The previous article describes my personal experience of changing attitudes towards wine, summarizes the unparalleled business model of high-end liquor, and provides an overview of the situation of Yanghe Co., Ltd.
This article will then analyze Yanghe . First, let’s take a look at the company’s asset status, based on the balance sheet of the third quarter report of 2022. This is a final photo of the latest company’s asset status.
total assets are 61.2 billion, cash-like assets of 34.5 billion (including cash funds, bank acceptance , bank wealth management, foreign investment tradable financial assets), inventory 16.2 billion, productive assets 10.3 billion, and other 100 million. Interest-bearing liabilities are 0 yuan.
High-end liquor inventory is mostly semi-finished base wine and finished wine, based on inventory data in the 2021 annual report. These two items account for 93%.
According to the book "Complete Book of Liquor Production Technology" edited by Shen Yifang , "In the early stage of storage, the new wine has a prominent smell of new wine, with obvious unpleasant feeling such as roughness and spicyness. However, after storage for 5 to 6 months, its flavor gradually changes. It is more ideal to store it for about 1 year. For sauce-flavored wine, the storage period must be more than 9 months before it has a slightly old wine flavor, which means that the storage period of sauce-flavored wine should be longer than other fragranced wines, and it is usually better to be more than 3 years."
Due to the particularity of liquor, the higher the base wine , the longer it needs to be stored. The value of base wine in the balance sheet is far underestimated, so there is no need to be afraid of inventory. This part of base wine inventory is actually an advantage. 12 years ago, Yanghe had to purchase some base wines due to its leapfrog development.
For this reason, Moutai Chairman Ding Xiongjun said that Moutai Liquor stocks "hundreds of thousands of tons of base wine" and is worth "many trillion yuan". It also caused quite a stir.
Yanghe has a lot of cash in hand and has no loan liabilities. I have made 9 billion in the first three quarters, and it is likely to make 10 billion profits this year . With 10.3 billion production assets, it makes a profit of 10 billion yuan per year, and this business is a perfect money printing machine.
Top 4 high-end liquors: Moutai, Wuliangye , Luzhou Laojiao , Yanghe. Among them, Moutai is ahead, followed by Wuliangye and Luzhou Laojiao, and Yanghe is still a little short of it.
Revenue and net profit lies in Moutai's growth in the past decade, followed by Wuliangye, and the revenue growth of Luzhou Laojiao and Yanghe is relatively different. Yanghe's net profit fell sharply after 2018. Since Yanghe's financial investment income accounts for a large proportion, it will be more obvious compared to the non-net profit.
Main business profit suffered a Waterloo from 2018 to 2020. What happened this year?
There was a problem with the main channels in 2018. The previously mature deep distribution model brought about the problems of transparent price system, low channel profit margin, and insufficient dealer motivation. Therefore, Yanghe carried out channel reform.
In 2018, Yanghe launched the updated version of : Sea Blue and : Blue with the promotional slogan "more aged wine, higher softness", with the intention of increasing prices through product replacement. However, when the new and old generations of products of Haizhilan and Tianzhilan coexist, it makes it difficult for old products to clean up inventory and high channel inventory.
In addition to the mistake of product replacement and price increase, the inventory has increased, and the profits of Haizhilan's channels in the province have become weaker, resulting in a significant weakening of sales intention. Tianzhilan has a large price difference between inside and outside the province, the profit level of channels outside the province is low, and dealers lack sales intention and motivation.
Daizhilan has transparent profits in the province, and is squeezed by Jinshiyuan.
In response to channel problems, Yanghe management adjusted its strategy in a timely manner to carry out channel reform:
1) Adjust the dealer system. In the past, multiple merchants coexisted in the same market, and the division of labor was unclear. The coexistence of multiple merchants caused disorderly competition for internal resources, resulting in chaos in the price system. After the adjustment, the province transformed from the system to a "one business-oriented, multiple merchants helped" to increase channel profits and reduce channel inventory.
In the past, the system guided by the manufacturer was directly controlled by the manufacturer, and after adjustment, it formed the integration of the manufacturer. The principle of division of labor is based on resources and capabilities. It determines who will lead the company based on the resources and capabilities of the dealers and manufacturers to improve efficiency.
2) single-row Haitian sales team, splitting Haitian and Dream Blue teams.Control volume and price support, and restore channel profits.
3) Refocus on creating Dream Blue, impacting high-end liquor, and realizing the transformation from Mao Wuyang to Mao Wumeng. Create a large single product with a positioning of 700 yuan for M6+. Former Chairman Zhang Yubai set up a high-end brand business department. M9. The manual class does not completely use sales as the assessment indicator, sets the regulation, stabilizes the price, and makes steady progress, and makes reserves for long-term growth and high-end challenges.
At present, channel reform has shown initial results. Yanghe has basically passed the pain period of channel reform.
Yanghe's non-operating income accounts for a large proportion, which has smoothed profits since 2018. Non-operating income mainly comes from Yanghe's financial management income, which is a financial management maniac in the liquor industry.
Everyone knows high-end liquor companies, God is the industry where food is rewarded. The money is so easy to make. cash flow is very good. Basically, they collect money and ship it, and they have a lot of money. High-end liquor companies also have another characteristic: the major shareholders are all state-owned assets, and the management naturally has no motivation to utilize funds, so there is a lot of cash on the account.
Moutai’s cash-like assets are the simplest, which are cash and bank deposits. How much interest income does this part generate?
Its financial report has an interest income of 1.2 billion yuan, and the yield rate of is 0.64%. Wuliangye's interest income was 1.8 billion yuan and investment income was 100 million yuan, which was calculated as a return rate of 1.73%. Luzhou Laojiao's interest income was 400 million yuan, investment income was 200 million yuan, and yield was 2.73%.
Yanghe is relatively complex, and its financial management income includes bank deposits, equity investments, trusts, etc.
I have counted the investment returns of Yanghe in the past five years from 2017 to the present.
You can see that Yanghe’s average investment income in the past five years is 4.5%. Yanghe achieved a 4.5% return with 19.9 billion yuan in cash investment. The bank deposits of 20.9 billion yuan, making a 2% profit.
Now a lot of people in the market are scolding Yanghe for managing financial management and investment trusts are storming, but the average rate of return in the past five years is 2.5 percentage points higher than the deposit period. 2.5 percentage points correspond to 40 billion yuan of funds, and the profit will be an additional 1 billion yuan of profit. Do you dare to think how beautiful it would be to invest 180 billion in Moutai’s cash like Xiaoyang?
. I bought some real estate trust and broke down, even if I lost 700 million. In the long run, it will definitely be very good. What's more, the policy has begun to transfusion blood to the real estate insurance for custody, and the loss is probably not too great.
But the bad news is that under external pressure, the investment amount has been greatly reduced and increased to fixed deposits, which is unfavorable for shareholders.
Why is Yanghe so keen on investment and financial management? This leads to Yanghe's core competitiveness. We will continue to talk about
in the next article.
