US Stock IPO Outlook | Online Channels "Missed the Boat," How is Baolutaiqi Competing in the Baby and Child Care Market?

The annual "Double Eleven" shopping festival has just passed, and the market's attention has once again shifted to consumer brands. In recent years, many emerging brands have stood out in a competitive environment with their keen market insight and unique product positioning, with domestic brands being the leaders among them.

In the niche market of maternal and infant products, the trend of "domestic substitution" is also evident. As domestic maternal and infant brands gradually gain recognition, IPO listings have naturally become one of the options for these brands to raise funds and expand their influence.

Recently, a baby care company from Fujian, Baolu Taiji, updated its prospectus, intending to apply for a NASDAQ listing with the stock code BBCH. The latest prospectus shows that the company plans to issue 2 million shares at a price of $4 to $6 per share, raising between $8 million and $12 million.

Focused on Camellia Oil Baby Skin Care, Stable Growth Over Three Years

The prospectus indicates that the domestic operating entity applying for listing, Fujian Baotai Technology Co., Ltd., was established in 2014, and its "Blue-Touch" (Baolu Taiji) brand mainly focuses on baby skincare products, bathing products, and household cleaning products. According to public information, Baolu Taiji's affiliated company, Fujian Baotai Daily Chemical Co., Ltd., was established in 2002 and formed a brand strategic alliance with the American Blue-Touch company at the same time. In 2008, Baolu Taiji was officially launched in the Chinese market.

According to Zhitong Finance APP, Baotai Holdings' revenue from 2021 to 2023 was $6.66 million, $8.2655 million, and $9.6561 million, respectively; net profits were $780,000, $1.1111 million, and $1.3543 million, respectively. From the data of the past six months, the company achieved revenue of $5.28 million in the first half of 2024, an increase of 8.28% compared to the same period last year, with a net profit growth rate of about 4.26%, maintaining relatively stable growth overall.

So far, the company's product portfolio mainly includes two categories: baby skincare and bathing products, as well as household cleaning products. In 2022 and 2023, Baolu Taiji's sales of baby skincare products accounted for 47.06% and 51.70% of total revenue, respectively; household cleaning products accounted for 52.94% and 48.30% of total revenue, showing a relatively balanced distribution.

It is worth noting that Baolu Taiji's representative products in baby skincare and bathing products include camellia oil, camellia oil moisturizing cream, camellia oil lotion, and camellia oil two-in-one shampoo and shower gel. The sales of camellia oil for infants are the highest, accounting for approximately 23.75% and 23.10% of total revenue in 2022 and 2023, respectively. The sales of camellia bathing oil accounted for about 13.56% and 7.32% of total revenue in the past two years. Additionally, the main products in household cleaning include fabric softeners, laundry liquids, multi-purpose cleaners, and disinfectants From the perspective of profit margins, Baolutaiqi's performance is commendable. In 2022 and 2023, the gross margin for infant skincare and personal care products remained stable at around 49%, while the gross margin for household cleaning products reached about 30%. The overall gross margin also increased from 39.09% in 2022 to 40.69% in 2023.

Overall, Baolutaiqi's production operations and product sales are relatively stable, but due to the company's focus on the "big single product" category of camellia oil-related infant skincare products, there are certain "hidden concerns" regarding its business expansion.

Indeed, the big single product strategy can maximize market share and enhance brand influence by concentrating resources on creating one or a few products with strong market competitiveness. Undoubtedly, this has brought high returns for Baolutaiqi's early expansion, enabling the company to achieve significant sales and performance growth.

However, since the camellia oil series, Baolutaiqi's infant skincare product line has not seen a continuous launch of new products. Additionally, its R&D investment in the past two years accounted for only 2.91% and 5.16% of total revenue, which is not due to a lack of funds. As of the end of 2023, the company had nearly $2.9 million in cash on hand, which is expected to further grow to $3.8054 million in the first half of 2024. The subsequent product relay gap may also indicate that Baolutaiqi's product sales are losing momentum. After the big single product strategy becomes ineffective, consumer enthusiasm declines, and market shipment volumes are easily affected, leading to a slowdown in performance growth.

Moreover, the infant skincare market is crowded with "players," with brands such as Yiye, Red Elephant, and Runben emerging in the market. Traditional skincare brands like Winona, Qichu, and Bedemei have also developed products specifically for mothers and infants, capturing a significant market share, which poses a considerable challenge for Baotai Holdings, which is lacking in product variety.

E-commerce Channel Development "Falling Behind," How to Compete in the Second Half of the Red Sea?

In recent years, the maternal and infant industry has been continuously developing globally, with consumer demand for maternal and infant products growing increasingly diverse. At the same time, with birth rates hitting record lows year after year, the maternal and infant industry seems to be shrouded in clouds, transforming from a golden track into a fiercely competitive red sea.

While brands are trying every means to expand their brand influence and sales reach, Baolutaiqi's channel development appears somewhat weak. As of 2023, there are 21 offline distributors cooperating with the company, covering several provinces including Fujian, Shandong, Jiangsu, Hunan, and Zhejiang. Channel expansion is relatively slow, and offline channels also face certain market challenges.

It is noteworthy that while physical supermarket channels are also struggling to grow, Baolutaiqi is further "doubling down." The prospectus shows that Baotai Holdings will continue to focus on offline channels in the future. In the short term, the plan is to enhance brand awareness and company profitability by launching new products and expanding its offline distribution network; in the next five years, the company aims to expand existing sales channels through establishing flagship stores, opening franchise stores, selling products through third-party retail agencies, and merging and acquiring suitable distributors In terms of building e-commerce channels, Baolutaiqi is clearly in an awkward phase of "not catching up." Currently, no official stores have been found on major online shopping platforms such as Tmall, Douyin, Xiaohongshu, and JD.com, and the absence of online sales channels and the blank slate of starting from scratch are evidently more difficult to fill.

Regarding online channels, the company stated that it plans to establish online sales channels within the next three to five years without affecting the existing offline sales network, and is considering creating new brands or developing new products exclusively for online sales, indicating that it does not seem to be "enthusiastic" about building e-commerce channels.

From the current state of the children's personal care market, it is still in a period of multi-brand competition, with both overseas and domestic brands coexisting, and the market is relatively fragmented. New brands are expected to ride the digital fast track of the internet to share the cake, but overall, the situation remains uncertain. Most brands are still trapped in homogeneous competition and price wars, hoping to break out through high exposure and high traffic via the internet and e-commerce channels, which increasingly makes Baolutaiqi's style appear conservative.

Moreover, in the future maternal and infant personal care market, major brands need to continuously enhance product safety and quality to meet consumer demands. However, market competition is fierce, the industry landscape is still changing, and companies face numerous challenges. At the same time, with the updating of parenting concepts, the refinement and specialization of products will be the development trend.

It is not difficult to see that in the end, market competition is about the comprehensive strength of brands across various dimensions. As consumer awareness increases and market competition intensifies, market share is increasingly concentrated among leading enterprises. While the infant and toddler personal care sector has become a gold mine, it has also first turned into a "red ocean." Under these circumstances, will Baolutaiqi, which focuses on a "big single product" strategy and emphasizes offline channels, still have a smooth path to an IPO in the United States as it did in its early development?