China Food

VC revealed: an underwater track is breaking out, with a total of 200 billion yuan


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where opportunities are, entrepreneurs and investors are.
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Investors and entrepreneurs are completely focused on the business in the children’s mouth.
 
Recently, the “Akita Manman” and “Wo Xiaoya” of the baby food track announced on the same day that they had obtained a new round of financing, which were 10 million US dollars and 100 million yuan respectively. This is also the second time they have obtained financing this year, and the last round of shareholders continued to bet.
 
According to incomplete statistics of pencil track, more than ten financing events have occurred in this year’s baby food track, and some projects are even three rounds a year. Behind the financing of these projects are the continuous bets of well-known investment institutions such as Zhenge, Shunwei, Meihua, Tiantu, black ant and Qingliu.
 
“The time is ripe.” Once felt that this track was too traditional and too small. It seemed that there were no new opportunities for investment. People found that the “turning point” had come. Changes in consumer groups, coupled with the boost of the wave of domestic goods, have brought great changes to the baby food industry. In the environment of consumption upgrading, all industries are worth redoing, and baby food is no exception. By 2020, China’s population under the age of 14 has reached 248 million. Investment institutions predict that baby food contains more than 200 billion yuan of imagination.
 
Entrepreneurs and investors are where the opportunities are. An investor told pencil that in 2021, her organization talked about almost all baby food projects on the market; According to the media, when a baby food brand was financing in round B, the valuation given by the management was five times higher than that in round a.
 
Some entrepreneurs have previously told pencil road that some investment institutions receive BP for at least two baby food projects every day. In his circle of friends, dozens of entrepreneurs are preparing to enter the track this year.
 
It seems that baby food may become the next fierce competition battlefield for consumer enterprises. In this blue ocean market, can we run a real big brand? We’ll see.
Keep an eye on the children’s “mouth” business
The baby food track has set off another wave of financing.
 
On December 6, “Akita Manman” and “Wo Xiaoya” announced financing again, which is the second time they have obtained financing this year, and the last round of shareholders continued to bet.
 
Before them, there were also vegetable Gele, duomaomao, yucute and full score Niuniu who had just obtained financing… According to incomplete statistics of pencil track, more than 10 financing events occurred in this year’s baby food track, and some projects even had three rounds of financing a year. Behind these projects, well-known investment institutions such as Zhenge, Shunwei, Meihua, Tiantu, black ant and Qingliu have entered the Bureau.
 
According to the observation of pencil track, different from the practitioners’ “making a lot of money” before 2021, the baby food track has completely surfaced, and the industry has really ushered in an outbreak period.
 
According to the estimation of Huaying capital, the market scale of children’s snacks is expected to reach US $21 billion in 2023, about 150 billion yuan. From the perspective of growth rate, children’s snacks are expected to maintain a CAGR of 13.7% in the next five years, higher than the CAGR of 7.8% for leisure snacks in the next five years. Coupled with the 50 billion supplementary food market, baby food contains more than 200 billion yuan of imagination.
 
In the imaginative market space, a large number of investors and entrepreneurs focus on the business of children. According to media disclosure, when a baby food brand conducted round B financing, the valuation given by the management soared five times compared with round a. An investor told pencil that in 2021, her organization talked about almost all baby food projects on the market.
 
Where the opportunity is, where the money is, where the entrepreneur is. Compared with the slowdown in the growth of other market segments of mother and baby, the baby food industry has attracted many competitors with high growth rate and huge scale.
 
“There are too many peers now.” A relevant practitioner previously told pencil path that there are dozens of entrepreneurs in his circle of friends who are ready to enter the track this year.
 
According to his understanding, some investment institutions receive at least two baby food projects every day. “Many people are now aiming at this track. Whether it’s nutritious rice flour, cereal or baby rice, it’s their direction, as well as the project of making children’s breakfast.”
 
“In addition to happiness, there is some fear.” The practitioner said that the point of “fear” is that not only entrepreneurs enter the industry, but also leading brands in the food industry at home and abroad such as Jiabao, Xiaopi, Heinz and grandpa’s farm, as well as domestic brands such as Fangguang, Yiwei and heyangyang, as well as giants in the field of mass consumer goods, are also active and start looking for new growth points in the field of baby food.
 
Compared with the whole snack or food field, baby food has relatively high gross profit margin, special population and high brand loyalty. Therefore, new retail enterprises or platforms want to get involved in baby food industry.
 
In December 2020, Mengniu became the controlling shareholder of miaokolando, the “first share of domestic cheese”, and children’s cheese stick was the main product of the latter; In mid-2020, the “three giants of snacks” joined the board almost at the same time. Liangpin store launched “liangpin snack Fairy”, three squirrels launched “Xiaolu blue”, and Baicao launched “Tong An’an children”. The three giants came to the field of children’s food and continued to “love and kill each other”.
 
Tianyancha app data show that there are more than 2.7 million infant food related enterprises in China, and the growth rate of newly registered enterprises reached 9.43% in 2020. It seems that baby food may become the next fierce competition battlefield for consumer enterprises.
 
The key lies in human change
 
In the environment of consumption upgrading, all industries are worth redoing, and baby food is no exception.
 
But in fact, a few years ago, everyone still felt that this track was too traditional and too small, as if there were no new opportunities. When Xiao Bo, founder of the infant supplementary food brand “Mi Xiaoya”, first contacted the investment institutions, he described to the investors how much space the market was, but the other party didn’t believe it at all.
 
This is true, but investors also have their own judgment.
 
“Last year, children’s zero complementary food was still an underwater project,” said Zhang BEINI, a partner of Qingliu capital operation who invested in “Akita Manman”
 
In fact, since 2015, she has been watching projects related to the upgrading of mother and child consumption. However, Zhang BEINI found that at that time, most of the baby food market was controlled by foreign brands, overseas shopping and purchasing were developed, users had more trust in the safety of foreign food brands, and it was difficult to have the soil for the expansion of new domestic brands. This field was not a good investment object at that time.
 
The inflection point appears in the second half of 2020. Zhang BEINI believes that with the new consumption boom, the mother baby track is changing from the education dividend of the past five years to the product dividend. Moreover, this time point is also in line with the user psychology of advocating domestic products. There are a lot of gaps in domestic Chinese products.
Specific to the segment track, the competition in the milk powder market is fierce, which has been close to the Red Sea market, but there is still much room for growth in the field of baby food. This is also one of the logics that Qingliu capital chooses to invest in “Qiutian full”.
 
What really brings changes to the baby food industry is undoubtedly the change of consumer groups. Once a child, the post-90s have begun to be parents. In the eyes of a new generation of parents, the weight of baby food has quietly changed. This group of main consumers generally have a high level of education, strong consumption awareness and more scientific concept of childcare.
 
Zhang BEINI said that compared with milk powder, how to make Chinese babies eat healthy and nutritious is a very long-term thing. “According to the tradition, the baby starts to add rice flour from 6 months and eats rice paste from 8 months. From 8 months, our Chinese eating habit is to gradually add cereals to the baby, train his chewing ability, and then gradually add vegetables, meat, seafood, eggs, etc.”
 
However, Yi qinlang, founder of “Akita Manman”, found that “a fact is that many baomoms and dads, including the founder of the baby food brand, do not necessarily know what babies are suitable or like to eat at different ages, such as 1 ~ 3 years old, 3 ~ 6 years old and 6 ~ 9 years old.”
 
In addition, with the development of social platforms, communities and short video platforms, this year’s parents are also more willing to believe that KOL’s online popularity and the talent of evaluation institutions are more likely to be planted by Amway. In order to solve professional problems, many Baoma and Baoda turn to various gods on the Internet, making “baby complementary food” a long-term traffic word and hot search word in the mother and baby industry in Xiaohong book. Last year, among the top 20 hot search words in the mother and baby industry of xiaohongshu, the rate of baby supplementary food on the list exceeded 70%.
 
Subjective factors and objective conditions determine that this generation of post-90s parents are more willing to spend money for their children’s food, and have more ideas of their own generation in spending money. “Many of the post-90s Bao’s parents can’t cook, so they have to buy packaged food instead of homemade food, and they don’t want to homemade baby food.” Xiao Bo, founder of “Mi Xiaoya”, said.
 
For the new generation of main consumers, their demand is to buy subdivided, high-quality and functional products. Moreover, these products are relatively time-saving and labor-saving, and do not need to be made by themselves.
 
With the gradual realization of the industry potential, many practitioners take the lead in enjoying the dividends brought by market growth. According to Xiao Bo, the revenue of “Mi Xiaoya” in 2020 increased by nearly 300% compared with the previous year.
“Wo Xiaoya” has accumulated millions of users since its formal operation in 2020. After five months of formal operation, the monthly sales of the brand will reach ten million; The monthly sales of “baby greedy” in 2020 has reached nearly 100 million yuan, an increase of more than 30 times over the same period in 2019; In addition, “Akita Manman” also had sales of more than 100 million in November this year, and shipped more than 120W pieces per month this year.
Looking for opportunities for new brands
Investors and entrepreneurs have strong confidence in the future of baby food. The current infant food market is far from saturated, and the penetration rate is far lower than that of developed countries, which means that the market still has broad growth space.
 
“China’s soil is very conducive to the birth and growth of new domestic brands.” Zhang BEINI believes that with the increasing acceptance of domestic products by the new generation of mother and child consumers, the ability of domestic entrepreneurs to build products is becoming stronger and stronger. “I think this blue ocean market will last for a long time.”
 
However, after the market warms up, the baby food track has entered a period of rapid development, but problems come one after another.
 
As a subdivided field of food, safety and quality issues bear the brunt, testing the quality control and supply chain management level of incoming enterprises. With the increasing number of brands entering the track, the quality is uneven. Some practitioners found that many emerging consumer goods brands almost adopt the OEM mode of asset light. Many brands are under the banner of “infants”. In fact, many products do not have the production qualification of infant food.
 
Behind this phenomenon, on the one hand, is the lack of industry standards. Different from the strict standards and supervision of the infant formula industry, the relevant laws and regulations on production, quality and technology in the zero complementary food industry are not perfect.
 
On the other hand, it is because practitioners are eager for success. A notice from the regulatory authorities also broke the minds of these brands, “in order to increase the probability of the commodity being searched and improve the sales volume of the commodity, the parties added the search keyword ‘infants’ to the commodity name, which made consumers misunderstand that the commodity is infant auxiliary food.”
 
“Supplementary food for infants and young children has become a new track, but individual participating enterprises are more speculative, so it is not surprising that there are all kinds of problems,” said an insider. Although the OEM mode can save high investment in building factories and accelerate enterprise expansion, it has higher requirements for supply chain management; For enterprises, if OEM manufacturers do not strictly implement quality control and improper operation of production and testing processes in the production process, they will lead to food safety problems, “and if food safety cannot be guaranteed, the survival foundation of food enterprises will be shaken.”
Under the new competitive situation, the industry pattern is changing rapidly. If any enterprise wants to be evergreen, it must develop in the direction of more specialization, standardization and branding. Safety and quality are the basic criteria that consumers will never change when choosing zero complementary food products. In addition to product quality problems, there are also problems such as low brand competitiveness, product homogenization, local areas falling into a price war, and it is difficult to expand categories.
 
In fact, in the end, the competition in the baby food market is the comprehensive strength of product R & D ability, brand building ability, channel dynamic marketing ability and supply chain ability. Innovative R & D, improving quality and creating high-end products are the inevitable trend of industry development. For infant and child products, cultivating consumer trust is an indispensable step.
 
How to operate? According to Wang Yi, founder of “little yellow elephant”, we first need to find our own opportunity points, not only make in China, but also make for China, but also solve the most painful pain points. “Who can better understand contemporary Chinese young parents, pay more attention to subdivided needs and innovation, use excellent products to help them solve the real pain points and anxiety in life, and balance nutrition, health, delicious and fun, the greater the opportunity.”
 
At present, although the children’s zero complementary food market is growing rapidly, on the whole, the market is still in a period of rapid development, and the peak is far from coming. China’s infant food market is still an emerging market, and there are infinite possibilities in the future.
 
Practitioners believe that there can be a real big brand here, but it will be a long process.
Reporter: Han Xiyan; Editor: Wu Jinna; Source: Pencil news (ID: Pencil News), reprint authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
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