“A Kuan Food, which relies on the popularity of the popular” Red Oil Noodle Skin “brand and is contracted for the brands of Ma Liuji and Li Ziqi, recently updated its prospectus again and plans to land on the Shenzhen Stock Exchange.”.
During the epidemic, under the catalysis of the new formats of “home economy” and “live broadcast with goods”, the products of Akuan Food, such as red oil noodles, hot and sour noodles, and Xinjiang Fried rice noodles, hit the demand and sold out through online channels. During this period, A Kuan also gained the favor of many capitals. According to enterprise investigations, in 2020 alone, Akuan Food obtained three rounds of financing, with investors including Gaoling Venture Capital and Maotai Investment.
In 2021, A-Kuan Food’s market share among instant noodle manufacturers was 2.1%. In addition to its own brand, A-Kuan Food is also the “OEM king” of the online celebrity brand. Last year, with the support of Zhang Lan and Wang Xiaofei, A-Kuan Food, as the agent behind the Ma Liu Ji, also caught fire. In addition, it mainly provides OEM services for brands such as Three Squirrels, Baicaowei, Li Ziqi, and NetEase Yanxuan.https://store.stoneitech.com/
One side of the production network is popular; While becoming the company behind online celebrity, A-Kuan Foods tightly grasps traffic to make money. Currently, Akuan Food is positioning itself as a leading enterprise in the new convenient food industry. In the future, the company plans to continue to create prefabricated vegetable products and become a benchmark enterprise for the new generation of convenient food and prefabricated vegetables.
The 665 million yuan raised by Akuan Food this time is planned to be used for the construction of the health food industrial park (Phase I), research and development center construction project, and other projects. As early as December 2021, A-Kuan Food submitted its initial listing application, updated its prospectus again in June 2022, and updated its latest performance again on March 1 this year.
However, from the latest 2022 financial report data, the company’s high growth is no longer. As of the first three quarters of 2022, Akan Food’s revenue was 927 million yuan, with a year-on-year growth rate of 3.39%, which has slowed significantly compared to the past two years. In 2020 and 2021, the company’s revenue was 1.11 billion yuan and 1.214 billion yuan, respectively, with year-on-year growth of 75.91% and 9.37%.
1、 “Online Red” Products and OEM
A Kuan Food is seen as a troublemaker in the convenience food circuit, which is closely related to the background of founder Chen Zhaohui.
Chen Zhaohui, 54, graduated from the China Youth University of Political Science with a major in law in 1991 and worked as a civil servant in the Youth Department of the Communist Youth League Chengdu Municipal Committee for two years. In 1993, he resigned from public office and became a salesperson at Sichuan Pepsi Cola Beverage Co., Ltd. In 1994, Chen Zhaohui founded Chengdu Yashi Advertising Company, which has been engaged in advertising business for six years. In 2001, he began to engage in the convenience food business and founded Sichuan Baijia Food Co., Ltd. After that, he started a convenience food business for over 20 years.
It is worth mentioning that due to the inclusion of the word “Baijia” in the company’s name, another well-known convenience food producer, Baixiang Food Co., Ltd., has repeatedly negotiated with the company, believing that the word “Baijia” and the image are prone to mistaken recognition with the registered trademark of Baixiang Food. The company has two lawsuits with Baixiang Food due to the use of the “Baijia” trademark. Finally, at the end of 2020, the company reached an agreement with Baixiang Food, giving the other party 900000 yuan and no longer using the “Baijia” brand.
It is not easy to find a way out of the red sea of traditional instant noodle markets. Chen Zhaohui once said, “Frankly speaking, although he survived, he did not live well and grew very slowly. From 2000 to 2015, the company worked for 15 years, and its annual output value was still less than 300 million yuan.”
Until around 2015, Chen Zhaohui caught some new consumption changes: First, Chinese fast food such as flour and noodles in the catering sector grew rapidly, and the unit price increased rapidly; The second is the rapid rise of the takeout market. That is, “while pursuing convenience and speed, the requirements for freshness, delicacy, and health are higher.”.
Therefore, he proposed the concept of a new type of convenience food, which is mainly produced through non fried processes. In 2015, Chuanbai Food officially launched its future flagship product – “Red Oil Noodle Skin” series under the “Akuan” brand. However, the real outbreak of the Red Oil Noodles series was during the epidemic. The prospectus wrote that since the COVID-19 in 2020, new business models such as “home economy” and “live broadcast economy” have accelerated, and online consumption has ushered in explosive growth.
Since 2018, the company has also been continuously upgrading the product form, packaging, and marketing methods of the “Red Oil Noodle Skin” series. In 2020, the annual sales of the red oil noodle skin product series was about 400 million yuan, with a cumulative sales of over 100 million copies. During the “Double 11” period in 2020 alone, the online order volume reached about 16 million copies. In 2021, the annual sales of this product series will be about 500 million yuan, with a cumulative sales of over 100 million copies.
In comparison, the overall operating revenue of the company in 2021 was 1.214 billion yuan, which was the single red oil noodle series, accounting for about 41.19% of the sales.
The best-selling of red oil noodles is related to the sales model of Akan Food. In 2019, 2020, 2021, and the first half of 2022, the company’s online sales channel revenue was 308 million yuan, 661 million yuan, 743 million yuan, and 327 million yuan, respectively, accounting for 50.46%, 61.34%, 63.3%, and 53.55% of the company’s main business revenue, with a relatively high proportion. The online sales channel has become an important sales channel for the company.
As a past advertiser, Chen Zhaohui’s marketing methods may have played a key role in the development of Akuan Food. During the epidemic, in the live broadcast rooms of leading anchors such as Li Jiaqi and Weiya, there were products such as Ah Kuan Food’s red oil noodles and sweet water surface, and there were also some celebrities behind social platforms such as Little Red Book and Tiktok.
At present, the instant noodle business, which focuses on red oil noodles, Chengdu sweet water surface, and Gouhun noodles, has become the main revenue source of the company. According to product classification, in the first half of 2022, the proportion of instant noodles, instant noodles, instant rice noodles, and self-heated food products was 58.15%, 29.5%, 10.92%, and 0.42%, respectively.
In addition to producing its own “online red” food, Akan Food will also assist other online red brands in production. The company mainly provides OEM services for customers such as Three Squirrels, Ma Liuji, Baicaowei, Li Ziqi, Laiyifen, Netease Yanxuan, etc. Including plum qi red oil noodles, plum qi potato youtan sour and spicy powder, Malauji sour and spicy powder, etc.
From 2019 to the first half of 2022, the top five customers of the company’s customized sales accounted for 91.65%, 89.44%, 85.63%, and 75.08% of the customized sales revenue, respectively, accounting for a relatively high proportion, and the main customers were relatively stable. However, the customized sales business of Akuan Food only accounts for about 10% of its main business, and independent production remains its main business.
According to data from Euromonitor/Everbright Securities Research Institute, from 2016 to 2021, the market share of A-Kuan food sales increased from 0.6% to 2.1%.
2、 Hard work, hard money
Although the single product became popular during the epidemic, it did not bring sustained and rapid growth to A-Kuan Food. In 2021, the company’s performance began to stall.
In 2021, the company’s operating revenue reached 1.214 billion yuan, an increase of 9.4% compared to 1.11 billion yuan in 2020; The net profit was 55841900 yuan, a decrease of more than 26% compared to 76078300 yuan in 2020. The company has fallen into a state of increasing revenue without increasing profits.
From 2019 to 2021, the gross profit margin of Akuan Food’s main business was 36.22%, 29.31%, and 27.37%, showing a downward trend year by year. The gross profit margin of the company’s main business in 2020 decreased by 6.91 percentage points compared to 2019.
In response, Akan Food stated that it was mainly based on the new revenue standards that in 2020, the company’s main business costs included transportation costs, handling costs, and storage costs incurred during transportation, which were originally accounted for in sales expenses. The impact on the current main business gross profit margin was 6.9 percentage points. After excluding the impact of the implementation of the new revenue standards, the company’s main business gross profit margin is 36.22%, 36.3%, and 34.5%. Overall, there is still a decline.
As for the gross profit margin of the company’s main business in 2021, which is 1.94 percentage points lower than that in 2020, A-Kuan Food said that it is mainly because of the gradual easing of the COVID-19 in China and the return to normality of consumer demand in the terminal market. In order to speed up the market layout and channel construction, the company has increased support for customers in various channels.
The return of demand to normal means that the situation of numerous domestic convenience food enterprises and fierce competition in the industry cannot be avoided. Akuan Food said that in recent years, it has also continued to invest in marketing expenses to carry out various forms of promotional activities, thereby creating brand influence and enhancing consumer loyalty.
However, this has also led to an annual increase in the company’s sales expenses. From 2019 to 2021, the sales expenses were 140 million yuan, 145 million yuan, and 164 million yuan, respectively.
The service fees for A-Kuan Food, mainly through online channels, in e-commerce channels are also increasing year by year. E-commerce channel service fees mainly refer to the sales promotion fees paid by the company to e-commerce platforms such as Taobao and JD.com, as well as delivery anchors and live streaming platforms for sales promotion in e-commerce channels. From 2019 to 2021, the company’s e-commerce channel service fees were 23.429 million yuan, 56.4639 million yuan, and 66.734 million yuan, respectively, accounting for 21.14%, 24.73%, and 24.91% of revenue.
In addition to making money from convenient food, the business of OEM is also difficult to do. According to the prospectus, from 2019 to 2021, the gross profit margin of customized sales of Akuan Food was 19.5%, 19.06%, and 17.59%, respectively, which was a significant difference compared to the gross profit margin of over 30% for e-commerce self-supporting and direct supply sales.
3、 The old problems of new enterprises
Although A-Kuan Food has made a breakthrough through the “new convenient food” story represented by red oil noodles, it is still difficult to make a further breakthrough in the highly competitive instant noodle market.
According to the prospectus, from 2018 to 2021, the compound growth rate of Akuan Food sales ranked first among the top ten manufacturers with a market share, and the market share rapidly increased to the top three domestic brands. Despite this, the company still occupies only 2.1% of the market share, and the “Taiwan funded”, “Japanese funded”, and “Korean funded” brands still occupy a dominant position in the market.
According to the research of Everbright Securities, in 2021, Dingxin’s international sales accounted for 35.8% of the market, with a unified 25.1%, Jinmailang 12.5%, Baixiang Food 5.9%, Xianyiding 2.8%, Nongxin 2.7%, and Akuan Food 2.1%, followed by Henan Simite, Henan Nanjiecun, and Hebei Zhongwang Food, all accounting for less than 1%.
In the domestic instant noodle market, there are not only absolute traditional leaders – Master Kang, Uni President China, Jinmailang, etc., but also various new brands including Shizu Ren, Lamian Noodles Shuo, and Hi Eating Home. In addition, three squirrels, good shops, Baicao flavor, Haidilao and other brands have also entered the market across the border. Including the prefabricated vegetable market that A-Kuan Food is entering, to some extent, has also diverted a portion of consumers.
A Kuan Food has a clear positioning for itself – “being better at new marketing methods such as online brand marketing, traffic operation, and IP creation”. It hopes that with the construction and implementation of the raised funds investment project, the company can further break through the bottleneck in production capacity. And its listing also carries the expectations of investors.
The sudden outbreak of performance during the epidemic has attracted a wave of investment from Akuan Food.
The prospectus records multiple equity transfers and capital increases made by Akuan Food since its establishment in 2016. Most of them occurred in 2020 and 2021. The investors include Tongchuangweiye, Gaolingyiheng, Qianhai Investment, Maotai Investment, and Jiangu Investment. After September 2021, the top five shareholders of the company, in addition to Chen Chaohui holding 52% of the shares, four institutions, Nanhai Growth, Gaolingyiheng, Qianhai Investment, and Fenghua Investment, all hold more than 4% of the shares.
It is worth mentioning that at the same time as investors enter, almost all of them have signed gambling agreements with A-Kuan Food. If the company is unable or can be reasonably expected to fail to fulfill its listing commitments, it will have the right to redeem, which has been included in a number of agreements.
For example, in the ninth equity transfer, the agreement requires that if the company cannot achieve the acceptance of its qualified listing by the competent department before June 30, 2022, or fails to achieve the qualified listing within 4 years after the company’s qualified listing application is accepted, the controlling shareholder and actual controller need to repurchase the underlying equity held by Shanghai Zhongyuan and Xinjiayi at the price agreed in the agreement.
With the end of 2021, A-Kuan Food submitted its first prospectus, some gambling agreements were also lifted. However, if it is not listed in compliance within a certain period of time, it still faces the risk of being abandoned by capital.
Overall, Aside from Hongyou Noodles, Akuan Food has not yet replicated its next explosive product, and although the OEM business has attracted attention, its gross profit has continued to decline. From online celebrity to Changhong, we still need to walk more steadily.
