“Industry leader” has always been a battleground for brands.
First of all, an early listing can raise a lot of money, allowing companies to have funds to expand the market; secondly, the industry leader often obtains a high valuation premium, squeezing the valuation of subsequent competitors in the IPO market; thirdly, the first stock can attract a lot of attention from the outside world, expanding its own industry influence.
It is worth noting that compared with the past 5-10 years to cultivate a listed company, the hot new consumer track in recent years has been driven by capital and traffic, running to the IPO, and more and more companies have been able to impact IPO in two to three years.
However, rushed listing not only brings traffic and funds to the company, but more importantly, it has become a mirror of the industry.
These companies, from the IPO prospectus to the naked data of quarterly and annual reports after listing, have revealed to the outside world and capital the current situation of the new consumer industry hidden behind the traffic. The heat of the new consumer in the capital circle has dropped from the “boiling point” to the “freezing point” in the past year, and this situation cannot be separated from those “disappointing” first stocks. Below, Linkshop Business will list for you those new consumption first stocks that tear open the “industry fig leaf” with their own strength.
01
Perfect Diary – Wormwood of domestic cosmetics
As the “first stock of domestic cosmetics”, Perfect Diary is a typical enterprise that lowers the industrys expectations as a whole.
Looking back at the development of domestic cosmetics in recent years, the listing of Perfect Diary marked a watershed. Before the listing of Perfect Diary, the media had been constantly proclaiming that the “golden age of domestic cosmetics has begun”, and the industry outlook was very optimistic.
Since 2017, the market size of the cosmetics industry in China has continued to grow, and Perfect Diary happened to catch up with the market expansion and hitched a ride on the Internet traffic express at that time. In 2019, the market size of the cosmetics industry in China reached 431.419 billion yuan, with a production volume of 1.24 million tons. Perfect Diary created a brand new Internet marketing model: using traffic stars as spokespersons and KOL product promotion to bring Perfect Diary in front of young people. “National trend + cosmetics” has become a social topic for young people. The Palace Museums makeup products were snapped up; carved lipstick became a standard for everyone, traditional cosmetics continued to break through the national trend, which also drew the attention of capital.
Data from Qcc shows that the number of investment and financing events in the cosmetics track increased significantly in 2015 and 2016, with 82 and 81 events respectively; the number of investment and financing events from 2017 to 2019 decreased slightly, with 2018 disclosing the highest amount of investment and financing amount, exceeding 9.1 billion yuan. In 2020, it was a year of concentrated eruption of new domestic cosmetic brands, with 73 investment and financing events in the cosmetics track and a total financing amount of 6.2 billion yuan. Perfect Diary even raised funds twice in 2020, receiving a total of 100 million US dollars from Tiger Global Management, Houbu Capital, and Boyu Capital; and 140 million US dollars from Huaping Capital, Carlyle Capital, and Zhengxing Valley Capital. It is evident that the capital has confidence in the entire cosmetics track.
However, the listing of Perfect Diary gave capital and the industry a “head-on blow” and also took off the false traffic veil of domestic cosmetics. After the listing, the media continued to be pessimistic about the domestic cosmetics industry, declaring that Perfect Diary has come down from its pedestal and the cosmetics industry is about to change.
Since it became the “first stock of domestic cosmetics” on November 19, 2020, the stock price of Yixian E-commerce has dropped from its peak of 25 US dollars to the current 0.572 US dollars in less than two years. It has also received a letter of violation of the ADS trading price from the NYSE, entering the countdown to delisting.
The financial reports over the years have once again made the industry and capital see the two major pain points of the industry: burning money for marketing and lack of core technology.
In the first quarter of 2022 just released, Yixian E-commerces operating income fell by 38.3% year-on-year, and although the loss has narrowed, the net income of its three cosmetics brands, Perfect Diary, Xiao Autin, and Pickbear, fell by 45.6% year-on-year, widening the decline.
Looking at Yixian E-commerces financial reports over the years, its marketing, sales, and management expenses are relatively high. The marketing expenses in 2019-2021 were 1.4 billion, 5.5 billion, and 4.9 billion, accounting for 48%, 106%, and 84% of the operating income for that year. Especially in the first year of listing, the total revenue could not even cover the marketing expenses, let alone other expenses. In the first quarter of 2022, Yixian E-commerce adjusted its marketing expenses, reducing them by 33% to 813 million yuan, followed by a 45.6% drop in the sales of cosmetics brands. Looking at Yixian E-commerces research and development expenses, which were 23.17 million, 66.51 million, and 142 million in 2019-2021, accounting for 0.7%, 1.2%, and 2.4% of the operating income for that year, the research and development expenses were too low, the product quality was rough, and homogeneity was inevitable even if KOL promoted the products. Half of the reputation.
With Perfect Diary as a cautionary tale, domestic cosmetics are gradually losing their appeal in the eyes of capital. Data from Linkshop Business shows that in the first quarter of 2022, there were only 3 financing events related to Chinese enterprises in the cosmetics category, of which Dewy Lab was a domestic brand, and the other two were Southeast Asian and Thai brands; after April, the investment boom in cosmetics suddenly stopped, with only 1 cosmetics brand receiving investment; since May, only two personal care brands have received investment, and the number of investments is not high. Compared to the same period in 2021 when there were more than 9 investment and financing events with a total investment exceeding 500 million yuan, the domestic cosmetics track this year seems to be somewhat quiet. The domestic brand JudyDoll was 100% controlled by the global private equity firm Pan-Atlantic Capital as early as 2021, becoming a true foreign-funded enterprise.
Not only has capital cooled off, but the public also feels that the cosmetics market in 2021 is unusual. The decline in the epidemic has cast a “shadow” over the already declining cosmetics market, making the next five years truly unpredictable.
02
Nai Xues Tea – The problem representative of new tea drinks
Before 2015, the new tea drink industry developed rapidly, giving birth to several nationwide chain brands such as COCO, One More, Happy Lemon, etc.; between 2015 and 2019, the new tea drink industry underwent a transformation, emphasizing “freshly made” to “freshly made,” featuring the addition of fresh fruits, grass jelly, pudding, and other ingredients to tea drinks. This transformation phase gave birth to several upgraded 1.0 new tea drink brands such as Hey Tea, Nai Xues Tea, Le Le Tea, etc. Among them, Nai Xues Tea pioneered the “tea + European-style pastry” sales model, embarking on a high-end freshly made tea drink development path, becoming the representative of high-end brands in the new tea drink track.
How hot was the new tea drink track in 2020-2021?
Data from the “2020 New Tea White Paper” revealed that by the end of the year, the market size reached 102 billion yuan, with a consumer base exceeding 340 million, accounting for 1/4 of Chinas total population. Before its listing in June 2021, Nai Xues Tea had raised 5 rounds of financing; Hey Tea also had two consecutive rounds of financing in 2020-2021; the brand Ning Ji, born in 2020, received two rounds of financing in 2021. As of November 25, 2021, the new tea drink industry had a total of 32 financing events, with a disclosed total amount of 14 billion yuan, reaching its peak in 10 years.
With the support of capital, these brands expanded rapidly in two years. In 2020, Hey Tea added 304 new stores, nearly matching the total for the previous 8 years; MXBC added nearly 3,000 new stores in the first half of 2020; Nai Xues Tea added 326 new stores in 2021; Hushang Auntie added 1,000 new stores in the first half of 2021.
Other industry giants are also “envious” and eager to get a piece of the pie. China Railway introduced a tea brand “Banda Tea,” ByteDance applied to register the “Byte Tea” and “Byte Tea” trademarks; Wanda applied for a milk tea trademark “Wancha”. For a while, new tea drinks became a code for tapping into young people, becoming a wealth password, and the overall excitement of the new tea drink industry attracted outsiders.
The listing of Nai Xues Tea pushed this lively scene to a climax, but looking at the financial reports and stock prices of Nai Xues Tea, the question of whether new tea drinks are profitable remains a big issue.
Founded six years ago, Nai Xues Tea preempted Hey Tea to list first and officially became the first stock of new tea drinks, but it opened at a lower price. On the first day of listing, Nai Xues Tea opened at 18.86 Hong Kong dollars per share, lower than the issue price of 19.8 Hong Kong dollars per share, and fell to 17.12 Hong Kong dollars per share on the same day. Less than a year after the listing, as of June 6, 2022, the price per share was 6.17 Hong Kong dollars, a nearly 70% drop in market value.
In March, Nai Xues Tea disclosed its first financial report after listing. In 2021, Nai Xues Tea had revenue of 4.297 billion yuan, a year-on-year increase of 40.5%, and an adjusted net loss of 145 million yuan, compared to a profit of 16.643 million yuan in 2020, a significant decrease.
Before the 2021 financial report was released, Nai Xue announced a significant price reduction on Weibo, launching a 9-19 yuan “Easy Series” fresh fruit tea that is updated every month. After the significant price reduction, there are no longer any products in the Nai Xue menu that are priced in the “3-digit range,” which is quite inconsistent with Nai Xues early high-end positioning, but it is clear evidence of its difficulties in the capital market.
The continuous infighting in the new tea drink track is fully reflected in Nai Xue, the only listed company, in terms of data – the rising costs of stores and frequent food issues.
Nai Xue has yet to achieve profitability, and losses continue to widen. The net profit from 2018 to 2019 was -69.73 million, -39.68 million, -200 million, and -4.5 billion. In a state of continuous losses, Nai Xue still chooses to expand. In 2021, Nai Xue added 326 new tea drink stores throughout the year, higher than the net increase of 172 stores in 2020. In addition, in 2022, Nai Xue plans to expand by 350 to 400 stores, with the offline store expansion rate accelerating, expected to break the 1,000-store mark this year.
Behind the increase in the number of stores is the rising fixed costs. In 2021, Nai Xues material costs increased by 20.6% year-on-year, reaching 1.4 billion yuan; employee costs increased by 55% year-on-year, reaching 1.424 billion yuan, with these two costs accounting for 65.8% of Nai Xues revenue. Meanwhile, the average sales value per order at Nai Xues stores decreased from 43 yuan in 2020 to 41.6 yuan, and it is expected to decrease further after this price reduction.
Food safety issues are a red line in the catering industry, but Nai Xue has repeatedly crossed it. In the second half of 2021 alone, Nai Xue was fined three times by regulatory authorities for food safety issues, including violations of production operations, excessive total bacterial counts, and false production dates on products. In May 2022, the company was fined for “selling food beyond the shelf life,” but the amount of each fine was not large.
Onlookers see the excitement, insiders see the tricks. When the naked data and issues are laid out for all to see, the external enthusiasm gradually loses its flavor.
After experiencing the “financing fever” of 2021, the new tea drink track has shown a downward trend at the beginning of 2022. According to data from Linkshop Business, as of November 2021, a total of 32 financing events occurred in the new tea drink industry, with a total amount exceeding 14 billion yuan, especially in the second half of 2021. As of March 21, 2022, there have been 8 financing events in the new tea drink industry, proving that capitals attitude toward the new tea drink track has also reversed.
At the beginning of 2022, a wave of store closures hit the new tea drink track. By February 28, 1938 stores had closed for MXBC; 1392 stores for Tea Bai Dao; 1690 stores for Gu Ming; 1079 stores for 1 Point Point; 1035 stores for COCO; 400 stores for Book Also Grass Jelly, although new stores were opened at the same time, they were far fewer than those closed.
The large number of store closures in the new tea drink track tells outsiders that new tea drinks may not be as profitable as they think, and the industrys excitement may not be as real as it seems.
03
Miss Fresh – The capital feast is dispersing
There are no stars and oceans in the vegetable market, but it has indeed been hot before.
In 2018, capital focused on community group buying. According to an incomplete statistics from Tianyancha, in 2018, more than 20 investment and financing events occurred in the community group buying sector, including Qian Dama, Shi Hui Tuan, and Shi Xiang Hui; community group buying was quiet in 2019 but resurged in 2020, with incomplete data showing that more than 10 rounds of financing occurred in the community group buying and fresh e-commerce fields in 2020, totaling more than 10 billion yuan. Among them, Shi Hui Tuan received three investments this year, totaling 2.497 billion US dollars; Tongcheng Life received 200 million US dollars in June and tens of millions of US dollars in July. The latest round of financing for Miss Fresh, at 495 million US dollars, is the largest financing in the fresh-to-home industry to date.
In the fresh e-commerce industry, Miss Fresh pioneered the pre-warehouse model, setting off a craze in the industry.
When the companys head, Xu Zheng, hadnt even thought of a name or logo, capital was already optimistic about this pre-warehouse model and gave a $5 million angel investment, followed by 10 subsequent rounds of financing, with Tencent and Goldman Sachs both showing interest. Qingdao Guoxin directly brought in 2 billion yuan, demonstrating great confidence in the pre-warehouse model.
However, after going public, Miss Fresh fell by 25% on its opening day, with its market value dropping from a peak of $22.7 to the current $43 million, leaving the gold and silver invested in the early rounds of financing in vain.
Miss Fresh recently announced that the company could not submit its 2021 annual report by the final deadline of April 30, 2022. The company stated that it is conducting an internal review of certain matters and is unable to submit its 20-F form until the review is completed. From 2019 to 2021, Miss Fresh incurred losses of 2.909 billion, 1
