected report source: [Future Think Tank official website].
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