Why food business performance is declining

In China's traditional New Year – Spring Festival, food companies ushered in the most prosperous sales season of the year, and the number of gift boxes in the supermarket channel suddenly increased. However, behind the scenes of a prosperous situation is the embarrassment of the decline in the performance of food companies.

“There is no doubt that the Chinese market is full of opportunities, but now, Nestlé has experienced some changes in China, and bear the brunt of the slowdown in growth.” Nestle's global CEO, Bo Kai pointed out that there are two basic changes in the Chinese market, that is, the rapid concept of consumers Migration and rapid changes, as well as rapid changes in the trading environment. "Nestle has spent a lot of time identifying these trends and making plans to keep up."

This tells the voice of most of my colleagues. In the past 2014, most food companies’ performance papers were not brilliant. In addition to Nestle, the US confectionary giant Hershey, biscuit giant Yizi International, and beverage giant Coca-Cola all suffered performance declines in China, and many domestic food company profits also appeared. A sharp decline.

In the first week after the Spring Festival, 16 food and beverage companies announced the 2014 annual performance report or annual report, of which 8 companies reported a year-on-year drop in revenue in the fourth quarter, and 12 companies saw a year-on-year decline in net profit, both at a rate of over 20%.

Shen Meng, Executive Director of Chanson Capital, told the Beijing Morning Post that from the external environment, economic growth slowdown and frequent food safety issues have inhibited food consumption; from the inside of the company, consumers pay more attention to health and food companies. It failed to quickly follow up and adjust the development strategy.

On the other hand, high marketing costs have also become a profit killer for food companies.

"TV station entertainment programs are like helicopters, and marketing costs remain high." An industry observer said that competition for high-quality television resources has led to a geometric growth of the title fee. In 2005, Mengniu was famous for its title "Super Girl". The title fee for that year was 14 million yuan. In 2014, Ili Hao took $500 million to obtain the naming rights in the third quarter of Where Daddy Goes. For ten years, the title fee for television entertainment has increased 35 times.

A former Mengniu executive told the Beijing Morning Post reporter that the title variety show is gambling. It is totally a matter of luck. You can't predict which program will fire. "The food industry has tens of millions of people who have played and played."

It seems difficult to be optimistic. Changjiang Securities said, "In the first quarter, the performance of the food and beverage industry will be better than the fourth quarter of last year, but there will be no significant improvement." Food companies have come up with a variety of transformation initiatives. Adjusting the product structure has become the first choice for foreign food giants such as Nestle. Coca-Cola has chosen global layoffs and cutting costs has undoubtedly become the most powerful weapon for thickening profits.

The fact that must be recognized is that the hearts and minds of consumers have changed with the times, and it is time for food manufacturers to keep up.