An era of delicious food has arrived.

“Investor Network” Hou Shuqing

If appetite is also a type of capital, 2024 may be a good opportunity for you to satisfy your appetite and get to the bottom of the market. Snacks, milk tea, hot pot, and other delicacies that can complement your “sense of guilt” are getting cheaper and maybe even tastier.

As financial data from major companies on various consumer tracks was released one after another, trends in the food chain, snack, and new tea industry in 2023 also surfaced. The players are surprisingly in the same direction: price reduction. At the same time, each of the three tracks is warm and cold.

While customer unit prices are falling and being phased out at an accelerated pace, the recovery process of leading companies is accelerating; the snack food industry is collectively cooling down, and even leading companies are facing growth difficulties; the new tea industry has gradually come out of the consolidation period and is becoming uniform in terms of price, scale, and strategy, and a wave of listing has arrived.

Restaurant chains: recovering, but customer unit prices are under pressure

In 2023, most catering companies showed a strong recovery momentum.

According to the “2024 Catering Enterprise Development Report” jointly released by KPMG and various industry associations, the revenue of catering enterprises above the national limit exceeded 1.3 trillion yuan in 2023, an increase of 20.9% over the same period in 2022. The share of enterprises above the limit in the overall revenue of the industry rose from 20.2% in 2019 to 25.3%, and industry concentration further increased. Most of the companies that gave good news in 2023 were also listed companies in the industry.

The strong recovery in 2023 is closely related to the end of the epidemic, which is confirmed by the revenue performance of the pot industry (02517.HK). For the four years 2020-2023, the company's revenue was 2,965 billion yuan, 3,958 billion yuan, 7.173 billion yuan and 6.094 billion yuan, respectively.

The cooking industry expanded greatly during the pandemic, and the total number of stores increased from 1,441 in early 2020 to 9216 at the end of 2022. However, by the end of 2023, the number of stores in the pot circle had increased to only 10,307, while revenue was reduced by about 1 billion dollars, showing a rare “reverse growth” in the industry. Compared to eating at home, stifled consumers still prefer offline dining.

After demand was released, cash flow from surging passenger flow enabled Helens (09869.HK), Quanjude (002186), Tang Palace China (01181.HK), Tehai International (09658.HK), and Taixing Group (06811.HK) not only to turn losses into profits in 2023, but also to double their net profit. Jiumaojiu (09922.HK) also achieved a net profit increase of 819.24%, encouraging hot pot to gradually mature as the “third growth curve.”

Xiabuxiabu (00520.HK) on the hot pot circuit had annual revenue of 5.918 billion yuan, up 25.25% year on year, slightly outperforming the industry market. The revenue scale swept away the decline in 2022 and basically returned to the level of 2019-2021. A similar situation also occurred in Haidilao (06862.HK). The company's annual revenue increased from 31,089 billion yuan in 2022 to 41,453 billion yuan, an increase of 33.55% year-on-year, which is basically the same as 41,112 billion yuan in 2021.

But at the same time, a number of catering companies also experienced Waterloo in 2023, and the first to bear the brunt was the baking circuit. Hutou Kuk Standard Chartered Bakery and Momo Dim Sum Shop were once in the limelight as representative brands of “New Chinese Baking,” but their decline was evident after entering 2023, and the market ended disastrously after “entering and leaving the ICU” a few times. Serious homogenization, slow development of new products, and supply chain shortcomings are their common sticking points. After spending all the financing, there will probably be no further turbulence on the baking track for a while.

The problem of aging brands and difficulties in starting a new brand has always been a headache for listed companies. The yakiniku brand newly established by Xiabuxiabu in 2022 experienced closure. As of April, there was only 1 store in Shanghai in the country, and the company's overall performance was still below the profit and loss line; Jiumaojiu also stopped operating the Cantonese food brand “Uncle Wei is the Chef” in April. Currently, the number of stores in the Jiumaojiu Northwest, where it started is only in single digits. The shift in power between new and old brands is a major test for catering companies, and what makes management even more troublesome is that this kind of handover doesn't just happen once.

Industry recovery and recovery in performance are still the main themes of restaurant chains, but the decline in customer unit prices is also a common phenomenon in 2023. Haidilao's customer unit price has fallen below the 100 yuan mark (99.1 yuan); the customer unit price in Xiabu Xiabu first-tier cities has dropped from 67.9 yuan to 63.4 yuan; although Jiumaojiu's profit grew the fastest, the customer unit price of its hot pot company also dropped the most, from 128 yuan to 113 yuan, and Taier pickled cabbage fish also dropped from 77 yuan to 75 yuan.

Hefu Noodle, on the other hand, confirmed this trend with real money price cuts. Founder Li Xuelin once claimed that the overall decline in Hefu Noodle was around 30%, mainly adjusting the price of old products and increasing the share of products in the 25-30 yuan price range; Wang Yujing, CMO of Dashi Stock (Domino China 01405.HK), once said that the company would not follow the price reduction trend, but the customer unit price of Dashi Shares dropped by about 7% in 2023.

Casual snacks: no recovery, but unit prices are also under pressure

There were also quite a few discounts on the casual snack circuit, but the report cards handed over by the companies behind them were not ideal. In 2023, the original upstream, middle, and downstream pattern of the snack industry changed drastically. Retailers, wholesalers, producers, and raw material suppliers fought together, and some brands disrupted the pace.

Even the top three net profit companies in the casual snack industry in 2023: Liangpin Shop, Three Squirrels, and Qiaqia Foods all experienced negative growth in revenue.

According to the 2023 annual report published by Liangpin Store (603719), the company's annual revenue was 8.046 billion yuan, down 14.76% from 9.44 billion yuan in the same period last year. Net profit attributable to mother fell 46.26% from 335 million yuan in 2022 to 180 million yuan, a drop of nearly half. Behind the 8 words “Annual revenue growth is under pressure” in Liangpin Shop's financial report, the company implemented the largest price adjustment measure in the company's history in 2023, involving more than 300 major products, and the price reduction was close to 22%.

The revenue of Qiaqia Foods (002557) was 6.806 billion yuan, down 1.13% year on year, and net profit attributable to shareholders of listed companies fell 17.77% to 803 million yuan. Judging from the decline rate, Qiaqia's decline eased slightly, but its gross margin fell from 31.96% to 26.75%, the biggest drop in gross margin among A-share listed snack companies.

The three squirrels (300783) seem to be in slightly better condition than the previous two: increasing profits, but not increasing revenue. Revenue for the year was 7.115 billion yuan, down 2.45% year on year, but net profit to mother increased 69.85% year over year to 220 million yuan. This isn't the worst. This is the fourth year since the Three Squirrels lost revenue in 2020, and the increase in net profit was due to the company's net profit plummeting 68.61% in 2022.

In order to remedy the situation, the three squirrels proposed the concept of “high-end cost performance”, that is, to achieve a price advantage by optimizing the supply chain while guaranteeing quality. The company's price of macadamia nuts fell by about 30% year on year in 2023, and followed the trend of community snack stores to improve the efficiency of reaching consumers while improving cost performance.

Behind this is a shift in consumers' consumption mentality. A wave of consumption upgrades around 2016 spawned a group of snack companies such as Three Squirrels, Liangpin Shop, and Baicao Wei. They produce snacks that are beautifully packaged, tasty, and have a brand image that keeps up with trends. However, today's consumers are aware that the premium brought about by packaging and corporate image does not match the slight improvement in the consumer experience; as long as snacks are tasty, it is enough.

Domestic developed e-commerce and logistics systems have responded to this demand, and affordable snacks are being accepted by more and more people. The number of affordable snack stores that are closer to the community than “internet snacks” is also growing. According to a research report published by Ai Media Consulting, as of October 2023, the number of domestic snack collection stores has exceeded 22,000.

Unlike the gradual increase in the concentration of the restaurant chain industry, new rivals and new channels are constantly emerging online and offline, instead continuously squeezing the living space of leading casual snack companies. This transformation is coming too fast for leading companies whose market capitalization can easily reach tens of billions of dollars. Of the 10 A-share snack companies, 6 experienced a decline in gross margin in 2023.

Ready-made tea: the era of low prices has entered its third year

The general price reduction of milk tea is nothing new. To some extent, this trend is driven by the demand side of consumers, but the pressure on the supply side is also intense, even more so for high-priced brands: in the past, they could use a price range of 25-35 yuan and exquisite store decoration to create a “our brand is very promising” atmosphere. However, it is clear that high prices are also a kind of self-restraint, which is equivalent to being cut off from a vast sinking market.

And this group of high-priced brands is also the most active in price adjustments. In February 2022, Hi Cha announced that it had completed its first comprehensive product price adjustment and announced that it would no longer launch products worth more than 29 yuan during the year. Nai Xue also announced a sharp price cut a month later and launched the “Easy Series” fresh fruit tea in the 9-19 yuan range.

Since then, it has been hard to find a drink that costs 30 yuan a cup on the market.

On September 22, 2022, Michelle Ice City handed over its first prospectus to A-shares. The huge store size and impressive financial performance amazed the entire market. Since then, franchise brands in the price range below 20 yuan have been popular in the primary market, and Cha Baidao, Gu Ming, and Shanghai Aunt have entered a period of accelerated store expansion.

By the end of 2023, brands with over 10,000 stores in the industry still had only one Michelle Ice City, with 36,153 stores. However, behind them are Cha Baidao and Gu Ming, which surpassed 8,000 stores, as well as Yihetang, which surpassed 7,000 stores, Shuyao Xiancao, and Shanghai Auntie.

Although Michelle Bingcheng maintained a faultless lead, its A-share listing path was not smooth, and there was no further progress after the A-share statement was submitted. Until January 2, 2024, Michelle Bingcheng submitted a prospectus to the Hong Kong Stock Exchange.

Currently, the mainstream listing direction for C-end tea companies is not A-shares, but Hong Kong stocks and US stocks. Tea Baidao was successfully listed on Hong Kong stocks recently. Gu Ming and her Shanghai aunt have already submitted Hong Kong stock listings. Overlord Cha Ji and Cha Yan Yuese also frequently spread listing news. There is news that Overlord Chahime is targeting US stocks.

Nayuki, who has been on the market for almost 3 years, finally achieved her first meager full-year profit in 2023. The company's revenue was 5.164 billion yuan, but the net profit to mother was only 13 million yuan, the net profit margin on sales was only 0.21%, and the market capitalization was sluggish for a long time. The opening of Cha Baidao, which had just been listed on April 23, fell below the issue price of HK$17.5. By the close, the stock price had fallen by more than 26% to HK$12.8.

Perhaps Nai Xue's tea (02150.HK) went to Hong Kong and went on sale too violently. As a result, A-shares are very cautious about this track, but they are favored by the upper echelons of the industry. Tianye Co., Ltd., which provides fruit ingredients, Fresh Drinks, Dexin Foods, Yeti Co., Ltd., which produces production equipment, Qinyuan Co., Ltd., and even Hengxin Life, which produces packaging materials, have been successfully listed.

These upstream companies can avoid the C-side Red Sea, and their customer range is not limited to milk tea, and the stability is better. Downstream, on the other hand, is like a red sea that never stops boiling. Consumers will always look forward to the next new product or brand, and companies will always struggle to create new products and shape the second curve. (Produced by Thinking Finance) ■