Author: Xiao Li Feidao, Editor: Xiao Shimei
In November 2023, Yang Yinfen, the new head of BESTORE, wrote in an open letter to all employees that the company is facing the most difficult challenge since its establishment, not only the problem of living hard, but the problem of whether to survive, if it remains unchanged, it is really possible to lose the opportunity to be at the table.
This is indeed not alarmist.
【Strategic Shift】
At the end of 2023, BESTORE officially announced that the average price reduction of more than 300 products of the company was 22%, and the highest price reduction was 45%, the largest price reduction in 17 years. This means that BESTORE has given up its positioning as a high-end snack and shifted its business strategy to the pursuit of "cost-effective".
In fact, in the past many years, the company's high product prices have not brought higher profits to the brand, but have discouraged consumers, and the operating pressure has increased day by day.
Since its listing, BESTORE's revenue has almost stagnated, and its profits have frequently experienced negative growth. In 2023, the revenue will be 8.046 billion yuan, a year-on-year decrease of 14.76%, and the net profit attributable to the parent company will be 180 million yuan, a year-on-year decrease of 46.26%. In the first quarter of 2024, it will continue to decline sharply by 58%.
▲来源:Chocie
BESTORE's profitability has also continued to deteriorate. The gross profit margin in the first quarter of 2024 was 26.43%, a significant decrease of 6.3% from 2015 and a new low since the financial disclosure data was available. The latest net profit margin was 2.54%, down 1.59% from 2019. Among them, the sales expense rate is about 20% all year round, but the R&D expense rate is less than 1%.
Judging from the above core operating data, BESTORE's high-end business strategy has not brought good growth to the company. However, after the strategic shift, there is a high probability that the future will still be difficult, because there will be a big price reduction at a high price.
For BESTORE, if the price reduction can achieve small profits and quick turnover, it will be a good result. But often the ideal is plump, and the reality can be skinny.
In recent years, discounts on casual snacks have become popular. Not only are BESTORE cutting prices, but the heads of the three squirrels and baicaowei are lowering their bodies to implement price reductions, not to mention that many small and medium-sized brand manufacturers are following the price reduction. You will fall, but the total consumer demand will not change significantly, so the final outcome of the price reduction and involution is likely to be difficult to achieve the price of the volume.
Three squirrels are a prime example. At the beginning of 2023, the company proposed a "high-end cost-effective" strategy and improved quality and price reduction. However, the total annual sales volume was 68,500 tons, a sharp decline of 12% compared with 2022.
Secondly, the price reduction of BESTORE's products will reduce the company's gross profit and net profit performance, impact investors' expectations, and the overall valuation level may tend to move downward.
From the perspective of the advantages and disadvantages of the business model, the leisure snacks where BESTORE is located are at the bottom of the entire food and beverage, the business threshold is not high, it is easy to fight price wars, and consumer demand changes rapidly, and the brand loyalty is not high. Unlike high-end liquor, it has high operating barriers, and can continue to raise prices, improve profitability, and tend to have a higher valuation level. In other words, BESTORE is in a hard business track, and all it makes is hard money.
BESTORE does not reduce prices, and it is difficult to operate! After the price reduction, it may be more difficult to operate!
【Industry Changes】
In the past many years, high-end has been the market positioning of casual snack companies, and BESTORE, Three Squirrels, and Baicaowei have been active everywhere. Nowadays, the giants are forced by reality to cut prices to survive.
The reason for this, in addition to objective factors such as macro consumption fatigue, the most important logic is that the snack store model focusing on cost performance has risen rapidly in just a few years, reshaping the market pattern of China's leisure snack industry.
From 2021 to 2023, the number of snack stores nationwide has grown from 2,500 to 25,000, an increase of 1,000%. It is expected to exceed 30,000 in 2025, with a compound annual growth rate of more than 30%. The sales scale increased from 3.7 billion yuan in 2017 to 700-80 billion yuan, with a compound annual growth rate of 112%.
▲The number of snack stores has expanded rapidly, source: Dongguan Securities
After several years of staking land, the snack market has roughly formed a market pattern of "Wanchen in the north, busy in the south, Ming in the west, and Ming in the east". Among them, the industry leader Snack is very busy, and the number of stores in 2021 was only 1,150, and by 2023, it has expanded to 6,500, more than 5 times.
In November 2023, Snacks is busy and Zhao Yiming strategically merged. The total revenue of the new group in 2023 will exceed 20 billion yuan, and the number of stores will reach 10,000 yuan, bringing the snack mass sales battle from regional competition to the whole country, and crushing other opponents.
So, why can snack stores rise so quickly?
According to the words of the 2023 semi-annual report of the three squirrels: the mass sales snack business is in line with the underlying consumer demand of "how fast and good it is", and it will achieve a rapid rise with richer snack categories and more affordable product prices, and will efficiently undertake the traffic transfer from traditional stores and supermarkets (PS: accounting for more than 40% of the sales channels).
Specifically, for example, snacks are very busy, Zhao Yiming has more than 2,000 categories, and the monthly update rate is more than 100 kinds, and the location is near the community or in a commercial area with more people, which can better meet the needs of consumers.
Of course, the most important thing is the price. Wholesale snack merchants have innovated the snack channel side, that is, bypassing distributors to purchase directly from manufacturers, and giving consumers profits with lower purchase costs, and ultimately obtaining small profits and quick turnover. According to statistics, the retail price of general mass-market snacks is about 20%-40% lower than that of supermarket channels on average. This is attractive enough for consumers.
Offline is still the main battlefield in China's leisure snack sales channels, accounting for more than 80%. Now, the rise of the mass snack model is regarded by the market as the "offline version of Pinduoduo", which has had a strong impact on the high-end price system of snacks, including BESTORE.
The good products have a big price cut, and they have to do it.
[Difficult to solve]
In 2012, BESTORE led by Yang Hongchun frantically bet on e-commerce channels, and made a big layout of Tmall, Jingdong, and No. 1 stores, embarking on the road to rise, realizing the leap from a regional snack brand to a giant in the snack industry.
In 2015, online sales exceeded 800 million yuan. From 2016 to 2019, online revenue continued to grow, accounting for about 50% from 33.7%. Relying on the dividends of e-commerce, BESTORE has surpassed Laiyifen, which still relies mainly on offline channels.
However, in recent years, the pattern of e-commerce platforms has been intensified and reshaped, the differentiation of online traffic has continued, the channel layout of BESTORE has been unbalanced, and the online growth engine has failed. In 2022, the revenue of e-commerce channels will show a rare negative growth, and it will worsen in 2023, plummeting by 32.6% year-on-year, accounting for 10.58% to 39.8% of revenue.
However, the Douyin e-commerce market has risen rapidly, and the sales of casual snacks will soar by 53% in 2023, constantly eating away at the market cake of Tmall and JD.com. Looking at their peers again, the revenue of the Douyin platform of Three Squirrels in 2023 will surpass that of the JD platform, with a year-on-year increase of 119%.
In terms of offline channels, BESTORE still increased the number of directly operated stores. In 2023, there will be 258 self-operated net stores, and the total number of directly operated stores will reach 1,256. During the same period, 191 franchised stores were closed, and 2,037 were left.
BESTORE's blind opening of stores may not be able to stop the decline of business. On the one hand, the acceleration of the opening of directly operated stores also means higher operating costs, which is also an important factor dragging down performance. On the other hand, the rise of the snack mass merchandiser model to divert offline traffic will also have an impact on the business of BESTORE's directly-operated stores.
On the other hand, the competitor Yanjin Shop has a deep understanding of the transformation of retail channels, and began to lay out snack mass sales channels as early as the second half of 2021, and the partner is the industry boss Snack Very Busy Group.
In 2023, Yanjin Shop's busy snack sales channel has exceeded 500 million yuan, accounting for more than 12% of total revenue, far surpassing traditional supermarket customers such as Walmart and China Resources Vanguard. From 2022 to 2023, Yanjin Shop's revenue increased by 26.8% and 42% year-on-year, and the net profit attributable to the parent company increased by 100% and 67.8% year-on-year. Its performance is one of the best among listed snack merchants.
BESTORE does not cooperate with the channels of mass merchandising giants, and may also have some concerns and considerations of its own. First, I want to control the offline traffic entrance by expanding the scale of the store, and I don't want to become an "offline platform worker". Second, the establishment of the mass merchandiser brand "Snack Stubborn", focusing on the Hubei market, was previously expected to open 500 stores in 2023, but it did not make much waves in the market.
Yanjin Shop chose to embrace the general trend of channel traffic change, and enjoyed a wave of super dividends, and the scale of performance has risen to a great level. On the other hand, BESTORE's decision-making was a little slow and chaotic, and some opportunities were missed. Of course, all of this has to do with the lack of the company's supply chain.
BESTORE does not have its own production factory, and its products follow the "OEM + OEM" model. On the one hand, food safety and quality may be difficult to effectively manage and control. For example, on the Black Cat complaint website, there are more than 2,400 complaints about BESTORE, involving eating foreign objects, moldy and spoiled food, etc. On the other hand, it is not possible to enter the retail scene in large numbers like other self-produced brands.
▲ Source: Black Cat Complaint
Yanjin Shop controls the supply chain by itself, and can control procurement, production and sales, and can extend the upstream and downstream industrial chains, with a good cost reduction effect, and the gross profit margin and net profit margin rank No.1 in the leisure snack industry, which is significantly higher than that of BESTORE.
Overall, in terms of online channels, the growth engine that used to be relied on has been extinguished due to the disappearance of the traffic dividend of e-commerce platforms. In terms of offline channels, no effective measures have been taken to deal with the major changes in traffic, resulting in passive operations. Based on this, the capital market has already voted with its feet, and the share price of BESTORE has retraced by more than 80% from the peak in 2020, and the market value has evaporated by 27 billion yuan.
As a result, the new handsome Yang Yinfen may also have to accept the reality of BESTORE's return to mediocrity, and the era of high growth is gone. However, the market's severe test may have just begun.
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