Home » The first batch of zongzi is here!How long will Wufangzhai’s “Dragon Boat Festival” bonus last?

The first batch of zongzi is here!How long will Wufangzhai’s “Dragon Boat Festival” bonus last?

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© Reuters. The first share of Zongzi is here!How long can Wufangzhai’s “Dragon Boat Festival” bonus last?

The Financial Association (Beijing, reporter Lu Jiale) reported that during the Dragon Boat Festival, when consumers were still discussing “sweet rice dumplings or salty rice dumplings”, a company was hitting A shares with “zongzi”.

Recently, Wufangzhai officially disclosed the pre-disclosure draft of the prospectus, and plans to list on the main board of the Shanghai Stock Exchange to hit the “first share of rice dumplings.” The prospectus shows that Zongzi is the company’s main product. In 2020, the company’s sales volume will exceed 366 million, and its revenue contribution rate will exceed 70%.

Whether Wufangzhai can really land on the capital market by selling rice dumplings has been questioned by the industry. Not only is the zongzi products affected by seasonality, but the main sales are concentrated in East China. At the same time, it adopts the production method of commissioned processing, which also makes the outside world doubt whether the company can break through the geographical restrictions and ensure the quality of the products.

Zongzi is king

Among all the listed companies selling zongzi, Wufangzhai is the one that relies on the single product of zongzi the most.

According to prospectus data, from 2018 to 2020, the revenue of Wufangzhai Zongzi products accounted for 66.28%, 67.74%, and 70.77%, respectively. Although the company is also expanding into other categories, the effect has been minimal.

Among them, moon cake series accounted for 6.84%, 6.45%, and 7.96% of revenue in the past three years; meal series accounted for 17.19%, 15.68%, and 11.41%; egg products and pastry products accounted for 9.69%, 10.13%, and 9.86 % Share.

From the above data, it can be seen that the revenue share of Wufangzhai Zongzi category is still increasing, while other categories have not yet formed a large-scale development, and the revenue share of the meal series is on the contrary declining. So how strong is the profitability of Zongzi?

The prospectus data shows that Wufangzhai’s comprehensive gross profit margin in the past three years was 45.24%, 45.43%, and 44.57%, respectively. Although there has been a decline in 2020, the overall gross profit margin is relatively stable.

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The gross profit margin of other A-share companies that produce rice dumplings is concentrated at more than 30%. Among them, the gross profit margin of the Guangzhou restaurant food manufacturing segment is 45.35%; Taoli Bread Mooncakes and Zongzi in 2020 will achieve main business income of 118 million yuan and 7.7101 million yuan respectively, of which the gross profit margin of Zongzi products is 36.43%; Sanquan Foods in 2020 The gross profit margin of the rice dumplings, dumplings and glutinous rice balls business was 32.27%.

As the so-called “Success is also Xiao He is defeated Xiao He”, as the king of Zongzi, Wufangzhai is also facing the problem of over-reliance on Zongzi categories and a single product structure. According to industry insiders, the sales season of zongzi is too obvious, and it is difficult to maintain high growth only by the annual sales around the Dragon Boat Festival.

Market: Consumption is phased

What’s the situation in the Wufangzhai rice dumpling market? Recently, a reporter from “New Consumer Daily” launched a front-line interview.

A consumer who loves Wufangzhai rice dumplings told the reporter of New Consumer Daily that although he is a fan of Wufangzhai, he usually does not buy zongzi, and only buys them before the Dragon Boat Festival. I usually buy some cakes occasionally, but not many times. In addition, the consumer stated that the audience of Wufangzhai has obvious regional characteristics. At present, there are not many people who recognize Wufangzhai Zongzi in Chongqing.

In recent years, the sales of Wufangzhai Zongzi products have declined. Data show that from 2018 to 2020, the sales of Wufangzhai Zongzi series products will be 411 million, 408 million and 366 million, respectively. Wufangzhai attributed the decline in zongzi sales in 2020 to the impact of the new crown pneumonia epidemic. Among them, the sales of direct retail sales fell by 24.66% year-on-year, but the sales of e-commerce increased by 30.44% year-on-year.

“The company’s main products are traditional seasonal foods such as zongzi and moon cakes, which have obvious seasonal characteristics. The sales of zongzi products are mainly concentrated before the Dragon Boat Festival, and the sales of moon cake products are mainly concentrated before the Mid-Autumn Festival. If it is concentrated in the consumption of zongzi and moon cakes Seasons, the company cannot make good market forecasts, timely organize production and inventory reserves, the company will face insufficient stocking of some products and lose business opportunities, or due to major changes in the external environment or the company’s market forecast errors, resulting in overproduction and resulting backlog and waste Seasonal operating risks.” Wufangzhai said.

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In response to the IPO, Wufangzhai stated that the company intends to use the funds raised from the issuance for the third phase of the Wufangzhai smart food workshop construction project, the Wufangzhai digital industry smart park construction project, the Wufangzhai R&D center and informatization upgrades. Construction project, Wufangzhai Chengdu production base upgrading project and supplementary working capital.

Chinese food industry analyst Zhu Danpeng said in an interview with a reporter from “New Consumer Daily” that Wufangzhai’s eagerness to go public also wants to implement a multi-brand, multi-category, multi-scenario, multi-channel, and multi-consumer layout. Only in this way can it improve Anti-risk ability and comprehensive strength, while making the moat more solid, this is a core reason for many companies’ IPOs.

Twists and turns

Wufangzhai’s road to impact the capital market can be described as twists and turns.

It is understood that since 2019, Wufangzhai has been listed on the A-share market and has changed counseling agencies three times in a row. In April 2019, the securities firm that GF Securities and Wufangzhai signed a listing counseling agreement. In September of the same year, GF Securities announced that “in view of the strategic development needs of Wufangzhai”, it terminated its counseling relationship.

Subsequently, CICC became Wufangzhai’s listing counseling agency. However, since Wufangzhai disclosed the third phase of the work progress report in June 2020, the progress of the cooperation between the two parties has not been updated. In September 2020, Zheshang Securities replaced CICC to sign a listing guidance agreement with Wufangzhai, and completed its listing guidance work in March this year.

“New Consumer Daily” reporter learned that Wufangzhai and other shareholders have a gambling agreement.

Specifically: In February 2021, Ningbo Yongwu Investment Management Partnership (Limited Partnership) and Ningbo Fuju Equity Investment Partnership (Limited Partnership) respectively signed a share transfer agreement with Wufangzhai. The agreement states Ruo Wufang Zhai cannot complete its A-share listing before the end of December 2021 or December 2022. Ningbo Fuju and Ningbo Yongwu have the right to require Wufangzhai Group to repurchase all of the issuer’s shares.

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From the prospectus, Ningbo Yongwu and Ningbo Fuju hold 3.77% and 1.13% of the shares in Wufangzhai, respectively.

The future fate of Wufangzhai who went public with risks is still unpredictable. According to data released by China Foods, in 2015, the scale of my country’s zongzi market was 4.916 billion yuan, and by 2019 it will grow to 7.337 billion yuan, with a compound annual growth rate of 10.53%. It is expected that the market size will grow to 10.291 billion yuan in 2024. The compound annual growth rate to 2024 is 7%.

From the perspective of industry insiders, as a time-honored brand, Wufangzhai has a certain brand effect. However, in the development process, it faces competition from listed companies such as Guangzhou Restaurant and Taoli Bread, as well as challenges from new companies. At the same time, in recent years, cutting-edge brands such as Xicha are also launching seasonal zongzi gift boxes, and the competition in this market will become increasingly fierce. Time-honored brands have their own advantages, but at the same time there are risks of being farther away from consumers in the new era.

“After the consumer thinking and behavior of the new generation have changed, the industry has also been under relatively greater pressure. How to force innovation on the consumer side, and improve the stickiness with the new generation of consumers in the process of upgrading and iteration It is a challenge faced by traditional Chinese enterprises and time-honored brands. In this regard, the process of time-honored brands is relatively slow.” Zhu Danpeng said, “Wufangzhai brand barriers and scale barriers are its deepest moat. After listing, it will be in the entire capital market. The development of a diversified layout under the blessings of the “China” is definitely helpful to the overall development in the future.”

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