Summary of the Conference Call for Wugu Mofang Company Overview - Company: Wugu Mofang - Event: Mid-Year Investment Strategy Meeting - Date: June 25, 2024 - Speaker: Jin Na, Investor Relations General Manager Key Points Industry and Company Developments 1. Brand Development: Wugu Mofang is celebrating its 18th anniversary and has undergone a brand upgrade in collaboration with professional branding agencies like Huayu and Hua. The company is repositioning itself as a "functional food" brand focused on health and wellness [3][4] 2. Product Focus: The company emphasizes the health benefits of its products, supported by scientific experiments, including studies on hypertension and hair growth [5][6] 3. Product Launch: A new product, "Sanxiang Powder," aimed at middle-aged consumers for lowering blood pressure, has shown promising results in scientific tests [6] Sales Channels Performance 1. Sales Channels: The company operates three main sales channels: specialty stores, new distribution channels, and e-commerce [8] 2. Specialty Stores: Revenue from specialty stores has shown a single-digit growth, despite a reduction in the number of physical locations [9][10] 3. New Distribution Channels: This segment has experienced a revenue growth of 30% to 40% year-over-year [11] 4. E-commerce Growth: E-commerce sales are expected to grow by 10% to 15% in the first half of the year, with significant growth during the 618 shopping festival, particularly on Tmall, which saw over 30% growth [12][29] Product Strategy 1. Core Products: The flagship product, "Walnut Black Bean Sesame Powder," continues to perform well, contributing significantly to overall sales [20] 2. Gift Products: The company is focusing on gift packaging products, which saw sales exceed 100 million during the Spring Festival, indicating strong market potential [21][22] 3. Seasonal Products: A new product, "Wet No Trace," has gained popularity, particularly during the summer season, with sales exceeding 10 million during the 618 period [24][25] Market Trends and Consumer Behavior 1. Consumer Trends: The company acknowledges a trend of consumer downgrade, where consumers seek better value for money. However, Wugu Mofang aims to maintain its focus on functional foods rather than competing on price [38][41] 2. Promotional Strategy: The company is strict about its promotional activities, limiting discounts to major sales events like 618 and Double Eleven, to maintain brand value [42][43] Financial Performance 1. Gross Margin: The gross margin has seen slight improvements, attributed to changes in channel structure, with specialty stores contributing around 40% of sales and e-commerce also at 40% [64][65] 2. Channel Profitability: Specialty stores have a gross margin of approximately 78%, while e-commerce margins are between 65% and 70%, and new channels are around 33% [65][66] Strategic Adjustments 1. Channel Strategy: The company is adjusting its channel strategy to focus on high-end membership supermarkets and smaller local stores, which are experiencing growth [46][47] 2. Distribution Expansion: Wugu Mofang is expanding its reach through various distribution methods, including direct sales and partnerships with local distributors [48][49] Conclusion - Wugu Mofang is strategically positioning itself in the health food market with a focus on brand value, product functionality, and selective channel growth. The company is navigating market challenges while aiming to enhance consumer engagement and maintain profitability through disciplined pricing and promotional strategies.
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