Edit | Yuer Lake
Produced by | Chaoqi Network "Yu See Column"
In mid-September, the first warehouse membership store of Laiyifen, a snack food company, was officially opened, which attracted the attention of the industry.
As "China's No. 1 snack stock", Laiyifen's external propaganda slogan is "insist on not fighting a price war". However, under the impact of the mass-selling snack brands that rely on the "price war" to emerge, Laiyifen has been in a painful period in recent years, so it has also tried to break the situation through the membership model.
In the first half of 2024, Laiyifen handed over a report card with both revenue and net profit declining, and the net profit attributable to the parent company after deducting non-profits turned negative, turning from profit to loss. As for the change in performance, Laiyifen mainly attributed the reason to the impact of external macroeconomic and social consumer market trends.
However, the total revenue and net profit attributable to the parent company in the first half of 2024, the total revenue and net profit attributable to the parent company, which are also the head companies of the leisure snack track, increased by 75.39% and 88.57% respectively, which makes its performance explanation unconvincing.
In particular, Laiyifen adjusted the structure of stores in some regions in the first half of the year, resulting in a year-on-year decline in the revenue of directly operated stores, and the current profit did not meet expectations, which was difficult to satisfy investors.
So, as the growth of the casual snack market approaches the ceiling and the competition in the industry becomes increasingly fierce, how will Laiyifen break through the dilemma?
Direct profit fell short of expectations, and profitability was in doubt
According to Laiyifen's financial report data, in the first half of 2024, Laiyifen will achieve operating income of 1.792 billion yuan, a year-on-year decrease of 15.05%; the net profit attributable to the parent company was 14.9245 million yuan, a year-on-year decrease of 72.56%; The net profit attributable to the parent company after deducting non-profits was -8.8888 million yuan, turning from profit to loss year-on-year.
According to analysis, Laiyifen's direct profit is less than expected, or the main "drag" of performance.
The fundamental reason is that during the golden period of the leisure snack track for several years, Laiyifen relied too much on offline channels, resulting in missing the dividends of the era of rapid development of the e-commerce industry. Moreover, under its strategy of emphasizing franchise and ignoring direct sales, its direct profits are far less than expected, which makes its overall performance somewhat unsatisfactory.
Laiyifen, which has developed from traditional stores, has always been its advantage, but it has also become a constraint to its rapid development. It is understood that Laiyifen's current sales channels are mainly divided into direct stores, special channel group buying, e-commerce and franchise.
Directly-operated stores have always been Laiyifen's main channel, and even in 2023, when its sales channels are becoming more and more diversified, the performance contribution of this channel is still more than 60%.
However, the direct sales model has the advantages of more controllable brand image and product quality, but it also has many drawbacks that are visible to the naked eye. For example, the expansion rate of the direct sales model is slow, and the input cost of venue rent and sales expenses is high.
Laiyifen is naturally aware of the negative impact of the direct sales model, so in recent years, it has continuously reduced the number of directly operated stores and began to lay out the franchise model.
It is understood that as early as 2017, Laiyifen launched the "Ten Thousand Lights Plan", abandoning the all-direct sales model, and at the same time accelerating the promotion of franchise to maintain its offline channel advantages. It is worth mentioning that the proportion of directly operated stores in Laiyifen has already accounted for more than half.
According to the financial report data, as of the end of 2021 to the end of 2023, the company's directly operated stores were 2,194, 2,128, and 1,910, a decrease of 175, 66, and 218 respectively, and at the same time increased the nation's franchise efforts, as of the end of 2021 to the end of 2023, its franchised stores were 1,294, 1,494, and 1,775 respectively.
However, even if it relies on the "asset-light model" of franchising, it is difficult for Laiyifen to compete with other leading brands only through offline channels, and even because of the adjustment of its internal business strategy, its direct profit in 2024 is less than expected.
The financial data of its turnaround is enough to show that Laiyifen, which is "running all the way" in the franchise model, is also very worrisome.
The snack track is "full of smoke", and it may be difficult for Yifen to be alone
Although the overall market size growth of the snack industry has slowed down, it is still expanding. Moreover, the situation of the leading brands of traditional snacks is not optimistic because of the increasing number of participants.
According to the Prospective Research Institute, from 2023 to 2028, the market size of the mainland snack food industry will grow at a compound annual growth rate of about 10%, and the scale will reach 2.6 trillion yuan by 2028.
However, in recent years, the emergence of mass snack brands represented by Mingming Busy Group has made traditional snack giants feel the pressure.
According to public data, in June 2024, the total number of stores of Ming Ming Snacks and Zhao Yiming Snacks across the country has exceeded 10,000, becoming the first 10,000-store brand in the snack chain industry, covering more than 300 cities across the country.
Not long ago, Zhao Ding, founder and CEO of Zhao Yiming Snacks, also revealed that the group's revenue in 2023 will be about 20 billion yuan. It can be seen that as a rising star in the industry, Mingming is very busy and the group is indeed rising rapidly at an astonishing speed.
As we all know, the biggest advantage of mass merchandising snack stores is that the prices are more affordable. Relevant data show that in terms of customer unit price, Zhao Yiming is nearly 20 yuan lower than several other brands, and in today's consumption background, the importance of low prices is self-evident.
Coincidentally, in November 2023, Yang Yinfen, chairman and general manager of BESTORE, issued an open letter to all employees, bluntly saying that the company's operation was in difficulty, and announced that 300 products in various channels of BESTORE would be reduced simultaneously, with an average price reduction of 22% and a maximum reduction of 45%. It is precisely because of this that BESTORE also handed over a report card in the first half of the year, with a significant reduction in net profit of more than 80%.
However, Laiyifen does not seem to be bothered to "get involved" in the price war. With the intensification of market competition, many snack companies have begun to "roll" prices, but Laiyifen, whose gross profit margin leads the industry, has publicly stated that it will "not fight a price war" and will use "new technology" to improve product quality, so as to enhance competitiveness.
However, its investment in technology does not match its slogan. Judging from the financial data, in the first quarter of this year, Laiyifen's R&D expenses were 2.2757 million yuan, a year-on-year decrease of 37.9%, while the median R&D expenses of companies in the industry in the same period were 5.3668 million yuan, far less than the R&D expenses of more than 15 million yuan in the first quarter of this year.
Therefore, when the industry fights a price war, it may be difficult to stay alone in Laiyifen, who adheres to the technical route and "holds" the identity. The development pressure it is facing can be seen through the continuous growth of revenue, but the fluctuation of net profit attributable to the parent company.
According to the financial report data of previous years, from 2016 to 2022, Laiyifen's revenue climbed from 3.236 billion yuan to 4.382 billion yuan, but the highest value of its net profit attributable to the parent company during this period stayed in 2016.
This also means that at a time when competition in the industry is intensifying, Laiyifen's profitability is also encountering unprecedented challenges.
Diversification challenges remain, and the second growth curve is hard to find
In fact, although the performance of Laiyifen's main business has been up and down, it has not given up its attempts to diversify in order to find more possibilities outside its main business.
For example, in the coffee track, Laiyifen not only launched a freshly ground coffee sales business as early as 2017, but also continuously upgraded its coffee brand. From the initial "Laicup coffee" to "Laicup coffee", it has rapidly expanded nearly 1,000 stores.
In addition, Laiyifen did not miss the hot sparkling water track in recent years, and also launched the first sparkling water - Pai Pai Lemon. At the same time, Laiyifen even crossed over into the liquor industry, and launched its own brand of sauce-flavored liquor products - "Zuiai" series through its wholly-owned subsidiary, Shanghai Zuiai Liquor Co., Ltd.
In order to create a second growth curve, Laiyifen also crossed over to dairy products, fresh lo-mei, frozen food, prefabricated dishes, fresh fruits, grain and oil seasoning and other categories, but most of the categories were tepid in the end, did not form a climate, and did not support the company's performance, becoming the second growth engine.
No matter how good a product is, it also needs to be promoted through effective marketing channels. Although Laiyifen has always been obsessed with diversification in terms of product layout. However, in terms of channel layout, it seems to be a bit of a tacit stereotype.
So much so that in the track of e-commerce, mass sales of snacks, etc., some "skills are not as good as others". The performance contribution of related channels is even more insignificant.
In addition to the lack of smooth diversification development, its main snack business often falls into a brand trust crisis because of food safety issues.
For example, in mid-June 2024, a number of media reported that a number of netizens first complained to Shandong Business Daily that the snacks purchased in Laiyifen had problems such as moldy deterioration and swollen bags.
Subsequently, China Consumer Daily reported that several netizens on Xiaohongshu also posted that Laiyifen's snacks were spoiled and had foreign objects. It is precisely because of the frequent occurrence of food safety problems in Laiyifen that Laiyifen has also become the target of verbal criticism from many media and self-media.
Image source: @ Screenshot of China Consumer Daily Weibo
In fact, Laiyifen has been complained by consumers because of food safety issues, and it is not an isolated case. On the black cat complaint platform, there are also many consumer complaints that Laiyifen's snacks are spoiled, insects, hair, etc.
Because of food safety issues, Laiyifen has also been punished by the regulatory authorities.
For example, on September 7, 2022, according to Tianyancha information, recently, the Huanzhen North Road Store of Shanghai Laiyifen Food Chain Management Co., Ltd. was fined 10,000 yuan by the Shanghai Baoshan District Market Supervision and Administration Bureau for operating food beyond the shelf life, and confiscated 110.9 yuan of illegal income. It is precisely because of the existence of these objective facts that many consumers' trust in Laiyifen has been greatly reduced.
Obviously, the lack of brand trust will also seriously affect Laiyifen's expansion of the second growth curve and the formation of new categories and product influence. To some extent, this may also be one of the important reasons why Laiyifen's basic market is difficult to maintain and the progress of product diversification is slow.
epilogue
As the first retail stock in China, Laiyifen's industry influence in this track is self-evident. However, with the changes in market demand and industry pattern, Laiyifen's blind adherence to traditional offline channels has also slowed down its pace of development, and even left it in a state of absence in e-commerce and other channels.
Although in recent years, Laiyifen has relied on the franchise model and gradually shown a scale effect. However, under the blow of dimensionality reduction of affordable brands such as mass sales snacks, Laiyifen's development strategy of refusing to lower its figure has also brought challenges to its market sinking, and it has brought pressure to further seize market share.
It is expected that Laiyifen, whose former halo is fading, can rely on product diversification, channel change, and bet on new technologies to find a new development path to break through the bottleneck and let it return to the "center stage" of the industry.