Hidden worries of raw milk suppliers after the carnival on the market

Under the temptation of capital, the upper reaches of the dairy industry also covet the platform of listed companies, with the help of the restart of the new third board to start the capital journey. A reporter from the Beijing Business Daily found that, including Zhongding United Animal Husbandry Co., Ltd., which officially landed on the new third board on December 10, a number of upstream enterprises that depend on raw milk supply for a living in the second half of the year joined the ranks of listed companies. Although it has a listing platform, due to the simple and low profit of the main business of raw milk supply and strong dependence on a single large customer, this also lays an uncertain hidden danger for the profits of the enterprise.

The gap between supply and demand gives rise to the momentum of listing.

Under the background that the domestic dairy demand is still strong and the industrial development is still optimistic, the fresh milk suppliers at the upper end of the dairy industry are ready to land in the capital market and prepare for the dividend of the spoon industry. A reporter from the Beijing Business Daily found that in July this year, Knight Dairy, which mainly engaged in forage cultivation, cattle farm operation and fresh milk supply, landed on the new third board; at the end of September, Ningxia Huifengyuan Animal Husbandry Co., Ltd. also hung a public transfer prospectus on the new third board. The company also sells fresh milk by raising cows. On December 10, another company, Zhongding Animal Husbandry, which relies on the rapid rise of breeding and fresh milk supply, also became a member of the new third board listed company. Coupled with the listing of Shangling animal husbandry, Junhua agricultural animal husbandry, holy animal husbandry, modern animal husbandry and other enterprises listed last year and earlier, the listed company team of raw milk suppliers is growing.

As for the motivation for the listing of these enterprises, dairy expert Wang Dingmian analyzed that the purpose is to obtain more convenient financing channels and expand the scale, and the prospect of growth in the industry has become the listing endorsement of these enterprises. Zhongding Animal Husbandry clearly pointed out in the public transfer manual that in recent years, China's raw milk market has been in short supply, and the gap between supply and demand is increasing year by year. According to reports, the gap between supply and demand of raw milk in the country was 20.4% in 2015 and is expected to reach 22.1% by 2017.

In addition, according to Wind, the income of China's dairy industry increased from 62.519 billion yuan in 2004 to 328.773 billion yuan in 2014. The increase in sales of dairy products is bound to lead to an increase in demand for raw milk. It will further stimulate the development of China's raw milk market, which also provides a market space for enterprises that make a living by selling raw milk.

Double unstable factors bury the risk.

However, although there is a large gap between the demand and supply of raw milk, can the gap be filled by the enterprises mentioned above? In this regard, a number of people in the dairy industry have expressed scepticism. "of course, there are opportunities, but foreign sources of high-quality and inexpensive milk and domestic ups and downs in raw milk prices have become unstable factors hindering the development of these enterprises." Wang Dingmian said.

First of all, the cancellation of EU milk quota and the conclusion of free trade agreements between China and many countries make it possible for international dairy enterprises to make up for the gap of domestic dairy demand. According to the forecast of the International Dairy Farmers' Union, the international milk price will enter the downward channel in the next five years, compared with this, due to the high cost of manpower, material resources and feed, the domestic milk price does not have a competitive advantage. therefore, the highly competitive international dairy products will have an impact on China's dairy industry in the future. Wang Dingmian continued to say that in addition to the price advantage, the safety of foreign milk sources has also attracted large domestic dairy companies to layout overseas, which has also eroded most of the way out for domestic fresh milk supply enterprises.

Secondly, as the overall market of domestic aquaculture enterprises has not yet entered the mature development stage, the roller coaster changes between "milk shortage" and "milk leftover" are often staged, which makes aquaculture enterprises face uncontrollable risks from time to time. At the end of last year, due to the sudden surge in milk supply, many enterprises were involved in the "milk pour storm" and suffered heavy losses.

Take the financial data of Zhongding Animal Husbandry as an example, the company's annual operating income increased from 7.88 million yuan in 2013 to 140 million yuan in 2014, and the company's net profit turned to profit from a loss in 2013. In the view of the industry, the profit in 2014 is related to the "benefits of post-milk shortage" in 2013. "large enterprises have a strong ability to resist risks, so if they catch up with a good year, their profits will be guaranteed. Of course, this is also related to the scale of Zhongding animal husbandry and the expansion of fresh milk production, large-scale coupled with a good year income is guaranteed, on the contrary, the income of enterprises is hardly stable. " Wang Dingmian said.

A single customer decides to find another way out.

For small and medium-sized farms, the impact of the contradiction between milk price and supply and demand will be more direct, while for enterprises with a certain scale and stable source of tourists, such as Zhongding Dairy and Knight Dairy, the risk is also high. However, every family has its own difficulties, with scale, there is productivity, but small farms dream of a stable source of customers can not achieve a profitable business.

A reporter from the Beijing Business Daily found that these listed raw milk suppliers have a common feature, that is, there is a strong customer concentration, and even many enterprises are founded by veteran employees of large dairy industries such as Mengniu. In other words, these enterprises found downstream customers at the beginning of their establishment. Take Knight Dairy as an example, it is mentioned in the public transfer prospectus that the company has a certain dependence on Mengniu Dairy, its largest customer. The sales revenue to Mengniu Dairy from January to June 2015 and from January to June 2014 accounted for 36.03% and 48.99% respectively; the income also sold to Mengniu accounted for 59.15% of Dingdingye's operating income in mid-2014; in addition, Ningxia Huifengyuan's major customer is Yili, which sells almost all of its products to Yili.

A number of industry insiders pointed out that stable large customers are often a double-edged sword, which not only ensures product sales, but also buries risks. Big customers hold on to the lifeblood of these suppliers tightly, and the unexpected consequences are unimaginable. On the other hand, large dairy enterprises will not lose much because they have a large number of suppliers.

Just recently, it was reported that there was some friction between Zhongding Animal Husbandry and Mengniu in terms of milk intake and price, thus affecting the cooperation between the two sides.

In fact, raw milk suppliers, including Zhongding Animal Husbandry, are also aware of the risks of large customer dependence. Sun Guoqiang, president of Zhongding Animal Husbandry, told Beijing Business Daily that the profits of breeding and raw milk supply are meagre and risky, so the company is planning to find ways to deal with it by exploring the business plate of downstream products. this is also the current practice of modern animal husbandry, a veteran raw milk supplier.

Wang Dingmian further said that under the big policy environment of the state encouraging downstream dairy enterprises to have a milk source base, the living space of a single breeding enterprise is getting narrower and narrower, and its way out is either to be swallowed by large dairy manufacturing enterprises to become a milk source base. or develop downstream and spread out to the whole industry chain. Therefore, listing is only the first step in the capital accumulation of these companies, and then these companies will stage more mergers and acquisitions or turn to the stage of product terminals.