Nai Xue is losing money, but the supplier behind it wins

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Consumer brands such as McDonald’s, HEYTEA, and Yuanqi Forest are no strangers to many people. They are born in the spotlight and enjoy the traffic of the public opinion center. In addition to the spotlight, the suppliers behind them are also worthy of attention. Since the second half of this year, this group of new consumer “employees” have become new entrants to the capital market, setting off huge waves in the commercial market.

Zero State LT and Surging jointly launched the special topic “Beyond the Spotlight: Suppliers Behind New Consumption Get Together for IPO”, starting from the prospectus and research report, focusing on the business development behind the IPO of these companies. This article is the first of the series, focusing on the supplier behind Nongfu Spring and Nai Xue’s tea – Tianye shares.

Author｜Tian Huan Editor｜Hu Zhanjia

Source: Zero State LT

In the 15 years since its establishment in 2007, Tianye has been on the road of chasing the wind.

In 2021, Nai Xue’s tea has gained a strong presence in the new tea drinking industry with its “Domineering Yuyou citrus”, and has driven the oil citrus “sit on the cold bench” in the fresh fruit industry to become the new favorite raw material for tea drinks, and the purchase price has risen by nearly 10%. times. And “Domineering Yuyou Orange” can become a hot item, in addition to the marketing of “3 seconds slightly astringent 5 seconds back to the sweet”, it is also inseparable from the suppliers behind it, from the New Third Board to the field shares of the Beijing Stock Exchange, oil orange juice It was launched with Nayuki’s tea.

Interestingly, while Nai Xue’s tea is still losing money, Tian Ye shares has already started to make a profit. This company, established in 2007, has been closely following the industry trend, from providing juice to beverage companies such as Coca-Cola and Huiyuan Juice, to cooperating with Nai Xue’s tea, Tea Baidao, Yidian, Shanghai Auntie and other new tea drinks.

However, although the tuyere can make pigs fly, sometimes it is not a good thing.

01

Customers from Food & Beverage to New Tea

Tianye Co., Ltd. is a Guangxi enterprise. In the past, although Guangxi is a famous fruit province in the country, the output of bananas, mangoes, lychees, passion fruit, etc. is among the best, but it seems that it is difficult to form a large-scale fruit food processing enterprise. make wedding dresses.

Tianye shares are an exception.

This company, established in 2007, is mainly engaged in the research and development, production and sales of tropical fruit and vegetable raw materials. In terms of composition, the company’s revenue sources in 2021 are raw juice, quick-frozen fruits and vegetables, fresh fruits and others, accounting for 90.52%, 4.24%, 0.69%, and 4.55%, respectively. Among them, raw juice products include concentrated juice, NFC, blended juice and other forms and specifications.

In addition to mastering more than 40 kinds of fruit and vegetable processing techniques such as mango, passion fruit, lychee, etc., Tianye Co., Ltd. also has its own modern processing factories for tropical fruits and vegetables, mainly located in Beihai, Guangxi, Ding’an, Hainan, Panzhihua, Sichuan, and Jingmen, Hubei.

In the past, Tianye’s major customers were concentrated in food and beverage companies, mainly providing raw juice for Huiyuan Juice, Nongfu Spring, Coca-Cola and other pre-packaged juice beverage manufacturers. Among its top five customers in 2019 are Nongfu Spring, Fresh Juice, and Coca-Cola.

At that time, the development of the prepackaged fruit juice beverage industry was on the rise, with a double-digit compound annual growth rate from 2011 to 2015. Tianye shares can be full even with only soup.

With people’s attention to health and the upgrading of the downstream beverage industry chain, the sales of juice began to decline. According to data from China Beverage Industry Association, from 2015 to 2017, the retail volume of fruit juice increased from 11.97 billion liters to 11.7 billion liters, and the market share of low-concentration fruit juice, which accounts for about 80% of the market, fell from 80.24 billion yuan to 78.82 billion yuan. Affected by this, the performance of Tianye shares has declined. The revenue growth rate from 2015 to 2017 showed a downward trend, and it was negative in 2017; the net profit attributable to the company’s shareholders decreased from 54.1875 million yuan to 42.0827 million yuan, and the gross profit margin increased from About 40% dropped to 37%.

On the other hand, as new tea drinks, HEYTEA, Naixue’s tea, Shanghai Auntie, and Wuyin Liangpin have all received financing. Among the investors, there are many institutions such as Sequoia Capital, Meituan Longzhu, and Hillhouse Capital.

The market size of the new tea beverage industry has maintained a double-digit growth rate, especially the freshly made tea beverages have become the favorite of consumers. Jiang Ya, chief consumer industry analyst at CITIC Securities, said that the scale of China’s existing tea beverages is currently about 100 billion yuan. Under the background of consumption upgrading, there is room for 3 to 5 times growth in the next 5 to 10 years.

The prophet of Chunjiang Plumbing Duck, Tianye Co., Ltd. did not hesitate to enter the new tea drinking track from 2019, establish a collaborative innovation process in response to customer needs, and start sample analysis, process and formula design, raw material investigation, testing after receiving customer needs or samples. Production, mass production, etc., and has cooperated with customers to launch oil orange juice, prickly pear juice, yellow skin juice, longan juice and other products.

The data shows that the proportion of Tianye’s sales revenue from food and beverage customers has dropped from 57.66% in 2019 to 33.49% in 2021, and the proportion of sales revenue from new tea customers has increased from 4.2% in 2019 to 61.82%.

The entry of new tea drinks has made the company’s performance soar, especially in 2021, its revenue will increase by 72.6% year-on-year to 459 million yuan, and its net profit will increase by more than 200% year-on-year to 65.1776 million yuan.

02

Trapped in the shackles of new tea drinking

Although the new tea drink gave Tianye shares a second chance to rejuvenate, as a brand supplier, Tianye shares inevitably fell into the situation of relying on big customers. According to the prospectus, the top five customers of Tianye in 2021 are Nai Xue’s Tea, Tea Baidao, Nongfu Spring, Yidian, and Auntie Shanghai. The four customers are all new tea drinks.

In addition, the proportion of the company’s sales revenue from the top five customers also increased from 49.68% in 2019 to 68.17%.

Although the company’s major customers are some relatively well-known brands, taking Nai Xue’s tea as an example, the company has not yet achieved profitability. That is to say, if the demand of these customers declines in the future, or replace Tianye shares, purchase products from other suppliers, or complete the self-construction of the industrial chain, it will undoubtedly be detrimental to the company’s revenue and profitability.

It is worth noting that Nai Xue’s tea and Shanghai aunt, who are the company’s largest customer and fifth largest customer, are also the company’s shareholders. In May 2021, Tianye shares will conduct a directional issuance. Nai Xue’s tea and Shanghai Auntie’s business entities, Pindao Catering and Zhenjing Industry, will be subscribed respectively. After the fixed increase, Nai Xue’s tea will become the fourth largest of Tianye shares. shareholders, with a shareholding ratio of 4.44%.

Another difficulty of Tianye shares is that customers all have billing periods, and they may not be able to repay in time. This can be seen from the company’s accounts receivable. From 2019 to 2021, its accounts receivable are 59.11 million yuan, 51.06 million yuan, and 41.44 million yuan respectively. Accounts receivable in 2019 and 2020 accounted for about 20% of total revenue. Only in 2021, the proportion has declined to 9% due to a substantial increase in revenue.

In addition to accounts receivable, the company also has inventory management risks. Inventory refers to the finished products or commodities held by the company for sale, in-process products in the production process, and materials and materials consumed in the production process or the provision of labor services. It mainly includes raw materials, turnover materials, commissioned processing materials, products, finished products (stock goods), etc.

From 2019 to 2021, the book value of the inventory of Tianye shares was 50.59 million yuan, 86.86 million yuan and 134 million yuan respectively, accounting for 5%, 9% and 11% of the total assets respectively. The amount is not only large, but also shows a trend of increasing year by year. . According to Wind data, its inventory turnover days have increased from 84.75 days in 2019 to 122.28 days in 2021 and 255.32 days in the first quarter of 2022.

In other words, the company has the risk of accruing large inventory depreciation reserves due to slow-moving products or inventory deterioration. On the other hand, precisely because the company’s inventory continues to grow, the company’s net cash flow from operating activities in the first quarter of 2022 fell by 38% year-on-year to 26.23 million yuan.

After going around in circles, the development of things has returned to the original point. As a supplier, Tianye shares, whether it is irreplaceable, and how long the dividends of the new tea drinking track can be maintained are still issues that determine the fate of the company.

03

How long can a tree stay in the shade?

From 2019 to 2021, the unit price of the company’s raw fruit juice will increase year by year, and the average sales price has risen from 8,200 yuan to 12,700 yuan. This is because the company’s sales revenue to customers in the new tea beverage industry continues to increase, and such customers are more concerned about raw materials. The product specifications of fruit juice demand are mainly small-package, customized, and whole-process cold chain products, and the cost and selling price are higher than those of customers in the food and beverage industry.

In sharp contrast, the unit price of new tea drinks is falling.

Starting from 2022, HEYTEA, which leads the trend of new tea drinks and pushes the price of tea drinks up to 30 yuan, will take the lead in reducing the price, and the price of pure tea, milk tea and fruit tea will be reduced by 3 to 7 yuan. Nai Xue’s tea followed closely, with a drop of 10 yuan, and launched an easy series of 9 to 19 yuan. Lele Tea removed the cheese from the original fresh fruit cheese tea and lowered the price.

A series of actions show that the new tea brand is bidding farewell to the era of 30 yuan.

Behind the price reduction is the increase in revenue but not profit of the new tea brand. Taking Nai Xue’s tea as an example, the company’s net loss in 2021 has expanded to 4.5 billion yuan, and it urgently needs to acquire more users. Therefore, while maintaining the quality, reducing the price has become the first choice of various brands.

As consumers hold their wallets tighter, new tea brands have become a general trend to reduce costs and increase efficiency in all aspects. To increase the premium space for the brand. It is understood that many brands have already begun to do so. For example, HEYTEA has independently built a 500-mu organic tea garden in Guizhou, and will also customize the supply chain in reverse according to new products, such as building its own strawberry base, from developing seedlings, cultivating and cultivating strawberries that meet product requirements.

Under the pressure of profitability of the new tea brand, it is difficult to say that the supply chain link of the new tea raw material juice where Tianye shares is located will not be replaced. You must know that raw juice is the most resistant business of Tianye. Its revenue share has increased from 44.13% in 2019 to 90.52% in 2021. Once it is no longer needed, it will be very fatal.

Tianye Co., Ltd. has also tried other businesses, such as the durian import business classified in “Other”, where some imported durians are used for processing and some are sold. Affected by the epidemic, the company’s durian sales revenue dropped significantly in 2020, and durian imports were suspended in 2021. business. The proportion of income in the “other” category also dropped from 21.33% in 2020 to 4.55%.

In other words, the company has yet to form a distinct second growth curve. Based on the above considerations, the company needs to deepen the relationship with customers, gain insight into customer needs, increase the production speed of explosive products, and deepen the moat. Then, expenses including R&D expenditures are bound to increase in the future. Financial pressure can be imagined.

Perhaps this is also the reason why Tianye shares not hesitate to gamble, but also to the North Exchange, which has better liquidity and stronger financing ability. However, money can only solve temporary difficulties, and the days when Tianye shares “backed by a big tree to enjoy the shade” may not be better than before.

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