Yunnan Baiyao Suffers Loss Crisis

Yunnan Baiyao Toothpaste, a well-known Chinese brand, has announced Chinese actress Zhao Liying as the spokesperson for oral health with 8,992,400 followers on Zhao's Chinese social media platform Weibo. In 2021, Yunnan Baiyao toothpaste gained over 23% of the market share maintaining the No.1 in the industry market share.

The Yunnan Baiyao is well known in China and abroad as a century-old brand of products that stop bleeding and heal wounds, reduce swelling and pain, activate blood circulation, and resolve blood stasis. Yunnan Baiyao Toothpaste is an oral care and health care product developed with toothpaste as a carrier, drawing on international advanced oral care and health care technology. Yunnan Baiyao Toothpaste contains Yunnan Baiyao active ingredients. It has the ability to help alleviate gum problems (bleeding gums, sore gums), repair mucosal damage, nourish gums, and improve periodontal health.

The Chinese dental care industry entered a period of rapid development in the 1990s when two international toothpaste giants, Colgate and Crest, entered China. In 1998, Chinese toothpaste production reached 2.807 billion units. In 2000, the production reached 3.6 billion units and the annual per capita usage increased to 2.8 units.

However, Yunnan Baiyao Group found that after the national oral environment research, the brushing rate of the Chinese population is 85.65%, but only 0.22% of adults achieve good oral hygiene indicators, and the prevalence of periodontal disease reached 99.4%. Gum bleeding, gum swelling and pain, mouth ulcers, periodontal disease, and other symptoms have become the common oral disease of many Chinese people. Coupled with the differences in dietary and oral concepts between the East and the West, traditional toothpaste with the appeal of anti-cavity, whitening and cleaning cannot meet the increasingly diverse and complex oral demands of Chinese people.

Therefore, Yunnan Baiyao Group, with the purpose of "integrating traditional Chinese medicine into modern life", has embarked on the exploration of improving the oral health of the Chinese people.

According to the Forward Research Institute, China's toothpaste market will grow at a rate of 7%-9% in the next few years. The growth of the toothpaste industry is slowing down, and the market capacity of simple toothpaste is limited. Also according to CBNData report, oral care is showing the demand for diversified taste, segmented efficacy, and refined care. Moreover, when it is difficult to make breakthroughs in the toothpaste market, manufacturing upgrades and product and category innovation have become key grips for Yunnan Baiyao to break through the bottleneck.

On the one hand, Yunnan Baiyao's intelligent toothpaste factory with an annual capacity of 500 million tubes of toothpaste was put into operation in 2019, and toothpaste production opened the Industry 4.0 era. On the other hand, it caught up with new consumption and new Chinese trends through new products such as active peptide repair toothpaste and IP cooperation. However, in Yunnan Baiyao Toothpaste's flagship store on the Chinese e-commerce platform Tmall, classic flavors of toothpaste are still its most competitive products, and children's toothpaste and the active peptide repair toothpaste launched last year have been relatively flat.

In addition, as the market penetration of mouthwash continues to rise, Yunnan Baiyao has also entered the market to expand oral care products represented by mouthwash.

It is noteworthy that earlier this year, Yunnan Baiyao released its 2021 annual report, achieving annual revenue of $5.45 billion in 2021, up 11.09% year-on-year and its net profit attributable to shareholders of listed companies was $420 million, down 49.17% year-on-year.

The reason for falling into this dilemma of increasing revenue without increasing profit comes from the loss of nearly $300 million in stock speculation during the reporting period, which became the main reason for the decline in net profit.

This is also the first year-on-year decline in net profit attributable to Yunnan Baiyao in 20 years.

The annual report shows that in 2021, Yunnan Baiyao invested in 9 stocks including Xiaomi Group, Tencent Holdings, Yili Shares, etc., all with varying degrees of loss, including a loss of more than $209 million in Xiaomi Group, $20.1 million in Tencent Holdings and $18.9 million in Yili Shares.

Compared to the overly aggressive securities investment, Yunnan Baiyao's performance in the main business is very flat.

Financial data show that in 2021, the health products subsidiary with Yunnan Baiyao toothpaste as its core achieved revenue of $885 million, up 9.7% year-on-year, a further slowdown in growth compared to the previous year. However, the toothpaste category still captured more than 23% of the market share in 2021, maintaining the industry's top market share position.