How to break through the performance differentiation of the food industry and BESTORE?

Author | Caijing New Media Writer Shu Zhijuan Editor | Gao Suying

As of April 29, 19 listed leisure snack companies have announced their 2023 financial reports. "Caijing" new media combing found that from the perspective of the industry as a whole, Qiaqia Food (002557. SZ) led the way with a net profit of 803 million yuan, Yanjin Shop (0002847.SZ), Ganyuan Food (002991. SZ) ranked second and third. Among them, Yanjin Shop and Ganyuan Food achieved both revenue and net profit growth, and BESTORE (603719. SH), Laiyifen (603777. SH) revenue and net profit have declined, and I think you are in the red.

It is worth noting that the net profit attributable to the parent company of the "revenue king" BESTORE decreased by 50% year-on-year to 180 million yuan, and the non-net profit decreased to only 65 million yuan, a year-on-year decrease of 68.82%. The revenue of the three squirrels ranked second in revenue was 7.115 billion yuan, although the net profit attributable to shareholders of listed companies was about 220 million yuan, a year-on-year increase of 69.85%, but there was still a big gap compared with the "net profit king" Qiaqia.

Behind the mixed performance is the competition of many retail enterprises in new channel expansion and new product innovation. With the rise of new business formats such as snack mass merchandisers and the continuous innovation of online models, the casual snack industry is entering a new stage of omni-channel integration.

From the perspective of the industry, with the continuous development of new quality productivity, the competition in the industry to reduce costs and increase efficiency will become the norm. This is not a simple price war, but requires enterprises to optimize the whole link of the supply chain to ensure product quality and achieve profit overflow. Under this trend, more and more Chinese snack brands are accelerating the pace of going global and tapping more overseas market space.

The performance is clearly differentiated

From the perspective of revenue, according to the author's statistics, there are 3 snack food companies with a revenue of more than 5 billion yuan in 2023, including Qiaqia Food, BESTORE, and Three Squirrels. Although BESTORE is the "king of revenue" last year, it reached 8.046 billion yuan, but its net profit was less than 1/4 of the third place in revenue. Qiaqia Food became the "net profit king" with 803 million yuan, followed by Yanjin Shop and Ganyuan Food ranked second and third, with net profit attributable to the parent company of 506 million yuan and 329 million yuan respectively. And I want you to have a net loss of 51.8919 million yuan for the whole year, a year-on-year increase of 72.60%, and it has been a loss for four consecutive years.

Regarding the net profit loss, I would like you to explain that the reason is that the gross profit obtained in 2023 is not enough to cover the expenses during the period. In addition, credit impairment and asset impairment losses amounted to about 9.2 million yuan, resulting in the company's continued losses in 2023.

According to the 2023 performance disclosed by BESTORE, the net profit attributable to the parent company declined significantly, down 50% year-on-year to 180 million yuan, and the non-net profit decreased to only 65 million yuan, a year-on-year decrease of 68.82%. In Q1 2024, the net profit attributable to the parent company and the net profit deducted from the non-net profit in Q1 will also continue to suffer heavy losses, falling by 57.98% and 48.69% respectively.

As for the decline in performance, BESTORE said that the company's online channel revenue declined due to market and platform changes, and the decline compared with the same period was due to the price adjustment of some goods, resulting in a decrease in gross profit margin, coupled with the instability of government subsidies, which comprehensively affected the company's net profit decline.

In stark contrast to the first-quarter performance of BESTORE, the Q1 performance report released by Qiaqia shows that from January to March this year, the company achieved a total operating income of 1.822 billion yuan, a year-on-year increase of 36.39%, and a net profit attributable to shareholders of listed companies of 240 million yuan, a year-on-year increase of 35.15%.

In addition to the growth of the first quarterly report, in the growth rate of the annual report, Yanjin Shop, Jinzai Food, Ganyuan Food and Miss You increased by 42.22%, 41.26%, 27.36% and 23.4% respectively.

Qiaqia said that the reasons for the growth of performance in the first quarter include the growth of snack mass sales channels, the hot sales of nut gift boxes during the Spring Festival, the growth of overseas sales, and the growth of new scenarios including tea and catering.

It is worth noting that the sales expenses of each company last year were very different. Among them, the sales expenses of Qiaqia Food were 616 million yuan, and the sales expense rate was 9.05%, while in the same period, the sales expenses of BESTORE, Three Squirrels, Laiyifen, and Haoxiangyou were 1.573 billion yuan, 1.238 billion yuan, 1.111 billion yuan, and 364 million yuan respectively, and the sales expense rates were 19.5%, 17.4%, 27.9%, and 21.1% respectively. BESTORE's sales expense ratio is twice that of Qiaqia, which can also understand the reason why the "revenue king" is not the "net profit king" is related to the high sales expenses.

Zhu Danpeng, an analyst of China's food industry, believes that due to factors such as low industry concentration, product homogeneity, and fierce competition, the 2023 report card of the leisure snack industry as a whole presents a situation of "ice and fire", and the differentiation is very obvious. How to continuously innovate and enrich categories on the subdivided track, and at the same time build a solid competitive barrier in the industrial chain, has become the biggest test faced by leisure snack companies.

Omnichannel transformation accelerates

According to the latest data from the China Business Industry Research Institute, the market size of leisure snacks in mainland China will be 928.6 billion yuan in 2023, and the market size is expected to exceed one trillion yuan in 2024.

Under the trend of performance differentiation, omni-channel development has become the focus of the development of the leisure snack industry. This includes strengthening the e-commerce channel business and cooperating with the snack wholesale channel.

According to the financial report, Jinzai Food has made efforts in emerging e-commerce such as Douyin, and has launched packaging specifications adapted to different channels such as large packaging and bulk, with the current product accounting for more than 50%, and the revenue of "bulk packaging" products has increased by about 200% year-on-year; The operating income from the third-party e-commerce platform also accounts for 69.59% of the total revenue of the three squirrels, and Douyin has become its second largest e-commerce channel.

From January to December 2023, the company's performance increased by 25 million yuan, increasing to about 30 million yuan, and the annual tax-inclusive income of the channel was nearly 200 million yuan. By January 2024, it will still maintain rapid growth, reaching nearly 50 million yuan.

Compared with the rapid development of other snack foods in e-commerce, BESTORE's performance in e-commerce channels is not satisfactory. In 2022, BESTORE's e-commerce business once accounted for half of its main revenue sources, accounting for 50.42%. However, by last year, this proportion had dropped by 10.59 percentage points, and the contraction of the e-commerce business had become a key factor in the decline in the company's total revenue.

With the rise of the "Generation Z" consumer group, casual snack companies have opened up new scenarios, and high-end membership store channels and snack mass sales channels have become an important source of new brand growth. Yanjin Shop said that in 2023, the revenue of the snack mass sales channel will account for about 20%, and the cooperation SKU with the head mass sales channel will exceed 40, and it is still increasing.

However, under the wave of industry expansion, capital has certain doubts about the mass sales snack track. The effectiveness of brand integration and whether it can form a synergy and play a strategic effect beyond the value of a single brand has become the key to the development of the industry. At the same time, from the perspective of the development trajectory of the industry, the mass snack industry is in a stage of rapid expansion, and after the development of "horse racing", it is expected that the market share will gradually converge into the hands of the head brands, and the market competition will be more intense.

Qiaqia Food responded that the dividends of the rapid development of the snack wholesale channel may still have 2 to 3 years, and it will increase its layout in this channel. Supply chain management is the key to determining competitiveness, and in the future, we will continue to promote the upgrading of the supply chain and achieve value-added, efficient, flexible and safe supply chain services through intelligent manufacturing. At the same time, it will also make efforts in county and township channels, and plans to increase about 200 county dealers every year in the future to continuously improve the penetration rate of snack mass sales channels.

Zhu Danpeng pointed out that the key to measuring the success of snack stores lies in efficient supply chain and large-scale operation. Only by establishing a sound supply chain system and achieving a certain scale of expansion can we effectively reduce costs and prices, so as to quickly occupy the market and enhance competitiveness, which is very important for the snack wholesale industry.

Accelerate the iterative innovation of overseas products

With the intensification of the involution of the track and the approaching ceiling, where will the leisure snack market go under the new quality of productivity?

Many enterprises that rely on the development of large single products have accelerated innovation and increased the pace of diversification, and the competition in the leisure snack track has become more and more fierce. Among them, Qiaqia has continued to iterate and innovate in the category of nuts, from "Little Blue Bag Probiotic Daily Nuts" and "Breakfast Daily Nut Oatmeal" to continuously improve its competitiveness in the tuyere competition. According to the financial report, in 2023, the revenue of Qiaqia nuts will be 1.753 billion yuan, a year-on-year increase of 8%, accounting for 25.75% of the total revenue. Second, the growth curve continues to exert force.

In addition, I want you to build a snack food matrix such as red date sesame balls, soft date candy, vitamin C dates, etc., and the operating income of red pie series products will exceed 200 million yuan in 2023;

At the same time, driven by the new quality of productivity, the competition in the industry to reduce costs and increase efficiency has become the norm. Enterprises no longer only improve the cost performance of products through a single profit, but through the optimization of the whole link of the supply chain, to ensure product quality and achieve profit overflow.

In this competition, R&D and innovation have become the "killer feature" of the competition. According to the data, in 2023, Qiaqia Food, Jinzai Food, Yanjin Shop and other enterprises will increase R&D investment, investing 64.604 million yuan, 39.664 million yuan, and 75.7914 million yuan respectively, a year-on-year increase of 20.62%, 31.38%, and 7.37% respectively. These investments not only help companies launch more innovative products, but also build their own moats.

Under this trend, more and more Chinese snack brands are accelerating their overseas expansion, and some brands have even tasted the sweetness. According to the financial report, in 2023, the overseas market revenue of Qiaqia Food will be 5.16 yuan, a year-on-year increase of 7.7%, and the proportion of total revenue will rise to 7.58%, and the overseas market revenue of Jinzai Food will be 6.989 million yuan, a year-on-year increase of 135.08%.

It is reported that at present, Qiaqia has been put into production in Thailand, with 10 self-owned factories in the world, and its products are sold in more than 50 countries and regions such as Europe, America and Southeast Asia.

However, Zhu Danpeng pointed out that expanding overseas markets is conducive to the sustainable development of leisure snack brands, but at the same time, it should also be noted that Chinese snack companies still face many challenges when going overseas, such as unsuitable product standards at home and abroad, supply chain, consumption habits and other problems. Only by adjusting and improving on the basis of localization and truly seizing the minds of consumers in other countries can we tap more overseas market space.