The "Sao Mao", which has fallen from the market capitalization of more than 600 billion yuan, has not yet produced enough performance to convince the market.

On October 30th, Haitian Flavor Industry (603288.SH) released its three-quarter report that revenue in the first three quarters was 18.65 billion yuan, down 2.33% from the same period last year; net profit was 4.329 billion yuan, down 7.25% from the same period last year, failing to stop the decline in performance, and brokerages have lowered their performance forecasts.

Looking back to 2021, Haitian Flavor Industry took advantage of the "Mao Index" to climb the peak of nearly 700 billion market capitalization and become one of the representatives of A-share "market dream rate" investment.

In 2022, despite a valuation correction, Haitian Flavor is still a white horse in the eyes of investors. After the additive incident, Haitian flavor shares still rose 42.6% in less than three months from October 31 last year to January 16 this year, reflecting the recognition of the market.

However, since the beginning of this year, the serious and persistent diseases of the Haitian flavor industry have gradually emerged. In the past, the low growth rate of the Haitian flavor industry during the epidemic can be attributed to the hindrance of catering consumption, but in 2023, when catering consumption generally recovered, the Haitian flavor industry fell into the quagmire of negative growth for a long time, and the secondary market suddenly realized.

As of October 31, the share price of Haitian Flavor was reported at 37.65 yuan per share, down 42.58% during the year, and the market value lost about 160 billion yuan, equivalent to a 600887.SH share.

In the past, the Haitian flavor industry, which relied on mature channel networks and could easily "earn" by selling soy sauce to restaurants, suddenly fell out of favor.

The soy sauce bottle is overturned.

Before the market capitalization of Haitian flavor industry was cut by the ankle, its performance growth touched the stage ceiling.

From 2020 to 2022, the revenue growth rate of Haitian flavor industry was 15.14%, 9.71% and 2.42% respectively, showing a downward trend year by year.

What is more fatal is that in 2022, affected by the additive incident, soy sauce, the core product of the Haitian flavor industry, began to sell, recording a negative growth rate of 2.3% for the whole year, and continues to this day.

The fundamental reason is that the Haitian flavor industry begins to lag behind the industry in the development of zero addition and high-end products, and the soy sauce category, which it once dominated, is "stalling".

In 2021, 2022 and 2023, the revenue share of Haitian flavor soy sauce products reached 60.13%, 58.26% and 56.24% respectively, and this figure further dropped to less than 50% in the third quarter of this year.

Private equity professionals in the consumer industry in eastern China told ID:TradeWind01 that in terms of product development in a market that is gradually subdivided by demand, Haitian is two years behind its peers 603027.SH and 603317.SH.

Trade wind (ID:TradeWind01) also learned from people close to the Haitian flavor industry that the number of smoked products in the Haitian flavor industry stopped growing around 2016.

In contrast, Qianhe flavor industry, which focuses on zero-added soy sauce products, saw a year-on-year increase in revenue of 50.04% and net profit of 111.82% in the first three quarters, of which net profit in the third quarter increased by 93.03%, compared with a slight increase of 2.2% in revenue and 3.24% in net profit in the third quarter.

As the gross margin of soy sauce products is higher than other products such as sauces, the weak growth of soy sauce products directly leads to the weakening of the scale effect of Haitian flavor industry, and the gross profit margin is under further pressure. In the first three quarters of this year, Haitian's operating costs fell 1.19 per cent from a year earlier, but its gross profit margin fell 0.7 percentage points to 35.5 per cent.

For comparison, the gross profit margin of Haitian Flavor Industry was about 3.91 percentage points higher than that of 600872.SH, the second in the industry, in 2020, while the gap between the two was narrowed to 2.9 percentage points in the first three quarters of this year.

The "rift" in the competition barrier

The performance of Haitian flavor industry has not improved after the epidemic. In addition to the lag in product development, the more important thing is that the channel network that formed its deep barrier in the past is not so effective.

According to a research report by Sun Shanshan, an analyst at Huaxin Securities, the channels of Haitian flavor industry are divided into catering, household and processing channels, accounting for 50%, 30% and 20% respectively.

The Haitian flavor industry is precisely in the catering channels to get rich. Since the consumption of condiments in food and beverage is 1.5 to 2 times that of the family, the first large single product of the Haitian flavor industry, straw mushroom, can be colored with only a few drops, which saves chefs money from an economic point of view, so it is deeply favored by Guangdong chefs. And with the process of nationalization of Cantonese cuisine to the whole country.

As a result, with the help of reusable catering channels, Haitian flavor industry only needs to sell its products to stores to enjoy huge profits. Up to now, Haitian Flavor Industry has created five large items of grade 1 billion in soy sauce, oyster sauce and soy sauce category. According to the sales caliber, Haitian flavor industry is more than 2-5 combined sales.

But it is the Haitian flavor industry's seemingly carefree channel network that makes the management ignore the changes that are taking place in the retail channel.

A person close to the Haitian flavor industry told ID:TradeWind01 that during the epidemic, the management thought that the annual decline in the growth rate of the Haitian flavor industry was caused by the epidemic affecting food and beverage demand, but did not find that there was a problem with the channel. It was only recently that it was "learned from the bitter experience" and wanted "internal optimization."

During the epidemic, retail channels have undergone a "reshaping" change.

The emergence of community group buying directly makes offline traditional supermarkets and hypermarkets "live in ICU", and the offline C-end channels will also change accordingly; Pinduoduo and live streaming will have an impact on the online e-commerce pattern.

The above changes are obviously not taken seriously by the Haitian flavor industry. In the first half of this year, revenue from offline and online channels fell 4.39% and 12.54% respectively compared with the same period last year.

In the first three quarters of this year, Haitian Flavor's intuitive adjustment to the channel is to reduce the number of dealers, a net reduction of 378 to 6775. Compared with the net decrease of 258 for the whole of last year, Haitian Flavor Industry has significantly accelerated the action of offline dealers.

Trade wind (ID:TradeWind01) called Haitian flavor industry to inquire about the next channel planning, but could not get through.

A South China seasoning industry analyst told ID:TradeWind01 that Haitian Flavor's dealer team is being optimized and the dealer network will be more "flattened".

But the problem is that the streamlined dealer team does not help Haitian Flavor sell more products at the moment. As the Haitian flavor industry uses the way of "payment before goods" for sales, the contract liability column can see the sales confidence of dealers to a certain extent.

In the first three quarters of this year, the contract debt of Haitian flavor industry was about 2.007 billion yuan, down 25.25% from the same period last year. For the whole of 2022, it fell sharply by 37.39% compared with the same period last year.

ID:TradeWind01 also learned from the Haitian flavor industry that at the end of last year, the channel profit margin of Haitian products was generally 8-10%, compared with the planned 10-12% did not meet expectations.

In the case of insufficient channel profits, dealers are naturally under pressure to make payments. In view of this, it is urgent for the Haitian flavor industry to restore channel confidence and repair competition barriers.