Wei long officially submitted to the Hong Kong Stock Exchange, disclosing the financial data in recent years. How does a packet of spicy gluten with a price of less than 10 yuan support the "first brother of spicy gluten" with a revenue of 4.12 billion yuan in 2020? Listed avant-garde dragon's first external financing attracted Tencent, Hillhouse, Sequoia into the game, how is the track of spicy snack food?

Let's find out from this prospectus.

Weilong: the largest spicy snack company in China

Weilong achieved operating income of 27.5 Universe 33.8 / 4.12 billion yuan respectively in 2018 / 2019 / 2020. Year-on-year growth of 23.0 per cent in 2019 and 21.7 per cent in 2020 was much higher than the 6.4 per cent and 1.9 per cent growth rates of China's snack food industry.

According to Frost Sullivan's data, Weilong ranks first in China's spicy snack food market.

Weilong's main products are seasoning noodle products, vegetable products, bean products and other products. In 2020, the income of seasoning noodle products / vegetable products / bean products and other products accounted for 65.3%, 28.3% and 6.4%, respectively.

From the perspective of development, the origin of Wei long can be traced back to 2001, when the founders Mr. Liu Weiping and Mr. Liu Fuping came to Luohe to start a business and created the first spicy gluten. In 2003, apply for Weilong trademark. Pingping Food was established in 2004, moved to Luohe Industrial Park, and then continued to promote product-supply chain upgrading, brand strength is also gradually formed.

In terms of ownership structure, in the pre-listing ownership structure, and Global Capital / Weilong Future Development Co., Ltd. / related pre-listing investors accounted for 92.17% of Weilong delicious 1.98% of debacle 5.85%. Among them, in Hehe Global Capital, Liu Weiping / Liu Fuping indirectly or directly holds 95% and 5% of the shares, and Weilong Future Development Co., Ltd. is an incentive shareholding platform for employees.

At present, Weilong's sales channels are mainly offline, online as a supplement.

In terms of offline channels: from 2018 to 2020, the proportion of sales of Weilong offline channels was 91.6%, 92.6% and 90.7% respectively, mainly using the first-class dealer model, strictly implementing the screening and evaluation mechanism, and visiting dealers and retail terminals from time to time to monitor the dealer situation. As of December 31, 2020, the company had 1950 dealers, covering more than 570000 retail terminals (70 per cent of the retail terminals are located in low-line cities).

In terms of online channels: from 2018 to 2020, the sales of online channels accounted for 8.4%, 7.4%, 9.3%, respectively. Online channels will supplement the coverage capacity of the company's offline channels. As of December 31, 2020, the company has 22 online distributors.

In terms of capacity, Weilong plans to more than double its production capacity in the next 2-3 years. Weilong has four factories, all in Luohe City and Zhumadian City, Henan Province. In the next 2-3 years, it plans to expand the Luohe Xinglin factory and the Yunnan factory, with a designed annual output of 13.1 / 198000 tons respectively. After the expansion, the company is expected to reach an annual capacity of about 615000 tons.

Industry overview: trillions of space in the snack food industry, the rapid growth of spicy food

According to Frost&Sullivan statistics, retail sales of snack food in China are 774.9 billion yuan in 2020, 6.6% CAGR in 2015-2020, 1.1014 trillion yuan in 2025 and 7.3% CAGR in 2025-2025.

Retail sales of spicy snacks were 157 billion yuan in 2015, accounting for 20.3% of the leisure snack industry. Retail sales are expected to reach 257 billion yuan in 2025, and CAGR in 2020-2020 / 2020-2025 is 8.9% and 10.4% respectively, growing faster than the industry.

According to Frost&Sullivan data, the retail sales of leisure noodle products and leisure vegetable products are 412 / 24.2 billion yuan respectively in 2020, and retail sales are expected to reach 672 / 54.7 billion yuan respectively in 2025, totaling more than 100 billion yuan, and the CAGR from 2020 to 2025 is 10.3% 17.7% respectively.

In the sales channel, the spicy snack food e-commerce channel develops rapidly, and the sinking market maintains a rapid growth rate.

At the level of competition pattern, the CR5 of retail sales of snack food industry in 2020 is 10.0%. The industry pattern is scattered, with a CR5/CR15 of 10.0% and 22.4% respectively. Weilong spicy gluten has a market share of 1.2% in the industry.

In the field of spicy leisure snacks, Weilong has a certain leading position as an industry leader. According to Frost&Sullivan data, Weilong has a clear lead over the second in the industry, with a 5.7% market share in the spicy snack food industry in 2020.

In the field of spicy noodles & spicy leisure vegetable products, Weilong has obvious advantages.

Seasoning noodle products: in 2020, the market share of industry CR5 is 18.4%, and that of Weilong City is 13.8%, which is 6.3times of the market share of the second place, exceeding the sum of the market share of the second and fifth enterprises. The company's E/F/G/H is 2.2% Universe 1.2% Universe 0.7% 0.5% respectively.

Spicy leisure vegetable products: in 2020, the market share of CR5 in the industry is 15.7%, and that of Weilong City is 10.8%, which is 6.0 times that of the second place in the industry, and also exceeds the sum of the market share of the second and fifth enterprises in the industry. The I/J/A/B of the company is 1.8% Universe 1.3% Universe 0.9% 0.9%.

The core competitiveness of Weilong: product research and development, channel advantage, leading position

Pay attention to product innovation and strong product R & D system

• Weilong's ability to launch new products is the key to its growth from the leader of the spicy noodle products industry to the leader of the entire spicy snack food industry. In 2019 and 2020, the revenue of the company's new products reached 36.0% and 12.7% of the total revenue of that year, respectively. Take wind eating kelp as an example, through product research and development, middle essence kelp as raw material, using pasteurization technology to retain the taste of kelp, the retail sales of the products reached 100 million yuan within one year.

• Setting up R & D teams in different areas is the core of the company's product R & D system. The company has set up independent R & D teams in the fields of food technology, industrial production technology, packaging and locking technology, and equipped with technical personnel to carry out in-depth special research. Then through the collaborative work between teams, the technology of each sector is integrated into multiple product development stages, which greatly improves the speed and success rate of the company's product innovation.

Clear channel positioning, strong channel management system

• Weilong has a strict screening and assessment mechanism for dealers to maintain the competitiveness and sustainable development of the sales channel.

• At the same time, Weilong also actively empowers dealers to help dealers manage and serve retail terminals more effectively, improve the service quality of terminal outlets, enhance single-store sales and expand shelf space.

• Clear positioning of online and offline channel functions, with the help of the advantage of online easy to push new products, to achieve complementary with offline channels.

• Weilong has a self-developed sales ERP system to achieve the visibility and control of the terminal retail outlets. Weilong analyzes the inventory and sales of dealers, collects the product display information of retail terminal outlets, assists dealers and guides their purchasing and sales activities in a timely manner.

The first-mover advantage of the leader under the rapid development of the industry

• According to Frost&Sullivan, the retail size of China's spicy snack food industry will reach 157 billion yuan in 2020, with an estimated annual compound growth rate of 10.4% from 2020 to 2025, which is better than the 7.3% annual compound growth rate of the snack food industry as a whole in the same period.

• As China's largest spicy leisure snack company (with a market share of 5.7% in 2020, 3.8 times that of the second), Weilong will continue to enjoy the dividends brought about by the development of the industry.

Pay attention to the cultivation of young customers, high consumption frequency & strong product stickiness

• Through the cultivation of taste memory in consumers' adolescence, the early emotional foundation between Weilong brand and consumers is established. According to Frost&Sullivan, 95.0% of the company's consumers are 35 and younger, and 55.0% are young people aged 25 and under.

• With consumer training, high performance-to-price ratio and more comprehensive channel coverage, the company has gradually turned Weilong products into high-frequency consumer goods, and small packaging products will be consumed about 9 billion times in 2020.

Industry-leading supply chain system with strict quality assurance

• Raw materials: attach great importance to the acquisition of upstream raw materials, and establish long-term cooperative relations with suppliers including COFCO, Yihai and China Grain Storage, so that they can be traced from the source.

• Production and packaging: most of the production lines of the company have been automated. Among them, most of the automation equipment are developed internally, and as of December 31, 2020, it has 6 production-related patents.

Comparison of financial data of key snack food companies