The export of thermos cups is accelerating, and how strong is the demand?

1. Thermos cup: a category on the rise in the industry

1.1. Cup and pot products that can keep both warm and cold

The thermos cups and potswe often talk about specifically refer to cups and larger-capacity pots that can provide thermal insulation (hot and cold preservation) functions for drinks or food. The principle of thermal insulation of the thermos cup is that the vacuum interlayer between the cup body and the cup liner and the sealing cover on the top work together to prevent the heat inside the cup from dissipating outward through the cup body, thereby achieving the heat preservation function. Thermos cups are generally made of ceramic or stainless steel as the only materials. However, because stainless steel is easier to shape, the finished product has better thermal insulation performance and is lighter, stainless steel thermos cups are the mainstream product in the thermos cup market. At present, the manufacturing process of stainless steel thermos cups is relatively mature, and there is almost no gap between brand products in terms of insulation functionality. Products in all price ranges on the market can generally provide long-term insulation (12 hours of effective insulation). Therefore, we believe that the consumption of thermos cups, whether in the domestic market or foreign markets, has shifted from functional consumption with durable goods attributes to fashion consumption with fast-moving consumer goods attributes. Brand influence and innovation capabilities will be the key factors in brand competition. key.

1.2. China: global thermos cup manufacturing center

Thanks to the complete and concentrated stainless steel industry system, China is the global manufacturing center for stainless steel thermos cups. In 2018, China accounted for 65% of the global production of stainless steel thermos cups, far exceeding other regions in the world. Among them, Yongkang and Wuyi in Zhejiang, Jieyang, Chao'an in Guangdong and other places are the main production areas of thermos cups. Leading cup and pot manufacturing companies such as Ha Ers and Jiayi are both from Yongkang City, Zhejiang Province.

Stainless steel is the most important upstream raw material for thermos cups. China's becoming the global stainless steel thermos cup manufacturing center is backed by its huge stainless steel production advantage. In 2021, my country's stainless steel production was 31 million tons, accounting for 54.7% of the world's production. In the past five years, it has accounted for more than half of the world's production. Stable and large amounts of stainless steel The raw materials from upstream ensure the mass production of thermos cups. Since stainless steel is the main raw material of thermos cups, fluctuations in stainless steel prices will affect the gross profit margin performance of thermos cup manufacturers. Through measures such as hedging and negotiating price adjustments with end customers, leading cup and pot manufacturers have maintained stable gross profit margin performance against the backdrop of rising raw material prices in 2021, and the drop in raw material prices in 2022H1 will be even more beneficial to the gross profit margin performance of manufacturing companies.

The output of thermos cups in my country has grown steadily. In 2021, my country's total output of thermos cups will be 650 million, YoY +10.5%, which is only a 33% increase from 490 million in 2017. In the past five years from 2017 to 2021, except for the impact of the epidemic disruption in 2020, the year-on-year growth rate in the remaining years has been steady growth from high single digits to low double digits.

1.3. my country’s market has broad room for growth, with an estimated scale of nearly 27 billion yuan in 2025

North America is the main thermos cup market, and my country has a vast market space. The global market size of the thermos cup industry in 2021 is RMB 52.8 billion, with a CAGR of +4% in the past five years. The global market size declined due to the epidemic in 2020 but recovered in 2021, with a YoY of +6.9%, returning to the growth track. In terms of regional share, China accounts for the largest share, accounting for 33%; followed by Europe, accounting for 23%; and North America, followed by 18%. China's thermos cup market has grown rapidly in recent years. The domestic market size will be 17.2 billion yuan in 2021, with a CAGR of +12% in the past five years. Although China is the largest market in terms of total volume, it is still lagging behind other developed markets in terms of per capita scale. In 2021, my country's per capita consumption of thermos cups is 12 yuan, while the North American market is 27 yuan, and the European market is 16 yuan. It can be seen that my country's thermos cup market has broad room for improvement, and from the perspective of per capita consumption, the North American market is still the most important market for thermos cups.

The size of my country's thermos cup market is expected to be nearly 27 billion in 2025. my country's thermos cup market has maintained a growth of more than 15% from 2017 to 2021, except for 2020, achieving nearly twice the growth rate of per capita disposable income, reflecting the continuous upgrading of consumers' drinking habits. Continuous penetration. Considering that the current per capita consumption level is still far behind that of developed economies, we believe that the relatively high growth rate of my country's thermos cup market will continue as disposable income continues to increase. We make the following assumptions about the market size of thermos cups in my country in 2025: 1) Per capita consumption of thermos cups will maintain low double-digit growth, 2) my country’s total population growth will remain low and the population will peak in 2025.

We make the above assumptions based on the following observations:

1) Except for the impact of the 2020 epidemic disturbance, my country's per capita disposable income growth fluctuated at the level of 9% every year from 2017 to 2021, while the per capita consumption growth of thermos cups was above 15% and maintained an accelerated growth trend, which is consistent with per capita disposable income. The growth rate is about twice as fast as that of the previous year. Since 2022, due to the impact of repeated epidemics leading to lockdowns in some regions, the growth rate of disposable income has slowed down, which may affect the growth of domestic thermos cup consumption in the short term. However, based on the historical law of synchronous growth, we believe that with the economic environment With the recovery of the epidemic, disposable income growth is expected to gradually pick up. However, considering the downward trend of the central trend of nominal economic growth, disposable income may be difficult to return to the high level before the epidemic. We expect the growth rate of disposable income in the future. It will fluctuate around 6-7%. Considering that the penetration rate of my country's thermos cup market is low and various emerging scenarios (outdoor activities, coffee drinks) continue to catalyze, we believe that my country's thermos cup market will still maintain a rapid acceleration of growth. It is expected that the year-on-year growth of per capita consumption of thermos cups is expected to be from The 8% in 2022 will gradually increase to 15% in 2025.

2) my country's population growth rate is accelerating and slowing down, with an average growth rate of 0.5% in the past 10 years, an average growth rate of 0.3% in the past 5 years, and a population growth rate of 0.03% in 2021. my country's population may peak within 10 years and begin to enter negative growth. Combined with the low growth rate in 2021, we assume that the total population will peak in 2025 and use this to make a linear estimate of the population growth rate from 2022 to 2024. Ultimately, we estimate that per capita consumption of thermos cups will reach 19 yuan in 2025, with the market size reaching 26.8 billion yuan, a 53% increase from 2021.

2. The U.S. market has strong demand and the domestic market has broad prospects.

2.1. United States: Long-distance commuting + the environmentally friendly concept of coffee will drive demand after the epidemic, and the basic outdoor market remains stable

Thermos cups are used by Chinese people to “keep hot” and foreigners to “keep cold”. From the perspective of usage requirements, unlike our inherent impression that thermos cups are used for "heat preservation", overseas consumers use thermos cups mainly for "cold preservation" to keep water or drinks cool. We believe that the use scenarios of thermos cups overseas can be divided into four categories: daily office work, commuting to and from work, outdoor sports, and school classes. The four types of application scenarios also put forward refined requirements for the function and design of the thermos cup. For example, the thermos cup for outdoor activities needs to be strong and wear-resistant, the thermos cup for commuting to and from work needs to be large-capacity and has good thermal insulation performance (the driving time in foreign countries is long), daily office work The thermos cup needs to have a sense of design, etc. Thermos cups generate refined demands based on different usage scenarios, targeting different customer groups, which promotes stable development of demand for overseas thermos cups.

The export volume of thermos cups has increased significantly, mainly due to demand in the United States. my country's thermos cup exports continued to pick up after the epidemic prevention and control was lifted in 2020. In the first half of 2022, the export volume of thermos cups reached US$1.19 billion, YoY +26%, reaching a record high. Comparing China's thermos cup export data, we found that the U.S. thermos cup import data is in sync with China's export data and is growing faster than our country. The import volume in the first half of the year was US$680 million, YoY +124%, and U.S. imports were in line with China's. The proportion of exports has gradually increased from 30%-40% in previous years to 60%. We believe that on the one hand, this shows that the United States is more dependent on China for the import of thermos cups. On the other hand, the number of orders in the U.S. market also affects the export volume of China's thermos cups. Key factory

The outdoor industry is highly mature and activity participation is growing steadily. The outdoor activity industry in the United States developed earlier. After years of intensive cultivation, it has formed a multi-category and highly developed outdoor activity system. The total output value of the overall outdoor industry has also entered a stage of stable development with a low growth rate. According to data from the U.S. Bureau of Economic Analysis, the total output of outdoor activities in the United States has maintained steady growth from 2012 to 2019, with a 7-year CAGR of +2.9%. The total industry output reached US$845 billion in 2019, and the overall growth trend is in sync with the U.S. economic growth trend. , accounting for 4% of US GDP all year round. In 2020, the U.S. outdoor activity industry was affected by the impact of the epidemic on the economy and supply chain. The total output declined year-on-year (YoY-19%), and its proportion of GDP also declined to 3.3%. However, from the analysis of various outdoor activity data, we found that the American people’s outdoor living habits have not changed due to the impact of the epidemic. On the contrary, after the epidemic, outdoor activities have partially replaced gathering activities, making outdoor activity participation higher. The activities developed more vigorously.

Therefore, we expect that Americans’ spending on outdoor activities will remain at least at pre-epidemic levels, and the total output of outdoor activities as a share of U.S. GDP is expected to remain at 4%. It is worth noting that the year-on-year growth forecasts of U.S. GDP in 2022 and 2023 are derived from the Federal Reserve’s economic forecast report, with growth rates of 0.2% and 1.2% respectively. Against the background of the steady development of outdoor activities, sales of thermos cups, as one of the outdoor equipment, are growing faster. According to the latest statistics from the NPD Group, as of May 2022, sales of water bottles and thermos containers in the past year have increased by 30% year-on-year. , the growth rate is second only to camping chairs, reflecting the new or replacement needs of more people in the context of participating in outdoor activities. Considering that outdoor entertainment activities will become more frequent after the epidemic and the demand for replacement of outdoor products lags behind, we believe that the good development momentum of outdoor equipment including thermos cups may continue until 2023.

We have verified the demand for outdoor activities in the United States after the epidemic by tracking the number of tourists visiting four representative national parks in the United States. We found that the number of tourist visits to the four national parks changes seasonally, that is, the second and third quarters are the peak seasons, and the first and fourth quarters are the low seasons, which are mainly driven by weather effects. At the same time, the monthly tourist visits are within a relatively stable range with seasonality. internal fluctuations. It is worth noting that the epidemic has had a small impact on people’s travel to national parks. There was only a large decline in April 2020, but then it quickly recovered and maintained the usual seasonal pattern. It can be seen that the epidemic has had very little impact on the desire of the American people to travel. The living habits of loving outdoor activities have not changed due to the short-term lockdown of the epidemic in the United States. This has provided opportunities for the consumption of outdoor products including thermos cups. Stable foundation.

In addition, according to data from the American Outdoor Foundation, the number of participants in outdoor activities in the United States has continued to grow after the epidemic. The number of participants in outdoor activities in 2020 and 2021 was +5%/+2% year-on-year. The increases are historically high. Outdoor activities The participation rate increased from 51% before the epidemic in 2019 to 54%, indicating that the epidemic has further promoted the development of outdoor activities. We believe that perhaps because of the epidemic, many group activities have the advantage of social distance, and outdoor activities with smaller groups are replace. We dug deeper into the participation data of some outdoor projects that meet the needs of thermos cups, such as cycling, camping, and mountain climbing, and found that the participation of each project has increased to varying degrees after the outbreak, from 13% in 2019 to 13% in 2019. , 14%, 16% to 15%, 15%, 18% in 2021.

The resumption of long-distance commuting has boosted demand for new purchases and replacements of thermos cups. The developed highway network and car culture in the United States have prompted a large number of American residents to move out of the city and live in suburbs or even other cities. Commuting to work requires a lot of driving time. In order to meet the demand for drinking water during commuting, the U.S. market has launched ultra-large capacity water storage units that can be placed in The thermos cups in the car are very popular among consumers. We counted the top 100 thermos cups sold (number) on the Amazon platform in June. Among them, thermos cups above 30 ounces (880ml) were the most sold, which shows that American consumers are very interested in thermos. A large part of cup demand may come from driving and commuting.

In addition, the United States is a major producer and consumer of carbonated drinks, with extremely low consumption costs, which is mainly reflected in the unlimited refill mechanism of carbonated drinks, that is, you can buy beverage cups in the store and receive unlimited drinks by yourself. This service is mainly provided in American fast-food restaurants and is particularly evident in fast-food restaurants along highways. Consumers first buy a disposable drink cup at a fast food restaurant at a low price (1-2 US dollars), and then use their own large thermos cup to receive the drink, which is cost-effective and keeps it cold. The lifestyle of long-distance commuting and the need to keep drinks cold have created the United States' preference for thermos cups. Considering that after the relaxation of epidemic prevention and control in the United States, people gradually switched from working at home to working in the office, and long-distance commuting gradually resumed, we believe this has promoted The demand for thermos cups is growing.

Bringing your own thermos cup for daily coffee has become an environmentally friendly trend. In addition to carbonated drinks, the United States is also a major coffee consumer. According to data from the National Coffee Association, 66% of Americans drink coffee every day and consume more than 500 million cups of coffee every day. On average, each person drinks 2 cups of coffee every day. The huge consumption has also gradually raised the issue of environmental protection of disposable coffee cups, so more and more coffee chain stores have begun to encourage consumers to bring their own cups to buy coffee. Starbucks began to resume the service of bringing your own cups to buy coffee after the epidemic to achieve With the goal of reducing disposable cups by 50% by 2030, Starbucks provides customers who bring their own coffee cups with a discount of US$0.1 each time and 25 membership stars (50 stars can be exchanged for a cup of coffee and cake). As a container that can keep warm and cold, thermos cups have become an alternative to disposable paper cups. As environmental awareness becomes stronger and regulations on disposable products become more stringent, the trend of bringing your own cups will continue to expand, and the demand for thermos cups may continue to rise.

2.2. China: Outdoor concept + coffee culture penetration drives cup and pot consumption

The heat of outdoor activities brings demand for thermos cups and kettles. my country's outdoor activity market ushered in rapid growth at the beginning of this year. We have collected statistics on outdoor items related to cups and pots, such as outdoor climbing, bicycles, and camping Tmall monthly sales data. It can be seen that all outdoor items are growing this year. There was a sharp rise after February, mainly because the epidemic lockdown in early 2022 promoted people's demand for outdoor small group and non-gathering activities. We believe that as the season turns to autumn, the temperature drops and it is more suitable for outdoor activities, and the related consumption vitality is expected to continue to be maintained. As a necessary equipment for long-term outdoor activities, thermos cups and pots will also increase with the vigorous development of outdoor activities.

The continued penetration of coffee consumption will benefit peripheral cup and pot products. my country's coffee consumption is on a steady upward trend, with retail sales reaching 11.4 billion cups in 2021, and a CAGR of 4.0% in the past 15 years. Compared with the United States, the penetration rate of coffee consumption in my country is quite different. In 2021, the retail sales of coffee in the United States will be 90.3 billion cups, and the per capita annual consumption is 272 cups, while the per capita consumption in my country is 8 cups. There is broad space for continued market penetration. We believe that thermos cups, as peripheral products for coffee consumption, will gain more attention with the continuous penetration of coffee consumption. This is mainly reflected in: 1) The penetration of coffee shops increases the opportunities for consumers to come into contact with thermos cups and coffee cups; 2) The environmental issues of disposable cups brought about by the increase in consumption will lead to the development of consumption habits toward bringing your own cup.

2.3. RMB depreciation benefits export-driven enterprises

Since China is the global thermos cup manufacturing center and the domestic market is still in the development stage, my country's thermos cup production mainly supplies overseas markets. The historical trend of my country's thermos cup exports has also kept pace with the global market. In 2021, my country's total exports of thermos cups were US$2.2 billion, with a CAGR of +11% in the past five years. From 2017 to 2019, it maintained low double-digit growth. In 2020, due to the epidemic Due to the impact of prevention and control, production activities have been restricted and exports have declined. However, they have rebounded and reached a record high against the backdrop of the easing of containment measures in 2021 and the rebound in overseas demand. Export volume in the first seven months of 2022 still achieved rapid growth despite the high base in 2021, with YoY +24%, reaching US$1.4 billion.

The depreciation of the RMB exchange rate is good for the performance of export companies. Since most thermos cups are mainly exported, exchange gains and losses caused by fluctuations in the RMB exchange rate will affect the performance of export-oriented enterprises. In 2022H1, the RMB depreciated against the U.S. dollar by 5% compared with the beginning of the year, falling from 6.37 at the beginning of the year to 6.69 at the end of June. This caused export orders during this period to generate large exchange gains, and the performance of related export companies achieved substantial growth. For example, Jiayi Shares in 2022H1 Achieved performance of 86.38 million yuan, YoY +162%, including exchange gains of 15.79 million yuan; Hals achieved performance in 2022H1 of 130 million yuan, YoY +124%, including exchange gains of 25.36 million yuan. In addition to the impact of RMB depreciation on exchange performance, we further explored the relationship between the RMB exchange rate and the total export volume of thermos cups. Although changes in total export volume of thermos cups are more affected by overall demand, we found that there is a positive relationship between RMB depreciation and total export volume. The judgment that devaluation stimulates exports is verified.

In addition, we found that during the appreciation period of the RMB exchange rate from 2020H2 to 2021, the total export volume showed an accelerated upward trend, and there was no decrease in exports due to the appreciation of the RMB. We believe this is because our country took the lead in controlling the epidemic in the second half of 2020 and achieved Work and production were resumed, but other production areas around the world were still affected by the epidemic at that time, which caused orders to tilt towards my country. In the third quarter, the RMB exchange rate against the US dollar continued to fall from 6.69 at the end of the second quarter to the latest 6.98, which is expected to still benefit related export companies on the revenue and performance sides.