Ask AI · What financial pressures are driving behind Xiaokuo Technology’s IPO?

01. Using 60% of revenue for advertising

In recent years, while browsing short videos and social platforms, you’ve probably seen “half-and-half” toothpaste or mouthwash. Relying on high-density online marketing, this brand, founded only in 2018, has carved out a niche in the traditional oral care market dominated by giants.

Recently, the parent company of “Half-and-Half,” Xiaokuo Technology, submitted its prospectus to the Hong Kong Stock Exchange, aiming for a main board IPO. Through the prospectus, we can get an overview of its oral business outlook.

From 2023 to 2025, Xiaokuo Technology’s revenue is projected to be 1.1B yuan, 1.37B yuan, and 2.5B yuan, with a compound annual growth rate of 51.0%, far exceeding peers. In comparison, during the same period, Dencao Oral (the parent company of Cold Sour Spirit) and Liangmianzhen had compound annual growth rates of 14.1% and 3.4%, respectively.

Breaking it down, Xiaokuo Technology’s rapid revenue growth mainly comes from increased sales of “basic oral care” products, including toothpaste and toothbrushes. Compared to previous years, by 2025, sales will have increased by 1.13 billion yuan, with toothpaste and toothbrushes contributing 1.06B yuan. Additionally, the “professional and beauty oral care” segment, including mouthwash, oral sprays, and dental floss, as well as the newly established hair and body care brand “Little Arrow” in 2025, contributed 64M yuan and 8M yuan, respectively.

▲Image source / Xiaokuo Technology Prospectus

The reason behind this is related to Xiaokuo Technology’s continuous expansion of products and offline channels.

Generally speaking, traditional companies tend to concentrate resources and focus on a few major products; but Xiaokuo Technology adopts a “high-frequency iteration” strategy similar to tech products. The faster the iteration, the more segmented the needs it satisfies and the broader the scenarios it covers. When analyzing revenue growth, Xiaokuo Technology also cites “enthusiastic market response to newly launched products” as one of the reasons.

Regarding channels, Xiaokuo Technology initially focused on online sales, but in March 2021, it shifted to offline expansion. For fast-moving, high-frequency, immediate-demand categories like toothpaste, offline channels are “battlefields.” Xiaokuo Technology also needs this to transform from an “internet celebrity brand” to a “everyday essential brand” in consumers’ minds.

Over the past three years, offline channel revenue share has increased from 5.5%, to 11.9%, and then to 19.7%, continuously rising. The prospectus also lists “expansion of offline sales network” as a reason for revenue growth.

Since product manufacturing is mainly outsourced to third parties, Xiaokuo Technology’s gross profit margin is much higher than that of peers. From 2023 to 2025, gross margins are projected at 72.1%, 69.8%, and 71.9%. During the same period, Liangmianzhen’s gross margin ranged between 16.7% and 16.83%.

However, high gross profit does not necessarily mean high net profit. During the reporting period, Xiaokuo Technology’s adjusted net profit margins were only 4.9%, 4.8%, and 6.2%. The main reason is that a large portion of profits is swallowed up by massive marketing expenses.

In the past three years, Xiaokuo Technology’s sales and distribution expenses have been high, at 685 million yuan, 835 million yuan, and 1.53B yuan, accounting for over 60% of total revenue. Nearly 80% of this went toward e-commerce marketing, brand promotion, and celebrity endorsements—“spending on marketing for growth.”

02. Small-town youth, self-made

Behind Xiaokuo Technology is a story of small-town youth starting from scratch.

Founder Yin Kuo is 37 years old. After graduating from high school, he first worked on assembly lines in Dongguan. In 2011, he started his first business, developing smart hardware projects. Four years later, he exited that project and founded Xiaokuo Technology.

Initially, Xiaokuo Technology aimed to follow the smart hardware approach and produce electric toothbrushes. After two unsuccessful years, in 2018, it registered the “Half-and-Half” trademark and shifted into the toothpaste sector.

What followed was a story of a curve to national salvation.

At first, “Xiaokuo Technology” targeted the high-end market: adding ingredients like caviar and bird’s nest inside, with packaging resembling skincare bottles, priced around 40 yuan. But because the high-end toothpaste market has a limited ceiling, and the affordable market is crowded with giants, Yin Kuo immediately decided to strategically abandon toothpaste and switch to a more niche, easier-to-innovate product—mouthwash—hoping to return to toothpaste later when capable.

In October 2020, with a probiotic mouthwash, Half-and-Half achieved “over 100 million yuan in sales in 80 days,” greatly boosting brand awareness. The success was based on two principles: product innovation and saturation marketing.

In 2022, Yin Kuo and Half-and-Half, with a more mature approach and team, returned to the toothpaste field. “In the past, toothpaste taste and flavor were too old-fashioned,” Yin Kuo said. To address this, Half-and-Half upgraded the brushing feel, cleaning power, lingering scent, and even packaging, while also ramping up content marketing, just like they did with mouthwash.

But this time, with a renewed focus on toothpaste, Yin Kuo’s understanding changed: “Pricing can’t be high; it’s a livelihood category.” The prospectus shows that currently, Half-and-Half toothpaste prices range from 9.9 yuan to 49.9 yuan, with different products, sizes, and channels setting different prices.

As an entrepreneur, Yin Kuo has always presented a happy, relaxed image. But now, Xiaokuo Technology faces a possibly less relaxed situation.

Looking at the list of investors in Xiaokuo Technology, a long string of names appears. Between 2018 and 2021, Meihua Venture Capital, Qingliu Capital, Huaxing Capital, ByteDance, and others all participated. Through financing, Xiaokuo Technology has accumulated ample capital, which is key to its saturation marketing and brand explosion.

But as the saying goes, “All gifts of fate have a hidden price.” The flip side of abundant investment is that Xiaokuo Technology has become burdened with heavy shackles.

The prospectus shows that Xiaokuo Technology issued redeemable convertible preferred shares with redemption rights. If the company fails to complete a qualified public offering within 60 months from the investment date, holders can exercise redemption rights. By the end of 2025, redemption liabilities totaled 581.9 million yuan.

As of the end of 2025, the company’s cash and cash equivalents stood at only 223 million yuan, clearly insufficient to cover these liabilities. Therefore, going public has become its most critical lifeline.

(Author | Lin Mu, Editor | Wu Yue, Image source | Visual China, Content from Caijing Tianxia WEEKLY)