Pure rice trapped in the rice cooker

In the era of consumption upgrading, we have witnessed the magical power of the "big single product strategy" of many consumer brands: the flagship products of start-ups (i.e. "big single products") break through by high-profile or leveraging the momentum, helping companies to quickly occupy the market. When they develop to a stable and rising stage, they can sprint into the capital market with good-looking "report cards" and good-sounding "new stories".

Among them, several companies in Xiaomi's ecological chain are more representative. In February 2018, Huami, which manufactured Xiaomi's Mi Band, was listed on the New York Stock Exchange; in September 2018, Yunmi, which started out by manufacturing water purifiers for Xiaomi, was listed on the Nasdaq; in February 2020, Stone, which once manufactured sweeping robots for Xiaomi, was listed on the Science and Technology Innovation Board...

Today, Chunmi Technology (hereinafter referred to as "Chunmi"), which developed the "Mijia Pressure IH Rice Cooker", is also rushing for an IPO. On January 18, the official website of the China Securities Regulatory Commission showed that Chunmi had started its listing guidance. This is the second time that Chunmi has "knocked" on the door of the capital market.

As early as December 24, 2021, China Merchants Securities and Chunmi signed a listing guidance agreement; on April 13 and July 13, 2022, China Merchants Securities submitted two guidance work progress reports to the Shanghai Securities Regulatory Bureau, but in October of the same year, Chunmi withdrew its listing guidance filing.

It is worth noting that in the second phase of the progress report on listing guidance, China Merchants Securities pointed out that in the past two years, the amount of related sales of Chunmi to Xiaomi Group accounted for more than 85% of the current revenue.

In addition, Chunmi's performance began to decline in the first half of 2022. Data shows that Chunmi achieved revenue of 873 million yuan in the first half of 2022, a year-on-year increase of only 8.64%; a net loss of 19.9551 million yuan, compared with a net profit of 30.2465 million yuan in the same period last year, turning from profit to loss.

Why does a company that has been specialized in producing rice cookers for 7 years want to enter the capital market now? Can Chunmi get rid of its high dependence on Xiaomi? When will Chunmi's performance decline be reversed?

1 Behind the re-listing

Yang Hua, the founder of Chunmi, is a serial entrepreneur.

Born in 1976, Yang Hua graduated from Inner Mongolia University in 2000. While in school, he served as the president of the Student Science and Technology Association. During his four years in college, he applied for more than a dozen invention patents, including one-button car start and 3D TV recording and playback, which attracted the attention of industry insiders.

These invention experiences enabled Yang Hua to stand out from 5,000 competitors when applying for a job, and he became one of the three fresh graduates who joined Motorola that year (2000).

In 2003, Yang Hua left Motorola and formed his own team to engage in the research and development of intelligent systems. In the following 10 years, Yang Hua, as the founder of Suobo Electronics, has been the general manager of Shanghai Suobo Intelligent Electronics Co., Ltd.

In 2013, the domestic mobile Internet industry was booming, smart applications and digital products were popular, and Xiaomi mobile phones also began to enter a period of rapid development. In May of the same year, Yang Hua decided to establish Chunmi. It was not until April 2014 that after communicating with Xiaomi co-founder Liu De, Yang Hua decided to change the company's name to "Chunmi" and join the Xiaomi ecological chain, leading a startup team of more than 20 people to do IoT.

In March 2016, with the birth of the "Mijia" brand, Chunmi launched the "Mijia Pressure IH Rice Cooker", which is also a product with high consumer awareness and sales. To date, the total sales of Mijia rice cooker series have exceeded 10 million units, giving people a brand image of "professional rice cookers".

Photo/ Mijia Pressure IH Rice Cooker (Junmi official account)

It was not until March 2019 that Chunmi launched its own brand TOKIT kitchen appliances, whose products include smart rice cookers, smart electric ovens, smart pressure cookers and smart water purifiers. Judging from this brand layout, Chunmi does not want to "only make rice cookers", but has the intention of developing in the direction of smart homes.

Perhaps, such a development layout is also paving the way for entering the capital market in the future. Like Huami, Yunmi, Stone and other Xiaomi ecological chain companies, Chunmi has also planted the "seeds" of the dream of going public early on.

"I believe that every startup company has a dream of an IPO, and we are moving in this direction year after year. We have set our goal to go public in China, and we hope it will be in two years," said Chunmi co-founder Guo Wenqi in an interview with Yiou in 2019.

Sure enough, two years later, Chunmi started the listing process. On December 24, 2021, China Merchants Securities signed a listing guidance agreement with Chunmi, and submitted two guidance work progress reports to the Shanghai Securities Regulatory Bureau on April 13 and July 13, 2022.

However, on September 27, 2022, China Merchants Securities signed a termination guidance agreement with Chunmi. In October of the same year, Chunmi withdrew its listing guidance filing. But only three months later, Chunmi restarted the listing process - on January 18, 2023, the official website of the China Securities Regulatory Commission showed that Chunmi had started listing guidance.

So, what was the reason that prompted Chunmi to start listing guidance for the second time?

In the view of "Zi Zi Financial View", on the one hand, it may be related to the fact that Chunmi's old shareholders are anxious to withdraw.

Tianyancha data shows that since its establishment, Chunmi has completed seven rounds of financing, almost one round per year. Investors include Xiaomi Group, Shunwei Capital, Everbright Zhongying, Star VC, Feike Electric, GGV Capital, Yingke Capital, Nokia Growth Fund, CDH Investments and other well-known institutions.

It has been 8 years since Chunmi received its first round of financing in 2015. As we know, the investment cycle of funds in the primary market is usually 5+2, that is, 5 years of investment and 2 years of exit. Therefore, it is possible that Chunmi’s second launch of listing guidance was caused by its old shareholders seeking to exit.

On the other hand, it may also be related to the timing of Chunmi's launch. Previously, Chunmi's official website disclosed that Chunmi's revenue in 2016, 2017 and 2018 was 100 million yuan, 230 million yuan and 560 million yuan respectively, maintaining a rapid growth trend, and it is expected that the revenue will exceed 1 billion yuan in 2019. However, by 2021, Chunmi's revenue was only 1.877 billion yuan.

Judging from the comparison of data, the high growth trend of Chunmi’s revenue is unsustainable.

In the case of a "stalling" in revenue, if Chunmi's IPO is not accelerated, it may be difficult for it to go public in the future.

2Is “Xiaomi addiction” difficult to solve?

In addition to the IPO, Chunmi still faces many problems. For example, has Chunmi gotten rid of its over-dependence on Xiaomi?

In the progress report of the second phase of the listing guidance work, China Merchants Securities pointed out that in the past two years, the proportion of Chunmi's related sales to Xiaomi Group accounted for more than 85% of the current operating income. Obviously, like many Xiaomi ecological chain companies, Chunmi also has the problem of over-reliance on Xiaomi.

Chunmi is also aware of the seriousness of this problem. In order to reduce the proportion of related sales and reduce the impact of high customer concentration, Chunmi has taken various measures to develop its own brand business in recent years.

First, Chunmi spent a lot of money to hire celebrities as spokespersons. On May 24, 2022, Chunmi's own brand TOKIT kitchen furniture officially announced that Wang Yibo became the brand's global spokesperson, trying to use the potential of "top domestic entertainment" to enhance the image and popularity of the TOKIT kitchen furniture brand, and transform this endorsement into a "celebrity style" sales strategy to drive product sales.

Secondly, Chunmi also took advantage of the live streaming trend. In early May 2020, TOKIT Kitchen Furniture held its first joint live broadcast on Gome and CCTV Boys, and also appeared in Luo Yonghao's Douyin live broadcast room; in late May, it appeared in the live broadcast rooms of more than 50 bloggers, including designer A Shuang, home design Xiao Simei, Design Duck, and Wuli Design Sister. (Editor's note: CCTV Boys refers to Kang Hui, Sa Beining, Zhu Guangquan, and Nigmat.)

The above two methods can, to a certain extent, help TOKIT complete the transformation from a niche brand to a "out-of-circle" brand.

Finally, Chunmi is working hard in overseas markets and expanding online and offline sales channels. In 2021, Chunmi will go overseas with two brands, TOKIT, which focuses on high-end intelligence, and joyami, which focuses on young and cost-effective products, and actively develop distributors.

However, "Zi Zi Cai Guan" believes that in the past two years, with Xiaomi's business accounting for as much as 85%, Chunmi may find it difficult to get rid of its dependence on Xiaomi in the short term. In this regard, we can see "previous lessons" from Huami and Yunmi, two companies in the Xiaomi ecosystem.

"Zi Zi Financial View" previously mentioned in "Huami's revenue and profit both fell in the fifth quarter, Huang Wang can hardly realize his own brand dream" and "Focusing on marketing and neglecting R&D, is Yunmi's stubborn problem difficult to solve?" that Huami's "de-Xiaomiization" began in 2015, while Yunmi began to gradually "de-Xiaomiization" in 2016.

But from the actual results, Huami and Yunmi have not yet gotten rid of their dependence on Xiaomi since their listing, and their stock prices have fallen to around US$2.

As we all know, if a company relies too much on a single partner, it will put its future performance at risk. Once Xiaomi terminates the cooperation, it may have a significant adverse impact on Chunmi's operating performance.

3. When will the downward trend in performance be reversed?

In addition to solving the problem of "Xiaomi addiction", another question waiting for Chunmi to answer is: Will the downward trend in performance in the first half of 2022 be reversed in the second half of the year?

Wind data shows that Chunmi achieved revenue of 1.877 billion yuan and net profit of 32.8291 million yuan in 2021. However, in the first half of 2022, Chunmi's performance began to show signs of weakness.

The financial indicators disclosed by Chunmi show that in the first half of 2022, Chunmi achieved revenue of 873 million yuan, a year-on-year increase of only 8.64%; its net loss was 19.9551 million yuan, compared with a net profit of 30.2465 million yuan in the same period last year, turning from profit to loss.

The specific reason for the loss is not yet known, but the poor performance will to a certain extent cause investors to worry about the future development prospects of Chunmi.

In fact, the current competitive environment faced by Chunmi is not optimistic: not only does it have to face competition from small home appliance companies such as Joyoung, Supor, and Bear Electric Appliances, but it also has to resist the impact from large comprehensive home appliance companies such as Midea, Haier, and Gree. In addition, Chunmi also has to deal with challenges from overseas brands such as Panasonic, Philips, and Toshiba.

Moreover, the competition in the industry that Chunmi is in will likely become more intense as time goes by. Obviously, this is not very friendly to Chunmi's ability to reverse its declining performance.

Moreover, Chunmi’s ability to create hit products seems to be declining. Chunmi once stirred up the Chinese rice cooker industry like a “catfish” and became famous overnight with the help of the hit product rice cooker. However, until now, the outside world has not witnessed Chunmi creating new hit products other than rice cookers.

In addition, Chunmi was once officially notified for failing product random inspections.

In February 2022, Chunmi received an administrative penalty notice from the Shanghai Chongming District Market Supervision Administration. The reason for the penalty was that the heating items of the smart electric oven produced by Chunmi, with the specification model MKX02M220V~50Hz 1300W, did not meet the standards. After that, Chunmi applied for re-inspection, but it still failed after the second inspection.

Picture/ Internet

In the end, Chunmi chose to destroy 22 of the 25 electric ovens of the same model, and the other 3 that had been sold were also recovered.

It is worth noting that the above-mentioned problematic smart electric oven was an order placed by Chunmi to Hunan Quankang Electronic Technology Co., Ltd. at a purchase price of 133.68 yuan per unit, and it was sold to the Tianhe Second Branch of Guangzhou Xuanjia Electronic Technology Co., Ltd. at a selling price of 255 yuan per unit. The price difference is as high as 121.32 yuan, and the selling price is almost twice the purchase price.

The incident of the product being named for failing the random inspection has brought a certain negative impact on Chunmi's brand image. "Zi Zi Cai Guan" also noticed that complaints about Chunmi's product quality issues can be seen on various platforms such as Xiaohongshu, JD.com, and Heimao Complaints.

Image/Xiaohongshu, JD.com

On the Black Cat complaint platform, netizens’ complaints about Chunmi include not only poor product quality, but also poor after-sales service, false advertising, and non-refunds.

Photo/ Black Cat Complaint

Whether it is the product quality issues detected by regulatory agencies in random inspections, or the product quality, service and other issues complained by netizens, this is contrary to Chunmi’s "user-centric" business philosophy.

4 Conclusion

Chunmi once became famous overnight with its rice cooker, a "big single product", and not only won the favor of many well-known investment institutions, but also gained a certain degree of consumer recognition. However, Chunmi's over-reliance on Xiaomi, weak performance growth, declining ability to create hit products, and declining reputation and credibility mean that it is going through a difficult time.

For Chunmi, it is certainly important to rush for an IPO, but it is even more important how Yang Hua leads the team to overcome the major difficulties that lie ahead. Otherwise, it will not only be difficult to get rid of its dependence on Xiaomi in terms of performance, but its brand development will also be trapped in the rice cooker for a long time.

*The title image in the article comes from: Chunmi Technology’s official Weibo account.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.