Sacon’s dilemma: Rapid decline in performance means there are not many cards left to play

Sacon’s dilemma: Rapid decline in performance means there are not many cards left to play
Sacon, once ranked first in the kitchen appliance industry, has experienced several years of "Great Leap Forward" expansion, coupled with decision-making errors in the kitchen appliance business, which has seriously damaged its vitality, and its operating performance has rapidly declined. It has been left far behind by its rivals, Boss and Fotile. From glory, expansion, decline to acquisition, Zou Guoying, who has always been a leader of the company, has witnessed the rise and fall of Sacon for 33 years. Now he is embarking on the "glorious" long-distance race of Sacon's revival. However, with the kitchen appliance market structure already determined, Sacon, which is fighting a desperate battle, does not have many cards to play.
score
In December last year, Sunrise East announced that on December 2, 2016, the company signed a "Letter of Intent for Equity Transfer" with Sacon Group and Sacon Group's actual controller Zou Guoying and other shareholders. The company plans to acquire 75% of Sacon Electric's equity for no more than RMB 750 million in cash.
At that time, the main business of Sacon Electric included the manufacturing of gas appliances, range hoods, air conditioners and household appliances. It directly held 100% equity of Sacon Water Heater and Sacon Marketing.
Now, one year has passed since the signing of the equity transfer agreement. How has Sacon developed under the leadership of its new owner?
According to data from CMM, in the first half of this year, in terms of the retail volume share of range hoods, Robam, Fotile, Midea, Vatti and Vanward ranked the top five, with retail volume shares of 18.8%, 16.4%, 11.2%, 8.8% and 4.6% respectively; in terms of retail sales, the top five were Robam, Fotile, Vatti, Midea and Siemens, with retail sales shares of 26.3%, 23.8%, 9.3%, 8.9% and 4.8% respectively. In terms of gas stoves, in terms of retail volume share, Robam, Fotile, Midea, Vatti and Vanward ranked the top five, with retail volume shares of 16.4%, 15%, 10.9%, 10.5% and 5.5% respectively; in terms of retail sales share, the top five were Robam, Fotile, Vatti, Midea and Siemens, with market shares of 23.3%, 23.2%, 11.5%, 7.3% and 4.8% respectively. It can be seen that there is no trace of Sacon in the top five market sales rankings in multiple categories of kitchen appliances.
The reporter checked JD.com and found that there was no Sacon product in the top 10 sales rankings of range hoods; nor was there a Sacon in the top 10 sales rankings of gas stoves. Instead, brands such as Fotile, Robam, Vatti, and Midea occupied the top 10 positions.
However, Sacon's report card for the first half of this year looks better. This year, Sacon Electric was consolidated with Sunrise East for the first time. In the first half of the year, Sacon Electric developed a total of 110 new products and projects, applied for 25 patents, and authorized 16 patents, including 5 authorized invention patents. It achieved sales revenue of 485 million yuan, a year-on-year increase of 17.9%, of which online sales were 138 million yuan, a year-on-year increase of 43.8%; engineering sales were 8.3 million yuan, a year-on-year increase of 71.9%; export sales were 51 million yuan, a year-on-year increase of 15.7%, and net profit of 41 million yuan was achieved in the current period, contributing a net profit of 21.9621 million yuan to Sunrise East (in the second quarter after the acquisition).
However, according to industry insiders, the improvement in Sacon Electric's operating performance in the first half of the year was not due to the release of synergy after its integration with Sunrise East, but was due to the overall improvement of the kitchen appliance sector. In the opinion of industry observer Hong Shibin, Sunrise East cannot provide many favorable conditions for Sacon, and it is difficult for the product lines to complement each other. Solar water heaters generally develop offline channels in the form of specialty stores, while kitchen appliances are mainly sold in stores.
Decline
As a long-established kitchen appliance giant in my country, Sacon was once a leader in China's range hood industry. Data shows that since 1996, Sacon range hoods have ranked first in the country in terms of comprehensive market share, market sales share, and market coverage for several consecutive years, and the Sacon trademark has also become a well-known trademark in China. Sacon has been ranked first in market sales for eight consecutive years, and its head Zou Guoying is even hailed as a legendary figure comparable to Zhang Ruimin and Lu Guanqiu in those days.
But like all heroes who once enjoyed glory, Sacon could not escape the dramatic fate. After reaching the peak, it was gradually overtaken by the younger generation and even fell into a slump. According to the kitchen appliance market data of CMM, in July 2011, the market share of Sacon range hoods and gas stoves in terms of retail volume and sales was 4.1%, 5.8%, 3.6%, 5.4% respectively, which was a different degree of "volume decline and profit decline" compared with 5.3%, 7.1% and 4.6%, 7.2% in the same period of the previous year. The decline in sales volume was much greater than that in sales volume.
Sacon was eager to diversify when it was leading the range hood market in the early days, which was seen by the industry as the main reason for Sacon's fall from grace. "The diversification of an enterprise must be based on specialization," said Liang Zhenpeng, a home appliance analyst. Sacon's cross-field diversification itself is difficult to guarantee its specialization, which will have a negative impact on the operation of the entire company and brand.
As early as 2003, Sacon invested over 100 million yuan to enter the fiercely competitive air-conditioning market. Then in 2005, facing the loss of the entire air-conditioning industry, Zou Guoying said, "Let go when it's time to let go," and withdrew from the air-conditioning industry after just two years of involvement. It was also during these two years that companies such as Fotile and Robam rose rapidly, forming a "Fang Lao Shuai" pattern with Sacon, and Sacon's monopoly in the range hood market was gone.
The failure of its cross-border foray into air-conditioning did not alert the top management of Sacon, and they subsequently entered the fields of real estate, water purifiers, solar photovoltaics, and solar thermal energy. However, Sacon did not make a good breakthrough in these fields.
Hong Shibin pointed out that there was nothing wrong with the diversification strategy of home appliance enterprises. But the problem was that the range hood market was still in a stage of rapid development at that time, and Sacon was only temporarily ahead, and the market structure was far from being formed. Under this situation, Sacon's focus was dispersed, which dragged down the development of its main business. In addition, the development of new businesses was hindered, which led to its lag behind. Now, it has become a marginalized brand in the mainstream first- and second-tier markets. "Sacon has not achieved ideal results and has fallen behind seriously."
problem
Of course, Sacon is not without efforts. Since 2017, Sacon has been active in the field of fine engineering decoration. It has not only successfully won the national strategic bid of Wanda, but also reached strategic cooperation with many well-known real estate companies, leading the transformation and upgrading of the high-end real estate kitchen appliance engineering market. It has also successfully won the Zhongnan kitchen appliance strategy and became the exclusive strategic partner of Zhongnan Group's Xiaochubao.
It is worth noting that in June this year, at the Sacon Brand Festival, Sacon Electric President Zou Guoying stated to guests from all over the country that it would take three years to return to the top camp.
Sunrise East said in its semi-annual report that in the second half of the year, each division and center of Sacon Electric will be guided by the annual goals, focus on increasing R&D investment, improving product intelligence, optimizing product appearance and functional design, and enhancing terminal O2O construction capabilities to ensure the completion of annual operating goals. Beijing Business Daily contacted a relevant person in charge of Sacon, who said that Sacon will announce next year's plan and how to return to the top camp soon.
Whether it can return to the first camp has caused doubts in the industry. According to the analysis of CMM, from the comprehensive performance of the brands, a duopoly has been formed in the mid-to-high-end market, represented by Robam and Fotile, and the growth rate of the two in recent years has been much higher than the industry average. Data shows that in the market, Fotile and Robam have occupied a large market share. Fotile has a total of 989 patents and continues to innovate kitchen appliance product categories; the 2017 semi-annual report released by Robam showed operating income far higher than the industry average. In the first half of this year, Robam Electric's operating income was 3.198 billion yuan and its net profit was 598 million yuan, up 26.63% and 41.37% year-on-year respectively. In comparison, Sacon has fallen far behind.
"The brand is aging and the product technology lacks highlights." Hong Shibin said frankly that this is the biggest problem facing Sacon at present. Chen Biao, an analyst at BiDa Consulting, also said that whether it is acquired by Sunrise East or other companies, it is difficult for Sacon to return to the front line of the market. The competitive situation in the kitchen and bathroom market has long been different from the past. Sacon has not been able to maintain steady growth in the past when the competitive environment was better. Why can it seize the market in a worse competitive environment?
"It is difficult for Sacon to return to the first camp. In the future, it still needs to focus on kitchen appliances as its main products and avoid creating branches so as not to be affected by Sunrise East's business," said Hong Shibin.
Some industry insiders also pointed out that Sacon is not without opportunities. After all, the industry's growth rate is slowing down, but the market is far from saturated, and every brand has the opportunity to grow.

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.

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