The May Day holiday is approaching, and various places are about to usher in a small tourism boom, and many tourists have also begun to prepare strategies for their travel. With the rise of urban outdoor sports such as camping and hiking, the concept of sun protection has "heated up again". Jiaoxia, which started by selling small black umbrellas, is targeting the younger generation of consumers, and is frantically harvesting "sun protection anxiety".
In April and October last year, Jiaoxia Holdings Co., Ltd. (hereinafter referred to as "Jiaoxia") submitted a prospectus to the Hong Kong Stock Exchange twice, intending to sprint for "China's first urban outdoor stock", but the process was not smooth. As of now, its IPO application status has been changed to "invalid".
Jiaoxia is an urban outdoor footwear company in China. Its main products cover functions such as sun protection, cooling, dryness, warmth, waterproof, lightweight and sports protection.
▲ Source: Banana Official Weibo
In the prospectus, it quoted the China Insights Consulting report as saying that in terms of total retail sales and online retail sales in 2021, it has a market share of 5.0% and 12.9% respectively, both of which are China's largest sunscreen apparel brands.
According to its prospectus, "Fuer Research" found that in the first half of 2022, Jiaoxia's revenue was 2.210 billion yuan, an increase of 81.3% year-on-year; during the same period, the adjusted net profit was 403 million yuan, a year-on-year increase of 196.32%.
In the first half of 2019-2022, despite Jiaoxia’s revenue of nearly 6 billion yuan, advertising and marketing expenses exceeded 1 billion yuan, research and development expenses were less than 200 million yuan, and the proportion of research and development was relatively low. In addition, as of June 30, 2022, Jiaoxia's sales and marketing personnel accounted for 58.0%, and R&D personnel accounted for only 14.5%.
At the same time, Jiaoxia is mainly based on the income of some Internet celebrity products. In the first half of last year, the revenue of Internet celebrity products accounted for nearly 80% of the total revenue.
In an old article in April last year, we focused on marketing under Jiaoxia and ignoring research and development, and the "black technology" of sunscreen cannot escape the "IQ tax" controversy.
Today, in the second half of the sun protection and large outdoor competition, how does Jiaoxia tell the new story of "lightweight outdoor"? As a result, "Fuer Research" has updated some data and charts of the old article in April, as follows Enjoy:
Ten thousand yuan umbrella is not waterproof? Last year, the joint umbrella launched by the luxury brand Gucci and the sports brand Adidas sparked heated discussions about the "IQ tax" on umbrellas.
Coincidentally, the price of an umbrella is more than 200 yuan, and the small black umbrella under the banana of "Hermes" in the umbrella industry is also questioned for harvesting sunscreen IQ tax.
In April last year, Jiaoxia Holdings Co., Ltd. (hereinafter referred to as "Jiaoxia") launched an IPO sprint to the Hong Kong Stock Exchange, intending to sprint for "China's first urban outdoor stock".
According to its prospectus, "Fuer Research" found that despite the rapid growth of Jiaoxia's revenue scale from 2019 to 2021, its net profit performance is not impressive, or it may be due to marketing expenses eating into profits. At the same time, its marketing rate is increasing, but its R&D rate is decreasing year by year.
There is no doubt that Jiaoxia is already a "harvester" in the domestic sunscreen market, but is it a hard-core technology or an IQ tax? The controversy never stops! After it opens the IPO door, the capital market, which votes with its feet, will always have its own judgment.
A "little black umbrella" props up an IPO
In 2013, Ma Long and Lin Ze, two post-85 science and engineering men, co-founded the Jiaoxia brand and launched the first sunscreen product, the double-layer small black umbrella. It is said that the word "Banana" is taken from "Under the Banana Leaf", which represents its commitment to satisfy young women's pursuit of outdoor sun protection.
▲ Source: Banana Official Weibo
In the prospectus, Jiaoxia quoted China Insights Consulting data as saying that in terms of total retail sales and online retail sales in 2021, it has a market share of 5.0% and 12.9% respectively, both of which are China's largest sunscreen apparel brands.
Before the IPO, Jiaoxia founders and executive directors Ma Long and Lin Ze held 29.07% and 27.91% of the shares respectively, Ma Long's wife Wang Yingying held 3.61% of the shares, Lin Ze's wife Huang Chengcheng held 4.35% of the shares, and the four together held 64.94% of the shares. %; In addition, Sequoia China holds 19.37% of the shares in Jiaoxia, Fengqiao Capital and Huaxing Capital hold 6.96% and 1.54% of the shares respectively.
In the first half of 2019-2022, Jiaoxia’s revenue was 385 million yuan, 794 million yuan, 2.407 billion yuan, and 2.210 billion yuan. Compared with the compound annual growth rate of 105.1% in 2019-2021, the growth rate began to slow down significantly; During the same period, its gross profit margin was as high as 50.0%, 57.4%, 59.1% and 60.3%, an increase of 10 percentage points in three years.
Despite a 6-fold increase in revenue from 2019 to 2021 and a high gross profit margin, the profitability of Jiaoxia's "blood-making" business is not outstanding. The prospectus shows that in the first half of 2019-2022, its net profit was -23.207 million yuan, -77,000 yuan, -5.473 billion yuan, and 491 million yuan respectively. It was not until the first half of 2022 that it turned losses into profits for the first time; The net profits were 20 million yuan, 39 million yuan, 136 million yuan and 403 million yuan respectively.
In addition, the net operating cash flow of Jiaoxia in the first half of 2019-2022 was 24.109 million, 60.223 million, -95.019 million and 478 million yuan respectively, and there has been an outflow of operating cash.
In the view of "Fuer Research", although Jiaoxia achieved profitability after adjustment, compared with the rapid growth of revenue scale, its net profit performance is not impressive; the story of an IPO supported by a small black umbrella is certainly beautiful , but its profitability may be further tortured by the capital market.
High marketing and low research and development cannot escape controversy
With the sunscreen double-layer small black umbrella "out of the circle", Jiaoxia's revenue mainly comes from online channels.
From 2019 to the first half of 2022, the revenue generated by Jiaoxia’s online stores and e-commerce platforms were 286 million yuan, 618 million yuan, 1.947 billion yuan and 1.708 billion yuan respectively; Major customer sales) generated revenues of 31 million, 32 million, 66 million and 95 million respectively.
Taking the first half of 2022 as an example, its online sales revenue accounted for 77.3% of all self-operated channel revenue, and the marketing contribution rate of offline retail stores was less than 10%.
Or because of this, with the increasing cost of Internet customer acquisition, Jiaoxia’s advertising and marketing expenses are also increasing: from 2019 to 2021, they will be 37 million yuan, 119 million yuan, and 586 million yuan respectively, accounting for 9.6% of the revenue in the same period , 15.0%, 24.4%; in 2021 alone, Jiaoxia’s advertising and marketing expenses will increase by 392.28% compared with last year. From 2019 to 2021, Jiaoxia’s distribution and sales expenses will be 125 million yuan, 323 million yuan, and 1.104 billion yuan, and the proportion of revenue in the same period will be 32.4%, 40.7%, and 45.9% respectively. In order to ensure profitability, Jiaoxia cut marketing expenses in the first half of last year, and its advertising and marketing expenses accounted for 11.9% of revenue, which was reduced by more than half from 23.0% in the same period last year.
Compared with the high marketing expenses year by year, Jiaoxia's R&D expense rate is showing a downward trend. In the first half of 2019-2022, its research and development expenditures were 20 million yuan, 36 million yuan, 72 million yuan and 63 million yuan, accounting for 5.3%, 4.5%, 3.0% and 3.0% of revenue in the same period.
In addition, according to the prospectus, as of the first half of last year, Jiaoxia's sales and marketing personnel accounted for 58.0%, and R&D personnel accounted for only 14.5%.
Banana's heavy marketing strategy may continue for some time in the future. It stated in the prospectus that it plans to expand its marketing team, further improve its ability to produce high-quality marketing content, and convey a more distinctive brand image to consumers.
On the one hand, it is the blessing of Internet celebrities, but on the other hand, it is high in sales and low in research and development, which makes Jiaoxia's products fall into controversy: Is it a functional product, a fashion product, or an IQ tax?
From the perspective of "Fu Er Research", whether it is sunscreen products or large outdoor fields, marketing under the banana is only a "stepping stone" for the second half of the competition; and as Internet traffic becomes more and more expensive, how to reduce the erosion of profits by marketing, Banana needs a better solution.
To gain an advantage in future competition, Jiaoxia must pay attention to the superimposed effect of internal product strength, technological strength and brand strength.
It is difficult for Internet celebrity brands to break the Internet celebrity game
A capsule series umbrella costs more than 200 yuan, and a sunscreen mask costs 99 yuan...
According to the prospectus, Jiaoxia’s product portfolio mainly covers clothing, umbrellas, hats, other accessories and shoes, including sun protection, cooling, dryness, warmth, waterproof, lightweight and sports protection.
Taking Jiaoxia’s revenue in the first half of 2022 as an example, revenue from clothing sales was 792 million yuan, accounting for 35.8%; sales revenue from umbrellas was 261 million yuan, accounting for 11.8%; sales revenue from hats was 497 million yuan, accounting for 22.5%. Sunglasses, masks, sleeves, gloves and other accessories achieved a total revenue of 603 million yuan, accounting for 27.3%. Shoes sales revenue was 57 million yuan, accounting for 2.6%.
From the perspective of comprehensive categories, from 2019 to 2021, the revenue of Jiaoxia's non-sunscreen products will be 0.03 billion yuan, 0.77 billion yuan, and 496 million yuan, respectively, accounting for 0.7%, 9.6% and 20.6% of revenue.
Although it tries to diversify its sources of revenue, its main income still relies on some online celebrity products. From 2019 to 2021, the revenue of Jiaoxia’s TOP30 best-selling products accounted for 99.8%, 88.6%, 74.8% and 71.6% of the current revenue respectively.
During the performance period disclosed in the prospectus, a total of 22 selected items have achieved annual sales of more than 30 million yuan, including sunscreens such as double-layer small black umbrellas, pocket series umbrellas, and capsule series umbrellas launched in or before 2017. Featured items.
In terms of product development, Jiaoxia adopts the strategy of "developing selected single products" and is proud of its ability to continuously produce popular models. For OEMs, the sales link relies on e-commerce channels, and the warehousing and logistics also need the cooperation of the supply chain platform, or only the product design and brand marketing links are completely independently controlled.
Jiaoxia also stated in the prospectus that all its production is outsourced to contract manufacturers, "cooperating with contract manufacturers allows for extremely flexible management of the supply chain and optimization of operations." According to the prospectus, there are 166 contract manufacturers under Jiaoxia, and most of the contracts are only for one year.
▲ Source: Banana Official Weibo
On the B side of the foundry, its risks and disadvantages are also obvious. Jiaoxia also admitted in the prospectus that it cooperates with third-party contract manufacturers in a non-exclusive manner, and may encounter operational difficulties related to contract manufacturers.
From the perspective of "Fu Er Research", similar to many Internet celebrity brands, Jiaoxia's back-end supply chain is not completely in its own hands, and it is difficult to build a core moat for the product. There is still a long way to go to break the "Internet celebrity game" and form a real barrier to competition.
Sunscreen Hard Technology or IQ Tax?
According to China Insights Consulting, the market size of China's sunscreen apparel has increased from RMB 45.9 billion in 2016 to RMB 61.1 billion in 2021, and is expected to reach RMB 95.8 billion in 2026.
Under the blue ocean of potential, there are many new entrants; the future competition in sun protection and large outdoor tracks can be predicted to become more and more fierce.
Maybe the "krypton gold" Internet celebrity products, maybe advocating hard-core technology, maybe it comes from the "IQ tax" of impulsive consumption, but consumers will eventually return to rationality.
Leaving aside the controversy over sunscreen hard technology or IQ tax, if Jiaoxia wants to continue to capture the minds of consumers, it can no longer stop at out-of-market marketing and gorgeous "coats"; its internal product strength, technological strength, brand strength and other shortcomings If not, it is closely related to every business link.
Jiaoxia, who is trying to open the IPO door, not only needs to impress consumers, but also needs to convince the capital market.
Some references in this article:
1. "Jiaoxia is going to be listed, is "sun protection" a good business? "China News Weekly
2. "Jiaoxia sprints to the Hong Kong Stock Exchange: Expanding from sunscreen products to the urban outdoor market" IPO has long been known
3. "Jiaoxia sprints for IPO: before IQ taxes are over" Lu Finance
4. "An umbrella sells for 200 yuan, and Jiaoxia, which relies on sun protection, is about to go public, and lost nearly 5.5 billion last year." See IPO
5. "Jiaoxia, Reshaping the Core is worse than Building a Name", Retail Park
Author | Yixin Jiubai
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Producer | Yoda
Produced by Fuji Research