China Food

What does China’s prosperous future depend on?

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China Wangwang, like many people, is flustered once it enters middle age.
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In recent days, buyback has not let China’s Wangwang out of the trough.
Products are difficult to sell, weak performance and aging brands. Even if the annual revenue exceeds 20 billion yuan and there is still a place in the mainland market, it will inevitably be surrounded by many enemies.
Yili, Mengniu, Dali food, etc., which one is not nibbling at the market share of China Wangwang? China’s prosperity is not as prosperous as before. What will the future depend on?

Earn 24 years
If you want to ask China Wangwang how to rise in the mainland, many people will point to Wangzai milk.
In the early 1990s, China Wangwang expanded rapidly after gaining a foothold in the mainland, relying on this product. Up to now, it is still in the form of cans and Tetra Pak, crowded in large and small stores or supermarket shelves.
Few people know that the first generation technology of this kind of dairy beverage, which is mainly made of sugar, milk powder and water, came from Japan. According to public reports, in 1996, China Wangwang imported technology from Japan, and Wangzai milk was born.
This kind of dairy beverage, which enlarges the four words of “Wangzai milk” and reduces the three words of “reconstituted milk”, has gradually penetrated into the mainland market from the first tier cities to the towns, and is gradually known by the public.
At that time, no one cared about the difference between this kind of “milk” and real fresh milk. Under the background that the per capita milk consumption was not advanced, Wangzai milk quickly became the favorite of the market. Wangzai milk’s revenue has always accounted for about 90% of the company’s dairy and beverage business income.
From 2005 to 2015, flavor milk and milk containing drinks were popular in China’s dairy market, which made the dairy products and beverage sector of China Wangwang (00151. HK) grow rapidly. From fiscal year 2006 to fiscal year 2019, the revenue of dairy products and beverage sector of the company soared from 2.16 billion yuan to 9.813 billion yuan, a 3.5-fold increase, which shows how much the market favors Wangzai milk.
I remember that in the past ten years, when visiting relatives during the Spring Festival, they had to choose Wangzai milk in a gift box, just like the “six walnuts” of Yangyuan drink.
With the magic advertisement of Li Ziming drinking Wangzai milk, the revenue of Wangzai milk reached its peak in 2013 fiscal year, with revenue of more than 10 billion yuan.
After 2015, low temperature milk, constant temperature milk and other subdivision products appeared. Yili Group and Mengniu Dairy industry increased the flavor milk products, and the dairy and beverage business of China Wangwang, especially Wangzai milk, fell into a downturn. The end consumer pursues the healthy normal temperature milk or the low temperature milk, Wangzai milk gradually deviates from the market trend, and the good days are gone forever.
From 2015 to 2019, the company’s dairy and beverage business revenue growth rates were – 13.6%, – 13.4%, 7.4%, 1.6% and 0.9%, respectively. Over the same period, the revenue of Wangzai milk dropped from 10 billion yuan to about 8.8 billion yuan.
While the dairy and beverage sector declined in general, the situation of other business sectors of China Wangwang was not optimistic.
In fiscal year 2019, the company’s rice and fruit business, leisure food business and other products business showed a downward trend. The revenue of rice fruit business was 5.611 billion yuan, leisure food income was 4.634 billion yuan, and other products was 36 million yuan, with a year-on-year decrease of 3.51%, 9.16% and 47.06% respectively.

What did middle-aged Wangwang miss?
Zebra consumption research found that the rise of China Wangwang in mainland China has certain contingency and era background.
It can be said that the company stepped on the “dividend” in the initial stage of reform and opening up and the development of mainland dairy market. With the gradual loss of “dividend” and the rise of similar enterprises, the company’s scenery is no longer.
The most obvious is that Wangzai milk and Wangwang rice fruit, as the main products of the company’s performance, have almost lost their competitiveness in the market competition since 2014.
Affected by this, the company’s revenue and net profit declined for three consecutive years.
According to the Research Report of CICC, China Wangwang’s revenue decreased by 16.53% from 2014 to 2016. Although the performance has picked up after fiscal year 2017, it is difficult for the company to return to glory.
What did the Taiwan funded enterprise miss?
Zebra consumption carding found that, on the one hand, we can see that normal temperature milk, low temperature milk and other products appear repeatedly, and they iterate rapidly and vary with the terminal demand, which to a certain extent squeeze the living space of Wangzai milk; on the other hand, Wangzai milk keeps unchanged to cope with the dramatic changes in external market environment, showing the conservative and cautious style of Taiwan funded enterprises.
As a result, in the era of FMCG, the product iteration and upgrading speed is faster and faster. Wangzai milk is still the can of Wangzai milk on the shelf.
Wangzai milk income decline trend has not stopped. First, it fell for the first time since the launch of products in 2014, and then declined by 13.5% in 2015, exceeding the speed of the company’s overall revenue decline.
In fiscal year 2019, although the revenue of Wangzai milk has rebounded, the weak growth of 1.9% is far from the strong growth momentum of China’s dairy market.
Thinking that lying in the “dividend” can be a move to eat the old, turning a blind eye to the changes in the demand of terminal consumers, Wangzai milk will inevitably become a “commodity”. After the rise of Xiangpiao (603711. SH), Yangyuan drink (603156. SH), doubendou and Vitasoy milk, Wangzai milk’s living space has become narrower and narrower.
In the rice and fruit snack business, the company’s snow cakes, Xianbei, and steamed bread were once sold all over the country. The 80’s and 90’s who ate these snacks have entered middle age. After the new snack enterprises such as liangpin shop and three squirrels (300783. SZ) have grown up, snacks are no longer limited to rice and fruit, nuts and cakes are stuffed into the pockets of the younger generation.
At present, the company still relies on several old products. How old are these products?
It is reported that Wangzai steamed bread was born in 1994, Wangzai milk was launched in 1996, Wangwang snow cake was born in 1984, and Wangwang Xianbei was born in 1983.
In addition, after nearly 30 years of development, China’s Wangwang’s product coverage market is nearly saturated, and it is difficult to seek incremental growth. By changing names and packaging, playing emotional cards and playing nostalgia, the main consumers of the Post-00 and post-10 generations can not eat this set of products.

What do you rely on?
China Wangwang, like many people, is flustered once it enters middle age.
Zebra consumption research found that companies in response to brand aging, product innovation and other aspects, more like a passive response.
In the past three years, new products have emerged in an endless stream. In 2017 alone, the company launched nearly 50 new products, ranging from coffee, juice, rice wine, to energy drinks. Others’ homes must have their own. Moreover, new products are launched almost every month.
Under the passive following strategy, many new products basically change the original product structure. For example, how much difference does it have with Wangzai milk?
In China’s food industry, not to mention the tens of millions of capital investment in the research and development of a new product, only the R & D cycle and marketing promotion need a lot of resources to help. The company’s spreading the old and bringing forth the new, the money has been spent, and the product has been launched, so it is difficult to splash water in the market.
After 2000, no matter how hard marketing and promotion efforts, it is difficult to copy the myth of Wangzai milk.
In addition to spreading the net and winning lottery to launch new products, the company has started from Wangzai IP.
Sharp eyed friends may have found that in the 2018 fiscal year, the company began to speed up cross-border activities, and Wangwang’s peripheral products were widely distributed, from furniture, condiments, palace crisp, and even clothing brand cooperation wangzi clothing, together with CHCEDO to launch wangzi snow cake air cushion and mask.
On the other hand, the company began to extend its tentacles to the sea. In 2019, the company’s sales company in Vietnam opened, and sales companies in several other Southeast Asian countries have been launched this year, which may be an important market to improve the company’s performance.
In the highly differentiated snack market, the new snack market is also undergoing a reshuffle. Chinese consumers have a more obvious trend towards healthy, diversified and high-end leisure food. China Wangwang, which has long been labeled as high salt and high sugar, has lost its market influence and appeal.
It can be said that Yili and Mengniu are the company’s biggest competitors in the dairy and beverage business, and the rice fruit business is attacked by new snack enterprises online and offline. Facing the mature FMCG market in mainland China, what will the company rely on in the future?
Author: Chen Xiaojing; source: Zebra consumption (ID: banmaxiaofei), reprinted with authorization.
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