The import and export situation of dairy industry in the third quarter of this year was recently released. Data show that in the third quarter of this year, China imported 600.9 million tons of all kinds of dairy products, a year-on-year decrease of 8.1%, of which 432,800 tons of dry dairy products, a year-on-year decrease of 4.3%.
Liquid milk was 176,100 tons, a decrease of 16.4% year-on-year. In addition to the decline in imports, the price of imported milk has also been squeezed by factors such as weak domestic demand and oversupply of raw milk.
As the main imported milk brand “Deya” milk of Pinwo food in recent years its performance is not optimistic. In 2023, the company’s net profit to the mother was a loss of 73.3708 million yuan, a year-on-year drop of 754.87%, while in the first three quarters of this year, the company’s net profit to the mother was still a loss of 5.727700 million yuan.
In addition to milk products, Pinfall Foods has also cultivated its own brands such as “Valentin” beer, “Henri” cereal, and “Jana” butterfly cake. However, only the beer business has achieved some results.
As the performance of normal temperature milk declined, the company placed its expectations for growth in the cheese business. In the first half of this year, the company increased its research and development and launch of cheese products. However, in recent years, the growth rate of the cheese market has gradually slowed down, new players have been pouring in, and the industry competition has become increasingly fierce, and whether the company can get a share of the cheese industry remains to be tested.
In 2020, Pinwo Food landed on the GEM to become the “first stock of imported food.” In this year, the company achieved revenue of 1.5 billion yuan, an increase of 8.91%, and the net profit of the mother was 136 million yuan, an increase of 37.31%, but this is the only time that the net profit of the company has been listed so far, which truly interprets the “listing is the peak.”
The business model of Pinwo Food is different from that of most domestic dairy companies, and it has created the “Deya” brand dairy products, which are produced by foreign suppliers such as Germany and Spain. In 2020, the company’s revenue from the “Deya” brand was 1.094 billion yuan, an increase of 13.18%, and the proportion of revenue reached 72.89%. However, since 2021, the development of Pinworth’s dairy business has begun to show some less optimistic “negative” signs.
Although the company’s revenue of dairy series in 2021 achieved 17.11% year-on-year, the gross profit margin of its dairy series dropped significantly by 10.16% year-on-year due to many unfavorable factors such as rising foreign procurement costs, rising shipping costs, and unstable transportation capacity.
The risk of this model of producing milk overseas and shipping it to China is not just cost volatility. From the perspective of product quality, some professionals have said that when (Pinworth’s milk) is shipped from Germany, in order to ensure the food safety of milk, the ultra-high temperature pasteurization method is used, although the shelf life is longer, but it will kill the active molecules in the milk, and cannot guarantee the retention of the same flavor and nutrients, which also leads to the lack of product core competitiveness and moat.
In addition, the current consumer demand update iteration speed is getting faster and faster, domestic dairy enterprises can quickly optimize the supply chain and deeply cultivate consumer demand, while imported milk due to production in foreign countries, limited by supply, the speed of category innovation is relatively slow.
Changes in the dairy industry in recent years have also made the imported milk business of Pinworth Food more and more difficult to do. Securities Star learned that this year, the domestic dairy industry is facing an oversupply of raw milk and fresh milk prices continue to fall. Pinworth Food also said in this year’s semi-annual report that the growth trend of China’s milk production is related to the pressure of slowing demand growth for dairy products and the phased surplus of raw milk. This has further squeezed the sales space of imported dairy products.
As the consumption growth of the domestic dairy market slows down, major dairy companies have set their sights on the cheese business. Pinworth Food also chose to increase the size of cheese products, the company’s 2023 annual report shows that in 2023 the company completed the Shanghai cheese factory reconstruction, production and auxiliary equipment procurement, installation and commissioning. The first batch of small round cheese was put into production at the end of the year. Through the independent production of original cheese products, the company optimizes the product mix and improves the profit margin.
However, the securities star noted that on the one hand, the cheese industry is undergoing industry shock adjustment. According to Kantar Consumer Index’s national household sample group data, cheese sales in tier 1 to 5 cities across the country increased by 9% in 2022, but in the 52 weeks to the second quarter of 2024, the overall cheese market sales fell by 19%. This significant decline in sales is mainly due to the loss of cheese consumers.
On the other hand, the cheese industry is also crowded with many participants, in addition to the head enterprises Miaoke Blue and Yili, a number of dairy players including bright, Sanyuan, Dr. Cheese, Junyao, Panda Dairy, etc., are increasing the layout of the cheese track.
The advantage of the industry’s leading enterprises is that they can concentrate resources and gain a stronger voice in the market. In a research report released in the second half of 2023, Puyin International pointed out that the competitiveness of players in the cheese industry in the future will depend on brand power, product research and development capabilities and marketing capabilities, and resource-rich and financially strong dairy companies such as Miaoke Lando and Yili are expected to continue to seize market share in the cheese industry. The slowdown in industry growth may also lead to a gradual deterioration in the profitability of small players.
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