How long does it take for market value to evaporate by over 30 billion yuan? The answer is four years. Recently, Taoli Bread, the 'bread king of Northeast China,' released its interim financial report, showing declines in both revenue and profit. In the first half of 2024, Taoli Bread's revenue was 3.021 billion yuan, down 5.79% year-on-year, and net profit was 290 million yuan, down 0.60%. Its market value has shrunk to 8.3 billion yuan, a far cry from its peak of nearly 45 billion yuan.

Looking back, Taoli Bread, with its differentiated positioning, chose the 4-15 day short-shelf-life bread market between long-shelf-life and freshly baked bread. Relying on the 'central factory + wholesale' production and sales model, it quickly achieved the top spot in the short-shelf-life baking track. In 2015, it listed on the capital market, becoming a leading representative in the industrial bread sector, basking in glory.

After listing, Taoli Bread's performance soared, with revenue growing from 2.563 billion yuan in 2015 to 5.644 billion yuan in 2019, with annual revenue growth rates above 16%. However, starting from 2020, Taoli Bread's revenue growth slowed to single digits. Behind the unsatisfactory performance lies a cruel truth: Taoli Bread is no longer selling well.

Once, Taoli Bread was a 'moonlight' presence in the hearts of students and white-collar workers. Compared to bread from bakeries that often costs over ten yuan a piece, Taoli Bread's prices are mostly around 1-5 yuan, making it the lowest-cost dignity in the food sector.

What's more, Taoli Bread not only offers large quantities—for example, a 4-yuan bag of toast bread contains 12 slices—but also has commendable flavors, with many classic 'best-sellers' deeply rooted in people's hearts.

The more glorious the past, the greater the contrast today. While Taoli Bread faces development bottlenecks, competitors are continuously making efforts. Dali Foods, Panpan Foods, Mankattan, Garden, and others all have their own short-shelf-life products. Even many supermarkets, such as Hema, Walmart, Yonghui Superstores, and RT-Mart, have launched their own bakery products. The short-shelf-life market is no longer dominated by Taoli Bread alone.

Moreover, with the growing health consciousness, Taoli Bread's products, almost all high in oil and sugar, have touched a red line in consumers' minds. In recent years, frequent food safety issues—such as foreign objects found in bread and negative news about insects and foreign matter during production—have continuously damaged Taoli Bread's reputation.

Under siege from all sides, Taoli Bread's troubles may just be beginning.

Standing Out with 'Short Shelf Life' Taoli Bread Ascends to the Pedestal

An old steed in the stable still aspires to gallop a thousand miles; a hero in his twilight years still harbors grand ambitions.

Wu Zhigang, born in 1935, is a representative of 'late bloomers' in entrepreneurship. Before retirement, he worked as a telegraph operator at the Dandong Telecommunications Bureau in Liaoning and later as a teacher, living a conventional life. After retirement, instead of enjoying his later years, Wu Zhigang had the idea of starting a business.

▲ Wu Zhigang

At that time, the bread market was filled with the 'flavor' of preservatives—seemingly easy to store but poor in taste and unhealthy. In response to this market condition, in 1995, 60-year-old Wu Zhigang, along with his son Wu Xuequn, opened a bread workshop in Dandong, deciding to make short-shelf-life bread with a one-week shelf life. Wu Zhigang named the product 'Taoli' (meaning 'peaches and plums'), both as a summary of his first half of life and as a wish to sell bread all over the world.

In the early days of the business, Wu Zhigang targeted breakfast shops as a breakthrough. He started delivering at 3 a.m. on a small tricycle, arriving at street-side stores by 6 a.m. to ensure freshness. After gaining fame, Taoli Bread successfully entered small shops and supermarkets. Healthy, tasty, and affordable, Taoli Bread's popularity grew day by day.

After becoming 'popular,' Taoli Bread did not rest on its laurels. Instead, it benchmarked against Japan's most famous bread brands, diligently researching baking techniques, and eventually created its classic signature product—the 'Chunshu' (mature) series sliced bread—further solidifying its 'position in the industry.'

In 2000, Taoli Bread's revenue exceeded 100 million yuan for the first time. By 2005, Taoli Bread had become the largest fresh bread producer in Northeast China.

Seeing the time was ripe, Taoli began to accelerate expansion, intending to establish its 'bread empire' nationwide. Facing the challenges of short shelf life and high delivery requirements for fresh bread, Wu Zhigang innovatively proposed the 'central factory + wholesale' model: establishing central production workshops in various regions, with these workshops as centers, delivering to areas within a 200-kilometer radius.

This model ensured that Taoli Bread maintained freshness while significantly reducing logistics costs, achieving 'delicious and affordable.' More importantly, it was easy to replicate for expansion, serving as an 'accelerator' for Taoli Bread's takeoff.

Under this strategy, Taoli Bread also established deep channel advantages through a 'direct sales + distribution' approach. In direct sales, Taoli Bread signed agreements directly with large chain supermarkets and small and medium-sized supermarkets and convenience store terminals in central cities. In distribution, Taoli Bread vigorously developed a dealer system, covering sinking markets at the township level through distribution. The ubiquitous Taoli Bread made its presence felt in various consumption scenarios.

In December 2015, Taoli Bread was listed on the Shanghai Stock Exchange, becoming the 'first bread stock' in the food industry. Since then, Taoli Bread's development has been 'at its peak.' From 2011 to 2017, Taoli Bread's revenue grew from 1.197 billion yuan to 4.08 billion yuan, with a compound growth rate of 22.68%; net profit increased from 146 million yuan to 514 million yuan, with a compound growth rate of 23.36%, far exceeding the industry average.

On August 18, 2020, Taoli Bread's market value reached 42.695 billion yuan. However, the 'curse' of peaking and then falling was not escaped by Taoli Bread. The crisis had already crept in unnoticed.

Southern Expansion Suffers Major Setback Food Safety Crisis Adds to Woes

Although Taoli Bread is 'ambitious,' the road south has not been smooth.

As of the end of 2023, Taoli Bread had 22 production bases in operation nationwide, with 5 more under construction. Compared to 18 in 2019, that's 9 more bases. This number may not seem large, but it's important to remember that these are heavy assets with significant investment.

Since its listing, Taoli Bread has repeatedly raised funds for base construction. By the third quarter of 2023, Taoli Bread's free cash flow on the books was only 260 million yuan. Moreover, since 2018, Taoli Bread's net increase in cash and cash equivalents has been negative, meaning its investment amount far exceeds its revenue, and the input-output ratio has not achieved the expected returns.

Taoli Bread's expansion plan was originally intended to drive performance growth through economies of scale, but instead it dragged down performance. Looking at the 2023 financial report, the net profits of Taoli Bread's subsidiaries in Shanghai, Hefei, Henan, Fuzhou, Xiamen, Dongguan, Zhejiang, and Quanzhou were all in losses. The combined revenue of Central China, Southwest, and South China was 1.426 billion yuan, less than the revenue of North China alone.

This has led to a situation where Taoli Bread is expanding production capacity while capacity utilization is declining. By the end of 2022, Taoli Bread's total production capacity reached 455,700 tons, but the actual capacity utilization rate fell by 4.17% from the previous year to only 81.39%. By the third quarter of 2023, the capacity utilization rate of Taoli Bread's production bases further dropped to 73.35%, down 5.16% from the same period last year.

Logically, southern provinces have developed economies and should have higher acceptance of short-shelf-life bread, but the result is the opposite. The reason is that provinces like Guangdong and Zhejiang have a strong morning tea culture, with a wide variety of breakfast options that are far superior in taste and nutritional balance to cold, dry bread, so the consumer base is not broad.

Moreover, the 'central factory + wholesale' model that Taoli Bread prides itself on is a double-edged sword. Each region operates as a base, developing and producing independently for a long time, leading to serious deviations in consumer perception of the brand. Many consumers choose Taoli Bread in supermarkets not because of the 'Taoli' brand, but simply because it is inexpensive and eye-catching. Some people don't even know where Taoli Bread comes from.

To make matters worse, with the rising awareness of healthy eating, sugar-free bread, lye rolls, bagels, and other products have become new trends. Taoli Bread, labeled with 'technology and ruthless tactics,' has become unpopular.

Since Taoli Bread's shelf life needs to be controlled within 7 days, various additives are inevitable. Some netizens have said that Taoli Bread is a disaster zone for trans fats. In the ingredient list, besides water and flour (which rank first and second), the rest are additives. The health risks of long-term consumption are imaginable.

Not only that, Taoli Bread has also faced multiple food safety issues. On the Black Cat complaint platform, most complaints about Taoli Bread are about product quality issues, such as mold, foreign objects, and missing production and expiration dates. In February last year, Taoli Bread was also exposed to the 'blade incident,' which trended on major platforms and severely damaged its reputation.

In addition to the 'internal troubles,' Taoli Bread also faces thorny 'external threats.'

Surrounded by Fierce Competitors Taoli Bread's Situation is Worrying

Today, the short-shelf-life bread market is no longer Taoli Bread's 'world.'

Since 2016, Panpan has been determined to enter the short-shelf-life bread market, creating the sub-brand 'Lingxian' and launching four series with more than 20 bakery products with shelf lives of 3-21 days.

In 2018, Bimbo, the world's largest baking brand, acquired Mankattan, becoming China's second-largest bread supplier. Bimbo focuses on North China, while Mankattan is deeply rooted in East China. The merger of the two brands is a 'strong alliance.' The same year, Dali Group launched the short-shelf-life bread brand Meibeichen, investing 2 billion yuan to introduce a new generation of bread production equipment from Germany and Japan. Leveraging Dali's financial and channel resources, as well as low prices and celebrity endorsements, Dali Group quickly rose to second place in the industry.

Even the supermarket channels that Taoli Bread relies on most have 'turned the tables.' More and more supermarkets are continuously increasing their bakery products, attracting consumers with 'large quantities and low prices.' Pangdonglai opened its own bakery brand Delicious; RT-Mart relaunched 15 classic bakery products; China Resources Vanguard and Yonghui also have their own signature best-sellers; Hema, Walmart, Yonghui, and other supermarkets all have dedicated bakery sections. Compared to short-shelf-life products, freshly baked bread is more competitive at similar price points.

The track is becoming increasingly crowded. Snack giants like Yanjinpu and Three Squirrels, convenience store brands like FamilyMart and Lawson, and even new tea drinks like Heytea and Naixue have all launched short-shelf-life bakery products, which are more popular among young people in terms of brand tone and channel scenarios.

To make matters worse, with the continuous rise in raw material prices such as flour, sugar, cream, and yeast in recent years, Taoli Bread, under performance pressure, has raised prices in different regions since 2022, with increases of around 6%. Even the downgraded edge-trimming products have risen from 10 yuan to 15 yuan per bag, and the price advantage is no longer obvious.

The vicious cycle continues. Taoli Bread's home base in Northeast China is also facing 'loss.' Since 2020, the revenue growth in the Northeast region has fallen to single digits. From 2020 to 2022, the revenue growth rates in the Northeast were 5.14%, 2.82%, and 0.47%, respectively.

The 2023 annual report shows that revenue in the Northeast was 2.828 billion yuan, down 2.25% year-on-year. This is the first decline in revenue in the Northeast since Taoli Bread's listing, undoubtedly a dangerous signal.

Controversially, while performance declines, the Wu Zhigang family has been cashing out through Taoli Bread. According to statistics from Cailian Press, as of the end of June 2023, the Wu Zhigang family had cashed out a total of over 4.8 billion yuan.

In addition to cashing out, the Wu Zhigang family has also been distributing large dividends. In this semi-annual report, Taoli Bread also disclosed its 2024 interim profit distribution plan: the company plans to distribute a cash dividend of 1.2 yuan (including tax) per 10 shares, totaling 192 million yuan. Small shareholders benefit limitedly from the dividends, with most going into the pockets of the Wu Zhigang family.

Some investors question whether the Wu Zhigang family lacks confidence in the company's future. Although Taoli Bread has denied this, the controversy remains unresolved.

In today's rapidly changing market landscape, Taoli Bread, which aspires to 'sell all over the world,' has come to a crossroads of fate. Whether to advance or retreat, a wrong step could have fatal consequences.

Under attack from both sides, the time left for Taoli Bread is running out.