Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 111

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 111
---
.7 million) in 2023 from RMB135.7 million in 2022, which was in line with the increase in
our total revenues.

Product Costs

The product cost increased
by 16.2% from RMB131.4 million for the year ended December 31, 2022 to RMB152.7 million (US$21.5 million) for the year ended December
31, 2023. The increase was mainly due to: (i) DDC Shanghai has obtained control over Yuli and Nona Lim on July 1, 2023. Yuli is principally
engaged in sales of RTC and RTE product giftboxes and Cook SF operates the brand “ Nona Lim”, an Asian food brand sells RTC
product based in U. S.; and (ii) the increase in offline consumer product sales of private label products.

Personnel Costs

Due to COVID-19, we had to
close all our experience stores in 2022. This resulted in a reduction in personnel costs by 62.5% from RMB2.4 million to RMB0.9 million
(US$0.1million) for the year ended December 31, 2022 and 2023. The closure of all retail locations also corresponded to a decrease in
the revenue from experience stores.

Lease expenses

Our total lease expenses for
the year ended December 31, 2022 and 2023 were RMB0.6 million and nil respectively. The decrease was mainly attributable to the closure
of all experience store during the year, and the termination of all contractual arrangements with City Modern.

Others

“ Others” primarily
includes depreciation and amortization expenses for equipment directly related to revenue. For the year ended December 31, 2022 and 2023,
other costs represented less than 1% of total costs.

Operating Expenses

Operating expenses increased by 54.2% to RMB197.7 million (US$27.8
million) in 2023 from RMB123.9 million in 2022.

Fulfilment expenses

The fulfilment expenses decreased
from RMB10.6 million to RMB7.3 million (US$1.0 million) for the year ended December 31, 2022 and 2023. The cost reduction was a result
of the decline in online consumer product sales since the second quarter of 2022. As a result, fewer