Who We Are
We are a baijiu company in China devoted to offering premium baijiu products featuring sauce aroma profile. According to Frost & Sullivan, we ranked 14th among all baijiu companies in China with a market share of 0.8%, in terms of revenue in 2021. We have grown significantly faster than the industry average during the Track Record Period. Our growth capitalized on the increasing popularity of sauce aroma baijiu across China and consumer preferences towards premiumization, and we are expected to continue to benefit from these market trends. We operate four major baijiu brands in China, including our flagship brand Zhen Jiu (珍酒), a thriving brand Li Du (李渡), as well as two regional leading brands Xiang Jiao (湘窖) and Kai Kou Xiao (開口笑). Leveraging these renowned brands, we promote traditional Chinese baijiu culture by developing a broad selection of fragrant, mellow baijiu products to appeal to different consumer preferences and capture broader market opportunities.
We aspire to carry forward rich culture heritage and turn every drop of aromatic baijiu into a joyful and memorable moment. Since our inception, we have been striving to make the best-quality products and bring cheerfulness to baijiu consumer community. We are committed to the traditional time-honored baijiu- making techniques and reinvigorating them by taking advantage of modern technologies to develop iconic recipes and tastes. We selectively locate all of our production facilities for sauce aroma baijiu in Guizhou’s Zunyi region, a place that is widely considered ideal for making fine sauce aroma baijiu in China, to secure the unique texture and taste of our Zhen Jiu products.
Our Market Opportunities
Baijiu is China’s national liquor and the world’s most consumed liquor. Baijiu accounted for 69.5% of the alcoholic beverage market in China in terms of revenue in 2021, exceeding wine’s 49.9% market share in French alcoholic beverage market and beer’s 50.5% market share in the U.S. alcoholic beverage market in the same period, according to Frost & Sullivan. The market size of baijiu industry in China is expected to grow from RMB621.1 billion in 2022 to RMB769.5 billion in 2026, at a CAGR of 5.5% driven primarily by the premiumization trend and high growth potential of sauce aroma baijiu.
Baijiu products in China are classified into four price hierarchies, i.e., deluxe, premium, mid-range and low-end. Leveraging our insight into the premiumization trend as well as our rich heritage and strong brand recognition, we primarily target our products at the premium and above baijiu market. As a percentage of our total revenue, revenue generated from our premium and above baijiu products increased from 51.8% in 2020 to 65.4% in 2022. We have built our flagship brand Zhen Jiu, our thriving brand Li Du and regional leading brand Xiang Jiao into brands focusing on producing and marketing premium and above baijiu products. In 2022, Zhen Jiu, Li Du and Xiang Jiao generated 68.4%, 76.7% and 74.7% of their respective total revenue from premium and above baijiu products. According to Frost & Sullivan, based on its consumer survey, consumers generally consider our Zhen Jiu, Li Du and Xiang Jiao brands as brands focusing on premium and above baijiu products. We have also strategically focused on the marketing of our premium and above baijiu products to boost consumer awareness of our premium brand positioning. For example, we have established a sales team with approximately 1,100 team members as of January 31, 2023, dedicated to the sales and marketing of premium and above baijiu products. The market size of premium and above baijiu in China is expected to grow at the fastest rate among all price ranges, at a CAGR of 12.3% from 2022 to 2026, from RMB234.1 billion in 2022 to RMB371.9 billion in 2026, according to Frost & Sullivan. The market share of premium and above baijiu in China’s baijiu market is expected to grow from 37.7% in 2022 to 48.3% in 2026. To better adapt to the premiumization trend in baijiu market, we are further expanding our premium and above product portfolio, increasing our baijiu production capacity for premium and above baijiu and growing our multi-channel sales network characteristic with immersive promotion strategy. We expect that revenue contribution from our premium and above baijiu products will continue to grow in absolute amount and as a percentage of our total revenue.
With sauce aroma baijiu being our major growth engine, we produce and sell sauce aroma, mixed aroma and strong aroma baijiu. According to Frost & Sullivan, in 2021, the market size of these three baijiu aroma profiles was approximately RMB506.9 billion, accounting for nearly 85% of the total market size, with the sauce aroma profile having the highest growth potential. As a percentage of our total revenue, revenue generated from our sauce aroma baijiu products increased from 59.6% in 2020 to 71.4% in 2022. The market size of sauce aroma baijiu in China is expected to grow at a CAGR of 12.2% from 2022 to 2026, from RMB203.3 billion in 2022 to RMB321.7 billion in 2026. The market share of sauce aroma baijiu in China’s baijiu market is expected to grow from 32.7% in 2022 to 41.8% in 2026, surpassing that of strong aroma baijiu and becoming the largest among all aroma profiles. While experiencing growing popularity among consumers, premium sauce aroma baijiu has been in short supply due to the intricate process and longer period of production, and the scarcity of suitable terroir. As a result, sauce aroma baijiu, which accounts for only 8.4% of the total baijiu production in China, generated 31.5% of the revenue and over 45% of the profit of China’s entire baijiu industry in 2021. The growing popularity of sauce aroma baijiu underpins promising growth potential. We believe we are well positioned to continue to benefit from this trend, especially with the continued growth of our flagship sauce aroma brand Zhen Jiu.
Our Growth Engines
We have built three tiers of growth engines consisting of a brand portfolio with precise product positioning targeting diverse consumer preferences and geographic areas. Our flagship brand Zhen Jiu is our major growth engine that continuously delivers strong and sizable growth across China. Zhen Jiu primarily targets sauce aroma baijiu lovers, was the fifth largest sauce aroma baijiu brand in terms of revenue in China in 2021, and achieved the fastest growth among the top five sauce aroma baijiu brands in China in the same year, according to Frost & Sullivan. Zhen Jiu ranked the fourth and the third, respectively, among all sauce aroma baijiu brands in China and in Guizhou in terms of annual production capacity of base liquor by the end of 2022, according to the same source. Li Du, our second growth engine, is expected to create additional momentum for continued growth. Li Du is a thriving brand featuring premium and above mixed aroma baijiu products and has gained great success and is expanding into the national market. Li Du was the fifth largest mixed aroma baijiu brand in terms of revenue in China in 2021, and achieved the fastest growth among the top five mixed aroma baijiu brands in China in the same year, according to Frost & Sullivan. Our Xiang Jiao and Kai Kou Xiao, regional leading brands in the Hunan market, are expected to continue to contribute to our long-term sustainable growth. Through dynamic management of our brand portfolio and leveraging our expertise to identify favorable market trends, our three tiers of growth engines as a whole are well positioned to drive strong and sustainable growth over the long term.
During the Track Record Period, we achieved strong growth and outstanding profitability. In 2020, 2021 and 2022, our total revenue reached RMB2,398.9 million, RMB5,101.6 million and RMB5,855.9 million, respectively, representing an increase by 112.7% from 2020 to 2021 and an increase by 14.8% from 2021 to 2022. In 2020, 2021 and 2022, our net profit margin was 21.7%, 20.2% and 17.6%, respectively, while our adjusted net profit margin (non-IFRS measure) for the same periods was 21.7%, 21.0% and 20.4%, respectively.
Source: ZJLD Group (06979) Prospectus (IPO Date : 2023/04/17) |