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On the evening of August 19, Youyou Food disclosed its 2024 semi-annual report showing that in the first half of 2024, the company achieved a total operating income of 530 million yuan, a year-on-year increase of 10.26%; net profit attributable to shareholders of the parent was 76.1357 million yuan, a year-on-year decrease of 5.22%; non-net profit was 60.8376 million yuan, a year-on-year decrease of 11.41%; net cash flow generated by operating activities was 120 million yuan, compared with -39.466 million yuan in the same period last year; during the reporting period, Youyou Food's basic earnings per share was 0.18 yuan.

It is worth noting that this is the third consecutive year that Youyou Food’s net profit has declined. According to the financial report data, Youyou Food achieved operating income of 966 million yuan in 2023, a year-on-year decrease of 5.68%; net profit attributable to the parent company was 116 million yuan, a year-on-year decrease of 24.38%. In the first quarter of 2024, the company achieved operating income of 275 million yuan, a year-on-year increase of 17.96%; net profit attributable to the parent company was 43.2879 million yuan, a year-on-year decrease of 8.77%.

Youyou Food did not clearly state the reason for the decline in profits in its financial report. However, in the discussion and analysis of the operating conditions in the first half of the year, Youyou Food stated that in the first half of the year, the company carried out a special action of "improving quality, increasing efficiency and focusing on returns". On the premise of ensuring the smooth operation of production and operation, it consolidated the foundation of industrial development, promoted the practice of lean management, and improved the company's operating quality. Intensify the development of new products, and launch new products such as Youyou boneless duck feet. During the reporting period, the company implemented the 2023 profit distribution. Since its listing, the company has implemented a cash dividend plan to reward investors for six consecutive years, with cumulative cash dividends exceeding 600 million yuan, and the cumulative total dividends accounted for more than 50% of the cumulative total net profit attributable to the parent.

It is worth noting that the financial statements show that in the first half of the year, Youyou Food's operating costs increased by 13.38%, sales expenses increased by 29.38%, financial expenses increased by 114.99%, and gross profit margin dropped from 32.75% in the first half of 2023 to 30.84%. In this regard, Youyou Food explained that the change in financial expenses was mainly due to the exchange difference caused by the conversion of foreign currency business in the reporting period and the reduction of bank deposit interest income.

Specifically, pickled pepper chicken feet is still the main business of Youyou Food, with revenue of 396.6 million yuan in the first half of the year, accounting for 75.61% of total revenue. In terms of sales channels, Youyou Food mainly relies on offline channels, accounting for 95.72%, while online channels account for only 4.28%.

In the industry's view, with the increase in entrants into the chicken feet market, the development of the pickled chicken feet sub-category has now faced a "ceiling". Youyou Food is currently in urgent need of cultivating other high-quality business sectors to improve the company's overall profitability.

Zhu Danpeng, a Chinese food industry analyst, believes that Youyou Food's main business of pickled pepper chicken feet is somewhat weak. Pickled pepper chicken feet belongs to a relatively low-end industry with a low entry threshold. The entire industry is also in a state of perfect competition. Even small production companies can participate. Therefore, under the impact of a large number of low-priced products, the development of this sub-category of pickled pepper chicken feet is likely to encounter a "ceiling", and Youyou Food's pickled pepper chicken feet business is bound to be impacted. In addition, new brands represented by Wang Xiaolu and Ma Zhua Zhua are pressing behind and have harvested many new generation customer groups in online channels. This has caused Youyou Food to be attacked from both sides and will feel greater market pressure.

Zhu Danpeng believes that Youyou Food's other businesses are relatively weak, and there has been no breakthrough in the "explosive" innovative category of pickled pepper chicken feet. A single market structure is difficult to adapt to long-term competition. Youyou Food's use of pickled pepper chicken feet as a single product structure will greatly improve production efficiency in the short term, but in the long run, there are greater risks. For example, the price fluctuations of upstream raw materials, fluctuations in downstream sales, and changes in the market competition environment.

Regarding the above questions, a Beijing Business Daily reporter called Youyou Food’s secretary, but no reply was received as of press time.

Beijing Business Daily reporter Zhang Han