The popularity of outdoor jackets has "ripened" Berghaus's IPO

In the years when outdoor jackets were most popular, Berghaus, which is now impacting the Hong Kong stock market, may be the biggest dark horse.

This brand, founded only 13 years ago, has achieved a staggering 127% compound annual growth rate in the Chinese outdoor market over the past three years.

In 2024, Berghaus's revenue reached 1.766 billion yuan, which is 4.7 times that of two years ago.

Its market share reached 5.2%, making it one of the top three domestic high-performance outdoor apparel brands.

In March of this year, before submitting its prospectus, Tencent invested 300 million yuan in Berghaus, becoming the company's fourth-largest shareholder and largest institutional shareholder with a 10.7% stake.

This round of financing pushed Berghaus's valuation to 2.8 billion yuan, reaching 2.4 times that of 2023.

The outdoor market boom has lasted for three years, and more and more clothing brands are entering the gold rush, making the "alternative to Arc'teryx" track increasingly crowded.

Berghaus clearly needs more memorable points beyond cost performance.

How to Overtake on the Curve?

Emerging from "taobao brands," Berghaus had a low profile in the industry for a long time.

Liu Zhen, chairman of Berghaus Group, once stated that revenue growth before 2019 was maintained at around 10%.

In the following years, outdoor sports broke out of the professional field and entered mass consumption.

Jackets priced under 1,000 yuan are no longer tied to outdoor scenarios but have begun to gain popularity as everyday clothing, with growth rates leading across all categories.

In 2023, the consumption of outdoor jackets exploded, with total sales across three major platforms exceeding 20 million units, surpassing sun protection clothing to become the largest category in outdoor apparel.

Many domestic outdoor brands have quickly gained a foothold in the market by leveraging cost performance positioning through e-commerce channels, and Berghaus is one of them.

The core outdoor jacket in the classic series is priced around 500 yuan after discounts, higher than Camel but slightly lower than Pathfinder.

Based on its cost performance positioning, Berghaus has paid early attention to the consumption needs of the female market, focusing on product development and design.

At the same time, it invests one-fifth of its revenue in advertising to continuously expand its market influence.

The big product strategy quickly achieved success.

From 2022 to 2024, Berghaus sold over 3.8 million outdoor jackets, with a compound annual growth rate of 144%.

Currently, 76% of the company's sales come from online direct sales.

The high proportion of DTC channels gives it greater profitability, with Berghaus's gross margin close to 60%, about 4 percentage points higher than Amer Sports during the same period, and the adjusted net profit margin reaching 17.2%.

Berghaus focuses on product research, design, and sales, without owning factories, outsourcing production to 250 contracted manufacturers.

This model not only allows Berghaus to expand sales in the short term but also enables high-intensity new product launches and stable output of popular products.

Among the top ten best-selling products from 2022 to 2024, about half were new products launched that year.

With the doubling of sales scale, Berghaus's cost procurement advantages continue to strengthen. The proportion of sales costs, including raw material procurement and commissioned manufacturing, has decreased from 45.7% to 40.4% of total revenue.

The cost average of the largest procurement item, 75D polyester yarn, has cumulatively decreased by 5.2% over the past three years.

The OEM model means that more effort is required in quality control, supply chain management, and other areas.

In 2024, the refund liabilities of Bosihe reached 44.26 million yuan, a year-on-year increase of 133%, higher than the revenue growth rate during the same period.

Repairing the Moat

In 2024, Bosihe ranked seventh in the all-channel retail sales in China's high-performance outdoor apparel market.

The leading brands include: Camel, which focuses on cost performance, Decathlon, and Anta's "middle-class three treasures" - Arc'teryx, Descente, and Kelon, as well as the traditional American outdoor brand The North Face.

In online channels, Bosihe is comparable in scale to The North Face, both ranking behind Camel.

Camel also aggressively attacks the e-commerce channel with cost-effective products, but its pricing is lower than Bosihe's, with popular products priced between 300 yuan and 400 yuan.

Camel completed its supply chain layout earlier, and now its major products are basically self-produced, with SPU four times that of Bosihe.

On one side is the scale pressure from Camel, and on the other side, there is competition from white-label brands, making it difficult for Bosihe to maintain its advantages in the mass market for long.

Now domestic brands intend to break away from the competition based on cost performance, with Camel, Kailas, and Pathfinder seeing average prices rise by 25% to 65% year-on-year over the past year.

Bosihe is no longer confined to relatively affordable classic series but is actively advancing into the mid-to-high-end market.

The professional performance series launched in 2022 has raised the pricing of its jackets to over 2,000 yuan, placing it in the same price range as Kailas and The North Face.

In early 2025, the peak series will be launched, targeting professional explorers and outdoor researchers, with down jackets priced over 10,000 yuan and mountaineering boots priced close to 6,000 yuan.

The primary key to the breakthrough in high-end positioning lies in technological endorsement.

The high cost of jackets mainly comes from the fabric.

The Gore-Tex double-layer structure fabric used by Arc'teryx is known as the "king of outdoor fabrics," patented by W. L. Gore & Associates, and is widely used in professional fields such as mountaineering clothing and space suits, serving as a strong endorsement for product pricing.

Many brands choose to develop their own fabrics to strengthen their R&D capabilities and brand professionalism.

For example, Kailas's waterproof and breathable material FILTERTEC, Jack Wolfskin's iconic TEXAPORE, Columbia's Omni-Tech®, and Anta's Storm Armor.

Bosihe's investment in related fields is not high, with cumulative R&D investment not exceeding 65 million yuan over the past three years, and currently only 4 invention patents.

It also launched its self-developed fabric Storm Breath, but it is used in the classic series of mountain hard-shell jackets priced at 659 yuan, which has not supported the price range upgrade.

The professional performance series products priced above 2,000 yuan still use imported fabrics from international suppliers, such as eVent Technology only supports basic pricing, while the key to opening up premium space lies in establishing a high-end mindset among core demographics.

Mass outdoor and high-end outdoor operate under two different logic systems.

The former relies on traffic and exposure, such as collaborations between Beisihe and celebrities like Ding Zhen, Angelababy, Bai Lu, and Cheng Yi.

The latter focuses on building a professional, high-end image and community influence.

Radical transformers like Kailas first eliminated all low-end, budget product lines and then opened stores in mid-to-high-end shopping centers like MixC and Taikoo Li.

Kailas also focuses on climbing and trail running scenarios, almost monopolizing sponsorship for domestic trail races. The "Unclimbed Peak Project" and "Seek Rock China" activities have both been operating for over ten years, completing a closed loop of brand cultural ecology.

As a solution, Beisihe is simultaneously strengthening its channels, sponsorships, and brand ecology.

For example, it is accelerating the filling of gaps in offline channels to provide space for brand concept display and consumer engagement.

In 2022 and 2023, Beisihe's offline stores doubled in growth. By the end of 2024, there will be 14 directly operated stores and 132 joint venture stores, with 60% located in first- and second-tier cities.

At the same time, it collaborates with outdoor activity groups and university mountaineering teams, sponsoring over 100 teams to conquer the seven summits, as well as the South and North Poles.

Focusing on climbing scenarios, it is entering the footwear, outdoor gear, and accessories market based on its jackets, launching hiking poles, tents, sleeping bags, and thermal blankets.

Beisihe believes that a complete range of outdoor gear and accessories will create a synergistic effect with outdoor performance apparel, enhancing the brand ecology and cultivating consumer brand loyalty.

However, the expansion of channels and product lines has increased operational difficulty.

In 2024, Beisihe's inventory scale surged by nearly 400 million yuan, with inventory turnover days increasing from 189 days to 213 days.

Due to the significant increase in inventory scale, the company's operating cash flow shifted from an inflow of 131 million yuan in the same period of 2023 to a net outflow of 30.52 million yuan.

Before the market dividend fades, Beisihe may need to quickly achieve a breakthrough in its transformation.

Risk warning and disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk