Today, the beverage industry has differentiated into many new categories, including sugar-free sparkling water, functional drinks, carbonated drinks, tea drinks, milk drinks, etc., which are emerging in endlessly and dazzlingly. This phenomenon has prompted the entire industry to diversify its products, with the structural differentiation of dairy products being particularly obvious.
However, Li Ziyuan, who is "in the middle of the game", is unique. Recently, Liziyuan released a performance report for the first half of 2023. The financial report data shows that in 2023H1, Liziyuan achieved revenue of 701 million yuan, a year-on-year increase of 0.06%; net profit attributable to the parent company reached 135 million yuan, a year-on-year increase of 30.56%; excluding non-net profit attributable to the parent company It was 130 million yuan, a year-on-year increase of 55.97%.
Faced with the continued structural differentiation of dairy products, Liziyuan has successfully "stepped out" of the dairy industry with its flagship sweet milk product. Its brand upgrade and price increase strategies for some products in the first half of the year have also received positive feedback from the consumer market. But in the face of the ever-changing consumer market, will Li Ziyuan always stick to the large single product strategy? Can the performance of double revenue and net profit in the first half of the year be sustained?
Revenue and net profit double, brand upgrade gives growth momentum?
Judging from the performance report, Liziyuan's overall revenue growth in 2023H1 was steady, in line with market expectations. Although in the second quarter of 2023, Liziyuan achieved operating income of 356 million yuan, a year-on-year decrease of 0.9%, it did not affect the positive growth of the overall performance in the first half of the year.
In terms of net profit, in the second quarter of 2023, Liziyuan achieved a net profit attributable to the parent company of 75 million yuan, a year-on-year increase of 21.1%. In the first half of this year, net profit attributable to the parent company also rose by more than 30%, and the overall profitability is remarkable.
The significant improvement in Liziyuan's profitability in the first half of this year was due to the influence of multiple factors. First, Liziyuan has raised prices for some of its products. On the evening of June 1, 2022, Li Ziyuan announced that it would adjust the ex-factory prices of some sweet milk milk beverages and flavored milk beverage series, with price increases ranging from 6% to 9%. The new prices will be effective from July 1, 2022 Be implemented on the day.
This round of price increases is mainly due to the continued increase in costs such as packaging materials, transportation, and energy in the early stage. Although in the early days of the price increase, the market was not very optimistic about Li Ziyuan's price increase measures. Most people once believed that product price adjustments would not necessarily lead to positive growth in the company's revenue and profits. However, based on the performance in the first half of this year, Li Ziyuan will definitely To some extent, it alleviated market concerns and doubts.
It is worth mentioning that due to the downward price of large packets of raw material powder and Liziyuan increasing the proportion of domestic milk powder purchases, the relatively cheap prices have also led to a significant increase in the company's gross profit margin.
According to Boyahexun.com, in 2022, the average price of imported large-pack powdered raw milk experienced changes of first rising and then falling, until December 2022, the large-packed powder dropped to 3.63 yuan/kg, which was a decrease compared with the highest point. 10.8%.
Secondly, Liziyuan has completely upgraded its brand image and positioning. In July this year, after Li Ziyuan established a long-term cooperative relationship with "Hua and Hua", it re-created its brand slogan and product packaging to embrace the new generation of consumer groups with a younger brand image.
In addition, Li Ziyuan also uses CCTV advertisements, uses authoritative platforms and online new media channels to strengthen promotion coverage, and cooperates with high-speed rail, subway and bus advertisements in more than 100 cities across the country to quickly increase its popularity, combining online and offline The combination punch does have a good contact effect.
According to Huaxin Securities, Li Ziyuan will continue to increase advertising efforts in the second half of the year, covering more than 100 cities across the country, and will cooperate with the five major CCTV channels in advertising to increase brand height.
Overall, in the first half of the year, Liziyuan enjoyed the benefits of product price increases, brand upgrades, and domestic substitution of milk powder. However, the continued fluctuation of raw material prices also lurks greater uncertainty. Therefore, in the second half of the year, Li Ziyuan still faces a lot of challenges if it wants to maintain a continuous increase in revenue and net profit.
How long can a hot-selling single product become popular? Is multi-category the end point?
Looking back on the first half of 2023, Liziyuan Sweet Milk, as a milk-containing beverage, has become a hit in the milk-containing beverage segment with its outstanding product strength, precise positioning and differentiated features.
However, multiple factors such as consumption concepts are driving changes in the product structure of the dairy market. If a company only relies on one large single product to develop the market, its development potential will be limited.
On the one hand, more and more dairy companies are entering the market, and the consumer groups in the dairy market are also showing an obvious trend of segmentation. With the improvement of health awareness, the consumer groups targeted by the domestic dairy market have expanded from early office workers and school students to middle-aged people over 50 years old. Consumption scenarios also extend from breakfast to sports, fitness, meal replacement and other sub-scenarios.
At the same time, consumers' demand for dairy product flavors is gradually becoming more diversified, and derived dairy-related products such as ice cream, milk wine, cheese, etc. are also receiving more attention.
Based on this, many dairy companies in the industry have taken action. In 2022, Guangming Group launched Guangming Superior Fresh Milk Ice Cream, becoming a representative brand of high-end ice cream in Shanghai; in August 2022, Jule Dairy launched Sour Milk Ice Cream, etc. Therefore, exploring new growth points in the market has become the focus of the game for entrants.
On the other hand, similar products of Liziyuan Sweet Milk, such as Wahaha AD Calcium Milk and Nutrition Express, were once very popular, but have gradually declined due to competition. According to Guosen Securities, judging from the sales volume of competing products, the sales of AD calcium milk exceeded RMB 3 billion in 2009; the sales of Nutrition Express exceeded RMB 20 billion in 2013. Then, as more and more big-ticket products emerged on the milk-containing beverage track, these brands faced the risk of declining sales. For example, Wahaha did not finally return to sales of tens of billions until 2022, and the market was once filled with voices saying that the road to "creating the next Wahaha" was getting increasingly difficult.
Therefore, whether referring to the changing trends of the market or learning from the development history of past hot products, Li Ziyuan is reminded to keep up with new consumption trends, constantly develop products that meet consumer needs, accelerate the launch of new products, and broaden the product matrix.
At present, in 2023, Li Ziyuan has shifted its strategic focus to accelerating the launch of new products. In February this year, Liziyuan launched a new 320ml 0-sucrose series of new products, focusing on low-calorie and straw-free ready-to-drink designs, aiming to meet differentiated consumer needs and further expand consumer groups.
However, while taking into account market demand, Liziyuan should also strengthen the layout of channels, especially online channels. In the past, offline places such as supermarkets, hypermarkets, and grocery stores were the main retail channels for dairy products. However, in recent years, the proportion of retail sales through online channels has shown an increasing trend year by year.
According to think tank data, the online market has become one of the most important sales channels in my country's dairy market in 2023, with its proportion increasing from 15% in 2022 to nearly 20.0%.
In contrast, Liziyuan’s layout on major online platforms is obviously lacking. Among them, Li Ziyuan only has 58,000 fans on Douyin platform, while the number of fans on Xiaohongshu platform does not exceed 10,000. According to platform news, as of August 15, 2023, Li Ziyuan has been in Xiaohongshu for only one year.
Taken together, Liziyuan has less influence on online channels and started late. Therefore, in the online channel that is gradually receiving more attention, Li Ziyuan still needs to catch up if it wants to catch up.
Conclusion
Following the super brand launch conference held in July, Li Ziyuan has completely upgraded its brand image and positioning, strengthened its association with "youth" and also strengthened its "sweet" product attributes. The distinctive brand image is easier to capture the minds of consumers. , this is undoubtedly a big leap after Li Ziyuan re-examines himself.
If Li Ziyuan wants to continue its performance growth in the second half of the year, while upgrading the brand based on the product side, it also needs to make up for the shortcomings of online channels, keep up with market demand, and speed up the launch of new products.
We will wait and see whether Liziyuan, which carries the childhood of the post-80s and 90s generations, can create a unique brand value around the two key words of "youth" and "sweetness".
Author: Jing Song
Source: Pinecone Finance