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Produced by Wang Yajing from Entrepreneurship Frontline Edited by Dan Zong

If nothing unexpected happens, Blue Moon will end the first half of 2024 with a loss.

On July 16, Blue Moon issued a profit warning, expecting to record a comprehensive loss attributable to the company's equity holders of approximately HK$665 million in the first half of 2024, an increase of nearly 300% from the same period last year.

The outside world did not seem surprised by this result. Wind data showed that Blue Moon's stock price rose for four consecutive trading days from the day after the profit warning announcement. On July 17, Blue Moon's stock price closed up more than 6%.

In fact, since its listing in December 2020, Blue Moon has suffered losses in net profit in the first half of the past three years.

From the first half of 2021 to the first half of 2023, the losses attributable to equity holders of Blue Moon Company were HK$43.937 million, HK$149 million, and HK$167 million, respectively, and the amount of losses was getting higher and higher.

Along with the profits, the company's stock price also fell. When Blue Moon was first listed, its market value reached as high as HK$112.2 billion, but as of the close of July 30, its stock price was HK$1.99 per share, and its total market value was only HK$11.7 billion.

In less than 4 years, the market value evaporated by more than HK$100 billion.

What confuses the outside world is why Blue Moon, which has always firmly held the position of "No. 1 laundry detergent", has come to this point?

1. Expected loss of HK$665 million, with profit hitting a new low since listing

In the first half of this year, Blue Moon delivered a mixed report card.

In terms of revenue, all product categories of Blue Moon recorded growth, with overall sales increasing by no less than approximately 38% year-on-year, and both gross profit and gross profit margin increasing.

(Photo/Blue Moon Announcement)

However, the more it sells, the higher Blue Moon's losses will be. Blue Moon expects to record a comprehensive loss attributable to equity holders of approximately HK$665 million in the first half of 2024, an increase of nearly 300% over the same period last year.

This is the lowest value since its listing in December 2020. The financial report shows that from the first half of 2021 to the first half of 2023, the losses attributable to the company's equity holders were HK$43.937 million, HK$149 million, and HK$167 million, respectively, and the losses gradually increased.

(Photo/Blue Moon Financial Report)

Blue Moon attributed the huge profit loss to increased sales and distribution expenses caused by increased sales activities, especially the promotion of new products, expansion of new e-commerce channels and brand building.

Although Blue Moon has not yet disclosed its sales and distribution expenses for the first half of 2024, this figure has been "astronomical" compared to its profits over the years.

From 2021 to 2023, its sales and distribution expenses were HK$2.392 billion, HK$2.651 billion and HK$3.244 billion respectively, growing at a double-digit rate each year.

(Photo/Blue Moon Financial Report)

In fact, Blue Moon has been "burning money" to do live broadcasts. For example, during the "618" period, Blue Moon invited a Guangdong couple, who are the "top streamers" on the short video platform, to live broadcast and sell goods at Blue Moon's Guangzhou headquarters, and gave away Apple phones during the live broadcast. Some media reported that a total of 5,000 Apple phones were given away during the live broadcast.

It has to be said that live streaming has indeed brought sales. According to Blue Moon, during the "618" shopping festival, the group ranked first in cumulative sales on multiple mainstream e-commerce platforms. In the first half of 2024, sales from new e-commerce channels increased by about 4.5 times year-on-year.

But the investment is obviously more. Blue Moon admits that compared with sales growth, the growth rate of sales and distribution expenses is higher, which is also one of the important reasons for the group's profit loss.

In the opinion of Chinese food industry analyst Zhu Danpeng, Blue Moon's products have a good quality-price ratio, but the cost-effectiveness is insufficient.

"When companies want to complement each other's shortcomings online and offline, it is in line with their needs to develop e-commerce channels, but e-commerce channels focus on cost-effectiveness and the prices will be more affordable, which will inevitably erode profits," said Zhu Danpeng.

Even so, Blue Moon still believes that this is a meaningful thing. It said that the group increased sales and distribution expenses in the first half of this year to deploy online e-commerce platforms. This move will help consolidate its market position on e-commerce platforms and drive long-term sales growth.

If Blue Moon continues to invest in high sales expenses, resulting in high profits and losses, will it change its investment in online e-commerce? How much does the company plan to invest in online e-commerce?

In this regard, Blue Moon told Jiemian News: Entrepreneurship Frontline that the company has always adhered to the omni-channel layout strategy, continued to deepen channel optimization, and actively deployed emerging channels. In the future, the company will continue to adjust the channel layout strategy in a timely manner according to the development of channels and changes in consumer shopping habits, and continue to improve and optimize channel construction.

2. Anxious "Big Brother" is stuck with laundry detergent

According to statistics from the China General Chamber of Commerce and others, Blue Moon laundry detergent has ranked first in the comprehensive market share of similar products since 2009 and is known as the "number one laundry detergent."

However, the hair care industry itself is an extremely inward-looking track. There are not only foreign giants such as Procter & Gamble (including Ariel, Tide, etc.) and Unilever (including Omo, Goldshine, etc.), but also a series of domestic brands such as Liby, Dettol, Super Power, Plant Protection, and Vitality 28 competing for this market.

In the laundry detergent market, Blue Moon's position is unquestionable, but as internal competition intensifies, even giants face the crisis of either advancing or retreating.

To be precise, Blue Moon's growth in scale is facing challenges.

The financial report shows that from 2020 to 2022, Blue Moon's revenue was HK$6.996 billion, HK$7.597 billion, and HK$7.947 billion, respectively, and has continued to grow.

(Photo/Blue Moon Financial Report)

If the growth trend continued, Blue Moon would have been expected to break through the HK$8 billion threshold in 2023, but unfortunately, Blue Moon fell 7.8% year-on-year to HK$7.324 billion that year.

Zhu Danpeng believes that from the perspective of the entire industry, channel, platform and consumer ends, creating product differentiation is the key to Blue Moon's performance boost.

"Comparing prices must be because the products are not differentiated enough. If the products are highly differentiated, it is not a comparison of prices, but a comparison of differentiation." Zhu Danpeng said that how to establish differentiated advantages is one of the best directions for Blue Moon to ensure growth, maintain profits and manage market value in the future.

In fact, in the market, many brands have embarked on the road of diversification. For example, Liby has entered the fragrance industry and created products such as laundry detergent beads and exploding salt. Dettol has products such as shampoo and shower gel. Zhihu has created products such as tissue paper and wet toilet paper.

According to incomplete statistics from "Jiemian News·Entrepreneurship Frontline", from 2021 to 2023, in addition to continuing to increase the investment in new laundry detergent products, Blue Moon launched a no-rinse antibacterial hand soap, washing machine cleaner and multi-purpose sterilization liquid, and a clean foam shower gel.

Judging from the data, Blue Moon has been "trapped" in laundry detergent. The financial report shows that in 2023, Blue Moon's revenue from clothing cleaning and care products reached HK$6.501 billion, accounting for 88.8% of the total revenue.

(Photo/Blue Moon Financial Report)

Strangely, Blue Moon did not even disclose the amount of investment in research and development. "Jiemian News·Entrepreneurship Frontline" found that in the financial reports from 2020 to 2023, Blue Moon only stated when talking about research and development that the group established a research and development technology center at the beginning of its operations, and established the Blue Moon Laundry Research Institute in 2015 to specialize in the development and evaluation of laundry products and methods.

Today, the group focuses on dual-line research and development, including launching new products to meet consumers' changing preferences and enhance user experience, as well as developing and sharing scientific and practical cleaning methods with consumers. However, R&D expenditure data has never been disclosed in the financial report.

"Jiemian News·Entrepreneurship Frontline" tried to find out from Blue Moon why the company does not disclose R&D expenditure data? How many R&D personnel does the company have? What is the proportion of R&D personnel focused on laundry detergent? What is the future R&D innovation strategy? Are there any plans to expand products other than washing and care?

Blue Moon only responded to "Jiemian News·Entrepreneurship Frontline" that the company strictly complies with the requirements of the Hong Kong Stock Exchange for information disclosure. In the future, the company will continue to focus on the development of all categories of products, launch targeted and functional new products, and actively expand the market for personal cleaning and care and household cleaning and care categories.

3. Pan Dong and his wife’s wealth shrunk by 55 billion yuan in three years

The history of Blue Moon can be traced back to 1992, when Dowming Company (Luo Qiuping was one of the founders) launched the first "Blue Moon" brand cleaning product.

In 1994, Luo Qiuping and his father Luo Wengui established Guangzhou Blue Moon Company in China to take over the "Blue Moon" brand cleaning products business from Daoming Company. Since then, Pan Dong has been one of the main technical consultants.

At the beginning, Blue Moon did not produce laundry detergent. Its first product was a strong oil-killer. Later, it launched hand soap and toilet cleaner. It was not until 2008 that it took the lead in launching the first laundry detergent in China, pushing China into the "laundry detergent era".

Since then, Blue Moon has been making great strides. On December 16, 2020, Blue Moon successfully landed on the Hong Kong Stock Exchange with an issue price of HK$13.16 per share. In less than a month (January 13, 2021), its stock price rose to an intraday high of HK$17.406 per share, corresponding to a total market value of HK$112.2 billion.

After the new shares were issued and listed, Pan Dong and Luo Qiuping held 77.36% of Blue Moon's shares, and their wealth also soared. In 2021, Pan Dong and his wife made their first appearance on the Hurun Global Rich List, with a wealth of 65 billion yuan, ranking 240th.

(Photo/ Screenshot of Hurun Global Rich List)

But these glorious histories have finally become a thing of the past. As of the close of trading on July 30, Blue Moon's share price was only HK$1.99 per share, with a market value of HK$11.7 billion. In less than four years, Blue Moon's market value has evaporated by more than HK$100 billion.

As Blue Moon's stock price fell, the wealth of Pan Dong and Luo Qiuping also shrank sharply.

In the 2024 Hurun Global Rich List, Pan Dong and Luo Qiuping's wealth was only 10 billion yuan, and their ranking dropped by more than 2,000 places to 2,418. In just three years, Pan Dong and Luo Qiuping's wealth shrunk by 55 billion yuan.

(Photo/ Screenshot of Hurun Global Rich List)

Based on this, "Jiemian News·Entrepreneurship Frontline" tried to find out from Blue Moon whether the company has a specific plan to boost the company's stock price? Blue Moon responded that the stock price in the secondary market is affected by many factors such as macro policies, industry development, market fluctuations, and company performance. In the future, the company will further enhance its market value management capabilities by continuously improving its management methods, seizing industry development opportunities, strengthening its core competitiveness, and improving the overall operational efficiency of the company.

But it is worth noting that Pan Dong and Luo Qiuping have actually taken away huge dividends from Blue Moon.

In January 2020, the Company declared a dividend of approximately HK$36.6 million to ZED Group Limited (ZED), which is wholly owned by Pan Dong (ZED is one of the Company's controlling shareholders and the sole shareholder of the Company until November 2010), based on retained earnings for the period ended December 31, 2009.

(Photo/Blue Moon Financial Report)

In June 2020, the Company declared an interim dividend of HK$2.3 billion to its then sole shareholder (i.e. Aswann Ventures Limited) on retained earnings for the period ended June 30, 2020.

Pan Dong holds 88.92% of the shares of Aswann Ventures Limited through ZED. Based on this calculation, Pan Dong took away HK$2.045 billion.

(Photo/Blue Moon's June 2020 prospectus)

From 2020 to 2023, Blue Moon will continue to pay dividends every year.

Among them, dividends paid from 2020 to 2022 were HK$404 million, HK$773 million and HK$936 million, respectively. The corresponding shareholding ratios of Pan Dong and his wife were 77.36%, 75.88% and 75.84%, respectively. During these three years, Pan Dong and his wife took away a total of about HK$1.6 billion.

(Photo/Blue Moon Financial Report)

(From top to bottom, these are the shareholding ratios of Pan Dong and Luo Qiuping from 2020 to 2023, Figure/Blue Moon Financial Report)

In 2023, Blue Moon plans to pay a dividend of HK$334 million. As of December 31, 2023, Pan Dong and his wife hold 75.83% of Blue Moon's shares and will receive another HK$253 million.

This means that since 2020, Pan Dong and Luo Qiuping have taken away more than HK$3.9 billion in dividends.

However, as Blue Moon's profits decline, it may become very difficult to continue to maintain high dividends in the future.

Next, what Pan Dong and Luo Qiuping have to do is to try every possible means to get Blue Moon back on the path of high growth. How to achieve this goal will test the experience and vision of Pan Dong and Luo Qiuping.

*Note: The title image in the article comes from Interface News.