Into the 30 year Gree electric appliances, meet the “eventful autumn”. Recently, the news that “Gree Electric Appliances has stopped supplying distributors in Hebei province” was a hot search item on major platforms.
Behind the news, Gree Electric Appliances shares have been falling. Its share price, which hit a high of 66.07 yuan at the end of 2020, has tumbled amid pressure on its performance and intensifying competition.
Hebei general distributor “defected” Philips
According to Caiassociated news, a source familiar with the matter said that Xu Zifa, an important distributor of Gree Electric Appliances in Hebei province, has officially announced that he will not be Gree Electric Appliances and will become Philips. Gree Electric Appliances has also stopped supplying distributors in Hebei recently, which has been confirmed by several Gree dealers.
In fact, the channel contradiction between Gree Electric appliances and dealers has already appeared.
In June, Gree suddenly announced that its third-largest shareholder 39bet-kết quả bóng đá-kết quả xổ số miền bắc-kèo bóng đá -soi cầu bóng đá-đặt cược, Jinghai Internet Technology Development Co LTD, had cut its stake by 110 million shares to cash out more than 3.5 billion yuan. The sale reduced Jinghai Internet’s stake in Gree Electric Appliances to 6.47 per cent.
The shareholders of Jinghai Internet are distributors of Gree Electric Appliances across China, including Xu Zifa, a distributor in Hebei, Zhou Zhenhua, a distributor in Chongqing, and Guo Shuzhan, a distributor in Henan. Among them, Hebei Gree Electric Appliances Marketing Co., which is linked to Xu Zizhi, has the highest stake of 28%.
In July this year, Gree Electric Appliances also asked dealers to choose between Gree Air Conditioning and Philips air conditioning, requiring dealers acting for Gree air conditioning not to act for Philips air conditioning, or they would lose the qualification to act for Gree Air conditioning.
Industry insiders point out that this is due to Gree Electric appliances in recent years to implement the “integration of online transformation” channel change caused. This time Gree stopped supplying the dealers in Hebei and the dealers switched to Philips, which may further intensify the conflict between the two sides.
For the change of dealer model, Dong Mingzhu once admitted that although Gree’s previous marketing model was created by her, Gree faces huge challenges in the process of channel transition from offline to online with the advent of the Internet era. For the huge marketing team, the reform process should not only let them move forward, but also let everyone become a beneficiary.
The main business is facing challenges.
In fact, for the gree, philips new players grip is just a small calamity, more serious or gree itself.
According to the financial statement, Gree Electric Appliances achieved operating revenue of 187.869 billion yuan in 2021, up 11.69% year on year; net profit attributable to its parent reached 23.064 billion yuan, up 4.01% year on year. On the surface, the growth rate looks good, but compared with the same period in 2019, Gree’s performance last year was far from ideal.
In the first quarter of this year, Gree Electric Appliances achieved a total operating revenue of 35.26 billion yuan, up 6.24% year on year; net profit attributable to shareholders of listed companies was 4.03 billion yuan, up 16.28% year on year.
It can be seen that in recent years, Gree Electric Appliances revenue growth seems to encounter growth bottlenecks.
On the one hand, it is related to the rising prices of copper, aluminum, steel and plastic, the main raw materials of household appliances, and the repeated impact of the epidemic on residents’ income and demand for household appliances. On the other hand, it may be due to its own reasons, as its base air conditioning business, its market share seems to be constantly being eaten by competitors.
Gree Electric Appliances once held the top spot in the air conditioning industry, but this pattern has been broken since 2020. According to the financial statement, Midea Group’s operating revenue in the air conditioning sector was 121.2 billion yuan in 2020, while Gree Electric Appliances only achieved 117.9 billion yuan in the air conditioning sector.
While Midea Group and Gree Electric Appliances are both industry leaders, the volume difference between the two is not too big, but the market value of Midea Group has nearly doubled, the price of the stock has nearly doubled; Haier’s market capitalization has also surpassed.
There is a risk of “aging”
To get rid of its dependence on air conditioning, Gree Electric Appliances has diversified its products, internationalized its brands and explored new growth curves.
In recent years, Gree’s series of household appliances covers almost all environmental appliances and kitchen appliances. Besides refrigerators, washing machines and other household appliances, it also includes sweeping robots, electric heating lunch boxes, tobacco machines, cutting boards and sterilizing machines and other small household appliances.
In addition to the home appliance business, Gree Electric Appliances has not given up the pursuit of market hot spots, and frequently crosses the boundary. Gree has started diversified development in the fields of mobile phones, chips, new energy vehicles and so on. Gree has a presence on every popular track.
But for now, whether it is mobile phones, or lithium titanate technology, the results are very modest. For example, Gree Mobile phone has been more than 5 years since its birth, but the outside world has rarely heard of Gree Mobile phone. At this year’s shareholder meeting, Dong Mingzhu also said that she would stick to mobile phones, but the market did not “pay” for the prospects she described.
And its share price has been falling, another reason or the current corporate governance structure. Gree Electric Appliances recently announced that its board of directors agreed to elect Dong Mingzhu as the 12th chairman of the board of directors, which means Dong Mingzhu will not retire until she is at least 71 years old.
Although there are many chairmen like Dong Mingzhu in the A-stock market, Fang Hongbo, 55, chairman of Midea Group, and Liang Haishan, 56, chairman of Haier Zhijia, are nearly 10 years younger than Dong Mingzhu, so they are not the same generation.
As for the succession of Gree Electric Appliances, there is still no clear answer. Former Gree Electric Appliances Secretary Wang Jingdong and former Gree Electric Appliances executive President Huang Hui, who had been widely rumored to be in the running, left their posts in August 2020 and February 2021 respectively.
What is clear is that Gree is facing a number of challenges. In addition to the performance growth of the main business less than expected, the lack of new growth points, and the risk of “aging”, these may be the main reasons why Gree Electric Appliances has been falling.