Author | Huazi Research Qian Linyi
Category | Listed company
related companies | Guaibao Pet (A05388.SZ)
Pet raising has become a part of the life plan of many young people at present. Pet related topics posted on social networks often like and collect more than a thousand likes. While raising pets, netizens sighed, "Boards and cats eat better than me~." With the continuous rise of pet "family status", the pet food market size has grown rapidly. The brand upgrade of domestic manufacturers and the ever-increasing market concentration also brings opportunities to investment.
Pet food industry situation
Pet food is divided into three categories: staple food, snacks and health products. Among the staple food, pet owners prefer natural and organic food. As the pet track matures, the types of food are becoming more and more abundant, and various snacks and health products have emerged one after another, and the scale of the pet food market has increased significantly. Judging from the development of the pet food market size in the past, the market as a whole has shown the characteristics of both volume and price increase. In terms of the quantity, the increase in silver economy and Dink family has made the demand for companionship among modern people increasingly strong, and has promoted the steady growth of the number of pets in my country. However, the growth of market size is mainly driven by price, because from the data point of view, the growth in the number of domestic pets has been stable but not large.
In terms of price, the improvement of national consumption level has made more people put this emotional demand on pets. Fine pet raising has gradually become a trend, and pet consumers' sensitivity to price is significantly reduced. In particular, the concept of pet raising in Chinese people is gradually changing from feeding leftovers to branded pet foods, which has led to the continuous increase in the penetration rate of pet foods. It also indicates that building mid-to-high-end brands in the future is the key to seizing the market dividend . According to iResearch Consulting data, the pet food market will usher in a period of rapid development in the next three years: the market size will grow from the current 133.7 billion yuan to 241.7 billion yuan in 2025, with an annual compound growth rate of up to 21.8%.
Competition pattern
domestic pet food market concentration is not high, CR10 is only 24%. By 2021, Mars, which occupies a leading position, will have a market share of only 7.9%. On the one hand, this is because the pet food industry in my country has not been around for a long time and the competitive strength of participating players is not much different, so there has not been a situation where winners take all. On the other hand, due to the separation of consumers and users of pet food, consumers are more concerned about the quality of food, and their stickiness to the brand is mainly reflected in their trust in their quality.
As domestic pet food gradually gets rid of its low-end and inferior image, the brand advantages of international big brands such as Mars, Nestle , etc. are relatively weakened. With its obvious price advantages and more local brand marketing, domestic brands have gained more and more favored by more consumers. According to the iMedia Consulting survey data, 59.6% of Chinese consumers prefer to buy domestic pet food brands; while 26.9% are willing to buy foreign brands.
Refer to mature markets such as the United States and Japan, the pet food industry has a high concentration: the CR3 of the Japanese pet food market is 49.8%, and the CR3 of the United States is 69.2%. This means that the increase in the concentration of my country's pet food market in the future will bring great development opportunities to domestic brands. At present, the main source of income for most domestic pet food manufacturers is still OEM exports. Domestic manufacturers with price advantages and early transformation into their own brands are expected to expand their market share and become industry leaders.
Pet food is still in the stage of low-end competition and frequent price wars. Therefore, finding potential leaders in the growth track can bring us investment opportunities. Compared with other consumer products, the pet food market is more similar to the maternal and infant market because of its separation between consumers and users. Due to the lack of showing off convergence, consumers value the quality of the product more and have a lower viscosity to the brand. Therefore, domestic manufacturers that can grasp market demand more quickly, reduce costs, increase efficiency and improve cost-effectiveness, and find effective channels for consumers, which is very likely to benefit from the dividends of this wave of market growth in the domestic wave.
Pet Food track, Zhongpei Shares (002891.SZ), Petty Shares (300673.SZ), and Luss Shares (832419.BJ) have been listed on A shares . Fubei Pet (A04901.SH) and Guaibao Pet (A05388.SZ) are in the listing application stage. Who will eventually become the leader of domestic pet food and seize the biggest dividend of market growth? This article will analyze and draw conclusions from the perspectives of marketing methods, brand matrix creation, production efficiency, channel optimization and financial management.
Among them, Petty's products focus on rubber-biting, with too single types and lack the comprehensive ability to build a brand; while Luce and Fubei Pet's revenue volume is too small and do not have first-mover advantages and scale advantages. We will not conduct detailed analysis here, but only serve as a reference for comparison. This article will focus on analyzing Zhongpin Co., Ltd. and Guaibao Pets to find one of the more investment-worthy companies.
Financial Overview
From the perspective of ROE, although Fubei Pets and Luss Co., Ltd. are leading, they are showing a downward trend, and only Gubao Pets are showing an upward trend overall. However, due to the large investment in marketing of Guaibao pets and the high investment in management expenses (mainly fixed assets), the net sales profit margin of Guaibao pets is significantly lower when the total asset turnover rate is similar to that of equity multiplier , which ultimately leads to Guaibao pet ROE at a disadvantage. However, the increase in ROE and the increase in sales revenue can verify the effectiveness of Guaibao's sales expense investment.
Product differentiation is not significant? User access is more important than products
Compared with the clothing, catering and other tracks in the consumer industry, the product differentiation of the pet food track is not so significant, which is one of the reasons why the industry is now more fragmented. Therefore, marketing is particularly important to increase its market share.
(I) Marketing Strategy
The management's understanding of the importance of marketing is reflected in sales expenses. Among them, Guaibao Pet has the highest sales expenses and sales expense ratio, followed by Zhongpeng Co., Ltd. Guaibao Pet’s marketing system mainly includes pan-entertainment brand marketing (celebrity spokespersons, etc.), diversified online platform promotion and creation of co-branded products. Compared with other pet food companies, Guaibao Pet carried out pet food brand marketing management earlier, with a mature brand marketing strategy and an experienced operation team.
Since Fubei pets' own brand sales account for a large proportion and are highly comparable to Guaibao pets, Fubei and Guaibao are compared in terms of marketing. Specifically, in order to expand the influence of its own brand, Guaibao Pet promotes its brand through variety show sponsorship, TV series advertising and celebrity endorsement, while Fubei Pet does not invest in its own brand in the above aspects.
At the same time, from the perspective of e-commerce platform promotion, Guaibao Pet's online promotion fees on e-commerce platforms such as Tmall, , JD.com, and service fees on online platforms are much higher than Fubei Pet. This allows Gubao pets to achieve better marketing results. Specifically, Guaibao Pet's own brand has strong revenue and net profit growth momentum, significantly exceeding the other three companies.
(II) Marketing channel
Online is a must-fight place for pet marketing. More and more pet owners choose to buy pet food online. The strategy of "channel is king" in distribution is facing the dilemma of not meeting expectations in the current era of consumption upgrading. Direct sales through online sales have become an important choice for current pet food manufacturers. In terms of marketing effect of
, comparing Guaibao Pet with Zhongpeng Shares, which also attaches importance to online marketing, it can be found that the sum of followers of zeal and Wanpy, the two major brands under Taobao Zhongpeng, is about 855,000. Guaibao Pet's Maifudi Tmall flagship store has 2.164 million fans, and the private domain traffic is more than twice that of Zhongpeng. McFudi's , Douyin , also has more fans than Zhongpeng's dong. In this regard, we can see that the advantages of good-boy pets are obvious.
is particularly important in the track where product is homogeneous, and marketing and promotion are particularly important. This is the case with casual snacks similar to pet food.Although Three Squirrels and Liangpinpuzi , which have large investment in brand promotion and high online sales, have not had the first-mover advantage, they have become the leader in casual snacks. This further demonstrates the advanced nature of Guaibao's pet strategy.
(III) Brand creates
Guaibao pet's brand matrix is complete, positioned as mid-to-high-end. In China, McDiffuser is mainly based on the agent brands K9Natural and Feline Natural, and abroad, Waggin'Train is mainly used on the acquired brands. Judging from the pricing and main sales areas of Guaibao pet brand, these four brands are aimed at the domestic mid-range dog food and cat food market, domestic high-end cat food market, domestic high-end dog food market and foreign mid-to-high-end dog snack market, forming good differences and complementarity. In contrast, Zhongpei Co., Ltd. owns eight brands including wanpy, zeal, King Kitty, with similar price segments, and there is competition among brands in the same industry, and their respective positioning is not clear enough.
The matrix layout of the private brand allows Guaibao Pet to transform from OEM to independent brand owners at home and abroad. Judging from the data, except for Fubei Pet, which only has domestic business (mainly owned brands and no export OEM), Guaibao Pet has the highest proportion of revenue from its own brands. Compared with Zhongpeng and Lus, which still use export OEM products as the main source of income, Guaibao Pet has obvious advantages in its comprehensive gross profit margin.
Only by reducing costs and increasing efficiency can we establish barriers
The sales leading position established by marketing may be quickly covered by competitors. Only by making good use of marginal cost reduction and forming a scale effect can the profitable flywheel rotate, in order to support continuous marketing investment and gradually form a lasting brand effect . The management expense rates of Zhongpeng Co., Ltd. and Guaibao Pet are both declining, among which Guaibao's expense rates have dropped significantly, mainly because the growth rate of management expenses is less than the growth rate of sales revenue. From the perspective of specific projects, in addition to the impact of the reduction in listing service fees, the scrap loss and material consumption in 2021 have significantly decreased compared with 2019 and 2020, which can be proved indirectly that Guaibao's production efficiency has improved. However, Guaibao's management costs are still higher than those of his peers. In terms of management efficiency, good pets still need to work hard.
Compared with Fubei, Guaibao's management cost is mainly expensive in employee salaries. Admittedly, this is due to the large difference in revenue volume between the two. However, from the perspective of per capita income generation, Guaibao's per capita income generation is only less than half of that of Fubei. Since 66.15% of Guaibao's employees are production workers, it means that the digitalization of production needs to be improved. Digitalization of production can not only help manufacturers improve product yields, but also reduce costs and form a positive cycle of production-profit. Judging from the use plan of financing funds, Guaibao Pet is actively building intelligent warehousing projects and information upgrading projects. In the long run, this reflects the strategic purpose of reducing costs and increasing efficiency of Guaibao pets and promoting further growth in profit levels.
Compared with Zhongpeng, which has similar operating income, Guaibao's management costs are expensive lies in depreciation and amortization. Since Guaibao invests a lot of fixed assets, it is reasonable to have high depreciation and amortization expenses. However, although Guaibao's pet management fee rate is the highest, the downward trend is obvious.
Channel Flattening
online sales high gross profit margin, with strong advantages. In recent years, Guaibao Pet's online sales have continued to expand. The proportion of direct sales is also increasing. This shows that Guaibao's awareness of its own brand is gradually increasing. Compared with Fubei Pet, which also has a high income from its own brand, Guaibao has a higher direct sales ratio and has a brand advantage.
Financial leverage and expansion speed
Lus and Fubei have almost no interest-bearing liabilities, while Zhongpeng and Guebao's debt ratio has increased significantly, among which Guebao's growth is particularly rapid. This is related to their expansion of fixed asset investment. From Guaibao's balance sheet, we can see that Guaibao Pet's fixed assets were approximately RMB 330 million, RMB 720 million and RMB 890 million in 2019, 2020 and 2021, respectively, which is the fastest expansion of asset projects.This reflects the company's confidence in its own growth, but it also increases operating risks, because once new fixed assets cannot be converted into revenue, the company will face great financial pressure.
So is it reasonable to invest in with a large number of fixed assets in ? Guaibao pet financing is mainly due to the investment in staple food production lines and warehouses, and expands reproduction of . Since 2019, Guaibao Pet has invested in and built 4 new production workshops, with the total investment exceeding that of Zhongpin Co., Ltd. This kind of land-based expansion strategy is feasible in the context of market growth.
But it should be noted that the capacity utilization rate of staple food of Guaibao pets has decreased. Although the company's explanation is that the new production line is not full, the new staple food production line may not be able to be well realized as income. The capacity utilization rate of the snack production line is gradually increasing, and Guaibao's snack business is mainly concentrated overseas. It is optimistic that Guaibao can invest this part of its profits into its own brand operations to form a positive cycle. This is also the advantage of Guaibao compared to Fubei pets that only have domestic brands. Its domestic and foreign businesses are complementary and has stronger risk resistance.
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