Summary of Key Points
Tao Li Bread has recently closed down two subsidiaries with virtually no revenue (Qingdao Tao Li and Changchun Tao Li), which may seem like a minor matter, but in fact, it exposes the company's deeper crises: performance has been declining for five consecutive years (profit shrinkage by nearly 70%), capacity is underutilized, market channels have been taken over by new competitors, and sales in both northern and southern markets have cooled down. Meanwhile, the family shareholders continue to cash out dividends. The company, once a leader in the short-life bread market with its "central factory + wholesale" model, now faces an awkward situation where growth has stagnated and its advantages have become a burden.
I. Closing Down Subsidiaries: Getting Rid of "Zombies" to Reduce Heavy Asset Burden
Qingdao Tao Li and Changchun Tao Li are not isolated cases; they represent the "excess assets" left over from Tao Li's expansion era:
- Qingdao Tao Li: With a registered capital of 40 million, it operates in a warehouse rented from someone else, had zero revenue in 2025, and a profit of only 25,000 yuan (which was from interest income, not bread sales), with no debt but complete cessation of operations;
- Changchun Tao Li: A company established in 1996 (a veteran subsidiary of Tao Li), had revenue of 1,800 yuan in 2025 (less than a month's salary for an average person) and a net loss of 1,900 yuan;
- The Truth Behind It: These subsidiaries were set up during Tao Li's expansion period, but now with declining sales, the factories are operating at capacity below their full potential, only increasing management costs. As of September 2025, Tao Li has closed down 10 subsidiaries and more than a dozen branches, essentially shedding unnecessary burdens.
II. Five Consecutive Years of Declining Performance: Profit Nearly Halved, Revenue Decreased by 1.3 Billion
Tao Li's situation is getting worse year by year:
- Profit Shrinkage: From 883 million yuan in 2020 (the peak), profits dropped to 284 million yuan in 2025, a decrease of nearly 70%; the annual profit fell by 45.6% in 2025;
- Revenue Decline: Revenue peaked at 6.759 billion yuan in 2023 and dropped to 5.448 billion yuan in 2025, a reduction of 1.3 billion yuan over two years;
- Poor Investment Return: The ROIC (return on investment) plummeted from an average of 16% over the past decade to 5% in 2025, lower than even bank fixed deposits—meaning the money invested is hardly generating any returns.
The situation continued in the first quarter of 2026: revenue was 1.169 billion yuan, with a profit of 51.83 million yuan, a year-on-year decrease of 38%, and the gross margin dropped to 21% (only earning 21 yuan from every 100 yuan in bread sales).
III. Advantages Turning into Burdens: The "Central Factory" Model Backfires
Tao Li thrived on its "central factory + short-distance delivery" model, building factories across the country to produce short-life bread (with a shelf life of up to 15 days) and using scale to reduce costs. However, now:
- Underutilized Capacity: The number of factories has increased (fixed assets rose from 1.79 billion yuan in 2020 to 3.66 billion yuan in 2023), but capacity utilization dropped from 81% in 2022 to 63% in the first half of 2025—more than half of the time, the machines are idle, while depreciation and labor costs remain unchanged;
- Heavy Asset Burden: When sales decline, these factories become a heavy burden, squeezing profits. The closed subsidiaries are a clear example of this underutilized capacity.
IV. Loss of Market Channels: Traditional Stores Losing Ground to New Competitors
Tao Li once relied mainly on large supermarkets for sales, but now:
- Declining Supermarket Foottraffic: People are visiting supermarkets less frequently, weakening Tao Li's traditional sales channels;
- New Competitors Emerging: Immediate retail (ordering bread online), community group buying (low-price deals), and proprietary bakeries from companies like Sam's Club/Hema (freshly baked products), as well as street-side bakeries (which offer freshly baked bread), are all competing for the short-life bread market;
- A Difficult Situation in Both Regions: Revenue from its northern bases (Northeast, North China, East China) decreased by 352 million yuan; subsidiaries expanded in the south (Shanghai, Zhejiang, etc.) not only failed to make a profit but also incurred a net loss of over 100 million yuan in 2024—losing ground in both regions.
V. Family Shareholders Cashing Out Dividends: Profiting While Investors Feel Disappointed
While performance is declining, the family shareholders are taking decisive action:
- Continuous Cash Outflows: The Wu family holds 62.68% of the shares and plans to sell an additional 2.999% in February 2026, potentially cashing out about 260 million yuan; cumulative cashouts over the years may exceed 3.7 billion yuan;
- Dividends Exceeding Profits: In 2025, Tao Li made a profit of 284 million yuan but distributed dividends amounting to 320 million yuan (2 yuan per 10 shares), meaning more was given out than was earned—essentially using the company's assets to benefit the family;
- A Striking Contrast: On one hand, 670 million yuan was invested in subsidiaries like Shanghai for research and development centers; on the other hand, idle subsidiaries were closed down. With performance plummeting and shareholders cashing out, investors can't help but wonder: is the company improving its operations or just taking advantage of its resources?
Conclusion
Tao Li's dilemma stems from its traditional model failing to keep up with market changes: heavy asset expansion has reached a ceiling in terms of sales volume, market channels are being challenged by new players, and the family's cash-out behavior has eroded investor confidence. To turn things around, Tao Li must address three key issues: underutilized capacity, aging market channels, and the balance of interests between the family and the company. Simply closing subsidiaries to reduce burdens is a temporary solution that does not address the root problems.