文丨Chinese business strategy Guo Haiwei
In just over ten years, Taoli, a small bakery founded by a retired teacher, won the crown of”the first share of Chinese bread”.
The first half of his life was unremarkable Wu Zhigang , Why can you create a company with a market value of more than 40 billion after retirement?
[The wind comes from the northeast]
In the 1980s, when many Chinese ate their first bite of bread, the people from the Northeast had already eaten it all century.
The large-scale introduction of bread into China began in the late Qing Dynasty. Foreign adventurers brought heavy ships and artillery into China, extending inland from the southeast and northeast.
The Northeast has been influenced by Russia and Japan for a long time, and it has long been unique in the bread industry.
In the late 19th century, Qiulin Daliba became popular and became the common memory of several generations of Harbin people and was traced back to the originator of Chinese local bread.
If China’s bakery industry must give birth to a local giant, then the Northeast is the most powerful competitor.
After the reform and opening up, although the Northeast bread market has huge potential, competition is far less fierce than the southern coastal areas.
In Guangdong, Jiadun, a time-honored Hong Kong brand, opened its first mainland branch in Dongguan in 1985 and entered Jiangsu and Zhejiang in 1995; the other two food giants Dali and Panpan, It was established in Fujian in 1989 and 1996 respectively.
When competitors competed in the”Guinei”, the peaches and plums born in 1995 still quietly accumulated their strength in the northeast.
[Accurate card slot]
The bakery industry can be roughly divided into two business models:one is”central factory + wholesale”, one It is a chain bakery.
When Taoli was founded, the bakery was the absolute leader of fresh bread, and the wholesale model mainly made long-life pastry products. Both well water does not offend river water.
But Wu Zhigang does not agree with this all-or-nothing pattern. He wants to open the door to a new business model-wholesale short-term bread.
The so-called “short insurance”, Refers to products with a shelf life of less than 30 days. Compared with “Longbao” and fresh bread, short-term bread has a fresher taste and a medium-long shelf life, making it healthier to eat.
At the time, this was definitely an innovation against common sense.
Anyone with a little retail knowledge knows that wholesalers are extremely sensitive to product shelf life. For the same product, the market price of half-term inventory is often much lower than the new date. In order to dispel the concerns of wholesalers, manufacturers are racking their brains to extend the shelf life.
But Wu Zhigang decided to go against the sky and directly cut the product shelf life to 5-7 days.
Wu Zhigang dared to take this risky move because first of all he saw huge retail traffic.
At that time, the retail industry in China was considered the top outlet.
In 1990, the total retail sales of social goods in China was only 825.5 billion. By 2000, this number had become 3,415.3 billion, a 4.1-fold increase in 10 years.
Behind the numbers is the huge flow of people, money, and things.
At that time, there was no e-commerce, and all the increments naturally fell into the fast-developing offline channels. Domestic offline retail giants, such as Wumart, Wal-Mart, Carrefour, RT-Mart, Suning, Gome, etc., all made rapid progress during this period. Field and developed.
is a retailer with massive traffic on the one hand, and a large-scale fresh bread market on the other. The two have passed by like this. Because there are no professional fresh bread brands, large supermarkets often build their own bakery; small and medium-sized supermarkets simply give up this business.
For Wu Zhigang, it is as impressive as the recent flood discharge of Qiandao Lake.
Secondly, the business model of chain bakeries is too heavy.
When he was young, Wu Zhigang was Chairman Mao’s”iron fan”. When his eldest son was born, he named him”Xuedong”, and he knew clearly that when he was young, he had to”in the battle of sports”Annihilate the enemy” philosophy of struggle.
The bakery requires large fixed costs, high labor costs, and a long product line. For a retired teacher, it is impossible to achieve rapid expansion.
Take Yuanzu Foods as an example. In 2019, the company had more than 648 stores, with rental expenses of 173 million, total labor costs of 427 million, and water, electricity and office expenses of 37.23 million. Even if advertising and asset depreciation are not included, the average annual sunk cost of the store is close to 1 million.
Until now, the Chinese market has not yet emerged from a bakery giant.
According to the statistics of Orient Securities in 2019, the number of top brand Hollyland’s stores was”nearly a thousand”. Bread New Language and Yuanzu ranked second and third with 792 and 648 respectively.
Compared with over 10,000 delicious duck necks, over 4,300 Starbucks, and even 672 cities above the county level, the number of bakeries is far from enough.
Looking back, Tao Li, who got on the channel and had a ride, did take a shortcut.
【Peach and Plum’s Fine Art】
In 1995, Wu Zhigang officially entered the bread industry and founded the brand”Peach and Plum.”
This is a very interesting name.
”Peach and plum” has the meaning of youth since ancient times, and the peach and plum are sweet and delicious, which perfectly corresponds to the main”fresh” product positioning. However, in the contemporary context,”Peach and Plum” more represent the students who are hard-workingly cultivated by the teacher, and symbolize the fruit of a century of cultivating people.
According to the feedback from senior practitioners in the circulation field to China Business Strategies, no Both retail stores and dealer owners have heard the story behind Taoli and know that this brand was founded by a university teacher. Invisibly, it increases the brand’s story and business credit.
Of course, this is something later. Before Taoli entered the retail channel, the biggest challenge was to solve the efficiency problem of short-term warranty products.
Because Taoli chose to go through wholesale channels, it was decided that only price areas generally accepted by the public could be selected.
But the product has a short shelf life, which means that the fault tolerance of multiple links in production, marketing, logistics and distribution is very small. If you are not careful, the value of a batch of goods will plummet or even be cleared.
But the precision of peach and plum lies in its efficiency problem The overall optimal solution is provided on .
First of all, Tao Li’s channel system construction closely revolves around factory planning.
In the same period, the practice of friends is to promote the short-term and long-term insurance business at the same time, and they want to ship the goods to the whole country at once. However, Taoli’s channel system is closely arranged around the factory coverage radius, focusing on the strategy of short-term bread preservation. By reducing the distribution radius, the sensitivity of distribution at the outlets is improved.
Tao Li’s factory is produced according to the”white + black” two-shift mode:production is based on the estimated volume of the sales side during the day, and the actual orders and estimates are concentrated at night The difference in amount. Both batches of products must be delivered before 6 a.m. the next day to maximize the use of the peak sales period during the morning peak.
This pursuit of efficiency is reflected in the cost, which is the high logistics cost. In 2019, the distribution fee for peach and plum reached 710 million yuan, accounting for 57%of the total sales expenses.
Secondly, Taoli reduced the number of products and boldly adopted the strategy of explosive products.
According to Taoli’s 2019 annual report, the company”focuses on small but refined bread sub-categories, and does not pursue multiple varieties, but pursues single product production and sales scale.”
In terms of product selection strategy, Tao Li prefers to improve those popular categories that have been fully tested and accepted by the market. By reducing offline core SKUs, Taoli has significantly reduced the cost of raw material procurement, production technology, R&D investment, and distribution at outlets.
Especially in the early stages of development, even if the market conditions change, Taoli can quickly achieve secondary deployment and product promotion, greatly avoiding the planning cost of sales.
According to the open source securities research report, many celebrity single products such as ripe peach and plum, natural yeast and other star products contributed more than 10%of the annual revenue.
In terms of brand investment strategy, Tao Li strategically abandoned the open media position and invested all sales expenses in channel marketing. In 2019, Taoli’s “advertising and promotional expenses” were only 47 million, accounting for 0.8%of total revenue. The secretary of the board of directors stated in the Shanghai Stock Exchange e Interactive that”the company’s advertising strategy has always been store display advertising.”
On this basis, Taoli is promoting a series of capacity expansion.
On November 12, 2019, the first-phase project of Wuhan Taoli with a capacity of 20,000 tons was officially put into operation. This is a delicate point in time. The citizens of Wuhan two months later were able to live in peace at home and hoard goods frantically.
In February 2020, the Shandong peach and plum project with a production capacity of 21,200 tons was put into production; in addition, peach and plum production bases in Shenyang, Jiangsu, and Zhejiang totaling more than 100,000 tons are also being promoted simultaneously.
The systematic operation of successfully reduced the unit price of peach and plum bread to below 9.9 yuan, which not only achieved high cost performance, but also left enough profit margins for channels and brands, and finally allowed peach and plum bread to enter the homes of ordinary people. .
In 2019, the revenue of peaches and plums reached 5.6 billion, and the net profit was 680 million. In the first quarter of 2020, peaches and plums under the epidemic reached a net profit of 194 million, a 60%increase.
[Challenges and Opportunities]
In April 2019, 84-year-old Wu Zhigang officially retired from Taoli Bread. The youngest son Wu Xueliang and his second son Wu Xuequn succeeded as their partners, serving as chairman and general manager.
In recent years, the growth rate of peach and plum has gradually shown fatigue. The revenue growth rate fell from 28.95%at the peak to 16.77%for three consecutive years; the growth of net profit was slower than that, dragging down the net profit rate by 1 point in three years.
From the perspective of the regional market, Taoli’s 19 regional subsidiaries registered after 2015 (excluding Shenyang) all recorded losses in 2019. Among them, the Fujian market lost more than 10 million yuan. Shenzhen and Jiangsu respectively Losses of 5 million and 8 million. Central China has become the only negative margin area due to the newly built base.
In 2018, Tao Li recorded a loss of 1.23 million for the first time in the Shanghai market, which has been in business for nearly 20 years; in 2019, the loss expanded to 12.68 million.
The peach and plum head market has made many investors sweat for its stamina, and it also shows that the traditional style of peach and plum has been challenged.
On the channel side, due to the ferocity of online channels, the new offline retail revolution, and the trend of channel fragmentation, traditional supermarkets are no longer in the limelight. Leading companies such as RT-Mart, Carrefour, Metro, Pokka, etc., have sold themselves for cash. Carrefour, once the No. 1 foreign retail brand, committed 6 billion yuan to Suning, which is less than 16%of the market value of Taoli.
Because Tao Li is deeply bound to terminal channels and lacks direct communication with consumers, it will inevitably be dragged down by the peak or even decline in traffic.
In terms of product strategy, the cost-effective approach of peaches and plums has made it difficult for high-end customers with upgraded quality to enter the high-margin consumption scene.
Taoli concentrated on the deep cultivation of the regional market, and missed the best window period for national brand launches, resulting in low brand awareness of Taoli in the blank market. This means that in the new region, Taoli needs to build its popularity and reputation from 0, making it difficult to achieve profitability in the new market.
What worries the outside world even more is the family-based corporate governance system.
When Taoli landed on the Shanghai Stock Exchange in 2015, the characteristics of family businesses became a major controversy.
In the board of directors, in addition to Wu Zhigang’s three sons and his wife Sheng Yali, who hold four seats, his immediate and collateral relatives have also participated in the company’s operations.
Take Wu Zhigang’s brother Wu Zhidao as an example, the prospectus shows that Wu Zhidao is the company’s human resources manager, and his wife Sheng Yaping (Sister of Sheng Yali) and her children Wu Xuefeng and Wu Jingyi are the legal persons of the Shanghai company. Marketing manager and former accountant.
At least 31 executives and close relatives had held shares at that time or had. According to”Times Weekly” calculations, the Wu Zhigang family’s shareholding ratio was as high as 96.77%before the IPO.
Today, the Wu Zhigang family’s shareholding ratio is about 67.84%. Based on the total market value of Taoli Bread at 39.46 billion on August 14, the family’s stock market value reaches 26.7 billion.
In the early stage of the market economy, due to the uneven quality of professional managers and chaotic property rights protection, the family model can indeed reduce internal management costs and help enterprises develop.
But with the development of the times, family businesses often make it difficult for professional managers to rise, and it is difficult to attract and retain outstanding talents.
Nowadays, Taoli’s management is gradually aging, and the average age of five board members has reached 59 years old.
However, the”internal worries” of peach and plum has not yet been concluded, and the”external worries” have been surging.
The demonstration effect of peach and plum bread has caused domestic and foreign giants to enter the market.
The world’s largest baking giant Bimbo, after acquiring Mancodon in 2018, it has become China The second largest bread supplier after peach and plum. As early as 1945, Bimbo used the”central factory + wholesale” model to step out of Mexico and start global expansion. Now it has grown into an industry giant with 100 billion revenue.
Dali, China’s largest local food company, also released the short-term insurance brand Meibochen in 2018. Dali meaningfully chose the headquarters of Fujian and Taoli’s rear northeast to start in the northeast, and attacked Taoli at a lower price.
相Compared with the strong challenger, Tao Li’s battle line is too short. According to the 2019 financial report, the revenue of”bread + pastry” accounted for as high as 97.9%.
The opponents of carrier class often take advantage of multi-category, three-dimensional channels and other in-depth advantages to hold back Tao Li in terms of channel purchase policies and combined promotions. A fierce battle has begun.
The pressure of national expansion and the entry of giants have caused Taoli’s channel expenses to grow rapidly.
According to the 2019 financial report, Taoli’s store expenses reached 133 million, an increase of more than 62%year-on-year, far exceeding the growth rate of revenue and sales expenses.
According to the research report of Dongxing Securities, per capita bread consumption in mainland China Only 24%of Japan and 18%of Hong Kong; the market size is only 46.3 billion, and there is great room for growth.
What is certain is that the Chinese bread market is likely to become a 100-billion-level consumer track in the future.
With unique market insights and strong team execution, Taoli has gained a leading position, occupying a 10%market share. However, its current revenue is only 5.6 billion, which is a very big gap compared with Bimbo and other baking giants with hundreds of billions.
In the next 20 years, the number of Chinese middle class will reach 800 million, which is about the total population of Europe. The Chinese market is bound to give birth to hundreds of billions of baking giants.
The great revival of China is destined to be a fast-paced economic express. The bread industry in the future will be the winner, and the story is far from reaching a conclusion.
The pictures are all from the Internet
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