The Proportion Of Self-Produced Raw Materials Is Less Than 10%, And The "First Brother" Of China'S Tea Industry Is Insufficient

There is no traditional tea listed company in such a large A-share market. The curse of "one Lipton is inferior to 60000 Chinese tea enterprises" has always been the pain of China's tea industry.

In fact, since Tieguanyin group broke through the A-share market in 2012, tea companies have been submitting prospectuses, but so far, the position of "tea first share" of a share has been vacant.

On February 20, 2021, the official website of China Securities Regulatory Commission (CSRC) once again disclosed the application draft of the IPO prospectus of China Tea Co., Ltd. (hereinafter referred to as "China tea"), which means that the IPO process of the company has accelerated and entered the stage of pre disclosure update.

Relying on the actual controller COFCO group and the huge supply and marketing network, Chinese tea is undoubtedly the industry's first brother. However, the 21st century economic reporter research found that the proportion of Chinese tea raw materials is less than 10%, and the key links are controlled by others. The market share of sales link is even more difficult to reflect the "first brother" status of the industry. The whole series of products have no obvious advantage in the domestic market, and the market share of single category is only 1.67%. Its IPO projects are only to increase production capacity, not to focus on industry integration. Chinese tea is more like COFCO brand marketing company gathered to promote the listing of tea business.

The war of tea shares

China is the largest tea producer and consumer in the world. According to the data, the domestic tea market sales volume will reach 273.950 billion yuan in 2019. In 2017, the total number of tea enterprises in China has reached more than 60000.

With a market scale of 300 billion and more than 60000 traditional tea enterprises, no A-share listed company has been established. Contrary to the huge market scale, the capitalization of Chinese tea enterprises has always been difficult to break through.

According to the preliminary statistics of 21st century economic report, there are no listed companies mainly engaged in tea in the A-share market, but there is no lack of traditional tea enterprises in the Hong Kong stock market and the new third board.

It is worth noting that after many tea enterprises were listed and listed, they did not lead the successful capitalization of Chinese tea, creating "Maotai shares" in tea, and most of the companies were in the plight of performance loss.

Among the three Hong Kong listed tea companies, Pingshan tea, which is engaged in high-end traditional Chinese oolong tea, has long been transformed into a blockchain group company due to its poor performance; longruncha, known as the first share of Pu'er tea, landed in Hong Kong stock market with the honor of "new national ceremony", but it was forced to delist by the Hong Kong Stock Exchange in 2019 due to its loss of performance and low stock price. Tianfu tea, the only tea stock in Hong Kong stock market, is not We have to raise the stock price without massive buybacks.

The performance of tea enterprises listed on the new third board is seriously differentiated. The reporter of 21st century economic report found that among the 15 new third board tea enterprises that can be counted at present, 10 enterprises will have a sharp decline in performance in 2020.

China's tea market industry concentration is low, the number of tea enterprises is large and scattered, "there are good tea, no famous brand; many brands, all kinds of homogenization serious" problem, make the road of capitalization of tea enterprises more difficult.

"At present, the domestic tea industry is in a development stage of intermingled good and bad, low quality and high price. There are categories without brands, and standardization and standardization need to be strengthened." Zhu danpeng, an analyst of China's food industry, believes that to solve the capitalization problem of Chinese tea enterprises, brand enterprises are needed to lead. In the view of the industry, the breakthrough of China's tea industry needs to be led by brand enterprises in the whole industry chain covering tea planting, purchasing, processing, sales and R & D.

China tea dilemma

Does China's tea industry in the IPO rush have the foundation to realize the first white horse stock of Chinese tea?

China's tea is a state-owned holding tea enterprise fully supported by COFCO. Its history can be traced back to the China tea company established in 1949. In 2019, China's tea industry will achieve a total revenue of 1.634 billion yuan and a net profit of 166 million yuan.

In terms of volume and scale, China tea company is the most representative of Chinese traditional tea enterprises.

But the 21st century economic report reporter research found that China's tea still can not get rid of the common problems of the development of traditional Chinese tea enterprises, it is more like COFCO brand marketing companies gathered to promote the listing of tea business.

In 2017, China Tea Co., Ltd., the predecessor of Chinese tea, was a wholly-owned subsidiary of Zhongtu livestock Co., Ltd., which was 100% controlled by COFCO before the mixed ownership reform. In October 2015, COFCO approved to integrate its tea business and promote the listing process of the company.

In April 2017, in order to promote the mixed reform and listing of Chinese tea, COFCO group agreed to adjust the scope of China's tea assets, stripping COFCO Shancui, Haina Baichuan, Zhonghong biology and Sanli Guangzhan to Zhongtu livestock.

After that, China tea started a series of mergers and acquisitions to solve peer competition and integrate tea assets. It successively acquired 40% equity of Xiamen, 51% of Fengqing, 100% of Wuzhou, 83.87% of Zhongcha technology and 60% of Longguan.

In addition to asset integration, the company actively introduces external investors. In June 2017, the sole shareholder of China tea, tudao decided to introduce five new shareholders, namely, Polystone, Guoshou property insurance, Tianjin Ziming, Kunxin Mingyu and Mitsui property as new shareholders through capital increase and property right transfer.

When Chinese tea was introduced into foreign investment institutions, it was clearly pointed out that China tea and China native animal husbandry corporation should try its best to prepare for the listing of the company as soon as possible, and should try its best to complete the listing before the third anniversary after the investor's delivery.

In December 2019, China Tea Co., Ltd. was established, and China tea and China native animal husbandry company once again made it clear that the application materials for listing should be submitted before December 31, 2020.

In June 2020, China's tea first submitted the draft of the IPO, and plans to raise 540 million yuan to carry out two projects of Yunnan Pu'er tea production capacity construction, marketing network and brand construction.

How about the quality of China's tea that has been rapidly integrated into the market?

According to the prospectus, during the reporting period from 2017 to the first half of 2020, China's tea revenue was 1.229 billion yuan, 1.490 billion yuan, 1.634 billion yuan and 771 million yuan respectively, and the net profits were 184 million yuan, 145 million yuan, 166 million yuan and 83.4133 million yuan, respectively.

Despite the vigorous integration, China's tea revenue has shown a downward trend in the reporting period, and the market share is even less bright spot. According to the prospectus, about 85% of China's tea sales rely on the domestic market, but the whole series of products do not have obvious advantages in the domestic market.

Take 2019 as an example, the domestic sales of Chinese tea and green tea are only 0200 tons, accounting for 0.02%; the domestic sales of Oolong tea are only 3800 tons, accounting for 1.74%; the domestic sales of black tea are 3800 tons, accounting for 1.67%; the domestic sales of black tea are 3700 tons, accounting for 1.15%; the domestic sales of white tea are 0300 tons, accounting for 0.77%.

Both oolong tea and Pu'er tea, which contribute more than 50% of China's tea revenue, have no advantages in the domestic market.

In addition, China's tea data show that the company's overseas market is shrinking rapidly due to technical barriers and tariff barriers, and sales in major export markets have dropped sharply.

More worrisome for the market is that China's tea claims to monitor the operation of the whole industry chain, but its prospectus reveals that China's tea has not grasped key advantages from raw materials to sales.

During the reporting period, more than 90% of raw and refined tea, the main raw materials of Chinese tea, needed to be purchased, and the proportion of self-produced tea was even less than 10%.

China tea has only one subordinate company, Zhongcha Songxi and Zhongcha Longguan respectively have their own tea garden. Zhongcha Songxi is a 2420.42 mu tea garden contracted by the state-owned tea farm of Songxi County in Fujian Province. It has been contracted for 30 years and has the right to manage the tea garden without biological assets. Only four employees of Zhongcha Songxi are responsible for the management. The contracted area of Longguan tea garden is only 300 mu, with a contract period of 50 years; the contracted area of farmland is about 100 mu, with a contract period of 30 years.

Chinese tea admits that it does not control the tea garden through the supplier, and the ownership of the tea garden belongs to the supplier or the farmer. This means that China's tea does not grasp the supply of raw materials, and the purchase is facing great market fluctuations and product quality problems.

In terms of sales mode, China's tea adopts the direct selling and distribution mode, the brand tea business adopts the sales mode of "distribution oriented, direct selling supplemented", and the raw material tea business mainly adopts the direct sales mode. During the reporting period, 65% of the company's products needed to be sold by distributors.

If the upstream does not master the raw material capacity and the downstream does not grasp the market, the positioning of Chinese tea may be more accurate for brand operators. The rapid integration of Chinese tea is far from leading the tea brand in the whole industry chain.

In the feedback opinions of the CSRC, it focused on the purchase and sales mode of China's tea, directly questioned whether the operation mode could control the high-quality tea resources, whether the sales subsidiaries and channels were in place, and whether there was a risk of undisclosed sales.

In this regard, the 21st century economic reporter has repeatedly called China's tea, but the phone has never been answered.

Worries about the future

China's tea has not yet got the permit to go public, and the market has raised many doubts about the operation mode and development prospect of traditional tea enterprises.

In recent years, new tea drinks and tea brands have been born, some of which are favored by capital, and new tea brands have also joined the rush to be listed on the market.

In February 2021, Naixue tea, a new tea brand, formally submitted a prospectus to the Hong Kong stock exchange, which is expected to win the "first share of new tea". Prior to that, there were also Xi Cha and Mi Xue ice city which were rumored to be on the market.

The industry believes that the habit of modern tea drinking has changed. Famous tea brands such as Lipton have already led the world tea industry market through industrialization, scale and branding. Traditional Chinese tea enterprises still operate under the mode of artificial tea making. The industry has obvious characteristics of agricultural products, with many categories and scattered planting.

The development of tea products and tea derivatives of traditional tea enterprises is insufficient, and most of them are low value-added products such as original leaf tea and tea powder. It is difficult to create brand and low profit, and can not realize industrialization and standardized production, which determines that many traditional tea enterprises have no business model of rapid growth.

At the same time, the long industrial chain of tea enterprises and the lack of standardized management make it hard for the traditional tea enterprises to enter the capital market.

At present, China's tea industry for many years there are more than sales, export structure imbalance pain point, the traditional tea market is facing shrinking risk, industry companies generally face greater sales pressure.

According to the China tea prospectus, as of the end of December 2019, the company's existing design capacity exceeded 30000 tons, but the company's capacity utilization rate in 2019 was only 58.71%. If the project is successfully put into operation, the processing capacity of Chinese tea will be 3000 tons / year, 500 tons / year for small package Pu'er bulk tea, and 250 tons / year for Yunnan black tea. How to digest the huge production capacity is a problem that Chinese tea has always been unable to get around.

At present, the company has accumulated a large amount of inventory to be sold. At the end of each reporting period, the book value of the company's inventory has reached 660 million yuan, 715 million yuan, 967 million yuan and 941 million yuan respectively, accounting for 38.31%, 39.42%, 45.51% and 45.62% of the total assets of each period.

China tea said that if there are significant adverse changes in tea market demand in the future, it may lead to a decrease in the net realizable value of the company's inventory, and will face a large inventory falling price loss, which will have an adverse impact on business performance.

COFCO group is the biggest source of Chinese tea, and the core advantages of the company are limited to this.

Compared with 87 domestic tea enterprises with total assets of more than 100 million and 6 tea enterprises with total assets of more than 1 billion, China's tea has no outstanding advantages. It is still very difficult to create a "Maotai" tea in the capital market by relying on the integration of resources and the capitalization operation for listing.