"The King of Laundry Detergent" is spending money to grow, Blue Moon Group expects a loss of over HKD 700 million in 2024

"The king of laundry detergent" is falling into a vortex of increasing sales but decreasing profits.

On January 10, BLUE MOON GROUP (6993.HK) disclosed its performance forecast for 2024. The company expects annual revenue of approximately HKD 8.5 billion, a year-on-year increase of about 16%, setting a new high since its listing.

Sales across all product categories have achieved growth. In addition to direct sales to major clients, sales across all channels have also increased.

The gross profit margin for 2024 is expected to remain at 61%, higher than the mid-2024 level of 58.7%.

While the performance is strong, the company is facing its first annual loss since going public. The expected net loss for 2024 is about HKD 700 million to 750 million, compared to a profit of HKD 325 million in 2023.

This is not the first time the company has encountered a situation of "increasing revenue but decreasing profits."

From 2021 to 2023, BLUE MOON's revenues were HKD 7.597 billion, HKD 7.947 billion, and HKD 7.324 billion, with year-on-year growth rates of 8.59%, 4.60%, and -7.85%, respectively.

However, the total annual profit has continued to shrink, with year-on-year declines of 22.54%, 39.74%, and 46.8%, with the rate of decline continuing to expand.

The household cleaning and daily chemical industry has low entry barriers and severe product homogeneity, leading to rapid growth of white-label manufacturers.

To maintain market share, the company has made significant investments in live e-commerce in recent years.

During the 2024 618 shopping festival, BLUE MOON collaborated with the top Douyin influencer "Guangdong Couple" to give away 5,000 Apple phones in a live stream, setting a new GMV record for household cleaning products on the platform.

Reports indicate that BLUE MOON spent HKD 40 million on promotional expenses for this live stream, with paid traffic accounting for as much as 69%.

In 2024, sales from new e-commerce channels increased by approximately 2.1 times year-on-year. However, overall, the growth in sales from new e-commerce channels is on par with the increase in marketing expenses.

In the first half of 2024, the company's sales and distribution expenses increased by 107.9% year-on-year to HKD 2.201 billion, with promotional expenses increasing by 311% to HKD 1.095 billion, and advertising expenses increasing by 133% to HKD 203 million.

The early success of BLUE MOON was due to its initial capture of the growth opportunity for laundry detergent in the domestic market and large-scale distribution to traditional supermarkets like Carrefour and RT-Mart.

After the decline of KA channels represented by hypermarkets, BLUE MOON lost its established position, and pricing has also become more flexible.

A check of the official Douyin flagship store reveals that the brand's currently promoted 660g "Supreme Biotechnology Laundry Detergent" is priced close to HKD 120.

However, in its exclusive collaboration link with influencers, a combination set of 13 laundry detergent products from BLUE MOON is only HKD 199.9, which includes 2 full-size bottles and 4 refill bottles of the Supreme laundry detergent, translating to a discount as low as 30%.

In an industry that pursues cost-effectiveness, BLUE MOON's reluctance to abandon its high-end positioning largely stems from its failure to find a second growth curve outside of laundry detergent. In recent years, clothing cleaning and care products have consistently accounted for over 80% of the company's revenue.

Therefore, the company is unlikely to abandon its aggressive e-commerce strategy in the short term BLUE MOON GROUP stated in its 2024 performance forecast that the overall operational and financial condition of the company remains robust. As of December 31, 2024, the group's cash and cash equivalents are approximately HKD 5.3 billion