Judging from the stock price, Blue Moon, the leading laundry detergent company, hit its peak when it was listed. The stock price rose for a few days at the beginning of the listing and then continued to fall. The market value evaporated from the highest of 111.3 billion Hong Kong

Judging from the stock price, Blue Moon (06993.HK), the leading laundry detergent company, reached its peak when it was listed. The stock price rose for a few days at the beginning of the listing and then continued to fall. The market value evaporated from the highest of 111.3 billion Hong Kong dollars to less than 50 billion Hong Kong dollars. He was brutally cut in half.

The disclosure of the half-year performance forecast on July 20 accelerated the downward trend of Blue Moon’s stock price. According to the profit warning issued, Blue Moon expects to lose approximately HK$44 million in the first half of 2021, compared with profits of HK$218 million and HK$302 million in the first half of 2019 and 2020 respectively.

After the profit warning was disclosed, Blue Moon’s stock price plummeted the next day (July 21), closing down 5.05%, and the stock price hit a record low. The stock price of

has been falling all the way, causing investors to suffer losses. Among them, Hillhouse Capital , which has been running Blue Moon for ten years, "harvested" huge floating losses. However, for Hillhouse Capital, which adheres to long-termism, this may only be a short-term pain.

Putting aside the fundamentals, Blue Moon’s unbearable performance in the capital market is not unrelated to its high valuation when it was listed. At the time of listing, Blue Moon's price-to-earnings ratio exceeded 60 times, which was obviously overvalued. To support the continued increase in valuation, a very strong growth capability is required, and in 2020, Blue Moon's revenue declined.

Regarding the reasons for the sharp turnaround in performance in 2021, Blue Moon listed four reasons in the preview.

1) There is a surplus of lower-priced products on non-corporate customer platforms in the market, causing disruption to the company's pricing strategy and the price system of the company's products in the market. In order to unify the pricing of its products in the market, the company provides certain discounts to its customers to stabilize the market price of the company's products. Such discounts have a negative impact on the company's gross profit margin of approximately 9% in the first half of 2021, but the level of certain discounts has been steadily declining in the first half of 2021;

2) raw material costs have increased year-on-year;

3) in the first half of 2020 Certain "Supreme" brand concentrated laundry detergents that were returned in the first half of the year were bundled with other products and sold at discounted prices in the first half of 2021, which had a negative impact of 1% on the gross profit margin in the first half of 2021;

4) The company has experienced a 1% negative impact since 2020 The laundry business, which has been developing since the fourth quarter, has incurred a loss of approximately HK$67 million.

As can be seen from the above four points, discounts and laundry business have become the most important factors in Blue Moon’s performance losses in the first half of this year. Let's first look at the issue of discounts.

Victims of low-price dumping on e-commerce platforms

Blue Moon’s customers mainly include offline hypermarkets and supermarkets, as well as online e-commerce platforms. The company's revenue from hypermarkets and supermarkets is not high, while offline distributors resell products to a large number of supermarkets, convenience stores and other stores. Price cuts in individual stores will not have a big impact on the company's gross profit margin. Therefore, the reason for the company's gross profit margin to drop significantly by 9% during the period appeared on the e-commerce platform.

Reporters noticed that on Taobao , Tmall and Pinduoduo and other e-commerce platforms, Blue Moon laundry detergent , washing and care sets and other products are at special prices. In addition, domestic fresh food e-commerce and community group buying have become increasingly involved, causing Blue Moon to become the "most innocent victim."

Since 2019, more than 60% of Blue Moon’s revenue has come from e-commerce platforms. Considering that fresh food e-commerce and community group buying have rapidly penetrated into the daily necessities field of the public since 2020, it is expected that the proportion of revenue brought by these platforms to Blue Moon will increase rapidly in 2021. On these platforms, the platform carries out low-price promotions for Blue Moon products. For example, the 1KG Blue Moon laundry detergent on Meituan Preferred advertises a "brand discount", and also provides consumers with "2 off for purchases over 19; 29 off 3” promotion.

Meituan Youxuan is just one of the platforms in the community group buying industry that uses low-price strategies to grab market share. Jingdong 's platforms such as Surprise Pinpin and Xingsheng Youxuan have also joined the industry, engaging in price wars with vegetable vendors. rice bowl.As you can see from the picture above, another laundry detergent brand Velox on Meituan Selection also has a low-price promotion. Therefore, not only Blue Moon, but also other companies in the laundry detergent market are forced to become the source of infighting in the e-commerce industry. "victim". The chain reaction of low-price promotions on the

e-commerce platform forced Blue Moon to lower its product prices to customers. If consumers purchase 3KG of Blue Moon laundry detergent from Meituan Preferred, the total price after the discount is 35.7 yuan, which is equivalent to 5.95 yuan/catties. This selling price is already close to Blue Moon’s average ex-factory price of 5.4 yuan/jin to customers in 2019.

In order to stabilize the market pricing of the company's products, Blue Moon has to balance the interests of various customer partners and provide corresponding discounts to e-commerce customers. If the company's revenue of HK$1.432 billion in the first half of 2020 is calculated, the impact of a 9% drop in gross profit margin is equivalent to reducing the company's gross profit income of approximately 220 million in the first half of this year. Therefore, this discount has become the fundamental reason for Blue Moon's sharp turn to losses. .

In order to eliminate the impact of being indirectly "kidnapped" by e-commerce platforms, Blue Moon needs to improve its bargaining power and cannot excessively cater to the low-price requirements of e-commerce platforms. In its half-year performance forecast, Blue Moon also mentioned that discount levels have been steadily declining in the first half of 2021.

On July 2, the State Administration for Market Regulation issued the "Regulations on Administrative Punishments for Price Violations (Revised Draft for Comments)", which clarified that e-commerce platforms that disrupt business order by dumping at low prices will be punished, and may be fined up to 5 times the illegal income. Under a series of heavy regulatory blows, the momentum of low-price dumping on e-commerce platforms may be significantly reduced, and Blue Moon's forced offer of large discounts to customers will become a thing of the past. This will be the key to Blue Moon's turnaround, and its gross profit margin is expected to regain high ground in the second half of this year.

Can the laundry business become another growth curve for the company?

Blue Moon disclosed in the profit warning announcement that the laundry business incurred a loss of HK$67 million in the first half of this year. If this business is profitable, Blue Moon will have a profit of more than HK$20 million during the reporting period.

So, why does Blue Moon want to enter the laundry business?

In the fiercely competitive market environment, although Blue Moon has occupied the first place in the national market share in the field of laundry detergent and hand sanitizer for many years, its growth pace has slowed down in recent years, and there is a potential risk of being beaten by the back wave. Therefore, in order to consolidate its market position, Blue Moon, whose revenue relies more on laundry detergent, needs to start a differentiated competition with a diversified product matrix.

From 2019 to 2020, China's household cleaning and care market size increased by 5.22% and 3% respectively. However, as a leader in the industry, Blue Moon's revenue growth rate during the period was not as fast as the industry scale growth, with growth of 4.17% and -0.8% respectively during the same period.

It is obvious that Blue Moon is losing some of its market share to competitors. According to data from Frost & Sullivan and New Thinking Industry Research Center, Blue Moon’s market share in China’s home cleaning care market in 2020 was 4.6%, a decrease of 0.75 percentage points from the peak in 2018.

Especially in the laundry detergent market, Blue Moon’s market position is not stable. In 2019, Blue Moon laundry detergent's revenue increased by only 4% year-on-year, while the industry market growth rate that year reached about 8%. In 2020, Naisi's domestic laundry detergent market share increased to 23.5%, approaching Blue Moon laundry detergent's 24.4% market share. It is not difficult to see that Blue Moon’s dominance in the field of laundry detergent has been threatened.

Therefore, Blue Moon pointed out in its 2020 annual report that it will improve its product matrix and capture new business opportunities. The new business that Blue Moon attaches great importance to is the laundry business.

As early as 2015, affected by the withdrawal of cooperation from many large supermarkets, Blue Moon independently opened the "Moon House" store, trying the O2O model for the first time, and providing regular laundry, dry cleaning and other services for both B-side and C-side. But later, due to poor management, most of the Moon House stores were sublet.

With the successful listing at the end of 2020, Blue Moon has re-increased its investment in Moon Laundry business. It plans to build about five laundry centers in Guangzhou, Tianjin, Chongqing and East China in the future (2021-2025) to continue to expand its service scale.The construction of the five laundry centers will start in the first half of 2021 and is expected to be completed in the first half of 2025. The total investment is HK$310 million, with breakeven in 3-4 years and investment recovery in 7-8 years. Looking at it now, the business is still in the investment period, which to a certain extent led to Blue Moon's losses in the first half of the year.

According to the prospectus, the company’s laundry business revenue in 2019 was only 2.4 million yuan, which failed to make a significant contribution to the company’s total revenue.

For the future, Blue Moon should focus more on continuing to implement its product diversification strategy. In its 2020 financial report, Blue Moon also stated that it will still promote the concentration of detergents and expand concentrated products to laundry softeners, dishwashing liquids and other categories. At present, the company's new products are also accelerating. Laundry detergent has added sterilizing type, fragrance type, and underwear type, and hand sanitizer has added foam type and no-rinse type.

At the same time, Blue Moon is reforming offline distribution channels, integrating online and offline, and replacing local promotion with dealers. It plans to cooperate with more than 2,000 offline distributors in the next five years, a significant increase of 42.6%-63.9% compared with the first half of 2020. %.

Faced with the dilemma of competitors such as Naisi, Liby, Procter & Gamble , etc. grabbing market share, the laundry detergent brother needs to make successful changes in order to continue to maintain its market position.

Author: distant