In 2021, China’s first cosmetics company xiefuchun lost $940,000. With a very long history in China, Xiefuchun has been close to 200 years old. The brand has won the United States Panama Silver Medal Award, but in recent years it saw a decline in performance, is this brand not good?
On the evening of April 22, xiefuchun released the 2021 financial report that the company reached about $5.89 million of sales revenue in 2021, an increase of 15.52% year-on-year with the net profit attributable to the shareholders of the listed company fell by a negative 57.36% year-on-year, with a loss of about $940,000.
Xiefuchun said that the main reason for the decline in net profit was to buffer the impact of the epidemic and promote product sales. The company has carried out a series of promotional activities, resulting in an increase of 15.52% in sales revenue and a decrease in a gross profit margin of 2.8%.
Second, sales expenses increased by 2.7368 million yuan, mainly due to the increase in employee salaries, e-commerce platform service fees, and brand promotion and publicity fees due to the reduction of preferential policies for social security payment and the increase in personnel.
Third, the management cost increased by 1.7762 million yuan, mainly due to the reduction of preferential policies for social security payments and the increase in the salary of employees and consulting fees due to the reduction of preferential policies for social security contributions and the change of personnel and wage adjustments.
According to the data, the Xiefuchun brand began with an incense powder shop in the 10th year of the Qing Dynasty’s Emperor Daoguang (1830), created by Xie Hongye, as China’s first cosmetics production enterprise. The brand is famous for making a variety of incense powder and sachets with its star products including face powder and solid balm.
During the Ming and Qing dynasties, Yangzhou incense powder was presented to the imperial court as a “tribute powder”, and xiefuchun, as the inheritance of Yangzhou incense powder, was designated as the royal brand on the court.
In February 1912, the U.S. government celebrated the opening of the Panama Canal and scheduled to hold the “1915 Panama Pacific International Exposition” (the “San Francisco Exposition”) in February 1915. Xiefuchun, as a giant in the Chinese incense powder industry, was jointly recommended by the government and the people. In addition, xiefuchun also had the strategic consideration of making a reputation for Chinese products and opening up overseas markets, so it took the initiative to register for the exhibition. Xiefuchun launched the three treasures of “incense, powder, and oil”, passed the barriers all the way and successfully passed the selection.
After 10 months of the Panama International Exposition, xiefuchun won the Panama Silver Medal award for its beauty, quality, pure taste, incense pieces, and incense powder. In the same year, xiefuchun incense powder and incense accessories won the bronze medal of the National Government’s Ministry of Agriculture and Commerce Domestic Products Exhibition.
During the Republic of China era, the development of xiefuchun’s powder-making skills reached its peak. The face powder, comb oil, and incense pieces known as the oriental solid perfumes are known as xiefuchun’s “three awesome products”.
Although xiefuchun has a deep cultural heritage and a long history, the brand’s performance is not very good from its annual report data in the past three years (from 2019 to 2021).
In 2019, xiefuchun saw a decline in its net profit. It achieved 64.77 million yuan of sales revenue, up 2.84% year-on-year, with a 12.21 million yuan of net profit attributable to shareholders of listed companies, down by a negative 8.78% year-on-year. According to the financial report, the reason for the decline in net profit is that xiefuchun saw a 1.7231 million yuan of growth in expenses in research and development year-on-year in 2019, an increase of 12411.58%.
In 2020, xiefuchun’s sales revenue was directly cut and there were huge losses with its sales revenue falling by negative 48.46% year-on-year to 33.38 million yuan and net profit attributable to shareholders of listed companies felling by negative 132.04% year-on-year to negative 3.91 million yuan.
According to the financial report, affected by the epidemic, xiefuchun’s offline physical store sales mainly in major tourist attractions across the country were seriously affected in 2020, resulting in a year-on-year decrease in the operating income of franchise and direct channels of 23.16 million yuan, down by 57.41%. Followed by the decline in the sales revenue of online platforms, with the operating income of e-commerce channels decreasing by 7.3952 million yuan year-on-year, down by 32.37%.
In summary, it can be seen that in recent years, xiefuchun’s performance has been mainly affected by the epidemic and research and development expenses, but as a time-honored domestic product, it attaches great importance to innovation and product research and development, which is understandable.
At the same time, in terms of xiefuchun’s channel layout, the brand is also advancing with the times. xiefuchun settled in Tmall in 2011, and then successively laid out on other e-commerce platforms. In May 2020, it established an e-commerce company and gradually made efforts in online channels.
Although its current strategy of increasing R&D investment and expanding sales channels has not yet shown due returns on xiefuchun’s performance, in addition to the brand having been hit by the epidemic. Xiefuchun, who has experienced nearly 200 years of ups and downs and is willing to keep pace with the times, is still worth being looked forward to.