At the end of the 19th century, the world’s first thermos cup was born in the UK, but now Jinhua City, Zhejiang Province hides the world’s largest thermos cup industry belt. Statistics show that the annual output of China’s thermos cups has reached 800 million, and more than 60% of them are exported under OEM.
With the upsurge of outdoor sports overseas in the past two years, the performance of the two listed thermos cup foundries has increased rapidly, and many other foundries in the industrial belt have also taken advantage of the wind to seek transformation.
01 The performance of the export foundry has doubled, has the industry entered a rising period?
It’s not like energy storage is sought after by capital, and it’s not like fast fashion is at the center of public opinion. It’s hard to believe that thermos cups, an unsentimental category, will still maintain rapid growth this year. According to the data of the General Administration of Customs, in the first eight months of this year, the export value of my country’s thermos cups totaled 999 million US dollars, a year-on-year increase of 50.08%, far exceeding the 14.2% growth rate of total exports during the same period. Among them, the total export value of thermos cups exported to the United States from January to August was 405 million US dollars, a year-on-year increase of 57.3%.
The Matthew effect is in full play in this “traditional” industry. Take Hals, which has a market share of more than 10% in the thermos cup export industry, as an example. Relying on OEM for overseas thermos cup brands, the revenue in the first three quarters reached 1.898 billion. RMB 175 million after deduction of non-net profit, a year-on-year increase of 14.28% and 106.69% respectively. Statistics show that the annual output of China’s thermos cups has reached 800 million, and more than 60% of them are exported under OEM.
In comparison, Jiayi, another leading listed company, is slightly smaller in size, but its growth rate is even better. The financial report shows that in the first three quarters of 2022, its revenue will reach 836 million yuan, and its non-net profit will be 168 million yuan, a year-on-year increase of 112.5% and 197.12%, respectively.
Different from the traditional impression of small profits but high turnover of foundries, it can be found through financial data that the net interest rates of the above two thermos cup export OEMs even far exceed the 5% hardware net interest rate limit set by Lei Jun for Xiaomi. Customers include American PMI (Starbucks, STANLEY), American S’well, YETI and other overseas brands.
Behind the impressive performance of vacuum cup OEM companies is the steady growth of overseas demand. Different from domestic demand for thermos cups, the main demand of American consumers for purchasing thermos cups is to keep cold. The usage scenarios of thermos cups overseas are mainly divided into four categories: daily office, commuting, outdoor sports, and school classrooms.
Essence Securities said in a special research report that the increase in demand for vacuum flasks in the United States this year mainly comes from outdoor sports and consumer demand during the back-to-school season. According to statistics from NPD Group, as of May 2022, the sales of water bottles and insulated containers in the past year have increased by 30% year-on-year, second only to camping chairs.
The other side of the high performance is the downward price of raw materials for thermos cups. Among them, stainless steel is the most important upstream raw material for thermos cups. The current average price is about 20% lower than that in early 2022. According to wind data, the price of stainless steel has dropped from more than 20,000 yuan/ton in the first quarter of 2022 to around 16,000 yuan/ton at present.
After the washing of time, the aggregation of categories often appears in the form of industrial belts, such as fast fashion women’s clothing in Panyu, Guangzhou, small household appliances in Shunde, and home textiles in Nantong. Thermos cup factories are concentrated in Jinhua City, Zhejiang Province, with Yongkang and Wuyi the most densely populated places, and Hals and Jiayi are also from Yongkang and Wuyi respectively.
In the 1990s, China introduced overseas cup and pot production technology, relying on the foundation of Yongkang’s original stainless steel and other hardware industry chains, the thermos cup manufacturing industry began to sprout. Tube making, swelling, welding, vacuuming, polishing, spraying, this is part of the more than 30 processes required to produce a thermos cup, and the stainless steel and hardware manufacturing process is an important part of it.
By 2020, Yongkang Stainless Steel Products Industry Association will be renamed Yongkang Cup and Pot Industry Association, and thermos cups have now developed into a pillar industry in Yongkang. China Quality News once reported that the output value of the Yongkang cup and pot industry currently exceeds 40 billion yuan, accounting for about 60% of the country’s total, and its export volume accounts for more than 80% of the country’s total.
02 How to escape the “OEM Dilemma”?
The gathering of industrial belts did not strongly promote the birth of brands. The thermos cup companies around Yongkang are mainly OEMs. “Big factories” such as Hals and Jiayi mainly produce OEMs for overseas brands, while more smaller OEMs generally fall into involution.
A small thermos cup manufacturer said that there are not too many barriers and differences in the technology of the thermos cup industry. The main differences between different brands and factories lie in the fineness of craftsmanship and the design of styles and patterns. Brands and R&D investment are the key to subsequent development . “Even if we produce products with craftsmanship like YETI and Thermos, we can’t sell them because there is no brand.”
Smaller foundries mainly produce classic thermos cups similar to black bullets, which are aimed at the domestic e-commerce market and wholesale market. The ex-factory price is generally 10 to 25 yuan, and the terminal price is about 69 to 79 yuan.
In contrast, although export orders are profitable, they still do not fully understand the dividends of the category, especially the brand premium part. The financial report shows that the average ex-factory prices of Hals and Jiayi shares are 34.51 yuan/piece and 29.38 yuan/piece, respectively, and the unit gross profit is 9.12/piece and 8.23 yuan/piece respectively.
Take YETI, the largest brand customer of Hals, as an example. The price of its thermos cups on Amazon’s US website ranges from US$22.5 to US$40. The difference between the OEM price and the overseas retail price is almost the same as the exchange rate. The top 10 best-selling mugs on Amazon North America are almost dominated by overseas brands, among which YETI has gained 4 single-product links.
Wang Fan, a seller in the outdoor sports category, told Hugo Cross-border that the market space for thermos cups is acceptable, but the competition within the category is fierce. In addition to brands with clear brand effects like YETI, Amazon’s self-operated links also have a place.
In addition, some leading thermos cup manufacturers have also begun to try to launch their own brands overseas. Taking Hals as an example, it launched SIGG, a fashion outdoor brand for the overseas C-end market, and its product prices range from US$20 to US$35. between. Jiayi also launched its own brand ONE2Go for the United States. However, judging from market feedback, the brand building of the two is still in its infancy.
A relatively clear path to transform from a thermos cup foundry to a C-end brand is to start with subdivided outdoor sports categories and launch sports bottles and other items. Zhejiang Feijian Industry and Trade Co., Ltd. was also an OEM for overseas brands in the early days, but while busy with the OEM business, it still did not give up the transformation to the C-end.
Xia Feijian, chairman of Feijian, once said, “Once the foreign trade orders are made, it is easier to become a big customer. The order volume is large and the output value is also large. But what makes me more entangled and difficult to choose is that To be a brand in Yongkang, but also to be a high-end brand, this is a very difficult path.”
One year after entering Amazon and launching its own sports water bottle brand, sales of its cross-border division will increase to US$6 million in 2021. “This kind of product is not only scratch-resistant and light, but also the caliber is very suitable for the usage habits of European and American outdoor consumers. The most important thing is that it avoids direct competition with international brands.”
Epilogue
As a dark horse category for export this year, thermos cups still maintained a high boom in exports in September. According to the latest customs data, the export value of stainless steel vacuum insulation containers in September was 157 million US dollars, a month-on-month increase of 19.01%.
The trend is still there, but the transformation of the brand has never been achieved overnight. How to use social media and channels to tap differentiated competition opportunities is a question that export companies need to think about.
