Why is Haier ＂big but not strong＂？

Source: big v business (id: v-views)
Author: Fang Wen Editor: Xiao Jun

Among the Big Three, Haier is in an awkward position.

When we look at the three dimensions of revenue, market value and products, Haier is a pity.

The revenue gap between Haier and Midea has gradually widened.

At present, Haier ranks in the second place in White Power, but the revenue gap with the first beauty is widening. Since 2021, the difference between Haier’s revenue and the United States has exceeded 100 billion yuan.

Haier’s marketing rate is lower than Gree’s.

Compared with Gree Haier, the advantage is not obvious, and the position of the second child is not stable. Haier’s revenue in 2022 was 243.5 billion yuan, and its current market value was 199.1 billion yuan, while Gree’s revenue in 2022 was 190.2 billion yuan, and its current market value was 184.9 billion yuan.

In recent years, Gree has been regarded as lagging behind by the market, and an important factor for the widening revenue gap between Gree and Midea Haier is the small overseas market.

Looking at the domestic market alone, Haier’s competitiveness is declining. In 2022, Haier’s domestic market revenue was 116.3 billion yuan, Midea was 201.3 billion yuan, and Gree was 129.9 billion yuan. According to this ratio, Haier can only rank third in the domestic market.

Ranked second in domestic white electricity, Haier is embarrassed, big, but not strong.

1, awkward second.

The stock price continued to slump, and Haier began to buy back shares.

According to the announcement, in the past six months, Haier has been spending money to buy back shares, with a total cost of 1.188 billion yuan to buy back 5,340 shares.

The downturn in the stock price may be due to the fact that Haier’s fundamental strength is not strong enough.

Since 2018, Haier’s revenue growth has begun to slow down. During the years from 2019 to 2022, Haier’s revenue was 200.7 billion yuan, 209.7 billion yuan, 227.1 billion yuan and 243.5 billion yuan respectively, and the growth rate was only single digits.

In the third quarter of this year, Haier Zhijia released its performance report for the third quarter of this year. According to the financial report, the company achieved a total revenue of 198.657 billion yuan in the first three quarters of this year, a year-on-year increase of 7.5%; The net profit of returning to the mother was 13.149 billion yuan, a year-on-year increase of 12.71%.

As one of the "Big Three White Goods",What Haier Zhijia is facing now is the scale that can’t catch up with the United States in the world, and now it is being chased by Gree.

Consumption picked up this year, and the home appliance industry also ushered in a slight growth in the first three quarters, and the performance of the three giants all achieved a double increase in profits.

Among them, Midea’s revenue in the first three quarters of this year also reached a record high of 292.38 billion yuan, up 7.58% year-on-year. According to the current momentum, Haier and Midea’s revenue will further expand.

In addition, although Haier is large enough, it is not outstanding in competitiveness, even worse than Gree, which is currently ranked third.

Midea’s net profit increased considerably in the first three quarters of this year, reaching 27.72 billion yuan, up by 13.27% compared with the same period of last year. Gree’s revenue in the first three quarters of this year was only 155.812 billion yuan, but its net profit attributable to its mother has surpassed Haier to reach 20.092 billion yuan, exceeding Haier’s 14.71 billion yuan by more than 5 billion yuan, which is a potential to open up the distance.

Specifically, in Haier’s cost control, the utilization rate of sales expenses is extremely poor.

In the first three quarters of this year, the sales expenses of Midea and Gree were 25.3 billion yuan and 13.3 billion yuan respectively, while the sales expenses of Haier were as high as 29.2 billion yuan. Compared with the revenue in the first three quarters of this year, Haier’s sales expenses are too high.

This situation is not accidental. In 2022, the largest sales expense of Midea among the Big Three was 28.716 billion yuan, and the smallest Gree was 11.285 billion yuan. In the middle, Haier’s sales expense was the highest, reaching 38.598 billion yuan.

Profitability has always been a "long-standing problem" that puzzles Haier. Under the background of continuous upgrading of industry competition, the pressure on Haier’s profit side may be difficult to eliminate.

Even if it costs a huge amount of sales expenses, Haier’s terminal and advertising problems are more.

In July, Haier was exploded with false propaganda. According to Credit China, Qingdao Haier Drum Washing Machine Co., Ltd. was fined more than 30,000 yuan by Dong ‘an County Market Supervision Administration for publishing false advertisements. The reason for the punishment was that a billboard placed on a washing machine product of Haier declared "antibacterial window mat: antibacterial rate > 99%", which effectively suppressed the growth of mold and avoided secondary pollution. However, the actual sample test shows that the antibacterial window mat only achieves 99% antibacterial effect on Escherichia coli and Staphylococcus aureus, and the advertising language exaggerates the antibacterial range and misleads consumers.

Among the black cats’ complaints against official website, Haier’s complaints reached 22,510, and there were also many questions about false propaganda.

As one of the "three giants of white goods", the influence of the brand has long been familiar to consumers, and it still costs huge sales expenses, which is not a good thing for Haier.

At the same time, it is better to do quality control and reduce the image consumption caused by some "low-level" mistakes than to spend a lot of time on publicity.

2. Strong overseas and weak at home?

The data shows that in the first three quarters of this year, Midea’s gross sales margin was 25.84% and its net sales profit rate was 9.72%. Gree’s gross sales margin is 29.25%, and its net sales profit rate is 12.59%. Haier’s gross sales margin is 30.71%, and its net sales profit rate is 6.68%. Obviously, Haier’s gross profit margin is the highest among the three, but its net profit rate is the bottom.

In addition, Haier’s growth rate has almost stood still in recent years. If you don’t advance against the current, you will retreat. Compared with the earlier performance of profit growth rate of more than 30% in 2017, Haier’s growth rate is slightly tired now.

In this case, Haier is also anxious to find new growth.

However, under the background of "white-hot" competition in the industry, it has become more and more difficult for home appliance enterprises to obtain increment. Almost all the global home appliance giants have begun to hand-to-hand combat, while the choice of Haier Zhijia’s new increase points to overseas markets and high-end.

In terms of overseas layout, Haier began to export more than 20 years ago. By 2005, Haier officially determined the strategy of global brands, and then it continued to increase its overseas weight through cooperation, joint ventures and acquisitions with overseas brands.

For example, in 2011, Haier Zhijia acquired Sanyo Electric of Japan and successfully laid out the white electricity business in Japan and Southeast Asia. In 2016, M&A won GE Appliances and entered the North American market; In 2018, it acquired all the shares of Fisher & Paykel of Haier Group and entered the Australian-New Zealand market; In 2019, Haier Zhijia acquired Candy, a well-known European home appliance brand, and began a new layout in Europe.

In addition, in recent years, domestic enterprises have started the mode of "going out to sea to create brands". Haier, which has been the first to go out to sea for a long time, has more than half of its brands such as casarte, Leader, GE Appliances, Candy, Fisher&Paykel and AQUA, which are overseas business lines and divisions.

Not only that, in the financial report, the company mentioned that the overseas market has continuously increased its market share by promoting high-end brand strategy and in-depth development of the network, with emphasis on the continuous promotion and deepening of high-end brands in North America and Europe.

High-end makes Haier Zhijia gain a lot of new growth, among which the increase brought by casarte is the most obvious. The financial report shows. In the first half of 2023, casarte’s market share increased from 12.8% to 14.2%, with a net increase of 1.4pct year-on-year, ranking first in the high-end market. In the brand, the market share of refrigerators and washing machines in China is 39.4% and 82.9%, and the market share of air conditioners in China is 29.2%.

Exploiting overseas markets and high-profit high-end brands have enabled Haier’s overseas business to grow rapidly in recent years.

At the AWE 2023 Summit Forum, Li Huagang, senior vice president of Haier Group and chairman of Haier Zhijia Co., Ltd., said that Haier Zhijia’s entire overseas income accounted for 52% in 2022, which was the first time that overseas income exceeded domestic income. In contrast, Midea Group’s overseas business accounts for 41.48%, while Gree Electric’s is only 12.24%.

However, Haier’s competitiveness in the domestic market is weakening.

If divided by region, Haier’s domestic market revenue in the past four years was 106.2 billion yuan, 107.2 billion yuan, 111.8 billion yuan and 116.3 billion yuan respectively, which was lower than Gree’s for a long time, except for its little growth, which was 136.1 billion yuan, 110.4 billion yuan, 122.3 billion yuan and 129.9 billion yuan respectively.

3. Is it hard to tell the new story of intelligence?

In August this year, Haier took the lead in formulating the first home model standard, and on November 20 this year, Haier Zhijia showed the first vertical model of smart family, HomeGPT.

Haier can be described as the most active one in the intelligentization of home appliances. In 2019, Qingdao Haier was renamed Haier Zhijia, which opened a new direction for the intelligent development of home appliances.

However, as early as 2006, Haier entered the Internet of Things with Uhome. By 2015, the smart home strategy was officially launched, and by 2020, the world’s first scene brand Triwinged Bird was released. Haier Zhijia has customized a "1+3+5+N" whole scene and whole house smart solution for Triwinged Bird, which can more actively meet the needs of users.

2019 is a turning point for the home appliance industry. It was this year that Haier’s revenue growth rate finally fell below double digits, and the year-on-year revenue growth only reached 9.05%.

Intelligentization has become a new way for Haier to find under the overall slowdown of the industry.

According to IDC data, China, as the world’s largest smart home market, will reach $54.5 billion in 2022, up 18.2% year-on-year. It is estimated that by 2025, the smart home market in China will reach 87.8 billion US dollars, with a compound annual growth rate of 14.9%.

Data show that in 2022 alone, the number of smart home investment and financing events in China reached 79, with an investment of 14.384 billion yuan.

Haier Zhijia got up early, but caught a late gathering. Today’s smart home market is already competing with each other.

The cake is big, and there are many people who want to share it. In addition to traditional home appliance companies, there are also a number of Internet technology companies, such as Ali, Baidu and Xiaomi.

It is not easy for all parties to get ahead even as an old home brand, not to mention that "smart home" comes first from intelligence and then from home. It can be seen that the core competitiveness represented by intelligent software is the most important thing, but as a traditional enterprise that has always relied on selling hardware to improve its thinking, its software ability is bound to fall into weakness.

Haier lays out smart homes, and through the three-winged bird, it wants to drive the sales of home appliances through the scene experience.

However, judging from Haier’s domestic home appliance sales in recent years, Haier has not achieved the function of thinning and cross-selling, and its domestic market share has not been effectively boosted.

In particular, the current intelligence has become standard.Home appliance enterprises of the second echelon in China, such as Hisense and Changhong, have increased their price/performance ratio and core technologies.In terms of revenue, it has approached Haier. According to the current trend, Haier’s second position may have to move.