Angel Nutritech (Angel Yeast's wholly-owned subsidiary) pivots into baby food market 10-26-2021

According to an announcement of Angel Yeast on September 15, Angel Yeast's wholly-owned subsidiary company Angel Nutritech intends to establish a joint venture with Wuhan Kanghelong Food Technology Co., Ltd. (Kanghelong). The purpose of this joint venture is to promote the rapid development of Angel Nutritech’s baby snacks and complementary food business segment. The joint venture will act as a professional holding subsidiary for Angel Nutritech to develop related products in the snack food industry and seek new opportunities in the field of baby snack food.

Angel Yeast changes track after its revenue gross faces great pressure

According to recent financial data, during the first half of 2021, Angel Yeast achieved an operating income of RMB 5.23 billion, a YoY increase of 20.6%, and their net profit was RMB 828 million, a YoY increase of 15%. Among this, the operating income in the second quarter was RMB 2.57 billion, a YoY increase of 12.5%, and the net profit in the second quarter was RMB 386 million, a YoY decrease of 7.2%.

Compared with 2020, Angel Yeast's performance growth in the first half of the currnet year has slowed down significantly. In 2020, Angel Yeast achieved operating income of RMB 8.933 billion, a YoY increase of 16.7%, and a net profit of RMB 1.37 billion, a YoY increase of 52.1%.

In the past three years, Angel Yeast's overall performance growth rate has shown a gradual slowdown. Data show that from 2017 to 2019, Angel Yeast's YoY growth rates were 18.8%, 15.8%, and 14.5%, respectively, and Angel Yeast's YoY net profit rates were 58.3%, 1.1%, and 5.2%, respectively. In the same period, Angel Yeast's gross profit margins were 37.6%, 36.3%, and 35%, respectively.

Analysts predict uncertainty for the future of Angel Yeast

According to the analysis from a consumer researcher from Changjiang Securities, the overall return from yeast products continues to decrease. In the long run, if there are no other new products with higher returns to support Angel Yeast's performance, then the future of the company is uncertain.

The researcher also remarked that the price of Angel Yeast's raw material molasses soared during the first half of the year, reaching more than 1,600 RMB/ton, which doubled from last year. At the end of August, the price of molasses was still at a high level. The researcher added that originally, Angel Yeast’s gross profit margins were not high and that with the price of raw materials increasing, money is not easy to make, which is a likely reason that Angel Yeast wants to enter the baby food market.

Several analysts have opined that it is difficult to predict whether the market will accept Angel Yeast's pivot strategy. At this point in the company's development, the company can either choose to focus on establishing itself in one key market or try to branch out into other markets. However, in order to create brand awareness for its baby food products, Angel Yeast still needs to further develop its brand sales strategies.

For more information check our Dairy Products China News.


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