Summary of Key Points
For two consecutive years, Pianzihuang has seen a decline in both revenue and profits. The old strategy of “raising prices first when everything else fails” no longer works. The resale price is far lower than the official guidance price, and the demand for gifts and stockpiling has diminished. Although costs have decreased, sales have continued to drop, with the demand side becoming the biggest challenge. The company is considering raising prices to test the true value of its products, which are often referred to as the “Moutai of medicines,” while also investing 750 million yuan in high-end medical beauty equipment. However, the effectiveness of medical beauty treatments is slow, so stabilizing its main business remains the priority.
Detailed Analysis
1. The Root of the Performance Decline: It's Not About Costs, but About Lack of Demand
In the past, Pianzihuang’s biggest issue was the rising costs of raw materials (natural bezoar and musk), which eroded its profits. However, in the first half of 2026, raw material prices fell (due to the opening of import channels), and the gross profit margin increased by 1.27 percentage points. Nevertheless, revenue and profits still decreased by about 15%. The problem lies with the demand side: previously, the company relied on “scarce materials, a secret formula, and a prestigious brand” to encourage dealers to stockpile products and customers to buy as gifts, with little need for advertising. Now, despite increasing promotional expenses by 70% (from 81 million yuan to 138 million yuan), sales remain sluggish. The company has also faced accusations of false advertising, further damaging consumer trust. In short, the non-medical uses (gifts and stockpiling) that used to support high prices have faded, and the remaining medical demand is not enough to sustain current sales levels.
2. The Failure of the Price-Hiking Strategy: Resale Prices Are 300 Yuan Lower than the Guidance Price
Pianzihuang’s price has risen nearly 20 times over the past 20 years, with a single pill increasing from 590 yuan to 760 yuan in 2023. But now, resellers are offering only 460 yuan for pills produced in 2024, 300 yuan lower than the guidance price. This indicates that the strategy of using price hikes to maintain value has failed. In the past, buying Pianzihuang was like investing—waiting for a price increase to make a profit or using it as a gift to impress others. Now, selling a 760-yuan pill for 460 yuan results in a loss of 300 yuan, so who would want to stockpile it? Gifts also seem less valuable when the resale price is so low. This suggests that the labels of “value preservation” and “high-end luxury” are no longer effective, and whether the current demand is sufficient to justify the high price is uncertain.
3. Should They Raise Prices Again? Is Raising Prices a Good Strategy?
Logically, if sales are poor, prices should be lowered. However, Pianzihuang might consider raising prices, similar to what茅台 did. After the price increase,茅台’s core customer base (consumers who drink the product) remained stable, proving the value of its high price. Pianzihuang hopes that if a price hike doesn’t lead to a sharp drop in sales, it confirms the value of its products and allows it to continue to position itself as a luxury brand. If sales plummet, it would indicate that the previous high price was based on speculation.
4. Investing in Medical Beauty: Can 750 Million Yuan Save the Situation?
Pianzihuang has been in the cosmetics business (with its Queen Brand pearl cream) but hasn’t been successful. It is now investing over 80 million yuan in land in Beijing and plans to spend 754 million yuan on building a medical beauty equipment base, focusing on high-end products. The medical beauty market is promising (expected to grow to 638.2 billion yuan by 2030), but the barriers to entry are high: medical equipment requires research and development, clinical trials, and registration (some are classified as Class III devices, with strict approval processes). The company also needs to establish relationships with doctors and continuously improve its products, which are very different from its traditional pharmaceutical and cosmetic businesses. The project won’t be completed until 2028, and it will take several years to see results. With its main business under pressure, waiting for these developments is not an option. Additionally, the medical beauty industry is already highly competitive, and it’s uncertain whether Pianzihuang can stand out.
5. High Inventory: A Burdening Problem
Pianzihuang has 5.95 billion yuan in inventory, accounting for 32% of its total assets, and it takes 413 days to turn over inventory (more than a year). Although the amount of raw materials purchased has decreased (from 4.8 billion yuan to 4.1 billion yuan), finished products are still hard to sell (inventory has only dropped from 1.45 billion yuan to 1.33 billion yuan). This is more problematic than rising raw material costs because if products can’t be sold, price hikes may deter further purchases and make inventory harder to dispose of. If inventory continues to accumulate, it will affect the company’s cash flow and hinder future research and expansion.
Conclusion
Pianzihuang faces a dilemma: either raise prices to test the value of its products or invest in medical beauty as a future growth strategy. The most urgent question is whether consumers are still willing to pay the high price for its products. If not, it may need to quickly shift its focus to medical beauty, or the reputation of being the “Moutai of medicines” could be lost.