China Food

Hot pot seasoning, boiling “gold mine”


“ 
boil, hot-pot/" 22375 rel="nofollow" target="_self">hot pot.
 ”
The saying “no hot-pot/" 22375 rel="nofollow" target="_self">hot pot, no winter” is reasonable – in this cold weather, about three or five friends chat while cooking, and their cold body is also warmed.
The Chinese people’s love for hot-pot/" 22375 rel="nofollow" target="_self">hot pot has been handed down for more than 2000 years – as early as the Western Han Dynasty, hot-pot/" 22375 rel="nofollow" target="_self">hot pot has been favored by the princes at that time, and the kind of hot-pot/" 22375 rel="nofollow" target="_self">hot pot was found in the cultural relics of haihun Hou’s tomb; In modern times, hot-pot/" 22375 rel="nofollow" target="_self">hot pot is still very popular and has formed a market of hundreds of billions.
In 2020, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot market accounted for 14.1% of the overall Chinese cuisine market in mainland China. The scale of China’s hot-pot/" 22375 rel="nofollow" target="_self">hot pot catering market has also increased from 281.3 billion yuan in 2013 to 584.3 billion yuan in 2020. During this period, the CAGR is 11.0%. It is expected to reach 707.7 billion yuan in 2022, which is the fastest growing category in Chinese catering.
Boiling hot-pot/" 22375 rel="nofollow" target="_self">hot pot has also driven the growth of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning market.
hot-pot/" 22375 rel="nofollow" target="_self">Hot pot seasoning is divided into two types: hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material and hot-pot/" 22375 rel="nofollow" target="_self">hot pot dipping material. At present, the industrialization and brand development of hot-pot/" 22375 rel="nofollow" target="_self">hot pot dipping material are relatively backward, which will be discussed in detail in future articles. This article will focus on the business of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning.
Figure source: Minsheng securities
Thanks to the high growth of the hot-pot/" 22375 rel="nofollow" target="_self">hot pot industry, the scale of China’s hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning market has increased from 16.9 billion yuan in 2017 to 24.9 billion yuan in 2020, with an average annual compound growth rate of 13.79%. It is estimated that the market scale of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning will reach 37 billion yuan in 2023, and the CAGR will be about 13% in the next three years.
Minsheng Securities Research Report believes that the hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material industry is in the early stage of growth, and the current important characteristics of the industry are high scenery, low penetration, leading enterprises, accelerating channel weaving and consumer brand awareness. In this track, there has been an obvious head echelon, among which Yihai international, Tianwei food and Haitian flavor industry have the largest voice.
On the premise of high expectations, how should investors layout? This article will analyze two problems:
1. Why did the upsurge of “base material” start?
2. How strong are the main participants?
Boiling “business”
hot-pot/" 22375 rel="nofollow" target="_self">Hot pot bottom is a seasoning used to prepare hot-pot/" 22375 rel="nofollow" target="_self">hot pot soup. In recent years, in line with the trend that mass consumers like Sichuan food, hot-pot/" 22375 rel="nofollow" target="_self">hot pot has developed rapidly with the characteristics of standardized dishes, diversification and convenient diet.
Taking Yihai international as an example, under the outbreak in 2020, the company’s revenue was 5.36 billion, with a year-on-year growth rate of 25.16%; The net profit was also 885 million, a year-on-year increase of 23.18%. On January 2, 2019, the company’s share price was only HK $17.76. By January 4 this year, the closing share price had reached HK $117.20, and the share price has more than doubled in two years.
Why has Yihai international performed so well in the capital market in the past two years? To understand the core logic of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning valuation, we must first understand the three elements of consumers, products and channels, that is, what we often call “people, goods and market”.
Generally speaking, consumers of hot-pot/" 22375 rel="nofollow" target="_self">hot pot ingredients can be divided into b-end and C-end. At present, 2C and 2b hotpot ingredients account for half respectively, basically in the scale of about 10 billion yuan.
Minsheng Securities believes that in the medium and long term, as far as b-end consumption is concerned, due to the gradual standardization of catering operation and stricter supervision, the industry has gradually formed a consensus on reducing costs and improving efficiency, and the demand for composite seasonings is increasing. In addition to Xiabu Xiabu, Haidilao and other national chain hotpot, hotpot chains with new flavors such as Huang Jihuang three juice stew pot, pig belly chicken hotpot Laowang, shrimp eating shrimp rinse, Runyuan four seasons Coconut Chicken are also accelerating their expansion, which provides good business opportunities for hotpot bottom enterprises.
According to the most conservative national demand for a family four times a year, the industry space is close to 15 billion, and the industry super seven has become medium and low-end small and medium-sized players. With large brands gradually replacing the share of small and medium-sized players, resources are gathering to the head.
For C-end consumers, with the general trend of younger consumption, composite condiments are more in line with the needs of young people than traditional condiments, with high efficiency and low cost. At present, the whole industry is still in the early stage of development.
According to the data of the National Bureau of statistics, the average number of domestic households decreased from 3.44 in 2000 to 2.62 in 2020, showing the development trend of family miniaturization. Referring to the experience of neighboring Japan, with the miniaturization of family structure, family cooking will become more and more uneconomic, resulting in more preference for convenience in demand, which is reflected in the increasing proportion of small packaged hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom materials. This change in consumption structure will benefit the industry.
In addition, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material continues to expand to consumption scenes such as cooking and spicy pot. For example, hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material is used in spicy hot, string incense, pickled vegetables, spicy pot and Mao xuewang.
From the hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom itself, it is also facing structural upgrading.
Driven by the structural upgrading, the price band of hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom materials has been moving upward. Over the past decade, the price ceiling has broken through and the industry has ushered in an era of upgrading. The price of butter hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom products will be increased. The products with butter below 5 yuan will be phased out, and the products with butter below 10 yuan will also be upgraded, and the price will be close to 10 yuan. The terminal price of clear oil and non spicy products in Shanghai market is 5-10 yuan higher than that of existing butter products, with obvious price gradient and small room for rise.
In fact, the upward movement of the price band of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning echoes the increase in the customer unit price of downstream catering stores. The customer unit price of Xiabu will increase by 33% from 2011 to 2020 and 20% from 2015 to 2020.
Figure source: Minsheng securities
On the channel side, the sales of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning has gradually shifted from the traditional farmers’ market to large supermarkets and e-commerce channels. Taking Tianwei food as an example, before 2016, more than 60% were farmers’ market channels, while the proportion of farmers’ trade circulation of the company decreased to 50% in 2020. A large number of modern terminals such as Ka and supermarket chains entered the company’s channel system.
However, the overall production threshold of hot-pot/" 22375 rel="nofollow" target="_self">hot pot materials is not high, and the taste gap of each one is not too large. The seasoning industry does not have the high premium of Baijiu.
Therefore, as far as the hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning industry is concerned, the entry threshold is not high, and the core competitiveness may be the channel in addition to the brand. Therefore, the channel construction (including advertising) investment of each brand accounts for the majority.
hot-pot/" 22375 rel="nofollow" target="_self">Hot pot seasoning “Three Kingdoms kill”
Limited by the differences in food culture and taste, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material industry has formed an obvious regional market. For example, the Northeast leader is the “Grassland Red Sun” with Mongolian taste, the southwest leader is the “bridgehead” with Sichuan Chongqing butter taste, and the East China, North China and Central South are the “Yihai international” with clear oil + non spicy taste.
In the past few years, the industry concentration has increased significantly, but it is mainly contributed by the leaders. From 2015 to 2019, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning showed a trend of slow concentration (Cr5 increased from 30% to 36%), but in fact, it was mainly contributed by Yihai international, the leader, and the corresponding compound growth rate of revenue was 42%.
On a larger scale, the high prosperity of the whole hot-pot/" 22375 rel="nofollow" target="_self">hot pot related compound seasoning industry has attracted more and more participants, mainly including the three listed companies Yihai international, Tianwei food and Haitian flavor industry, showing a situation of “Three Kingdoms killing”.
(1) Separately, Yihai international is the exclusive bottom material supplier of Haidilao, which belongs to last mover first mover. In the early years, relying on the scale foundation and brand advantages laid by Haidilao group, on the one hand, it strengthened efforts to expand third-party channels + new business (Chinese polyphony and convenient food), on the other hand, it cultivated its own brand “chopstick hand kitchen”. At present, the scale occupies a leading position in the industry temporarily.
In 2019, Yihai International’s sales from Haidilao was 1.663 billion yuan, accounting for 35% of the annual operating revenue. In 2020, due to the epidemic, the procurement of Haidilao decreased significantly, and the related party transactions between Yihai international and Haidilao also decreased, but accounted for nearly 22% of the revenue.
From the perspective of SKU, Yihai has three flavors: butter, clear oil and non spicy, but its main advantage is that it is clear oil and non spicy, and has a large bargaining power and market share in the market. From the perspective of price band, Yihai seafood is positioned at the high end. In 2020, the ex factory unit price of Yihai is 30.1 yuan / kg (third-party hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning), and the corresponding gross profit margin is 55.7%.
The number of dealers has increased from 116 in 2013 to 2700 in 2020. In 2019, the terminal will cover 500000 outlets, especially in East China, North China and Central South China.
(2) Tianwei food is a traditional Sichuan style polyphonic enterprise. It has been deeply engaged in the industry for more than 20 years, accumulated strong product strength, and has mature experience in building regional large single products. At present, it is in the stage of internal management iteration and rapid channel expansion nationalization.
From the perspective of SKU, the company distributes butter, clear oil and non spicy, and its core advantage lies in spicy Sichuan and Chongqing hotpot seasonings. In recent years, with the promotion of the national strategy, the company has gradually added non spicy flavors (mushroom, three delicacies, clear soup, etc.). In terms of price band, the company’s layout is medium and high-end and Volkswagen markets. In 2020, the ex factory unit price of Tianwei hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material is 22.7 yuan / kg, with a corresponding gross profit margin of 41.3%.
In 2019, 83% of the company’s revenue structure came from distribution and 11% from customized meal preparation business. The company’s channel structure is traditional, and the farmers’ market is conducive to large-scale production. However, with the channel reform and brand upgrading, the company will increase the development and construction of modern channels.
(3) Haitian flavor industry is a condiment platform company. It laid out hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning in August 2020. Although it has strong channel competitiveness, hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning is quite different from soy sauce and oyster sauce in terms of product attributes and industry competition logic. Analysts believe that at present, Haitian’s launch of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning is more of a “card position”, and there is a high probability that the category boundary will be expanded by acquiring local brands in Sichuan and Chongqing in the future.
Compared with Yihai and Tianwei, the company adopts a differentiation strategy on the product side. On the one hand, the packaging design of Haitian flavor industry highlights the characteristics of youth and fashion. On the other hand, the taste does not rely on the traditional Sichuan spicy flavor, but focuses on regional flavor (Xinjiang tomato, Yungui sour soup, Korean army pot and Japanese Shouxi pot).
The number and quality of Haitian flavor dealers have advantages in the whole industry, which is due to its accelerated channel fission and sinking in recent years, helping the national expansion. In 2020, the number of dealers was 3001, with a compound growth rate of about 19% in the past six years. In terms of channel density, breadth and dealer strength, it is in a leading position in the industry, especially at the catering end, it has built high entry barriers and channel stickiness.
Compared with the amount of hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning revenue, in 2020, Yihai International (5.359 billion yuan) > Tianwei food (2.365 billion yuan) > Haitian flavor industry (1.161 billion yuan).
In 2020, 59.53% of Yihai International’s revenue came from hotpot bottom materials, and 51.59% of Tianwei food came from hotpot bottom materials. Haitian flavor industry did not clearly mark the revenue from hotpot bottom materials, but other revenue accounted for 5.09% of the total revenue.
If only the net interest rate is compared, Tianwei food fluctuates greatly, which is mainly caused by the change of sales expenses. After Tianwei increased its brand and channel investment, its sales expense rate has increased from 12.96% in 2018 to 20.05% in 2020, of which the advertising and business promotion rate has reached 8.59%; Although Yihai’s investment in product promotion has an upward trend, the advertising cost rate in 2020 is only 2.6%, and the overall sales cost rate is about 10%; Due to its strong channel capacity, Haitian flavor industry sold about 1.366 billion last year, and the sales expense rate remained at a low level of 6%.
In the short term, the improvement trend of consumption structure is expected to continue, and the fundamentals will usher in an inflection point. Minsheng securities expects that the fundamentals of 2021q4 will continue to improve. On the one hand, the terminal demand will be repaired steadily, and the company’s continuous de inventory action has achieved good results. It is expected that the revenue growth in a single quarter is expected to turn positive. On the other hand, the cost investment is more rational. At the same time, the base is low, and the profit in a single quarter is expected to grow positively.
In addition, hot-pot/" 22375 rel="nofollow" target="_self">hot pot has become the hottest investment track in the past two years. Many new chain hot-pot/" 22375 rel="nofollow" target="_self">hot pot stores have obtained financing, which directly benefits the upstream hot-pot/" 22375 rel="nofollow" target="_self">hot pot bottom material enterprises. According to incomplete statistics, since 2021, there have been more than 10 financing transactions in the domestic hot-pot/" 22375 rel="nofollow" target="_self">hot pot catering industry, of which the more typical ones include: in June, Banu completed more than 500 million yuan of financing; In August, Chaotianmen announced that it had obtained nearly 100 million yuan of pre-A round of financing; In the same month, senior brother Zhou announced the completion of round a financing of RMB 100 million. In September, the subdivided hot-pot/" 22375 rel="nofollow" target="_self">hot pot brand Laowang submitted a listing prospectus, indicating its expansion plan.
With the rapid development of China’s economy, investors at home and abroad see the potential of this huge cake. As a rapidly developing industry in the traditional catering industry, the hot-pot/" 22375 rel="nofollow" target="_self">hot pot industry has a wide audience, a long history and great development potential in China. Once it enters the track of large-scale, chain and standardized development, it is bound to attract extensive favor of capital.
Generally speaking, hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning is a habit consumption driven industry. Enterprises must cultivate carefully and use time to achieve greatness. As an investor, only by patiently accompanying the growth of the enterprise can we really feel the charm of investment in the condiment industry.
reference material:
[1] Special report on hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning industry: one of the best tracks in the seasoning industry and optimistic about Yihai international, Great Wall Securities
[2] Yihai international vs Tianwei food, hot-pot/" 22375 rel="nofollow" target="_self">hot pot seasoning industry, tracking in June 2021, capacity expansion, Merger and acquisition of Youshu
[3] Compound condiment: who can win the competition between the two, Suning Financial Research Institute
[4] Boiling feast: looking for the direction of long-term high prosperity, Minsheng securities
*This article is written based on public information and is only used for information exchange and does not constitute any investment suggestions
Author: Tang Fei; Source: capital planet (ID: zibenxingqiu), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
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