DayDayCook’s IPO Push: Can Acquisition-Led Growth Offset Persistent Losses?

This is an English adaptation of a FoodBud historical article originally published on November 18, 2023.

After more than five months in the IPO pipeline, DayDayCook received the China Securities Regulatory Commission’s filing notice for an overseas listing. The company planned to raise up to US$50 million on the New York Stock Exchange, with CMB International, The Benchmark Company, Guotai Junan International, Valuable Capital, Tiger Brokers and others acting as underwriters.

DayDayCook’s monetization journey has run for about a decade, from food media account to consumer food company. Its capital-market story is built around founder Norma Chu, who was born in Hong Kong, has ancestral roots in Chaozhou, Guangdong, and previously worked in private banking at HSBC after studying finance at the University of Washington.

Chu has said in interviews that she learned to cook from her grandmother and saw cooking as a social activity. In 2011, her then-fiance gave her a recipe-sharing website for her birthday. That site became the predecessor of DayDayCook, which was formally founded in 2012 and began using short cooking videos across social and media platforms to promote Asian food culture.

From Content Platform to Food Company

Across more than ten years, DayDayCook rode several waves: cooking short video, content commerce, experiential retail, prepared foods and, more recently, a multi-brand push into overseas markets.

According to the prospectus, DayDayCook’s revenue came from online sales, offline sales, advertising and experience stores, but several lines had contracted.

• Advertising revenue from content marketing and distribution channels fell from RMB11.0766 million in 2020 to RMB870,600 in 2022.
• In Q1 2023, advertising revenue fell another 26.27% year on year to RMB106,100.
• Experience-store revenue dropped from RMB3.2345 million in 2020 to RMB428,100 in 2022.

As those businesses shrank, product sales became the core revenue driver. Online and offline product sales together accounted for 91.53% of total revenue in 2020, 93.28% in 2021 and 98.24% in 2022. In Q1 2023, that share rose to 99.75%. In practical terms, DayDayCook had become a food company.

Revenue, Margin and Losses

The prospectus showed revenue of RMB169 million in 2020, RMB205 million in 2021 and RMB180 million in 2022. Gross margins were 16.46%, 17.77% and 24.46%, respectively. Net losses were RMB114 million, RMB459 million and RMB122 million.

In the first half of 2023, revenue was RMB89.425 million and net loss was RMB8.953 million. The loss narrowed year on year, but the company remained unprofitable.

Debt was another pressure point. In 2022, DayDayCook had total assets of RMB250 million and total liabilities of RMB374 million, implying a debt-to-asset ratio of 146.59%. In Q1 2023, cash and cash equivalents were only about RMB18.10 million, while short-term bank borrowings reached RMB58.299 million. The debt-to-asset ratio rose to 149.70%.

Over three years, cumulative losses approached RMB700 million. The listing, therefore, looked less like a victory lap and more like a financing move under sustained operating pressure.

IPO Proceeds and Acquisition Strategy

Despite weak core-business performance and continued losses, DayDayCook argued that M&A could help create a second growth curve. The prospectus said 25% of IPO proceeds would be used to acquire suitable RTC/RTE brands that could complement its existing sales channels and customer base.

The planned use of net IPO proceeds was:

• 50% for business expansion
• 25% for acquisitions
• 15% to repay pre-IPO debt
• 10% for cash reserves

International Expansion

Since July 2022, DayDayCook had entered the U.S. market by selling products through Yamibuy, a North American shopping platform known for Asian goods. It also completed its first overseas acquisition, Nona Lim, which had a U.S. distribution network selling Asian noodle products and soups to customers including Whole Foods Market, Target and Kroger.

DayDayCook said China’s stable and mature supply-chain network gave it an advantage in the North American food market. Even after cross-border logistics costs, the company believed its pricing could remain competitive, helping multiple products enter the ready-to-cook and ready-to-eat categories.

At the time, the company was also accelerating overseas expansion into Southeast Asia, Europe and other markets.

Multi-Brand Expansion

DayDayCook had already used acquisitions to build its brand portfolio.

In 2019, it acquired a 60% stake in Fujian Jinjiang Yunmao E-commerce Co., Ltd. to develop e-commerce. In 2021, it added the Mengwei and Yu Jia Weng brands, and also spent US$35 million to acquire a tortilla factory.

After entering 2022, its acquisition activity became more frequent and more international. DayDayCook agreed to acquire Nona Lim, a Southeast Asian noodle brand based in San Francisco, for US$1.9775 million in cash and US$1.3184 million in stock equivalent. The transaction was scheduled to close in Q3 2023.

Note: IPO proceeds, acquisition timing and forward-looking expansion plans are historical figures and statements from the 2023 source article.