Since 2015, Gaibao Pet has achieved three rounds of advancement as a driving force for growth, from channel drive to large single product drive, to product structure upgrade drive. The reflection behind this is continuous refinement of capabilities and continuous organizational evolution: First, the company has the ability to continuously create large single products and iterate. Second, the foundation for the company to continue to enjoy channel dividends is the upgrading and optimization of organizational efficiency. Currently, the company's organizational efficiency continues to improve, and the momentum for product structure upgrading is strong. We are optimistic about the future development of GaiBao Pets, and we focus on recommending them.

Reviewing the company's product structure upgrade and channel transformation path

2015-2018: Snacks switched to staple foods, and cost-effective products started. In 2017, the company gradually switched from a zero-food category to a staple food category. The core was the improvement in consumer insight, keenly capturing the gap in low- and mid-range cost-effective staple foods, and successfully shaped the first-generation staple food “Beef Double Food Package”. Since then, it has continuously strengthened the forward-looking nature of product development, launched a variety of popular cost-effective staple foods one after another, and actively reached young consumers with pan-entertainment marketing methods, and initially established the company's youthful brand image.

2019-2020: Starting from e-commerce, a large single product echelon of medium- and low-end staple foods was formed. From Tmall to JD, the sharp increase in e-commerce penetration has enabled the company to take advantage of traffic dividends. The share of online sales rapidly increased from 61% in 2018 to 83% in 2021.

More importantly, at the product level, the company upgraded from the ability to create explosive products to the methodology of creating large single products. “Nutritious Forest Food” and “Algae Fun” became explosions of staple foods, forming a large single product echelon with medium- and low-end prices, and the company's product life cycle was extended.

2021-2022: Channel integration reduces the proportion of online distribution and explores high-end products for the first time. After the medium- and low-end staple food products gradually matured, the company operated an independent brand of the Frégat series, which was initially incubated in Mafudi. Based on a high-end strategy and a high proportion of online channels, it has become an urgent need to improve the direct operation capabilities of e-commerce channels and stabilize the price market. In 2021-2022, Gaibao integrated online dealers, and the proportion of the online distribution model decreased by 10%. The gradual increase in e-commerce direct management model laid the foundation for subsequent improvement in profitability.

2023-present: New big products lead brand upgrades, Douyin has verified its strong marketing power and control over new channels. Since 2023, the company has focused on high-end products represented by Frégat, Barf, and goat milk, driving the company's profitability. Essentially, the reason behind this is the upgrading of the company's brand positioning and the expansion of the customer base. The amplification effect of this logic was particularly remarkable during the promotion period. At the same time, with its strong refined channel operation capabilities, McFudi continues to rank first in the category on the emerging Douyin channel.

The organizational efficiency of Gaibao Pet continues to improve, and the momentum for product structure upgrading is strong. Since its launch, Gaibao Pet's growth driving force has achieved three rounds of upgrades from channel-driven to explosive-driven, to large-scale single product-driven upgrades, which reflect the continuous advancement of strategy and continuous organizational evolution: First, the company has the ability to continuously build large products and iterate. Iterative product innovation is particularly critical for mass consumer goods brands. Gaibao Pet continues to increase investment in R&D and marketing expenses, and has always been at the forefront of the needs of young consumers. As a mass price band brand, it is fundamental for it to stand out from channel changes and product generational changes. Second, the basis for continuing to enjoy channel dividends is the upgrading and optimization of the company's organizational efficiency. At the organizational level, a highly online brand not only means favoring online investment, but also requires a significant improvement in decision-making efficiency on the enterprise side and an efficient organization. Therefore, we believe that the foundation that supports the company to continue to enjoy the dividends of e-commerce channels is the company's stable organizational structure and continuous optimization of the organization's human efficiency. In the context of strategic efforts to upgrade and iterate products and greatly improve the efficiency of organizational decision-making, the company uses e-commerce to keenly understand consumer needs, form a positive feedback mechanism, and finally achieve a more sustainable dynamic shift from channel-driven logic to product structure upgrading.

Risk warning

1. Competition among pet food brands intensified, and domestic sales growth fell short of expectations; 2. Risk of fluctuations in raw material prices; 3. Pet food safety issues; 4. Profit forecast assumptions are unfounded or fall short of expectations.