Compared with Midea and Helby, Gree seems to have lost?

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Source/Bohu Finance (ID: bohuFN)

In 2019, Dong Mingzhu said: “Gree will achieve 600 billion revenue in 2023!”

At that time, Midea Group, Gree Electric Appliances, and Haier Zhijia were already the three giants in China’s home appliances, with revenues of 278 billion yuan, 198 billion yuan, and 201 billion yuan respectively in 2019. Gree is 71.2% of Midea and 98.5% of Haier.

Four years have passed, and the financial reports for the first half of 2022 show that the revenue of Midea, Gree, and Haier are 183 billion yuan, 95 billion yuan, and 122 billion yuan respectively. Midea’s revenue is almost twice that of Gree, and the revenue gap with Haier is from 1.5% to 22%.

In recent years, compared to Midea and Haier’s muffled efforts, Gree has been very active. It has crossed lines, created the “next Dong Mingzhu”, and entered live broadcasts to bring goods. There have been continuous incidents out of the circle, but they have fallen behind?

Midea and Gree have twice the market value

Both air-conditioning giants and Guangdong enterprises, Midea and Gree are old enemies. Dong Mingzhu once publicly satirized Midea in an interview with the media: “Mide and I are not opponents at all. If I take him as an opponent, I feel that I am very sad.” A few years later, Midea and Gree, who used to stand almost on the same starting line, Not really an opponent. As of September 13, 2022, the market value of Midea and Gree were 395.3 billion and 197.9 billion respectively, and Midea’s market value and revenue were almost twice that of Gree.

(Source: Network)

According to the financial report for the first half of 2022, Gree Electric’s operating income was 95.22 billion yuan, a year-on-year increase of 4.58%; the net profit attributable to the parent was 11.466 billion yuan, a year-on-year increase of 21.25%. Among them, Gree Electric’s air-conditioning revenue was 68.75 billion yuan, accounting for 72.2%. It is not difficult to see that air conditioning is still Gree’s main source of income. From 2014-2022, the sales scale and proportion of Gree’s air-conditioning business can be found that although the overall trend is declining, it still accounts for the majority. As Gree’s ace business, air conditioners will be surpassed by Midea air conditioners again in the first half of 2022.

There are two main reasons for this:

1. Affected by the epidemic, offline stores in the home appliance industry have been affected to a certain extent, and the advantages of beauty, which has long laid out online channels, have played a significant role.

2. Gree has launched a marketing reform and has a tense relationship with some dealers. The channel change has a certain impact on sales.

In addition to the air-conditioning business, Midea’s diversified development has also achieved certain results. According to the financial report for the first half of 2022, Midea’s operating income in the first half of the year was 183.663 billion yuan, a year-on-year increase of 5.04%; the net profit attributable to the parent was 15.995 billion yuan, a year-on-year increase of 6.57%. Among them, smart home revenue was 125.9 billion yuan, accounting for 69% of the total revenue; Midea air conditioners reached 83.236 billion yuan, accounting for about 45% of the total revenue. As for the categories of refrigerators, washing machines, kitchen appliances and small household appliances that Midea laid out in the early years, its revenue is expected to become the second growth curve.

According to data from Aowei Cloud, in the first half of 2022, in various categories such as household air conditioners, microwave ovens, desktop ovens, electric fans, electric heaters, induction cookers, and electric kettles, Midea’s series of products have both online and offline market shares in China. number one. Even if it is not the first, it is the second and third position in the market. In 2021, Midea’s total revenue is 341.2 billion yuan, and non-air-conditioning home appliances revenue is 132.2 billion yuan, accounting for 39% of total revenue.

In addition, Midea’s overseas layout is also the reason why its market value is 197.4 billion more than Gree’s. In the past ten years, Midea has successively acquired and invested in Miraco, Toshiba White Electric, Clivet, KUKA, Servotronix and other companies. In the first half of this year, Midea’s overseas revenue was 73.96 billion yuan, accounting for 42.55% of its revenue. Gree’s overseas revenue was only 13.735 billion yuan, accounting for 14% of its revenue.

In the final analysis, although Gree and Midea are often compared, they follow two paths. Gree is still a single-category company focusing on the domestic market, with air-conditioning revenue accounting for more than 80% and domestic market revenue accounting for more than 80%; Midea is a multi-category and multi-line development, and is expected to develop a second growth curve. For the current Midea, Haier is a stronger opponent than Gree.

Haier’s strong development

Although in terms of air-conditioning business, Haier belongs to the second gradient compared to Midea and Gree, but Haier’s development focuses on high-end and overseas, and has ushered in rapid growth. According to the financial report for the first half of 2022, Haier’s operating income in the first half of the year was 121.858 billion yuan, a year-on-year increase of 9.07%, and the net profit attributable to the parent was 7.949 billion yuan, a year-on-year increase of 15.89%. Among them, the overseas business achieved revenue of 61.481 billion yuan, accounting for 50.4% of the total revenue, which has exceeded the domestic market.

There are two main reasons for Haier’s rapid growth:

On the one hand, it is able to benefit from overseas markets.

Haier is the first enterprise in China’s home appliance industry to launch an internationalization strategy, and its play in overseas markets is remarkable. Through the synergy of own brands going overseas and M&A brands, the localization of global layout is rapidly promoted. For example, in the US market, in addition to its own brands, the three high-end brands of Monogram, Cafe and GE Profile in the United States have been acquired. In 2021, the revenue of the three high-end brands in the US market will increase by more than 40% year-on-year.

In addition, while laying out the overseas high-end brand market, it has also improved the supply chain capabilities of various regional markets around the world, avoiding unfavorable factors such as rising raw material prices and tariff sanctions to the greatest extent, and reducing costs through resource exchange. An important factor in the 13% increase in overseas business.

On the other hand, Haier has been making efforts in high-end home appliances and smart home businesses since around 2016. Compared with Midea, Haier Home Appliances chooses the “less but refined” route, with less revenue from categories but overwhelming Midea.

In particular, Casarte, a subsidiary of Haier, has almost become synonymous with high-end home appliances in China. In the domestic market in the price range above 10,000 yuan, the offline market share of Casarte brand washing machines reached 73.9%, refrigerators reached 36.2%, and the market share of air conditioners in the price range above 15,000 reached 30.3%. The average price of refrigerators, air conditioners, and washing machines in the offline market is two to three times that of the industry. In addition, Haier also achieved full coverage of high-end, terminal and sinking market groups through the three brands of Casarte, Haier and leader.

It can be seen from the comparison of the sales revenue of Midea, Gree and Haier non-air-conditioning home appliances from 2016 to 2021. Haier’s non-air-conditioning home appliance revenue has been increasing, and the growth rate is relatively fast. In 2016, Haier’s non-air-conditioning home appliance revenue was 97% of Haier’s, and in 2021, it has dropped to 76%. And Gree’s non-air-conditioning appliances are incomparable with Midea and Haier.

Among China’s three major home appliance giants, Midea relies on the blessing of ace air conditioners and other home appliances, and ranks first in total revenue and net profit; Haier relies on “overseas markets + star products” to dominate the first camp of home appliances; what about Gree? Can air conditioners that rely on “mastering core technology” go on for a long time?

Gree’s road is not easy to go

Obviously, no.

“When talking about Gree, talk about air conditioning” has now become a mantra of Gree. In the early years, the home appliance industry achieved high growth, specialized in air conditioners, and mastered core technological concepts to help Gree occupy the forefront of the domestic home appliance market. However, with the disappearance of the demographic dividend and the declining consumption in the overall environment, the sales scale of domestic home appliances has shown a downward trend.

According to the data of the National Home Appliance Information Center: in the first half of 2022, the domestic home appliance sales scale was 360.9 billion (including 199.5 billion online and 166.4 billion offline), a year-on-year decrease of 11.2%. Among them, the retail sales of air conditioners was 78.2 billion, a year-on-year decrease of 16.2%. If you want to rely on air conditioners to occupy the market leader for a long time in the future, obviously the competitiveness is not strong enough.

In fact, Gree has been trying to break through the predicament of a single business, but it has not made a splash. In the home appliance business other than air conditioners, Midea and Haier have firmly occupied the domestic and foreign markets, and Gree is far from the two; the smart home industry has also entered the market one after another, such as Xiaomi, Ali, and the competition has entered a white-hot stage.

As for the layout of other fields, Gree has also hit a wall many times. Since 2013, Gree has successively announced its entry into the fields of mobile phones, new energy vehicles, smart wearables, ice washing and kitchen appliances, and even began to deploy chips, medical equipment and other industries, entered the live broadcast industry, and entered pre-made dishes. However, this kind of “cross-border” attempt is not easy, and Gree’s previous events such as mobile phones and car manufacturing have been a lesson in the past.

Up to now, Gree has no other business with real large-scale revenue. In the repeated failed attempts, Gree seems to lag behind compared with Midea and Haier. In addition, under the catalysis of the epidemic, Gree focused on channel reform, but it was not easy.

In the early days, the interests of Gree and dealers were deeply tied, which gave Gree a great advantage in sales channels, and thus remained the leader in the air-conditioning industry all year round. And now Gree is paying the price for it. Since the channel reform, in the past 20 years, Gree Shandong distributors have turned against the tide and defected to the competitor Midea; in June of the same year, the second day after the 618 live broadcast sales of Gree Electric exceeded 10 billion yuan, Jinghai Internet reduced its holdings of 2.5 billion yuan. Isolate stocks; in June this year, Jinghai Internet again cashed out more than 3.5 billion yuan. In August, Xu spontaneously defected to Philips. Obviously, the conflict with dealers is already “blade-to-blade”, and the impact on Gree’s revenue is bound to continue.

The gap with Midea and Haier has gradually widened, and exploration in other fields has not yielded results. Now the contradictions with dealers are also intensifying. Whether Gree’s channel control ability is still strong is also a question.

As Dong Mingzhu said, “(Gree) has relaxed its vigilance in sales over the years and is a little pampered.” Now, Gree must speed up.

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