Milk and beer cannot sustain Pinlive Food.

Zebra Consumer Chen Xiaojing

Pinlive Foods has once again tasted the bitterness of difficult business by transporting foreign food products back to China for sale over long distances.

In 2023, the company's revenue from its five major product series, including dairy and beer, declined across the board, leading to its first loss since going public. The days of easy money are gone.

The company attributes this to rising overseas procurement costs, increased shipping costs, unstable shipping capacity, weak recovery in the domestic liquid milk market, and intensified competition, all of which have significantly impacted its performance.

Pinlive Foods does not want to go head-to-head with dairy giants and is pinning its hopes on its emerging cheese business to become a new growth driver.

From Profit to Loss

Wang Mu, the 56-year-old founder of Pinlive Foods, likely understands the challenges of the imported food business better than anyone. While 2021 and 2022 saw only declining performance, last year, the business outright collapsed.

On the evening of April 17, Pinlive Foods (300892.SZ) disclosed its 2023 annual report, showing revenue of 1.123 billion yuan, down 27% year-on-year, and a net loss attributable to shareholders of 73.3708 million yuan, a 754.87% decline—marking its first loss since listing.

Last year, the company's revenue from dairy, beer, grain and oil, cereals, and general food products all declined, dropping by 25.86%, 34.09%, 24.87%, 46.52%, and 14.99%, respectively. Meanwhile, the gross margins for these businesses decreased by 7.71, 7.27, 12.39, 12.84, and 9.68 percentage points compared to the previous year.

With the company struggling, its distributors also faced tough times, leading many to abandon Pinlive. The number of distributors dropped by 135, leaving only 495 by year-end.

One of the few bright spots in 2023 was a 23.54% increase in the average order price for online self-operated channels, reaching 66.49 yuan. However, the number of orders and customers declined significantly.

Core Shrinkage

Pinlive Foods does not manufacture products; it merely acts as an importer. However, it rebrands foreign products under its own labels for domestic sale.

In 2012, Pinlive launched its milk brand, Deyá, followed by the beer brand Valensina in 2013. Later, it introduced cereal brand Henry and olive oil brand Pinlive, among others.

Currently, only Deyá and Valensina can shoulder the company's operations.

Pinlive's ability to scale its milk and beer businesses was due to both its efforts and the unique market conditions of the time.

Now, these two categories face fierce competition from domestic brands and industries, leaving Deyá and Valensina in a precarious position.

In 2023, Deyá and Valensina generated revenues of 891 million yuan and 131 million yuan, respectively, down 25.87% and 33.84% year-on-year. This continues the decline of the company's two core businesses over the past two years.

Beyond milk and beer, the company's other brands, such as Henry, have fared even worse. Revenue plummeted from 10.483 million yuan in 2021 to just 126,500 yuan last year.

At this point, milk and beer can barely sustain Pinlive, and other businesses offer little hope.

Private Label Business

In 1997, Wang Mu, a native of Fuzhou, founded the predecessor of Pinlive Foods, Kuichun Industrial, in Shanghai, specializing in importing foreign milk, beer, and other products for domestic sale.

At the time, imported foods were highly favored by Chinese consumers, representing a blue ocean market. The company thrived and quickly completed its initial capital accumulation.

After that, Wang Mu shifted strategy, selling foreign products while also developing its own brands. Deyá milk, produced under a private label arrangement with a German company, began to gain prominence during this period.

Public data shows that from 2013 to 2019, China's liquid milk imports grew from 194,800 tons to 924,300 tons, peaking at 1.296 million tons in 2021.

Capitalizing on the downturn in domestic milk production, Deyá, as an imported brand, reaped significant benefits.

From 2017 to 2019, Deyá's revenue reached 608 million yuan, 785 million yuan, and 967 million yuan, accounting for 50.05%, 62.80%, and 70.15% of the company's total revenue, respectively.

As a result, Deyá maintained its position as the top imported milk brand for years, with a market share of 21% in 2022.

However, as domestic dairy products improved in quality and faced stricter regulations, consumers quickly returned to local brands. Meanwhile, large domestic dairy and beer companies intensified competition, squeezing Pinlive's core products and making business increasingly difficult.

Recognizing its weaknesses, the company began expanding upstream.

In 2021, Pinlive acquired a 50% stake in Pinlive-Hochwald, a subsidiary of Hochwald Foods GmbH, through its Singapore-based unit to produce ultra-high-temperature sterilized milk.

At the same time, the company turned its focus to cheese products. In 2023, it completed construction of a 100-million-yuan cheese factory in Shanghai, with the first batch of Deyá small round natural cheese products rolling off the production line by year-end. Can cheese rebuild Pinlive? That depends on whether giants like Yili and Mengniu allow it.