As time steps into 2024, the once-favored cheese brand Miaoke Lando faced a series of challenges. Confronted with a dual decline in market share and profitability, the company, self-proclaimed as "the first cheese stock," must feel the pressure. Its share price fell to a record low of 11 RMB/share on February 6th, which also became the lowest point in the stock's history.

On March 25th, the 2023 annual report disclosed by Miaoke Lando showed for the first time a simultaneous decline in revenue and profit since its listing. Following this, the first quarterly report released on April 26th, 2024, also suggested a continued decrease in operating income.

Just as Miaoke Lando attempted to reverse the market downturn by bringing in a new spokesperson—the popular idol star Wang Yibo—they unexpectedly faced a new public relations crisis. Queries about the "trans fatty acids" in their products spread rapidly online, and on May 9th, they captured a high position on the Weibo hot search list. However, so far, there has been no official response to consumer questions about the product ingredients.

Despite this, the company seems to have taken a relatively low-key attitude in dealing with the turmoil, and the incident has gradually faded from public view over time. At present, the discussion about "Miaoke Lando’s trans fatty acids" has significantly decreased.

However, the abatement of a storm regarding food health does not alleviate the various challenges faced by Miaoke Lando. Whether it's the substantial slip in performance, the capital market's pessimism, or the pressure faced by the entire cheese industry, all are significant challenges testing this enterprise.

Under the shadow of poor performance, Miaoke Lando has fallen into crisis. According to Miaoke Lando's annual report for 2023, the company's operating income was 4.05 billion RMB, a 16.16% decline from the previous year, of which cheese business revenue was 3.137 billion RMB, with a decline of 18.91%. Impacted by fluctuations in raw material prices and exchange rate changes, the net profit attributable to shareholders of the listed company also decreased by 53.9% year-on-year.

Miaoke Lando's founder and CEO Chai Xiu recently stated at a public event that the company's financial report was disappointing, and she felt heartbroken. The stock price fell from 84 RMB to less than 13 RMB, and her net worth has consequently shrunk substantially. Chai Xiu reflected that supply chain issues led to a cost increase of over 100 million RMB, but obviously, such introspection couldn't bring a turnaround for the decline in performance. Especially when Miaoke Lando's operating income presented negative growth for the first time in 2023, the uncertainty of the company's prospects was increasingly highlighted.

From 2016 to 2022, Miaoke Lando's operating income increased year by year, at 0.512 billion RMB, 0.982 billion RMB, 1.226 billion RMB, 1.744 billion RMB, 2.847 billion RMB, 4.478 billion RMB, and 4.83 billion RMB respectively. However, in recent years, this growth momentum has abruptly stopped, and the company has had to confront new market challenges and internal pressures.

With the arrival of 2023, a noticeable economic phenomenon is that the growth value has shifted from positive to negative, dropping to -16.16%. This catastrophic incident of the first negative growth is even more relentless compared to the decrease in profits. From 2021 to 2023, the net profits of Miaoke Lando's parent company were 0.154 billion RMB, 0.138 billion RMB, and 63.44 million RMB respectively, with growth rates of 160.6%, -10.89%, and -53.9% year-on-year. Moreover, the after-deduction non-recurring gain or loss net profit attributable to the parent company shareholders experienced nearly a 90% plunge year-on-year, dropping to a mere 7.17 million RMB.

If we observe the financial results of Miaokelando for the first quarter of 2024, we can see that the downward trend has not been effectively curbed. During this reporting period, the company's revenue was 950 million yuan, a reduction of 7.14% compared to the same period of last year. However, the net profit unexpectedly achieved a year-over-year increase of 70.63%, reaching 43.13 million yuan. This improvement in net profit is inseparable from the company's successful cost reduction. According to its financial report, Miaokelando's operating costs for the first quarter of 2024 were 635.5 million yuan, saving nearly 0.5 billion yuan compared to 688.4 million yuan in the same period of 2023.

For all enterprises, profit growth and cost control are crucial. However, for the consumer goods industry, sales expenses are often closely linked to operating income. Observing the substantial reduction in sales expenses by companies, people can't help but start to question the direction of operating income. For example, between 2018 and 2023, there was a certain positive correlation between the operating income and sales expenses of Miaokelando, especially from 2021 to 2023, when the growth trends of these two indicators were almost synchronized. This implies that an increase in sales expenses often leads to higher operating income and vice versa.

A particularly critical issue is that Miaokelando's investment in product research and development compared to sales expense spending is far apart, showing a strategic imbalance. During the period from 2021 to 2023, the company's total investment in product R&D was 40.09 million yuan, 51.22 million yuan, and 45.54 million yuan respectively, while the sales expenses were as high as 1.159 billion yuan, 1.21 billion yuan, and 938.8 million yuan. The response from the secondary market also confirmed this point, with investors showing a negative view of Miaokelando.

Miaokelando's stock reached an all-time high of 84.5 yuan per share on May 25, 2021, and then entered a continuous downward trend. As of the closing price on May 17 this year, the stock was at 15.3 yuan per share, with a market value evaporating over 35.4 billion yuan since the peak period. When the market asks "Who will shake Miaokelando's market position," we must mention the company's four core strategies – “Product Leadership, Brand Presence, Channel Cultivation, and Management Upgrade,” which suggests that the company may still increase its investment in sales expenses in the near term. Once, Miaokelando dominated the "cheese stick" market with a brainwashing commercial, but few people know that the company went public through a reverse takeover as early as 2016, becoming the "first cheese industry stock." Miaokelando's corporate development reached a strategic turning point in 2021 — starting to focus on cheese products.

In a highly competitive market, Miaokelando closely revolves around the four core strategies of "Product Leadership, Brand Presence, Channel Cultivation, and Management Upgrade," striving to continuously focus on leading product development, increase investment in brand building, actively push forward channel expansion and meticulous work, and constantly drive the improvement of management level. In the process of executing the "Brand Presence" strategy, Miaokelando began to increase its marketing and advertising investments, especially in 2021, enhancing the placement on digital media, using social platforms such as Weibo, WeChat, Xiaohongshu, Douyin, and others for multifaceted brand marketing, strengthening interactions with consumers, and improving brand recognition. The company firmly believes that excellent terminal display is the best showcase of brand value, therefore, they are generous with display resources. These diversified brand marketing initiatives have made the slogan "For cheese, choose Miaokelando" deeply rooted in the hearts of people. Today, with no wavering from this strategy, inviting the star Wang Yibo to become the brand ambassador is also part of implementing the strategy.

However, as the "Children's Cheese Sticks" market matures, an increasing number of enterprises have started to target the business opportunities behind it. For example, the children's cheese brand Miaolei completed two rounds of financing within the year 2020; in the same year, Junlebao received capital injections from Sequoia and Hillhouse; Raising Your Own Cow was jointly invested in by Meituan Longzhu, KKR, and Dehong Capital; and the emerging cheese brand "Cheese Doctor" won the favor of Today Capital. This series of capital operations and the entry of new enterprises have gradually divided the market share of "Cheese Leading Brand."

According to data from Euromonitor International, by 2023, the two leading companies in China’s cheese industry will be Miaokelanduo and Baikelifu, with market shares of 25.3% and 17.8%, respectively, followed closely by Yili with a market share of 10.1%. In the future, up-and-coming brands such as Cheese Doctor, Guangming, Aishichenxi, and Panda Dairy are ready to launch, heralding a new round of market competition. How long will the 30 billion market cake, which is pursued by the capital market, continue to be hot? The cheese industry is regarded as a sector with limitless prospects.

The China Dairy Industry Association has formulated a "Three-Year Action Plan" (2023-2025) for the cheese industry, aiming to increase the national cheese output to 500,000 tons and achieve a retail market size of over 30 billion yuan by 2025. Huatai Securities’ research report also predicts that if the current consumption of liquid milk can be converted to 30% cheese consumption, China's cheese consumption could see an increase of more than six times. Despite the bright prospects shouldered by the “long slope thick snow” of the cheese industry, the pressure facing the industry is also evident.

Firstly, there is a problem of over-simplification of product structure within the industry. Data from Euromonitor shows that processed cheese, especially cheese sticks, have already taken a dominant position in the market. This high concentration of a single product limits the consumer groups and scenarios, mainly providing snacks for parents and children, which may pose significant risks to the future development of the entire industry. Secondly, cheese has not yet become a necessity in the daily lives of Chinese consumers. Unlike in Western countries, cheese sticks are more commonly seen as a leisure food item and do not have an advantage in either taste or cost-effectivity, especially with the recovery of consumer spending power after the pandemic, the popularity of cheese sticks has significantly decreased. Finally, cheese as an imported product has not formed a long-term stable consumption habit in the Chinese market like coffee. It is neither addictive nor can it replace other foods in terms of its effects.

The cheese industry has seen a significant growth in products like cheese sticks in just a decade, but this trend seems to be gradually coming to an end. For the Chinese cheese market, sustained development momentum needs to come from the efforts of dairy companies themselves. According to the research report "China Cheese Industry: Market Demand May Be Undergoing Structural Challenges" released by Pu Yin International, the future growth of the cheese industry will depend on enterprises’ major strategies: product innovation and diversification of product portfolios; changing consumption scenarios, expanding the use of cheese to dining tables, enhancing its attributes as a daily necessity; and at the same time, by using effective marketing means to strengthen consumer education, to promote the formation of cheese consumption habits among consumers.

Groups like Mengniu's YoyiC face similar challenges. Although celebrity endorsements can bring a short-term increase in traffic and sales, the long-term vitality of a product still depends on its quality. The impact of past marketing strategies, such as "brainwashing jingles," may be waning, and YoyiC needs to find new creative ideas to continue attracting and satisfying consumer needs.