Zhongjing Foods: Rising Costs and High Advertising Fees Bring Challenges

Our reporter Wang Jinchen

Recently, Zhongjing Foods, the "first share of mushroom sauce", released its 2022 semi-annual report.

According to the company, the company's profit decline is mainly related to the increase in raw material costs and the increase in advertising

In the first half of this year, Zhongjing Foods’ advertising expenses were 33.

In the IPO fundraising of Zhongjing Foods, an important part is the "marketing network construction project".

The vigorous deployment of marketing network construction and advertising marketing did not bring about a substantial increase in performance for Zhongjing Foods

Zhongjing Foods was established in 2002.

Zhongjing Foods started sprinting for IPO in 2015 and successfully listed by 2020

From 2019 to 2021, the operating income of Zhongjing Foods was 628 million yuan, 727 million yuan, and 806 million yuan, respectively, with growth rates of 18.

At present, seasoning food is still the main business of Zhongjing Foods, accounting for 57.

However, the gross profit margins of these two businesses decreased by 1.

　　As the "first share of mushroom sauce", Zhongjing Foods is firmly in the first position of mushroom sauce, but it has jumped out of the subdivision of mushroom sauce, and its performance in the sauce market is not outstanding

　　Zhongjing Foods said in its semi-annual report that the main reasons for the decline in net profit were the company's increased advertising efforts and rising raw material costs

　　The problem of rising raw material costs is a common problem faced by the sauce industry.

　　In the first half of this year, Zhongjing Foods' investment in advertising increased by 100.

　　The breakdown of sales expenses of Zhongjing Foods shows that Zhongjing Foods spent 33.

　　Among them, CCTV is the focus of Zhongjing Foods advertising, with an investment of 23.

　　Although advertising has increased by 100.
07%, revenue has only increased by 6.
12%, and net profit has declined
.

　　The layout of Zhongjing Foods' marketing network construction began as early as when it was listed to raise funds
.

　　It is reported that when Zhongjing Foods was listed, the actual net amount of funds raised was 913 million yuan, and the "marketing network construction project" was included in the investment projects of the raised funds.
The total committed investment of this project was as high as 150 million yuan
.

　　According to the current adjusted investment situation, the actual investment of the "marketing network construction project" and the "annual output of 60 million bottles of seasoning sauce production line project" is higher than the total committed investment, 247 million yuan and 206 million yuan respectively
.

　　The total committed investment of Zhongjing Foods for "marketing network construction" of 247 million yuan is equivalent to the total net profit of the company in 2020 and 2021
.

　　The reporter noticed that Zhongjing Foods plans to purchase real estate for the construction of the marketing management center in the "marketing network construction project", but according to the actual purchase of real estate in the previous period, it plans to reduce related expenses
.
The company also stated that, in view of Zhengzhou’s local policies for purchasing houses and cars, Zhongjing Foods plans to add a wholly-owned subsidiary of the company as the main body for the implementation of the marketing network construction project
.

　　From a long-term perspective, the investment of Zhongjing Foods in marketing is increasing year by year, and the proportion of the company's advertising expenses in sales expenses is increasing year by year
.

　　From 2019 to 2021, the company's advertising expenses were 11.
2827 million yuan, 16.
5464 million yuan, and 27.
7091 million yuan, accounting for 11.
06%, 18.
01%, and 21.
37% of sales expenses, respectively
.

　　The 2022 semi-annual report shows that Zhongjing Food's advertising expenses jumped to the first place with 41.
68% of sales expenses
.

Responsible editor: Zhao Yu Review: Peng Zonglu