“King of Vegetable Fat” Jiahe Food Gambling Coffee

Wen| Zebra Consumption Ren Jianxin

The new tea drinks suddenly abandoned the vegetable fat powder collectively, and Jiahe Food, the king of the vegetable fat powder, immediately experienced a major decline in performance.

Faced with the severe operating situation, the company decided to focus on the coffee business and try to find a new growth curve.

Yesterday, the company disclosed its “Prospectus for Issuing Stocks and Securities to Specific Objects” and raised 550 million yuan to expand its coffee production capacity, and it is on the verge of doing so.

550 million on coffee

After more than a year of planning and promotion, the preliminary work of refinancing of Jiahe Food (605300.SH) is basically ready.

On January 16, after receiving the approval of the China Securities Regulatory Commission for registration, yesterday, the company disclosed the “Prospectus for Issuing Stocks and Securities to Specific Objects” and that in the next 12 months, refinancing work will be carried out at an appropriate time.

According to the plan, the company will issue shares to no more than 35 qualified specific objects and raise no more than 725 million yuan, of which 550 million yuan will be used for coffee production expansion and construction projects and 175 million yuan will be used to supplement working capital.

Under the coffee production expansion construction project, Jiahe Food plans to build a coffee production base with a construction period of 24 months. After the project is completed, it will have an annual production capacity of 16000 tons of roasted coffee beans, 3000 tons of ground coffee powder, 8000 tons of hot and cold extract coffee liquor, 10000 tons of RTD ready-to-drink coffee and 610 tons of freeze-dried and mixed-flavor coffee.

According to the company’s calculations, during the operating period of the project, the average annual operating income was 1.119 billion yuan, the average gross profit margin was 14.25%, and the average net profit was approximately 77 million yuan.

Currently, the controlling shareholder of Jiahe Food is Liu Xinrong, and the actual controllers are Liu Xinrong and Tang Zhengqing. The two directly hold 32.26% and 23.04% of the equity of the listed company respectively, and indirectly control 22.11% of the equity through Ji ‘an Huixin, the third largest shareholder. In addition, Ji’ an Huixin is the executive partner of Ningbo Heli, the fourth largest shareholder. To sum up, Liu Xinrong and Tang Zhengqing jointly control 82.61% of the voting rights of listed companies. This fixed increase will not affect the stability of the control rights of listed companies.

This fixed increase of Jiahe Food has received continuous attention from the market in the process of promoting it. In November 2024, the fixed-increase application was reviewed and approved by the exchange, and the company’s stock saw a surge.

On November 26, the company’s share price opened slightly lower, then quickly rose, and closed at a daily limit that day. The next day, the stock price corrected slightly. On the 28th and 29th, two more daily limits were gained, and the company’s stock price once stood at the highest point of the year at 17.61 yuan.

After yesterday’s prospectus was disclosed, the market became extremely calm. The company’s share price went green throughout the day, closing at 13.73 yuan/share, down 3.85%.

the second curve

In China, coffee is an exotic product. In 1989, Nestlé entered China and used instant coffee to dominate the China coffee market for decades. At that time, a China family that could keep a bottle of Nescafe coffee in a cabinet must have been either rich or expensive.

The pioneer of coffee chains in China was Shangdao Coffee. In 1996, Shangdao Coffee landed in Hainan, ushering in the era of chain coffee shops in mainland China. Coffee + Western-style meals, big shops + luxury clothes have attracted a large number of middle-class mainland people who got rich first and joined them crazily. In the past ten years, the number of Shangdao Coffee stores has reached 3000. Many of the first cafe memories of the post-60s, 1970s and 1980s in the mainland are Shangdao Coffee. But what Shangdao really sells is not coffee, but steak and other Western food.

It was not until 1999, when Starbucks opened its first store in Beijing that the era of mainland coffee chains really came. It is the teacher of all local coffee chains in China today. With higher pricing and high-end positioning, the high-line urban market has been rapidly deployed and has become an important social space for urban white-collar workers and business people in China.

Looking around, Starbucks China has lived peacefully for more than a decade without a comfortable life without rivals.

Until 2017, Lucky was born in Xiamen. With the attitude of replacing Starbucks, it quickly opened stores across the country through its price advantage, directly lowering the coffee that Starbucks often costs more than 30 yuan to the range of 15-20 yuan.

Lucky, like the Sao Paulo Cafe in Japan, made up for the gap in cost-effective coffee in China, gradually transformed coffee from elite to popular in China, and cultivated a large number of coffee users.

Lu Zhengyao, as the founder of Lucky, was eliminated in 2020. After that, he continued to start a business, made a big circle, and still returned to the coffee track.

In October 2022, in Fuzhou, Fujian, Lu Zhengyao and Kudi returned again, coming even more fiercely.

Affordable prices have promoted the development of China’s coffee industry. Currently, the number of freshly ground coffee stores across the country has nearly 200,000.

According to industry data, in 2022, my country’s per capita coffee consumption will be 9 cups, and in 2023, it will rapidly increase to 16.74 cups. However, compared with the world’s major coffee consuming countries, there is still a big gap.

As the domestic coffee consumption concept matures, users ‘demand for coffee has gradually diversified, and freshly ground, ready-to-drink, pre-packaged, capsule coffee, etc. can all find their own markets.

Since 2017, Jiahe Food has been vigorously deploying its coffee business. After years of development, coffee has become the company’s second largest business segment. Its products cover the entire coffee product chain, including instant coffee, coffee solid drinks, cold extracted coffee liquid, roasted coffee beans, ground coffee powder, espresso liquid, freeze-dried coffee, etc. However, the company’s coffee business is mainly aimed at B-end customers such as coffee chains and industrial industries. C-end users do not have a deep perception of Jiahe Food’s coffee business.

In the past, Jiahe Food built a production line with traditional instant coffee as its main product. Now it is unable to meet the production demand of fine coffee, and its structural production capacity is obviously insufficient.

Vegetable fat was abandoned

In the 1950s, Kanason Company of the United States developed a solid powder using raw materials such as vegetable oil. It is easily soluble in water and has a flavor and taste that exceeds dairy products. It quickly became popular as a coffee companion.

Driven by brands such as Nestlé, coffee companions entered the China market and, together with instant coffee, cultivated the first generation of coffee users in China.

Coffee companion is also what users now know as vegetable fat powder.

Jiahe Food is one of the earliest participants in the vegetable fat end industry in China. In April 2021, the company was listed on the main board of the Shanghai Stock Exchange, becoming the first stock in vegetable fat end.

Industry data shows that in 2023, the national market size of vegetable fat powder will be 8.674 billion yuan, and Jiahe Food’s market share will be approximately 22.27%, making it an absolute leading position.

In the early days, Jiahe Food’s vegetable fat powder products were mainly supplied to industrial users, with Fragrant Piao, Tongyi, Wahaha, etc. being its main customers. At this stage of development, the company’s business is relatively stable, but there is little room for growth.

Until in recent years, new tea drinks have taken the lead, various brands have expanded crazily with the help of capital, and Jiahe Food Industry has ushered in its own period of rapid development.

Jiahe Food once disclosed in the prospectus that CoCo Duke, Aunt Shanghai, Gu Ming, Yihetang, Mixue Bingcheng, etc. are all important customers of the company. At that time, almost all of its top five domestic customers came from the new tea industry.

The demand from the new tea and beverage industry has driven the company’s sales of vegetable fat powder products to continue to grow, from 144,300 tons in 2019 to 168,700 tons in 2023.

However, as the development of the domestic new tea and beverage industry enters a mature stage, competition for product power has become the core, and various brands have played the health card one after another, and zero vegetable fat has become the general trend.

In 2024, Jiahe Food’s operating conditions will turn sharply. In the first three quarters, the company’s powder oil business revenue dropped by 42.17%. Among them, the most serious decline is the chain channel dominated by new tea drinks.

Affected by this, the company expects to achieve a net profit attributable to the parent company of 85 million yuan to 120 million yuan in 2024, a year-on-year decrease of 53.64% to 67.22%.