Image source @ Visual China
Institute of Literary | Value
On the evening of April 22, Beijing time, three squirrels released the 2021 fiscal year annual report and the first quarter of fiscal 2022, which once again disappointed the market: revenue fell for two consecutive fiscal years, net profit in the first quarter was close to the waist, marketing costs remained high, offline store expansion was less than expected, and the Wandian plan was also suspended...
The above unfavorable factors have made the throne of the three squirrels "snack empire" crumbling, and the reason why it has come to this point today is that the crazy expansion of offline channels is very responsible.
Thinking about it carefully, the three squirrels under the power line and the good shops on the turning line are in a dilemma at the same time, and the Value Research Institute believes that it can only explain one truth: the biggest taboo in the new retail industry is blind expansion, which is the root of all problems.
Next, how can they change?
Revenue decline, profits cut down, "Ten Thousand Stores Plan" dragged down three squirrels?
However, contrary to expectations, the three squirrels once again disappointed the market: revenue fell for two consecutive fiscal years, net profit in the first quarter was close to the waist, marketing costs remained high, offline store expansion was not as fast as expected, and the Wandian plan was also suspended...
The above unfavorable factors have made the throne of the "snack empire" of the three squirrels crumbling.
The two most important financial indicators of revenue and net profit have lit up red lights, which is the biggest trouble of the three squirrels at present.
At that time, coinciding with the rise of new consumer brands to march offline, the three squirrels that had already established a solid fence online naturally began to open up a new battlefield offline.
But stretching the front line too long not only puts pressure on the supply chain, but also puts a severe test on the daily operations, personnel management and health and safety supervision of the headquarters. In addition, when the three squirrels switched from the line to the line, the original handy full reduction offers, the effect of promotional activities was sharply reduced, and the disadvantage of cost performance was also revealed.
The most direct consequence is that the expenditure has soared across the board in the past year: marketing and sales expenses of 2.072 billion yuan, an increase of 21.01% year-on-year, management expenses of 283 million yuan, an increase of 28.1% year-on-year, and even the lowest proportion of research and development expenses have increased by 9.56%.
What's worse is that it took so much manpower and material resources to open a store, and the three squirrels still haven't got rid of their dependence on online channels. In the previous fiscal year, the revenue of the three squirrel feeding stores was 818 million, the revenue of the alliance stores was 749 million, accounting for about 17% of the total revenue, and the revenue of the feeding stores even decreased by 6.39% compared with the same period in 2020.
Under pressure, the three squirrels could only survive with their arms broken and overturn the "Wandian Plan".
The failure of this "Great Offline Leap Forward" movement is undoubtedly a critical blow to the three squirrels. But what cannot be ignored is that there are many snack giants who have the same disease as the three squirrels - looking at the herbs, Shiozu Shop, and Laiyifen can be found that the problems they encounter in offline expansion and online and offline integration are no less than the three squirrels.
The coexistence of online and offline, the common problem of new consumer brands
New consumer brands have had a consensus over the years: to make their fortunes online and stabilize basic after-hours expansion to offline. It seems that only by taking root offline can we get rid of the attributes of Internet celebrities and truly achieve "long red and never fade".
In addition to the three squirrels, Baicaowei also began to expand the line wildly in the second half of last year, not only accelerating the pace of opening stores but also incubating a number of new store formats.
At the beginning of June last year, the preferred franchise store of Baicao snacks was officially opened, and two months later, 13 new stores were quickly opened, and the location of the store span was extremely large: from Changchun in the northeast to Xiangyang in the central region, and then to Hangzhou, Wenzhou and Yiwu in the eastern coastal area. According to the official announcement released by Baicaowei in August, more than 20 customers had been signed at that time, and more than 40 franchise stores had entered the preparatory stage.
Compared with the three squirrels, Baicaowei actually went offline later, but it went more aggressively – its goal is to open 200 new stores in 2022.
However, the expansion plan of Baicaowei is also full of helplessness. Recalling that when I first took over The Pepsi Flavor from the hands of Good Thought, PepsiCo Greater China CEO Ke Ruinan once said that PepsiCo values the advantages of the online channel of PepsiCo:
"Baicaowei's rich product categories, asset-light and e-commerce channel-focused business model are highly complementary to our business in the Greater China region, and we hope that we can help the growth of PepsiCo's online market through Baicaowei and create a diversified product portfolio advantage."
However, after the initial stage of scenery expansion, Baicaowei's offline store opening plan has also stalled. In January this year, Baicaowei announced that the number of offline franchise stores exceeded 25, covering 18 cities in North China, Central China, East China and Northeast China – this expansion rate is far from the original two-month target of 40 stores.
Compared with the three squirrels and Laiyifen, the good shop encountered another problem - the online expansion was not effective.
Among the three giants of Taojia snacks, the good shop is the one that attaches the most importance to offline channels. In 2019, before the outbreak of the epidemic, the sales of online and offline channels of good shops accounted for nearly half, and the proportion of offline store revenue far exceeded that of three squirrels and herbs. However, in the past two fiscal years, the good product shop has exerted its efforts on online channels, but it has fallen into an unfavorable situation of increasing revenue without increasing profits and soaring costs.
According to the data, the revenue of the good shop in fiscal 2021 was 9.324 billion, an increase of 18.11% over the same period in 2020, but the net profit was only recorded at 282 million, a sharp drop of 18.06% year-on-year, and the net profit attributable to the mother after deducting non-deductions fell by 25%. In the fourth quarter of the lowest fan, the good shop even had a net loss of more than 30 million yuan, and the profit plunged by 142% year-on-year.
The losses of the good shops were mainly due to soaring costs – especially the large amount of marketing funds invested in online channels. According to the financial report data, the marketing and sales expenses of the good shop reached 1.672 billion yuan in fiscal 2021, an increase of nearly 30% year-on-year. Among them, the promotion cost alone was as high as 830 million, a year-on-year surge of 34%.
The sharp rise in marketing costs and the steady stream of promotional activities have significantly depressed the gross profit level of good shops.
We can compare a set of data: in fiscal 2021, the gross profit margin of the good shop was 23.48%, and the proportion of online sales was 48.6%; in the same period of 2020, the proportion of online sales and the overall gross profit margin were 40% and 29.99%, respectively.
Seeing this sharp contrast, perhaps the top management of the good shop should really think about whether it is a correct decision to exert online channels and stop offline expansion?
For a while, it seems difficult to find a standard answer to this question.
But if you think about it carefully, the three squirrels under the power line and the good shops on the attack line are in a dilemma at the same time, and the Value Research Institute believes that it can only explain one truth: the biggest taboo in the new retail industry is blind expansion, which is the root of all problems.
In 2022, should the snack giant expand or contract?
It needs to be clear that the failure of the expansion of the three squirrels and good shops does not mean that the snack consumer market is in recession. On the contrary, the report of Ai Media Consulting shows that the size of China's snack food market is expected to reach 1.24 trillion yuan in 2022, with a year-on-year growth rate of more than 7%, growing into one of the world's largest snack markets.
The backbone of the trillion-dollar snack market is still the familiar group of people - Generation Z. In the era when Generation Z occupied the consumption highland, snacks have become a necessity of life to some extent, which should open up a broader market space for the three squirrels.
Nielsen IQ's Gen Z Food and Beverage Consumption Report released last year pointed out that more than 90% of Gen Z videos and heavy consumers account for more than 90%, and nearly half of Gen Z plans to increase spending on food and beverages in 2022. According to the national census data, Generation Z accounts for nearly 20% of the total population, which is a huge number of more than 260 million.
The market potential is huge, three squirrels, good shops, Laiyifen and Baicaowei, these head brands, why live more than one?
In the view of the Value Institute, the wrong direction of expansion, the misalignment of supply and demand, and the marketing and sales strategies that cannot catch up with the trend of the times all need to be backed.
How can it be changed? Two points are crucial.
First of all, whether online or offline, expansion is not undesirable, and it is most important to maintain rationality, create differentiation and control costs.
Taking offline channels as an example, the best in terms of differentiation and cost control are the good product shops and Laiyifen. They have several advantages in common: store locations and target customer groups are highly overlapping, and the store distribution is not too scattered, and they all have their own base camps. The former can help them reach users accurately, while the latter facilitates supply chain management and creates regional agglomeration advantages.
According to the data of Jihai brand monitoring, as of the first half of last year, more than 1,000 stores of good shops were distributed in central cities such as Wuhan, Chengdu, Changsha, and Zhengzhou, accounting for more than 50%, with Wuhan base camp as the center of external radiation.
Laiyifen is rooted in Jiangsu, Zhejiang and Shanghai, opening more than 1,500 stores in Suzhou, Nanjing, Shanghai, Xuzhou and other places, accounting for nearly 60% of the total stores. Compared with the strategy of three squirrels casting a wide net across the country, the offline expansion of The Good Shop and Laiyifen is more layered and more reasonable.
In the view of the Value Research Institute, the main reason why new consumer brands want to go offline is to strengthen the connection and communication with consumers, consolidate brand image and enhance brand influence by creating offline consumption scenes.
Compared with the crazy but disorderly store opening plan, the orderly expansion of the point and the surface is more conducive to the development of a brand's conscience. The popularity of good shops in Wuhan is far from being comparable to other snack brands. This is worth the careful consideration of three squirrels and the taste of herbs.
Secondly, the importance of online channels to new consumer brands is irreplaceable, but it is necessary to spend more time on marketing and user retention to keep up with the pace of development of the times.
The Nielsen IQ research report pointed out that when Gen Z buys snacks and beverages, the psychology of "liking the new and tired of the old" is particularly obvious. According to a survey conducted in June last year, 54% of respondents had purchased new domestic brands in the past three months, and short videos, grass planting communities and popular variety shows became the best marketing positions for these new brands.
The official data released by Station B shows that in the first half of last year, the number of video plays and submissions in the food area has soared, among which the number of home snack video plays has increased by 1063% year-on-year, and the higher the value of the food, the more likely it is to get high playback.
Combined with this series of data, the three squirrels and good shops should adjust their marketing and research and development strategies in a timely manner. High-value snacks and targeted delivery on short video platforms such as B station, douyin, and Kuaishou can help them re-conquer the picky Z generation.
Write at the end
In the latest financial report, the three squirrels also revealed their strategic plan for the next decade: focus on the nut industry, create a multi-brand model, and gradually move towards health, digitalization and globalization.
This strategic planning marks that the three squirrels bid farewell to the previous stage of expansion and began to take the brand upgrade route, which is also a thorny road.
We all know that the three squirrels first officially relied on the nut big single product strategy to become popular, and the current hottest product is also nuts, but perhaps many people do not know that Zhang Liaoyuan and nuts have an indissoluble relationship before starting a business.
In 2001, Zhang Liaoyuan, who had failed to start a business again, entered a nut company in his hometown as a pecan salesman, and the goal of building a snack empire officially sprouted in the hearts of this young man.
"After I did e-commerce, the whole person went crazy, in fact, I am not very diligent, but when I find an opportunity, I will rush forward without hesitation."