If there are no surprises, the toothpaste brand ranked fourth in China will IPO on the Hong Kong stock market. Once successfully listed, it will become the “first stock of domestic toothpaste” in the Hong Kong stock market, and once again, consumers will successfully “use” their daily necessities to be listed.

The Dental Circuit has always been a fun track, and it's also a racetrack heavily staked by capital. The investment and financing culture on this racetrack is also very interesting. In the first two years, investors' investment preferences for dentistry were dental chains. After the outbreak of the epidemic, it also coincided with the new retail/new consumer era, and most investors began to shift their attention to oral FMCG products.

From an investment perspective, this is clearly a shift in investment logic. The former model is heavier and has a longer cycle, while the latter model is lighter, so it's easy to see changes in cash flow.

However, if you look at it from a market perspective, China's current investment in dental tracks is in line with the investment logic of consumer goods: portability, aesthetics, and the use of popular logic to quickly seize consumer sentiment.

Annual revenue of 1.6 billion

Vimei's prospectus directly shows its fourth position in the market. This figure reflects that at least the Chinese have enough confidence in choosing toothpaste.

According to the prospectus, according to Frost & Sullivan's data, in terms of retail sales of all oral care products in 2020, Vimice ranked fourth with a market share of 5.3%; similarly, they also ranked fourth in the Chinese electric oral care market with a 4.3% market share.

When it comes to Vimici, the most well-known one is their “Shook” toothpaste brand. The revenue from toothpaste almost contributes to the vast majority of Vimeggy's revenue.

According to the prospectus, in 2019, 2020 and the first nine months of 2021, Vimegger achieved revenue of 1,662 million yuan, 1,616 million yuan and 1.23 billion yuan respectively; net profit for the same period was 504.94 million yuan, 211 million yuan and -494 million yuan respectively. The adjusted net profit was 48.193 million yuan, 152 million yuan, and 129 million yuan respectively.

The two data lines in Vimiterie's prospectus are very interesting.

First, Vimezzi's share of online revenue is increasing year by year, while offline revenue is decreasing year by year. For the year ended 2019 and December 31, 2020, and for the nine months ended 2020 and September 30, 2021, the revenue generated by the Vimegger online channel was $630 million, $674 million, $467 million and $533 million, respectively, accounting for 37.9%, 41.7%, 43.6% and 43.3% of total revenue.

Second, Vimei's offline marketing expenses remain high. In 2019 and 2020, sales expenses were 734 million yuan and 631 million yuan respectively, accounting for 44.17% and 39.06% of total current revenue, respectively. As of September 2020 and September 2021, this share was 41.17% and 41.31%.

Judging from the above two data lines, it can be seen that the Internet is bringing more revenue to Vimei, yet Vimiterie is still spending huge sums of money to grab offline share.

This is understandable. For any consumer goods brand, offline is a must-compete place, not to mention that China's dental care track must be a 100-billion-level racetrack.

Also, Vimitero's gross profit is quite high. In 2019, 2020, and the first nine months of 2021, gross profit was 894 million yuan, 939 million yuan, and 772 million yuan respectively. The corresponding gross margins were 53.8%, 58.1%, and 62.8%, respectively.

It has received many rounds of financing, with Junlian and Zhong Ding on the list

Obviously, toothpaste is a high-margin business — this is also an important factor in capital's willingness to invest on the racetrack. The new consumer brand “Ice Spring”, whose main product is toothpaste, completed 3 rounds of financing in just 8 months in 2021. Well-known institutions such as Baidu Venture Capital, Country Garden Venture Capital, and BAI Capital are all investors in it.

Vimitero has also brought in institutional investors. According to public information, in 2014, Junlian Maolin, Huizhou Bailihong, and Beijing Han Ying made a total of 75 million yuan in Series A investments in Vimei. In April 2016, Junlian Maolin, Huizhou Bailihong, and Beijing Hanying added an A+ round of investment totaling 75 million yuan to Vimei.

In July 2016, Oceanview Express and Zhong Ding invested a total of about 133 million yuan in Series B investments in Vimiterie.

Prior to this IPO, Junlian Maolin (a subsidiary of Lenovo Investment) held 15.79% of the shares and was the largest shareholder. The two founders, Wang Ziquan and Cao Ruian, held 15.58% and 14.86% of the shares respectively. Oceanview Express holds 14.28% of the shares and Zhuhai Qishu Phase II holds 12.65% of the shares, ranking the fourth and fifth largest shareholders respectively.

An oral circuit under the cusp: some brands have 6 rounds in a year

When investing in Vimei in 2016, the investment reason given by Zhong Ding was that the Shook brand was very popular with consumers. This logic coincides with the style of most frequently funded oral care brands today — explosives logic.

According to Frost & Sullivan's report, China's dental circuit still has a lot to do.

According to some data, China's dental care market developed steadily from 2016 to 2020, with total retail sales increasing from 49.6 billion yuan to 88.4 billion yuan, with a compound annual growth rate of 15.5%. In the future, as the penetration rate of diversified oral care products increases and consumption upgrades, retail sales in the Chinese oral care market are expected to reach 152.2 billion yuan in 2025, with a compound annual growth rate of 11.5% from 2020.

Based on the retail sales volume of all oral care products in 2020, the top five oral care companies accounted for a total of 33.9% of the market share. In other words, for new brands, they have plenty of room to grow.

The 369 Medical Lottery Network once made an incomplete statistic. In 2021, there were 85 investment and financing incidents at the China Dental Circuit. There were more than 30 cases of financing that exceeded 100 million yuan in a single transaction. The maximum amount of a single transaction reached 200 million US dollars, and the total amount of financing exceeded 13 billion yuan.

Among these, the fastest moving dental brand is the “mixed” dental brand. It completed 6 rounds of financing within a year, with the highest financing amount of nearly 400 million yuan. Since its establishment in 2019, it has received a total of 10 rounds of financing within two years, investing in well-known institutions, including Meihua Venture Capital, Qingliu Capital, Innovation Factory, ByteDance, and Jinding Capital.

Compared with Vimei, the biggest advantage of these new consumer dental brands is that they know the logic and traffic style of popular products, and know how to quickly grasp the consumer mentality in the short term. For current consumers, it is most important for dental brands to achieve more convenience and beauty on a healthy basis.

Whether it's a mix of mouthwash products or BOP, which focuses on mouthwash, they have sold hits online. It is worth mentioning that BOP is also a star project of the Dental Circuit. It has completed 2 rounds of financing within a year. DCM China, BAI Capital, and Lightspeed China are all participating investors. The founder of BOP once told the media that he just used the style of making up his mouth. The reason why Sanban has become the darling of capital may be that Seiryu Capital's statement represents some of the logic of capital investment: “Samban focuses on mouthwash, and mouthwash is the category of oral care consumer goods that really have a chance to become a high-circulation FMCG category.”

Under this investment logic, mouthwash brands such as Huga HUGGAH, Qing Zhi Scientific Research, Breathing Ocean, and Bai Xi all successfully obtained financing in 2021.

In addition to this, electric toothbrushes and toothpaste are also segmented tracks where investors are willing to pay for them. Taking electric toothbrushes as an example, Usmile is already preparing to go public. Gaoyuan, Source Code Capital, and Zhong Ding Capital are all investors. The Xiaomi Ecological Chain company “Dr. Bei” also completed a new round of financing in early February this year, Fosun Chuangfu Investment.

It's understandable that capital favors the dental circuit, but one question might be worth thinking about: do consumers really need so many homogenized mouthwashes, mouthwashers, and electric toothbrushes?