Distribution Cost of Traditional Seasoning Products in China

Perfecting the ownership structure to ensure the steady growth of performance

Haitian Ye Wei is the leader of condiment industry in China. The company has a long history of soy sauce brewing, and Haitian ancient sauce garden can be traced back to the Qing Dynasty for more than 300 years. 1955 Haitian soy sauce factory was established by public-private partnership in 25 ancient soy sauce gardens in Foshan. 1995 the reform of state-owned enterprises was completed and successfully transformed into a limited company. Since then, Haitian has entered a stage of rapid development. 20 13 Haitian became the first enterprise in condiment industry with sales exceeding 10 billion, and 20 14 Haitian was listed on Shanghai Stock Exchange.

Haitian has been deeply involved in China condiment industry for more than 60 years, with soy sauce, oyster sauce and sauce as the core. At present, its categories have been extended to vinegar, cooking wine and various compound seasoning (chicken essence, chicken powder, chafing dish bottom materials, etc. Haitian brand is deeply rooted in the hearts of consumers. For 9 consecutive years, the company has ranked first in China's brand power index industry, the market share of condiment industry and the sub-category of soy sauce.

Development events in Haiti

In 20 19, the owner's operating income of Haitianwei reached1980 million yuan, up by 16.2% year-on-year, and CAGR 20 10-20 15.3%. Despite the impact of the COVID-19 epidemic, the company's revenue maintained steady growth in the first three quarters of 2020, and its operating income increased by 15.3% year-on-year to1709 million yuan. The net profit returned to the mother in 20 19 was 5.35 billion yuan, up 22.6% year-on-year. 20 10- 19, and the CAGR reached 26.2%. In the first three quarters of 2020, the net profit returned to the mother increased by 19.2% year-on-year to 4.57 billion yuan.

2010-operating income and growth rate of Haitian flavor industry in the third quarter of 2020

Haitian Ye Wei's net profit in the third quarter belongs to the mother 20 10-2020.

Benefiting from product upgrading and scale effect, the company's gross profit margin has been continuously improved. Compared with 20 10 in 20 19, the comprehensive gross profit margin of the company increased 12.4pp to 45.4%, and the net interest rate increased 15. 1pp to 27.0%. In the first three quarters of 2020, the freight was adjusted to operating costs according to the new accounting standards, and the company's gross profit margin decreased slightly by 2.2 percentage points to 42.3%. Due to the reduction of sales expenses caused by the adjustment of freight to operating costs and the obvious scale effect of the reduction of marketing and promotion expenses during the epidemic period, the net interest rate in the first three quarters increased by 0.9pp to 26.8% year-on-year.

Haitian Yewei 2010-Comprehensive gross profit margin and net interest rate in the third quarter of 2008

Guangdong Haitian Group Co., Ltd. holds 58.3% shares of Haitian Yewei, making it the largest shareholder. Company executives and other six concerted parties directly and indirectly hold 49.7% of the shares as actual controllers. The high shareholding ratio of company executives helps to improve the enthusiasm of management and win in the fierce market competition.

List of ownership structure of Ye Wei in Haiti (first half of 2020)

The company pays attention to employee training, arouses the enthusiasm of employees, and the salary follows the concept of "high salary, high efficiency and high responsibility". In 20 14, the company implemented the first restricted stock incentive plan, totaling 6.58 million shares, accounting for about 0.44% of the company's total share capital at the time of grant, and rewarded 93 key personnel in core technology, marketing, production, engineering and management except the management. High motivation for ordinary employees helps to stimulate team morale and improve employee loyalty.

Equity incentive of the company

The leading position of soy sauce is stable, and oyster sauce is growing rapidly.

The company's condiment business is mainly based on three traditional categories: soy sauce, oyster sauce and seasoning sauce. Soy sauce is the main source of the company's income and profit. In 20 19, the three categories of income accounted for 57%, 18% and1%respectively, and the gross profit accounted for 30%, 7% and 6% respectively. With the rapid development of oyster sauce and sauce, the proportion of soy sauce in the company's operating income has decreased year by year (from 72% in 20 10 to 57% in the first three quarters of 2020), while the proportion of oyster sauce has greatly increased (from 0% in 2010 to 60% in the first three quarters of 2020).

Benefiting from the rapid growth of the oyster sauce industry, the company's oyster sauce category has the highest growth rate (2010-2019cgr:19.2%), followed by sauces, while the soy sauce category has a relatively stable growth rate of 2010-due to its high maturity and base.

The gross profit margins of Haitian soy sauce, oyster sauce and sauce in 20 19 were 50.4%, 38.0% and 47.6% respectively. Benefiting from economies of scale and direct price increases, the gross profit margin of the three categories has been continuously improved in the past decade, with the largest increase being soy sauce 16.8pp, oyster sauce 9.2 and sauce11.4pp..

2010-percentage of annual operating income by category in the third quarter of 2020

20 10 to 20 19 classification gross profit percentage

Haitian Yewei 20 10-20 19 income CAGR

Haitian Yewei 20 10-20 19 classification gross profit margin

The company's soy sauce and oyster sauce products are the absolute leader in the industry. In terms of soy sauce, according to the retail caliber, Haitian Yewei's market share in 2065438+2009 was 7.3%, which was 3.8 percentage points higher than the second place (3.5%). According to the ex-factory sales caliber, Haitian Ye Wei's leading edge is more obvious. According to our calculation, in 20 19 years, the sales volume of Haitian Ye Wei soy sauce accounted for 19.9% of the total sales volume of the whole industry, far exceeding the second place, Zhongju Gaoxin (fresh fragrance) (4. 1%).

Market share of 20 19 retail caliber soy sauce industry

20 19 market share of soy sauce industry.

In terms of oyster sauce, the company has a significant advantage in retail and its market share has steadily increased. Thanks to the company's efforts in the field of oyster sauce, the market share of oyster sauce products has increased rapidly. According to the retail caliber, the market share of oyster sauce in 20 15 was 33.3%, and it increased by 8.9 percentage points to 42.2% in 20 19. In 20 19, the market share of the company's oyster sauce products exceeded that of Lee Kum Kee (30.5%) 1 1.7 percentage points.

20 19 market share of retail oyster sauce industry

Haitian Ye Wei Oyster Oil Products 20 15- 19 Market Share

The increase in ton price pushes the gross profit margin of soy sauce up.

Haitian soy sauce is brewed by traditional natural fermentation process, which is complex and requires six processes to produce. The company's soy sauce production has high technical content and strict quality requirements. After the finished product is produced, it is packaged and put into storage after three inspections. Combining modern technology and big data technology, the product quality is stable and has reached a very high standardization level.

Production technology of Haitian soy sauce

The operating income of Haitian soy sauce in the first three quarters of 2020 was 9.73 billion yuan, up by 12. 1% year-on-year, and the CAGR was 12.7% during the period of 2010/9. Gross profit in 20 19 reached 5.86 billion yuan, up by 13.2% year-on-year, and CAGR was 17.9% in 2019 years. Thanks to the optimization of soy sauce product structure, the company's ton price has steadily increased. In 20 19, the average selling price of soy sauce products was 5355.5 yuan/ton, which was 26.0% higher than that of 20 10, driving the gross profit margin of soy sauce category to rise from 33.6% of 20 16.8 PP to 50.4%.

Operating income of soy sauce

Gross profit of soy sauce

The price of soy sauce has risen steadily.

The rapid development of oyster sauce has increased the proportion, while the proportion of sauce has remained stable.

In the first three quarters of 2020, the annual operating income of Haitian oyster sauce category was 30 1 100 million yuan, up by 18.2% year-on-year, and the CAGR was 210.5% during the period of 2019. The gross profit of 20 19 reached13.3 billion yuan, a year-on-year increase of 13.3%, and the CAGR was 25.3% during the period of 20 10- 19. Benefiting from the accelerated penetration of oyster sauce in residents' diet, the company's oyster sauce sales expanded rapidly, accounting for far more than sauce, becoming the company's second largest single product.

Among the three main categories of the company, the gross profit margin of oyster sauce is the lowest, with 20 19 being 38.0%, which is lower than that of soy sauce and sauce, with 12.4 and 9.6pp respectively. However, in recent years, thanks to the direct price increase and scale effect, the gross profit margin of oyster sauce category has increased rapidly.

Operating income and growth rate of oyster sauce

Gross profit and growth rate of oyster sauce category

The company's operating income in the first three quarters of 2020 was 65.438+0.95 billion yuan, a year-on-year increase of 65.438+00.2%, and the CAGR was 654.38+06.4% during the period of 2065.438+00-654.38+09. The gross profit of 20 19 reached 109 billion yuan, up 9 1% year-on-year, and the CAGR was 20% during 2010/9. The gross profit margin of sauce is second only to that of soy sauce, rising from 36.2% of 201.4pp to 47.6% of 20 19.

Operating income of sauces

Gross profit of sauce category

There is still room for expansion of product categories in the future.

After years of development, Haitian has developed from a simple soy sauce manufacturer to an industry leader covering a variety of condiments through self-construction and mergers and acquisitions, forming a very complete condiment product matrix. Similar to Kikkoman, the continuous extension of categories provides a new growth curve for the company and pushes the company to gradually widen the gap with other competitors.

Promote the internal segmentation and upgrading of traditional categories such as soy sauce

Among the three traditional categories of Haitian (soy sauce, oyster sauce and soy sauce), five star-rated items (Haitian Jinbiao soy sauce, Haitian straw mushroom soy sauce, Haitian fresh soy sauce, Haitian super oyster sauce and Haitian soy sauce) and two series products (Haitian time-honored brand series (soy sauce) and Haitian organic series (soy sauce)) were formed, with sales of 654.38 billion yuan. The average price of the company's 654.38 billion yuan large single product is around 9 yuan, which is in the mainstream price band and belongs to the low-end products, covering most consumer groups. The launch of 20 13-20 14 Haitian time-honored brand series and organic series has strengthened the company's high-end product matrix and catered to the trend of quality and health under the consumption upgrade.

Company 10 billion yuan large single products and 200 million yuan series products.

If you look carefully by category, the company's soy sauce and oyster sauce products are rich in variety, with high, medium and low-end comprehensive layout. Soy sauce varieties include bagged and special series which are famous for their cost performance, focusing on health and high-end simple series and organic series. Haitian classic gold label soy sauce and straw mushroom soy sauce have been selling well for more than 60 years. In order to consolidate the company's market leading position, Haitian constantly innovates and upgrades soy sauce and subdivides products. For example, 20 14, on the one hand, the company subdivided the gold label soy sauce into a series of single products such as sweet gold label and fresh gold label, on the other hand, it upgraded to super gold label to improve the amino acid ammonia content and product quality. Haitian also launched the "naked soy sauce" series with only five raw materials on the "Double Eleven" day in 2020. The packaging also adopted innovative double-layer technology, and no preservatives were added to prevent soy sauce from oxidative deterioration. This is the "naked soy sauce" series of freshly squeezed soy sauce launched by Kikkoman 20 10. Haitian has taken a solid step towards high-end healthy soy sauce. It is estimated that the proportion of high-end soy sauce in all soy sauce products will increase to 50% in the next five years.

Oyster sauce is in the stage of expansion and cultivation. The low-end products of value-added series focus on large capacity and high cost performance. The mid-range products are represented by the best-selling series of 65.438 billion pieces, while the high-end series has fresh oyster sauce which is widely loved by consumers and brand oyster sauce which focuses on high quality. 20 19 Haitian gaoming has a production capacity of 600,000 tons of oyster sauce, and plans to add and expand 300,000 tons of production capacity. In addition, Jiangsu Haitian factory plans to expand its production capacity by 600,000 tons. We predict that the total production capacity of Haitian oyster sauce will reach about10.5 million tons in 2023, and the CAGR production capacity will be about 25% in 20 19-2023.

As for sauces, the company has covered many sub-categories such as soy sauce, seafood sauce, bean paste, bibimbap sauce, tomato sauce, garlic Chili sauce, etc., and it is expected to open up a world in the field of complex sauces.

Haitian traditional three categories of product matrix

Divided into larger categories such as vinegar.

20 16 Haitian straightened out the category thinking and began to cut into new categories through the establishment of new subsidiaries or mergers and acquisitions. For the choice of new categories, the company tends to have a large layout space and no obvious strong enterprises for the time being. At present, the company reserves new products such as vinegar, cooking wine, pickles and compound seasoning, forming a diversified product matrix. Among them, vinegar and cooking wine are the new categories that the company focuses on developing, which together account for half of the production capacity of Jiangsu factory.

Haitian arranges new categories through new establishment or merger.

In terms of vinegar, the company has 70,000 tons of vinegar production capacity in Gaoming, and released150,000 tons of vinegar production capacity in Jiangsu factory in 2065.438+07. In the same year, the company acquired 70% equity of Zhenjiang Danhe Vinegar Industry (with a production capacity of 20,000 tons), with a total production capacity of 240,000 tons. In terms of cooking wine, the company currently has three series products and five categories of single products. 20 19 Haitian gaoming has a capacity of 50,000 tons of cooking wine, and Jiangsu Haitian plans to add and expand a capacity of 450,000 tons. We predict that the total production capacity of Haitian cooking wine will reach about 500,000 tons by 2024, and the CAGR production capacity will be about 50% from 20 19 to 2024. With the solution of capacity constraints, the company's vinegar and chafing dish bottom products are expected to start to be released in 20021year.

Haitian started Gaoming's 2.2 million tons condiment expansion project at the end of 20 17, with a total expansion scale of 2.2 million tons (including 0.5 million tons of soy sauce, 300,000 tons of soy sauce and 400,000 tons of compound seasoning), and the production capacity of newly-built soy sauce almost doubled on the existing basis. In 20 19, Gaoming's annual production capacity increased by 400,000 tons. At the same time, Jiangsu Haitian has started the second phase of construction and partially put into production, with an annual production capacity of 200,000 tons. It is estimated that the total production capacity of the company will be about 3.35 million tons by the end of 20 19. In the next five years, with the gradual implementation of Gaoming's 2.2 million tons project, Haitian's production capacity and technical advantages are expected to continue to support the company to lay the foundation for sustained growth through the low-cost layout of high, medium and low-end full-price categories.

In recent years, Haitian has accelerated investment and capacity building.

Kikkoman's development is 50-70 years ahead of that of Ye Wei. Haitian is still in the growth stage, and the expansion is mainly based on soy sauce. In the future, as Haitian enters a mature stage, cross-industry and transnational expansion is expected to become a new growth curve for the company.

20 19 sales of Kikkoman in Japanese market by category.

20 19 sales ratio of various categories in Haitian China market

High channel coverage and strong competitiveness

At present, the company's sales network has achieved 65,438+000% coverage of 365,438+0 provincial capitals and municipalities directly under the Central Government, 65,438+000% of prefecture-level cities and 90% of county-level markets, and 90% of inland provinces have sales exceeding 100 million. By the first three quarters of 2020, the company's operating income in the northern, central, eastern, southern and western regions of China will account for 26. 1%, 2 1.8%, 20.6%, 18.8% and 12.7% respectively. North China and Southeast China have always contributed revenue to the company, but the company has also been actively expanding to the central and western regions. By the third quarter of 2020, the central region has become the company's second largest revenue region. Since 20 12, the growth rate of operating income in the central and western regions has been higher than the national average. In the first three quarters of 2020, the growth rate of operating income in the central and western regions reached 23.7%/25.6%, which was about 9- 1 1pp higher than that in the whole country.

20 10 proportion of regional operating income in the third quarter

The growth rate of operating income in the central and western regions in the third quarter was 20 1 1

The company has five marketing centers, more than 1 10 sales departments and more than 350 sales teams or sales offices all over the country. Channel refinement is the strategy that the company has always adhered to. Haitian, a mature region of prefecture-level market, deeply develops and seizes market share by adjusting the structure and densely distributing points, while the county and township markets in immature regions adopt the strategy of "from big to small and gradually sinking", sinking from county-level markets to villages and towns through the distribution system, and improving the category penetration rate.

Ye Wei, Haiti has the widest channel coverage.

According to the 2020 Asian Brand Footprint Report released by Kaidu Consumer Index, Haitian Yewei ranked fourth in China FMCG brand with 570 million consumer contact and 75.7% penetration rate, and was the only condiment enterprise in the top ten list, with the consumer contact increasing by 6%, and continued to lead the FMCG market in China.

The number of consumers contacting Haitian Ye Wei ranks fourth among fast-moving consumer goods in China.

Multi-dealer system helps to cover the market quickly at low cost.

Like most condiment enterprises, Haitian sales mainly rely on the distributor system, that is, the channel system of first-class distributors and second-class distributors is adopted. By the end of the third quarter of 2020, the company had 6739 first-class dealers, with more than 12000 dealers. Regionally, the company's sales ability in the east and south is stronger, and the per capita income in 20 19 is 4.9 million yuan and 4.4 million yuan respectively. Because the central and western regions are vast and still in the stage of market expansion, the company has increased the deployment of sales staff in the central and western regions, and it is expected that the central and western regions will become new growth highlights of the company in the future.

Proportion of dealers by region in the third quarter of 2020

Per capita operating income of dealers in various regions in the third quarter of 2020

The company does not have a general distributor in each market, but there are at least two distributors, and each distributor sells exactly the same goods, which makes the competition among distributors fierce, and the price increase of distributors is low, so the company can enhance its bargaining power. At the same time, in order to seize the market, dealers spontaneously expand the development and sales area of secondary dealers, and the sinking construction cost can be transferred from the company to the dealers. In the early days, Haitian quickly achieved deep coverage in a low-cost way with a large number of dealers. In the later period, the company transformed some secondary dealers into primary dealers, which improved the mastery of market terminals.

The company implements embedded management for dealers, directly dispatches factory operators and sales managers to dealers, and at the same time, provides professional teams to manage and guide dealers, helping dealers and secondary dealers to expand sales channels and regions, and build a win-win model of long-term cooperation with dealers. In addition, the company adopts a tough channel policy of "pay first, then get the goods" to ensure the company's initiative in the channel and avoid its own funds being occupied by dealers. We believe that the company's strong brand strength and consumers' trust in the brand are behind the company's strong control over dealers. Therefore, even in the context of low channel profit margin, dealers are still willing to cooperate and take the initiative to bear the cost of deep cultivation and sinking of some channels. By improving the quality of dealers, the company maximizes the coverage of market terminals, and has now covered more than 500,000 direct control terminal sales outlets.

Catering channels are sticky and have high barriers.

Haitian is the largest supplier of condiment catering channels, and the market share of soy sauce in catering is about 20.8%. The company's catering channel revenue accounts for about 60%, and the main products sold are straw mushroom soy sauce, gold label soy sauce and other low-priced products. Although other condiment enterprises also have their own layout in catering channels, their different positioning forms dislocation competition with Haitian. For example, Lee Kum Kee and Zhongju Hi-Tech products are mainly positioned in the middle and high end, Lee Kum Kee mainly provides services for high-end restaurants, and Zhongju Hi-Tech mainly focuses on salty soy sauce.

Since 2020, due to the epidemic situation in COVID-19, the growth of catering channels has been slow, but we believe that the long-term structural trend will remain unchanged and the catering industry will continue to expand in the future. Because chefs have stricter requirements on taste and are more sticky to seasoning products, it means that it is more difficult for seasoning enterprises to occupy the share of catering, so Haitian Weiye has the advantage of being easy to defend and difficult to attack. Haitian infiltrates terminal resources by recruiting professional catering distributors, cooperates with cooking school such as New Oriental, and promotes the sales of catering channels through product mix. In the medium and long term, we believe that the penetration rate of Haitian Ye Wei in catering channels will continue to increase, and further seize the market share of small and medium-sized brands in catering terminals.

Revenue estimation

The company aims to achieve the goal of+15%/ 18% year-on-year operating income/net profit attributable to the mother. Although the fourth quarter is facing the pressure of the late Spring Festival and the base, it is expected that the company still has hope to achieve its goal.

It is estimated that the operating income of Haitian Yewei in 2020/202 1/2022 will be 227.7/264.8/30.73 billion yuan, up15.0%16.3%16.0% year-on-year; The net profit returned to the mother was 638/7.57/9.04 billion yuan, up19.1%18.7%/19.5% year-on-year; The EPS is 1.97/2.33/2.79 yuan, and the current share price corresponds to PE of 98x/83x/769x.

(1) For the soy sauce business, it is estimated that the revenue growth rate of the company in 2020/20211%13.3% respectively, of which the sales volume will increase/.

(2) For oyster sauce business, it is estimated that the revenue growth rate of the company in 2020/202 1/2022 will be 23.7%/26.2%/23.4% respectively, of which the sales volume will increase by 25%/22.5%/2 1% respectively, and the unit price of sales will increase by-/KLOC-0 respectively.

(3) For the sauce business, it is estimated that the revenue growth rate of the company in 2020/202/KOOC-0//KOOC-0/.9%/KOOC-0//KOOC-0/.2%/KOOC-0//KOOC-0 respectively.

Profit forecast details

Summary of profit forecast