The countdown to the Spring Festival of the Year of the Rabbit has entered.
Young people who have experienced in-situ Chinese New Year in big cities for three years are about to start returning to their hometowns. But giving gifts to family members, relatives and friends is not an easy task.
For young people, gift-giving must be unique. It is best to have both a sense of ritual and a sense of high-end, unconventional, so that the recipients can feel their own intentions. But for the old family, nothing is more practical, and young people returning from big cities are always stumbling on the matter of giving gifts.
However, as people pay more attention to health than ever in recent years, the “daily nuts” that carry the best pursuit of health are becoming a new consumption trend and trend. With the joint support of various brands, the category of daily nuts has gradually entered the festival consumption scene and has become the first choice for young people to give gifts.
In fact, the popularity of Daily Nuts on the track today is actually inseparable from the biggest hero behind it-Volong Foods. As early as 2015, Wolong took the lead in realizing the transformation from a single large package to a mixed small package, created the “mixed nuts” category, sold more than 1 billion bags, and took the number one position in the industry.
But today, when it comes to daily nuts, the first brands that come to consumers’ minds may be Qiaqia Food, Bestore, Three Squirrels and Baicaowei, but few people can think of Wolong Food anymore.
On January 6, Qingdao Wolong Foods Co., Ltd. submitted an initial public offering prospectus (draft for the meeting), planning to sprint for an IPO listing on the Shanghai Stock Exchange. This also allows the outside world to see the growth path of this industry pioneer.
This article will discuss from the following aspects:
1. From No. 1 in the industry to No. 3 in the industry, what has the “Nut Captain” experienced?
2. Where is Wolong Food, which is gradually falling behind?
3. A series of new products are coming out frequently every day. Can Wolong Foods, which has entered the capital market, achieve its wish?
As early as June 25 last year, the official website of the China Securities Regulatory Commission disclosed the prospectus (declaration draft) for the initial public offering of shares of Qingdao Wolong Food Co., Ltd. According to the plan, Wolong Foods plans to be listed on the main board of the Shanghai Stock Exchange.
Half a year later, Wallon Foods received feedback from the China Securities Regulatory Commission. In response to the feedback, Wallon needs to explain the reasons and rationale for the downward trend in operating income, the reasons for the decline in market share and the rationale, and explain whether there is any impact Matters concerning the issuer’s continued profitability.
According to the listing process, generally speaking, feedback is a necessary part of listing. Feedback, however, generally shows various issues that the SEC deems flawed or ineligible for an IPO.
For Wolong Foods, the declining trend of revenue and the decline of market share are serious problems it is facing now.
According to a set of survey data from Qianzhan Industry Research Institute, before 2019, Wolong had the highest market share in the mixed nut industry, reaching 13% in 2019, ranking first in the industry; in 2020, the market share was 7.6%, ranking first in the industry 3. The market share in 2021 will be 7.2%, ranking third in the industry.
It can be seen that Wallon’s market share has declined for three consecutive years, and it has slipped from the champion to the third place.
Compared with several other peers, Wolong Foods has not been established for a long time. According to the prospectus, the predecessor of Wolong Foods was established in May 2016. According to previous news reports, the Wolong brand was founded in 2012 and launched the “Daily Nuts” series of products in 2015.
The founders have been in the nut industry for a longer time.
Yang Guoqing entered the nut industry as early as 2007. At the beginning of his business, he was engaged in nut trade-related work. Inspired by a chance chat with foreign friends: foreigners do not eat shelled nuts.
At that time, most of the Chinese nut market was single-category, large-packaged, and had strong festive attributes. Therefore, Wolong carried out a “micro-innovation” – from a nutritional point of view, scientifically proportioning 6 kinds of preserved nuts such as American almonds, Vietnamese cashews, Australian macadamia nuts, and Brazilian pine nuts. Thus “Day Nuts” was born.
In 2015, “Daily Nuts” became popular as soon as it was launched, and the supply was once in short supply.
It only took less than 5 years for Wolong to become the leader in the daily nut market segment. In 2019, it ranked first with a market share of 13%. foothold.
According to the prospectus, the revenue of Wolong Foods in 2019, 2020 and 2021 will be 1.165 billion yuan, 889 million yuan and 1.108 billion yuan respectively; The post-net profits were 131 million yuan, 85.0642 million yuan and 118 million yuan respectively.
Source: Wolong Food Prospectus
From 2019 to 2021, the company’s net profit rate will exceed 10%, and it is also in the upper reaches of the fragmented leisure snack industry.
Under the leadership of Wolong Foods, the growth rate of the sub-category of daily nuts in recent years is much higher than that of the entire casual snack market. According to industry data, on the Tmall channel, the penetration rate of daily nut consumers among nut consumers has increased from 17% in 2017 to 47% in 2019.
In Trout’s “Positioning” book, it is mentioned that the key to business success is to become different in the minds of customers. The end result of positioning is to “occupy the brain with one word”, that is, to make the brand the representative of the category in the minds of customers, such as “Wanglaoji = drink to prevent fire”, “Gree = air conditioner”, “Apple = high-end mobile phone”, etc.
Thanks to the certain mental advantage that Wolong Foods’ “daily nuts” occupy in the minds of consumers, this is also an important reason why it, as a market pioneer, can eat the first bite of dividends.
But in recent years, Wallon Foods has gradually lost its status as the daily nut leader. It has plummeted in the consumer market, why is this?
Objectively speaking, micro-innovation belongs to a relatively simple business model, which only passes the test of taste and nutritional value, and hardly requires R&D and production. From the product level, the moat of the enterprise is not high.
That’s why, after Wolong’s Daily Nut was born, Qiaqia Food, Three Squirrels, BESTORE, Laiyifen, Baicaowei, etc. have laid out mixed nut subdivision tracks, launching their own daily nuts respectively. Products have promoted the Red Sea competition on the nut track.
This is also seen by the outside world as Wallon’s “daily nuts” are easily imitated, resulting in the company’s extreme lack of growth, which is also the root cause of its loss of leading position.
But this is not the case.
From Caijing Wuji’s point of view, no matter in terms of products, channels, or brands, compared with its peers, Wolong’s strategic direction is understandable, and it can even be said that it is taking the “correct” path.
In terms of products, Wallon Foods knows that its success lies in the success of daily nuts, and based on the “big single product strategy”, Wallon has been trying to make daily nuts a daily basis.
For example, in order to impress consumers with better quality, Wolong is one of the few snack food companies in the industry that has built its own factory. According to reports, in the Qingdao factory, Wolong has strictly controlled the whole process of raw materials – processing – subpackaging – finished products. The selected nut raw materials are all from the high-quality raw material bases in the world’s leading production areas, and the raw materials can be traced back to each Foreign farms ensure the consistent quality of each bag of nuts.
Source: Wolong Food Prospectus
At the same time, in order to lock in the nutritional content of nuts, Wolong also introduced advanced baking equipment and automated production lines, passed the BRCGS (food safety global standard) system certification for many years, and obtained the A-level certificate…
It is worth mentioning that Wolong has also been adhering to the strategy of “nuts + x” for many years, enriching product categories, such as successively launching new health products such as “Baked Oatmeal with Raspberry Yogurt” and “Daily Nut Energy Bar”.
From the data of Wolong, it can be found that the main source of revenue of Wolong Foods is nuts. Including mixed nuts, single-origin nuts, nut gift boxes, baked goods with nuts, etc. In 2019, 2020, and 2021, the revenue from mixed nut products accounted for 92.14%, 85.73%, and 75.74% of the main business revenue, respectively. Although it has declined year by year, the absolute percentage is still relatively high.
Source: Wolong Food Prospectus
In terms of channels, following the trend of going online in recent years, nut snack companies are no longer limited to a single retail channel, but are pursuing the integrated development of online and offline synergy, and Wolong is no exception.
According to the prospectus, Wolong Foods has established a multi-channel sales model that focuses on distribution, supplemented by direct sales, and covers online and offline. During the reporting period, the distribution model revenues were 906 million, 553 million and 667 million yuan, respectively, accounting for 78.14%, 62.94% and 60.87% of the main business revenue. The main business income of online channels is 202 million yuan, 265 million yuan and 358 million yuan respectively, accounting for 17.45%, 30.21% and 32.74% respectively, and the compound growth rate is 33.17%, which is a relatively fast growth rate.
Source: Wolong Food Prospectus
In terms of branding, when the new generation of consumers gradually become the main force in the market, Wolong regards the younger layout as an important strategy.
For example, we have seen that in many film and television dramas such as “Everything is Good”, “Sweeping Black Storm”, “Who Is the Murderer” and many other film and television dramas that young people are keen on, Wolong has adopted immersive plot implantation; , Xiaohongshu and other social platforms, celebrity collaborations, top KOLs bring goods and other methods, Wolong tried to establish a strong emotional connection with this year’s young people.
In comparison, almost every step taken by Wolong Nuts coincides with Qiaqia, the “Brother Nuts” of today. But as a result, Qiaqia’s market share continued to increase, and it jumped to the top spot. On the contrary, Wolong lost its core competitiveness in the tempering of facing consumers time and time again.
The reason lies in “people”. Caijing Wuji believes that Wolong Foods lacks an entrepreneurial team, or lacks a strong executive team.
This can be seen from many aspects. For example, compared with the foundry model, self-built factories have better control over product quality, but Wolong’s complaints have always remained high, such as “the nuts appear black. Negatives such as “foreign matter”, “bugs eaten from nuts”, “hala spoilage within the shelf life”, “hair in bread” and other negative aspects are inconsistent with the positioning of “Wollong only makes good nuts”.
Source: Black Cat Complaint Platform
Also, since 2019, Wolong Foods has switched to film and television drama implants, and has maintained an annual implant number of 8 to 10. They also hired traffic star Gong Jun and female volleyball player Zhu Ting as spokespersons, but they overlooked an important issue. Increased exposure does not mean an increase in brand power. The result is just like the status quo. High marketing costs account for research and development costs. Get the expected scale effect.
Regrettably, as the pioneer of the industry in the past, Wallon, who should have been the leader in nuts, put forward a new goal in 2021 in the face of fierce competition in the market-“to be the leader of nuts”.
Yang Guoqing, chairman of Wolong Foods, once said that the proposal of the new slogan is to hope that Wolong Foods can become a representative brand of the nut industry in the hearts of consumers.
However, the past life cannot be pursued, and the next life cannot be waited for. Now it seems that it is too late.
Undoubtedly, nuts are still an imaginative track in the snack food industry.
On the one hand, the concept of “a handful of nuts and melon seeds a day is good for health” is deeply rooted in the hearts of the people and is promoting the continuous expansion of the track. The strategic positioning consultancy Ries Data predicts that by 2030, China’s nut market will reach a market size close to 200 billion yuan, with huge potential for future growth.
On the other hand, although new competitors are constantly emerging, the structure of the nut market has not yet been truly formed, and the vast market is still worth cultivating. According to public information, the industry CR3 of JMGO is less than 50%.
Although these have a positive side for Wolong Foods, judging from the various aspects in the prospectus, Wolong’s strategy for the future is not clear.
It is worth noting that the 700 million yuan raised by Wallon this time is mainly used for production expansion, channel construction and supplementary cash flow. Among them, 200 million yuan is planned to be used for brand image and omni-channel sales network construction projects.
Taking offline channels as an example, Wolong expects to invest 89.725 million yuan, and will launch MINI stores offline in regional offices in East China, South China, West China, and North China to directly display the company’s full range of products. It is planned to launch 7,500 sets of MINI stores, with a total price of 60 million.
Correspondingly, after Wolong Food hit the category, each company quickly made evolutionary upgrades based on its own advantages, further explored pain points, segmented needs, and polished quality, so as to quickly share the market and surpass the previous waves.
For example, the three squirrels have enriched the product structure and innovatively adopted partitioned fresh-keeping packaging. The official announcement is that “the sales volume of mixed nuts on the whole network is the first”; Make fresh hair within 7 days; Qiaqia Daily Nuts proposes the “little yellow bag” compartment logo, also grasps the pain point of “freshness”, proposes a 2-step freshness rule to “pick fresh” in season and master key insurance technologies The “tech fresh”,.
Compared with “Houlang”, Wolong’s shortcomings are worth thinking about. In May 2022, Wolong Foods will upgrade “Daily Nuts” to “Three Good Nuts”, and put forward the three good standards of “Naturally Fragrant, Really Crisp” and set Announcing that Wolong Daily Nuts has entered the 2.0 era.
For Wallon, choosing to open a MINI store as soon as it entered the capital market is still a question mark whether it will help its competitiveness.
At the same time, Wallon also began to tell new stories. According to the prospectus, in the next three years, it will devote itself to the research and development of new product series such as nut baking and nut butter, and vigorously cultivate the domestic consumption market of new nut baking food. According to Wolong, the demand for deep-processing products of nut-related raw materials in the domestic bakery industry is gradually increasing. The company plans to purchase relevant deep-processing equipment to seize the market for deep-processing materials.
Source: Wolong Food Prospectus
Obviously, before nuts have really become a daily consumer product for Chinese people, the research and development of new products still needs more market education, and it may not be a smooth road.
In Caijing Wuji’s view, if the listing can allow Wallon to attract fresher blood and a more modern corporate system, it may be an important aspect of whether the former king can return to the top.
The “nut king” Qiaqia may provide us with a reference-in recent years, offline, Qiaqia nuts have adopted the “milk sticking” tactic, in other words, selling milk “closer” to the terminal. Specific measures include: in some big cities with relatively large customer traffic and influential terminal stores, joint promotions with Yili, Mengniu and other brands, tasting tasting, consumption guidance, etc., will also be done together with big-name milk during the live broadcast ; In small stores, display nut products and milk together to guide consumers to buy together.
As we all know, the distribution rate of milk is very high, and there is a lot of demand for gifts. At the same time, the turnover speed is very fast; and Qiaqia nuts are sold next to milk, which is naturally promoted to the daily consumption attribute by the synergy, which quickly drives Distribution rate.
The innovation of the “milk paste” tactic is derived from the optimization of performance, incentives and departmental coordination brought about by the organizational adjustment behind Qiaqia in the past few years, which is the source of making the organization more effective.
One trick is fresh, you can eat it for a while, but you can’t eat it for a lifetime. How to narrow the shortcomings and expand the advantages, this is what Wallon needs to stop and reflect on, and it is also what investors are most concerned about.
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