Written by Cheng Liang

Edited by Yang Jie

In one year, 240 million was spent on brand marketing, product price increases, and the sale of "sky-high price mustard" After that, Fuling mustard fell into a situation of “increasing revenue without increasing profits”.

"Zhacao Mao" Fuling Zhacai has not had an easy life recently.

The Tukeng sauerkraut incident revealed by CCTV’s “315 Party” caused a shock in the pickle industry. On the same day, Zhujiang Economic Station and “Consumer Report” magazine also released a “ On the list of "Top Ten Not Recommended Products in 2021", Wujiang mustard, the main product of Fuling mustard, was included in the list due to its high sodium content. The topic even became a hot search on Weibo. Fuling Mustard had to quickly come forward to clarify, saying that the named products complied with national food safety standards. After that, Fuling mustard also urgently launched a new light salt version.

As part of its "healthy route" implementation plan, at the press conference to launch Wujiang light-salted mustard on March 22, Zhou Binquan, chairman of Fuling Mustard Group, proposed a "double expansion" strategy, "using mustard." As the starting point, we will launch the "double expansion" strategy of expanding categories and markets, and then realize the development from "Xiaowujiang" to "Dawujiang", and strive to build Fuling Mustard Company into an output value exceeding 10 billion yuan in 3-5 years. , an industrial group with profits and taxes exceeding 2 billion yuan.”

However, Fuling Mustard’s annual revenue is currently less than 3 billion yuan, and it is not easy to achieve its “10 billion” goal.

Fuling mustard has always been willing to invest in brand marketing. As early as 2007, in order to open up the market, it spent tens of millions of yuan to place advertisements during prime time after CCTV News Network, and signed the well-known actor Zhang Tielin as its spokesperson. With the slogan "China's mustard must be counted in Fuling, Fuling's mustard must be counted in Wujiang", the popularity of the Fuling brand and its Wujiang mustard products has rapidly expanded.

In 2021, the sales expenses of Fuling mustard tuber increased from 368 million yuan in 2020 to 475 million yuan, a year-on-year increase of 29.08%; among which, the brand promotion expenses increased from 2.1 million yuan in 2020 to 2021 yuan. 240 million yuan, accounting for 50.57% of sales expenses, a year-on-year increase of 113 times.

However, the brand that Fuling Mustard has spent a lot of money to maintain was hit hard because of the "315" list.

On March 15, Fuling pickled mustard hit its lowest price since the beginning of this year, closing at 28.87 yuan per share, a drop of 9.87%. Since March 16, its stock price has begun to rebound. As of the close of March 26, Fuling mustard was quoted at 31.40 yuan per share, a decrease of 2.03%, and the total market value was 27.872 billion yuan. Compared with its high of 41 billion yuan in total market value in February 2021, more than 13 billion yuan has been evaporated.

Shortly after the controversy over sodium content was clarified, Fuling pickled mustard’s light-salt products also quickly became available.

On March 22, Fuling Pickle held a new product launch conference at the group headquarters and officially launched Wujiang Light Salt Pickle with a salt reduction of more than 30%. Zhao Ping, general manager of Fuling Mustard Group, said that while the new product will meet consumers' demand for healthy dietary products, it will also lead the industry to officially enter the era of healthy light salt. "After the Spring Festival this year, the upgraded version of Wujiang light salt mustard has begun trial sales. On 16 In a pre-sale city, 200 million packs were sold in a short period of time."

Previously, according to the "Financial World" weekly observation, the same 80g of Wujiang mustard contains sodium according to different tastes. Differentiated, but most of them are higher than other brands. For example, Wujiang pickled mustard has a sodium content of 2165 mg/100g for the sauce-flavored, light-flavored, and hot and sour flavors, and the spicy flavor is 2558 mg/100g; while the original flavor of Jixiangju pickle has a sodium content of 1492 mg/100g, and the original flavor of Yuquan pickled mustard has a sodium content of 2165 mg/100 g. Sodium content is 2120 mg/100 g.

After the launch of light salt products, according to Taobao official flagship store data, the sodium content of the old version of Wujiang mustard with the same gram weight is 2558 mg/100g. The 70g bag of Wujiang light salt mustard sodium produced by Fuling mustard The content has been reduced to 700 mg/35 g.

(Picture/Screenshot of the official Taobao flagship store of Fuling pickled mustard)

More importantly, with light salt pickled mustard as a symbol, Fuling pickled mustard’s diversification strategy must also go further. Zhou Binquan said at the press conference that the "category expansion" in the "double expansion" strategy is to expand from focusing on the pickled mustard category to the coordinated development of categories such as Wujiang seasonings, Wujiang pickles, snacks, and bean paste; "expanding the market." It has expanded from the household consumer market to the catering market and the food industry consumer market, forming a crossover between pickled mustard, rice dishes, snacks, and sauces.

However, with these alone, can Fuling pickled mustard capture the "appetite" of consumers?

According to the "Recommended Dietary Nutrient Intakes for Chinese Residents (2013 Edition)", the daily sodium intake for healthy adults is 2200 mg, which is approximately equal to 5 grams of salt. Generally speaking, foods with more than 600 mg/100g of sodium in solid foods and more than 300 mg/100g of sodium in liquid foods are high-sodium foods. Based on this calculation, the new Wujiang mustard product after reducing salt is still in the high-sodium category.

“I have always felt that snacks like pickled mustard are not very healthy, and there may be too many additives with strong taste. Most of the time it is just a flavor enhancer, eaten with vegetarian dishes and porridge. I won’t eat too much, one I buy it once a month at most. The new salt-reducing product may be a new experience for me," Yang Mengmeng, a post-95s generation who is losing weight, told Caijingtianxia Weekly.

Zhu Danpeng, a Chinese food industry analyst, also believes that “the pickled mustard track itself does not have a big health label, and its future growth has hit the ceiling, while the new salt-reduced products launched by Fuling pickled mustard are of little significance to health. , but it will affect the taste to a great extent.”

As the only listed company in the mustard industry, Fuling’s long-term revenue-increasing tool for mustard is price increase. Since 2008, the price of Fuling mustard has increased 12 times. Last year, some netizens discovered that in some online stores, Fuling Zhacai launched a "five-year agarwood gift box" mustard with a net content of 900 grams but a price as high as 1,521 yuan, comparable to Moutai. However, as the company's profit growth rate declines, Fuling's "price increase" strategy of pickled mustard seems to have hit the ceiling.

According to the financial report, Fuling mustard saw an increase in revenue but not profit in 2021, with revenue increasing 10.82% year-on-year to 2.519 billion yuan, while net profit attributable to the parent company fell 4.52% year-on-year to 742 million yuan, excluding non-net profits It fell 8.49% year-on-year to 694 million yuan. In 2021, mustard products accounted for 88.39% of revenue, but costs increased by 26.81% year-on-year, and gross profit margin fell by 5.01%.

In this regard, the company explained that the purchase price of cabbage heads, the main raw material of Fuling mustard, soared in early 2021, the price of raw materials was abnormally high, and the price fluctuations of bulk commodities in the middle of the year caused the prices of packaging, auxiliary materials, etc. The sharp rise has put the consumer goods industry under pressure on the production side, while on the sales side, the challenges of the distribution system have increased, and it is also facing a greater impact from new channels such as community group buying.

Fuling Zhacai stated in its financial report that due to the impact of market supply and demand, the prices of green cabbage heads and semi-finished mustard tuber products will increase by approximately 80% and 42% year-on-year respectively in 2021, causing the company’s main business costs to increase by approximately 13% year-on-year last year. .

Fuling’s mustard business model is very simple. The company purchases green cabbage heads, processes them into bags of mustard, and then sells them to dealers to collect cash. The Fuling area of ??Chongqing produces more than half of the country's mustard cabbage, which has become a unique moat for Fuling mustard. Fuling mustard, which was listed on the Shenzhen Stock Exchange in 2010, has ranked first in domestic market share for many years and is the undisputed industry leader. It was once known as "mustard" in the capital market.

From 2010 to 2021, the company's revenue increased from 545 million yuan to 2.519 billion yuan, an increase of 362%; the net profit attributable to the parent increased from 56 million yuan to 742 million yuan, an increase of 1225 %. In 2021, the gross profit margin of the mustard category of Fuling mustard reached 54.80%. On February 19 of the same year, Fuling mustard hit a high of 53.90 yuan, and the total market value also exceeded 41 billion yuan.

However, in the first three quarters of 2021, Fuling mustard has already experienced "increasing revenue without increasing profits". Its revenue in the first three quarters increased by 8.73% year-on-year, but the net profit attributable to the parent company and the non-net profit were respectively Year-on-year declines of 17.92% and 19.22%. It is worth noting that the inventory balance of Fuling mustard tuber was 330 million yuan at the end of 2018; by the first three quarters of 2021, it had grown to 482 million yuan. The increase in inventory seems to mean that Fuling mustard is beginning to be "hard to sell".

In order to increase revenue, Fuling pickled mustard decided to increase its price. On November 14 last year, Fuling mustard announced that it would adjust the ex-factory prices of some products, with price increases ranging from 3% to 19%. After the price increase, although the revenue of Fuling mustard in the fourth quarter of last year dropped from the previous quarter, the net profit increased from 127 million yuan in the third quarter to 238 million yuan.

According to the announcement and Sichuan Securities Research Institute report statistics, among the 12 price increases of Fuling mustard tuber since 2008, 4 of them were direct price increases, which directly increased the ex-factory price and retail price of mustard tuber products. price, with the price increase ranging up to 19%; the remaining 8 times were indirect price increases through adjustments to weight or packaging.

As raw material prices continue to rise and costs are under pressure, the domestic packaged mustard market is approaching its ceiling. Data shows that from 2013 to 2019, the domestic packaged mustard market size increased from 3.779 billion yuan to 6.688 billion yuan, with a compound annual growth rate of 9.98%. However, some institutions predict that its annual compound growth rate will decline between 2020 and 2024. to 8.23%. As the absolute leader in the industry, Fuling pickled mustard has very limited room for growth in its market share.

Under multiple pressures, "raising prices" to cover the cost pressure has become a helpless move for Fuling mustard. At that time, many people thought that bagged Wujiang mustard cost only a few cents, but the unit price has risen to nearly 4 yuan. Even high-end "sky-priced mustard" products appeared last year.

According to the observation of "Financial World" weekly, in the current traditional supermarket channels in Beijing, the prices of Wujiang mustard products under Fuling Mustard are generally higher than other brands.

Although Wujiang pickled mustard, Jixiangju and Yuquan pickled mustard all offer 80g pickled mustard priced at 3.5 yuan/bag, Wujiang pickled mustard has different flavors and weights divided into more detailed categories, and the pricing is also different.

For example, for a 70g bag of original mustard, Wujiang mustard sells for 3.2 yuan, while Yuquan pickle sells for 2.5 yuan; 300g of Wujiang pickle sold in cans with rice is priced at 13.8 Yuan, Jixiangjuxia rice is 266g plus 40g (***306g) priced at 13.8 yuan.

"In early January last year, I bought 2 150g packs of Wujiang Fuling crispy pickled mustard at Tmall Supermarket. The original price was 3.5 yuan/pack, and the actual payment discount was 3.33 yuan/pack. But now I click on the same product The link to the same product has changed to 130g mustard with an original price of 5.5 yuan/pack and a discount of 4.4 yuan/pack," said Bao Xiaoguo, a consumer born in the 1990s.

(Picture: provided by the interviewee)

When the price of Fuling mustard was raised at the end of last year, Zhu Danpeng also bluntly told the "Financial World" weekly that the price increase was detrimental to the stage of Fuling mustard. Sexual profit growth may be helpful, but it may not be useful for performance in 2022 and longer-term improvements.

According to a report from Everbright Securities, with the price increase, the sales volume of Fuling mustard has declined. Data shows that in 2019, the price of Fuling mustard increased by 8% year-on-year, and sales fell by 4%; in 2020, after the market price digestion in 2019, the sales performance was not obvious, but in 2021, when the price rose by 13%, the sales volume increased again down 2%.

Bai Wenxi, chief economist of IPG China, also told Caijingtianxia Weekly, "Excessive price increases will trigger and enhance the substitution effect of products. The room for price increases of Fuling mustard has gradually narrowed. Price adjustment methods need to be used with caution. And due to the existence of price rigidity, even if the price adjustment is affected by costs, the company is not willing to reduce prices after the cost drops." But Fuling mustard is still " Not short of money."

According to Euromonitor data, in terms of retail sales, the market concentration of packaged mustard has maintained a steady increase from 2008 to 2019, rising from 46.15% in 2008 to 72.2% in 2019. The market share of Fuling pickled mustard has increased from 21.28% in 2008, which is more than double the 9.56% of the second-place Yuquan mustard; to 36.41% in 2019, which is higher than the 11.5% of the second-place Yuquan mustard. More than twice.

To become a giant in the mustard industry, Fuling mustard cannot do without its major shareholder, Chongqing Fuling District State-owned Assets Supervision and Administration Commission. Tianyancha data shows that Chongqing Fuling District State-owned Assets Investment and Management Group Co., Ltd. currently holds 35.26% of the shares and is the actual controller of Fuling Mustard.

(Photo / Photo by "Financial World" Weekly)

At the same time, Fuling pickled mustard also has a high gross profit margin that many snacks cannot match. Its main products, mustard and radish, even after the gross profit margin dropped by more than 5% year-on-year in 2021, are still as high as 54.80% and 49.05% respectively. Both of them are much higher than the gross profit margin dropped by 6.46% to 23.89% in the first half of 2021. Master Kong instant noodles.

"Fuling mustard mustard is definitely not bad at money. The company's own distribution model is to pay first and then deliver the goods. Moreover, its leading position and market share are there. It has been around for ten years. There may be no problem. It just needs to break through its own ceiling and invest a lot of manpower and financial resources in the layout of other projects.

From the perspective of financial data, at the end of 2021, the company’s asset-liability ratio was 7.51%, with total assets of 7.749 billion yuan, liabilities of 581 million yuan, and monetary funds on the books of 3.086 billion yuan. There are no Short-term borrowing and long-term borrowing. According to Jiemian News, Fuling mustard dividends have reached 577 million yuan in 2021, accounting for 77.76% of the net profit in the same year. Moreover, in 2021, Fuling mustard tuber also completed a fixed-increase capital raising of 3.28 billion yuan to add 200,000 tons of mustard tuber production capacity.

“Fuling mustard continues to expand production capacity despite increasing revenue but not profit, and its main business has peaked. This is to consolidate market share. This is a necessary move for companies to maintain their market position. It is also a basic action for sustainable development, and large-scale dividend distribution and financial management are, to a certain extent, to maintain investors' concerns about supporting stock prices and increasing profits," Bai Wenxi said.

In fact, before launching light-salt products and telling the story of "healthy catering", Fuling mustard muster has been trying to develop a second growth curve in order to get rid of the constraints of a single category on the company's performance. In 2014, the company began to diversify its development and launched products such as radish and kelp shreds. In 2015, it spent 129 million yuan to acquire Sichuan Huitong Food Industry Co., Ltd. and announced its entry into the field of kimchi. However, in 2021, its mustard products still accounted for 88.47% of the revenue, and the contribution of pickles and other products to the company's total revenue is still negligible.

At that time, Fuling mustard’s reply was that adding a small amount of radish was not to hedge costs, but to conduct market research and testing to meet consumers’ demand for a fuller taste; the radish used by the company, It is a radish originating from Linghai, Liaoning Province, Northeast China. Its main quality indicators are far better than those in the general vegetable market. The cost of Linghai radish shipped to Fuling, Chongqing is no lower than that of mustard. However, it seems that the inclusion of "radish" in Fuling mustard is not recognized by the majority of consumers.

It is worth noting that Fuling Mustard's 2021 financial report showed that in 2022 the company will face the contradiction between high-quality rapid development and sales bottlenecks. In order to solve the current dilemma, the company will use "sales breakthroughs to achieve growth" is the primary strategic task, and the key tasks include paying close attention to the three major growth points of mustard price adjustment, health, and attracting new customers, and implementing the three key actions of terminal price adjustment, upgrade and version change, and national trend and health promotion.

In addition to raising prices, can Fuling's "extracting Mao" tell a new story?

(At the request of the interviewee, Yang Mengmeng and Bao Xiaoguo are pseudonyms in the article)