The three squirrels who rushed for a year made a wrong demonstration to the good store that cut the price?

Image source@Visual China

Text | Good Finance

At the end of November, BESTORE suddenly announced the largest price reduction for the first time in 17 years, with the average price reduction of more than 300 products on sale in the store by 22% and the highest reduction of 45%.

Perhaps it is in line with the current trend of low-price consumption, or it is for the outside world to see the counterattack of brand snacks on mass snacks, so after the news of BESTORE's price reduction, its stock price increased instead of falling, directly from 19.38 yuan at the close of November 30 to 24 yuan on December 5, with an overall increase of 23.84%

In this way, BESTORE's price reduction is a good thing for brands, consumers and investors.

But is this really the case? You know, the large-scale price reduction of BESTORE means that its brand high-end strategy is basically a failure. In addition, when the "big brother" BESTORE in the brand snack industry announced a price cut, did they follow or not?

Of course, more embarrassing than the BESTORE is the three squirrels, at the end of last year all shouted out the "high-end cost-effective" strategy, but the stock price has been flat, until recently rubbed on the BESTORE "price reduction" hot spot, followed by a wave of market outbreak, in three trading days, the closing price per share increased from 18.82 yuan in the same period to 20.03 yuan.

That is to say, the three squirrels that have been running for a year are not as good as the BESTORE that bluntly announced a big price cut to run far and more useful, and the high-end cost-effective strategy that increased in advance seems to have failed to achieve the performance level, bringing real growth and valuation improvement to the three squirrels...

Therefore, this article will analyze from the following two points:

1. Why are the three squirrels who rushed ahead of time not as loud as the "voice" of BESTORE to reduce prices?

The cost-effective strategy of the second and third squirrels and BESTORE is to deal with the attack of mass sellers of snacks, but can the price reduction from high-end brands really effectively fight back against those who are very busy with snacks?

How did the three squirrels who "got up early" be taken away by the good store that "caught up with the evening market"?

For the three squirrels and BESTORE have the same "price cut", but they have received different capital market reactions, Xiangshan Finance believes that there may be three reasons:

First, it is unfortunate in the form of "price reduction".

Different from the current BESTORE directly announcing large-scale price cuts, the "high-end cost-effective" strategy launched by the three squirrels at that time was itself in an uncertain groping, and the profit space was almost unpredictable.

Second, the performance continued to be under pressure after switching to the high-end cost-effective route.

Objectively speaking, the soaring stock prices of BESTORE and the three squirrels are essentially no different from the concept and trend of speculation, and the market enthusiasm comes and goes quickly.

However, in this regard, the three squirrels, who have been working on high-end cost performance since the end of last year, did not show the expected price for volume in the first three quarters of this year, but fell by 14.07% year-on-year. As for the attributable net profit, although it increased by 81.42% year-on-year, it was "saved" by reducing costs and increasing efficiency.

Tianyancha APP shows that in the first three quarters of this year, the operating cost of the three squirrels was 3.448 billion yuan, a year-on-year decrease of 10.74%. As for the three fees, in the same period, the sales expenses of the three squirrels were 824 million yuan, down 31.57% year-on-year, the management expenses were 163 million yuan, down 17.39% year-on-year, and the research and development expenses were 18.7 million yuan, down 34.45% year-on-year.

In the case of the joint reduction of three fees + operating costs + other sporadic expenses, the total operating cost of the three squirrels reached 4.489 billion yuan, but the overall decline was 15.8% compared with the same period last year, exceeding the revenue decline in the first three quarters of this year, so the corresponding profits will naturally be "saved".

As for the three squirrels' high-end cost-effective strategy effect, why is it not obvious? The key reason is that it still adopts the OEM production model as a whole, even if the local macadamia nuts and other nut categories have achieved supply chain optimization from raw materials to self-built factories, but for the three squirrels with more than 1000 SKUs, the market profit space that can be squeezed out is still limited, so it is difficult for the high-end cost-effective strategy to effectively reflect the performance level...

The third is the entangled psychology of whether to be a high-end brand or a low-end market.

For the high-end cost-effective strategy of the three squirrels, Zhu Danpeng, an analyst of China's food industry, once bluntly said that the so-called high-end cost-effective is actually a contradiction. How to go to the high-end cost-effective, and how to go to the high-end with high cost performance?

In this regard, after synthesizing the responses of the three squirrels, Xiangshan Finance noticed that "high-end" refers to high-quality products. Just like Zhang Liaoyuan, the founder of Three Squirrels, explained: low price is the general basic demand of consumers, but the first characteristic of people's demand for snacks is delicious.

Therefore, even though the three squirrels have now embarked on the cost-effective route, the "high-end" image is still the brand "cheongsam" that they are reluctant to take off. After all, the high-end brand personality that has been established with great difficulty is indeed a pity to give up now. And in the long run, it is easy for the brand to slide from the high-end to the low-end, but it may be difficult to go from the low-end to the high-end market in the future.

Perhaps because of this, BESTORE seems to have always had a similar entanglement. The most direct proof is that, putting aside the transformation of the three squirrels a year ahead, since the beginning of this year, e-commerce platforms have launched tens of billions of subsidies, Jingdong has returned to low prices, Ali has returned to Taobao, to Zhongxuegao to launch low-price sub-brands, and then to Pinduoduo, which has risen with a low price advantage, once surpassed Ali in market value, all of which interpret the change in the direction of consumption, and low prices are the first choice of consumers.

But in this case, BESTORE, which has always had a keen sense of smell, recently announced a price cut, and even if it copied homework, it seemed that it was too slow, which is difficult not to be reminiscent of the high-end snack brand image that it has been pursuing in the past.

In addition, unlike the three squirrels and Zhang Liaoyuan's clear full-category and omni-channel implementation of high-end cost performance, BESTORE currently has nearly 1,600 SKUs, but this time only about 300 of them are subject to price reduction, and some media pointed out that this part of the price reduction adjustment is mainly concentrated in offline stores.

Under the heavy restrictions, it is not difficult to see that BESTORE is entangled in whether to take the low-price or high-end route.

However, no matter what kind of price reduction BESTORE has attracted so much attention this time, if it cannot reverse the decline in performance in the future, then the current overheated market sentiment may turn into a basin of oncoming cold water at that time, dousing the investment imagination of BESTORE and the three squirrels...

JD and Pinduoduo in the snack world: from the three squirrels, BESTORE to snacks are very busy

Returning to the competitive perspective of BESTORE's large-scale price reduction, from focusing on high-end quality snacks to gradually turning to the cost-effective route in order to resist mass selling snacks, BESTORE and the three squirrels have a set of improvisation and the difference in their stance on the demand for consumers' first characteristics, which is actually very similar to the dispute between JD and Pinduoduo in the e-commerce field.

For example, snack players who are very busy and other mass-selling snack players, the insight into the current consumer demand is cheap and low price first-quality last, so its target group: the lower can be the low-end income group, the upper can be the middle-class consumers who have become price-sensitive due to the economic environment, asset depreciation and shrinkage, the consumer group is more comprehensive and diversified, and the market has a stronger ability to resist risks.

Objectively speaking, isn't this the Pinduoduo model? Especially when it comes to what consumers really need, Pinduoduo's answer has always been low prices. The priority of this dimension is the same as that of today's mass sales snacks, and even exceeds the key e-commerce elements such as product quality, category richness, and logistics timeliness.

But in this regard, the three squirrels and JD.com have different consumer insights, that is, high-end quality first - low price last. Just like the three squirrels and BESTORE who have been forced to embark on the cost-effective and price-reduction route, they still want to create a contradictory "high-end cost-effective" strategic name, mainly targeting the middle class and above group market.

However, from the experience and perspective of Pinduoduo, the fault tolerance rate of consumers who are very busy with snacks at the moment may be very high. After all, it is cheap enough and has no quality idol baggage, so even if the snacks bought by consumers at a low price may be slightly flawed, if the overall is not bad, then it is a super-psychological expectation, so white-label products can also occupy a place in mass snack stores.

But on the other hand, the low-cost route of JD.com or BESTORE and Three Squirrels may not be so easy to follow. First, it is easy to hurt the old fans who bought expensive in the past, and the second is that there is a quality baggage, and the high-end routes of Jingdong or BESTORE in the past have made consumers have high psychological expectations for their nature. Therefore, although the price has dropped slightly, if the product is also slightly flawed, then consumers may still be very dissatisfied with JD.com, BESTORE and the three squirrels. After all, the brand tonality of the two is there, and it is almost impossible to deny it...

In addition, from a longer-term perspective, what BESTORE, Three Squirrels or JD.com can do in the future is to make the expensive ones cheaper, but Zhao Yiming can optimize the supply chain through screening like Pinduoduo, so that the cheap products will become better in the future. At first glance, these two seem to have the same goal, but behind them are two completely different consumer mindsets.

To give an exaggerated example, there has been a popular Rolls-Royce five-yuan voucher before, but let alone five yuan, it is a voucher of 5,000 or 50,000 yuan, which is still unaffordable for most consumers who can't afford Rolls-Royce, and those who can afford it don't seem to care about this voucher.

But if you say that domestic cars like Wuling become better on a cheaper basis, then I believe that there will definitely be many people who choose to vote with their feet. This is actually in response to what Huang Zheng, the founder of Pinduoduo, once said: "Consumption upgrading is not to let Shanghainese live the life of Parisians, but to let people in Anqing, Anhui Province have kitchen paper and good fruits to eat." ”

Of course, if BESTORE and the three squirrels can really reduce the prices of all categories and the quality remains the same, then it may not be impossible to achieve the anti-encirclement and suppression of mass sales of snacks. But unfortunately, on the one hand, the OEM production model of BESTORE and the three squirrels mentioned above determines that it is difficult to achieve a large price reduction of all categories and all channels in a short period of time without changing the quality;

But the problem is that in the first three quarters of this year, in the context of a significant reduction in costs and efficiency increase, the net profit margin of the three squirrels is only 3.7%, and in the third quarter it is only 0.95%, which is close to the life and death line of losses.

If the mass sellers choose to further follow up the price war in the future, then the three squirrels may fall into the embarrassing situation of continuous revenue growth and long-term profit loss, and it is also difficult to drive the investment confidence of the capital market...

All in all, the difference in the focus of consumption stratification and consumption trends has made Pinduoduo and Jingdong open up a market value gap of more than 100 billion, and even surpassed Ali. Therefore, in the snack industry, even now BESTORE and the three squirrels have begun to make efforts to make cost-effective routes like JD Taobao imitating Pinduoduo's tens of billions of subsidies, but from the brand quality burden to the restrictions of the production model, to the urgency of improving performance, and other factors, it is difficult for the three squirrels to fully break through the market encirclement of mass snack players.

After all, in the face of the general trend of the times, all technical aspects, what sky-high prices, and all kinds of deviations are almost as worthless as local chickens and dogs.

If the three squirrels can't fully adapt to the current trend of low-cost consumption, then the future will not be overwhelmed by the times...