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Investor Network Han Yijia

Looking at the snack market today, price and channel variables seem to have become the main storyline.

Among the old snack brands, Three Squirrels has invested heavily in online channels, opened more than 40 live broadcast rooms for subdivided categories on Douyin, and achieved a 60.08% increase in net profit in the first quarter of 2024. Qia Qia Food has transformed into a cooperative snack hypermarket, achieving a 35.15% increase in net profit in the first quarter of 2024. In the snack hypermarket track, Zhao Yiming and Snacks Are Busy also merged to form "Mingming Is Busy" to further capture offline channels.

As one of the "three giants of snacks", Bestore seems to have failed to recover in time. Recently, Bestore released its 2024 semi-annual performance forecast. The announcement shows that it is expected to achieve a net profit of 21 million to 30 million yuan in the first half of 2024, a year-on-year decrease of 84.15% to 88.91%.

From its initial positioning as a high-end snack to its large-scale price cuts to adopt a low-price route, at a time when the snack industry is constantly chasing new trends, Bestore seems to be still groping for a way to recover and survive.

Price cuts can hardly stop profit decline

The net profit situation of Bestore in recent years has not been optimistic. In 2021, the company's net profit attributable to the parent company was 282 million yuan, a year-on-year decrease of 18.06%; it rebounded in 2022, and in 2023, the net profit attributable to the parent company was 180 million yuan, a sharp year-on-year decline of 46.26%. The net profit situation in the first quarter of 2024 has not improved, and the decline has further expanded, a year-on-year decrease of 57.98%.

Regarding the sharp decline in net profit in 2023, Liangpin Puzi stated that it was due to the price adjustment brought about by its price reduction strategy, which led to a decline in gross profit margin. At the same time, the government subsidies in this period were affected by the rhythm, which led to a comprehensive decline in net profit.

In November 2023, Yang Yinfen, the newly appointed chairman and general manager of Bestore, announced the principle of "reducing prices without reducing quality" and implemented the largest-scale price reduction for the first time in 17 years, with an average price reduction of 22% for 300 products and a maximum price reduction of 45%. In 2023, the company achieved operating income of 8.046 billion yuan, a year-on-year decrease of 14.76%.

Correspondingly, the price reduction strategy has brought about a continuous decline in gross profit margin for Bestore. The gross profit margin in the first quarter of 2024 was 26.43%, a sharp drop of 6.3% from 2015, setting a new low since financial disclosure data was available. With the overall gross profit margin of the snack industry at 18%-25%, Bestore's price reduction strategy has further compressed its profit growth space.

From the specific data, in addition to the price reduction strategy, both online and offline channels of Bestore are weak. In terms of online channels, data shows that in 2023, Bestore's online e-commerce revenue was 852 million yuan, a year-on-year decrease of 19.42%, and the e-commerce traffic of traditional platforms such as Taobao declined; in terms of offline channels, although Bestore added 567 offline stores in 2023, it also closed 500 stores, of which 324 were closed due to losses.

The continued decline in net profit has also caused a reaction in the capital market. In recent years, several major shareholders of Bestore have successively reduced their holdings.

In January 2024, Bestore announced that the company's second largest shareholder, Dayong Co., Ltd., had reduced its holdings of the company's shares by 20.05 million shares through centralized bidding and block trading, accounting for 5% of the company's total share capital, and its shareholding ratio decreased from 30.30% to 25.30%. In May of the same year, the company announced that Ningbo Hanyi and Dayong Co., Ltd. planned to reduce their holdings by no more than 12.03 million shares respectively. Although the reduction plan was terminated recently, the continuous reduction intentions of key shareholders including the founding team and the second largest shareholder, coupled with the fact that the shareholding ratio of the main investor Hillhouse Capital dropped significantly to 4% at the time of the IPO, also made the market question whether capital is withdrawing.

Amid internal and external troubles, after cutting prices to survive, Liangpin Puzi is still struggling in a profit dilemma.

Transformation and exploration of market space

Judging from its business strategies over the years, Bestore seems to be constantly seeking breakthroughs.

In 2024, Bestore released a new brand value proposition, "Natural and Healthy New Snacks", with natural and healthy new snacks represented by newly upgraded wild bamboo shoots, crispy pancakes and prunes as its main products. Bestore said that it will launch more upgraded healthy snacks in the future to continuously enhance the competitiveness of the company's products.

This is not the first time that BESTORE has transformed to survive. In 2019, BESTORE took the lead in the industry to propose a high-end snack positioning, positioning three core directions: clarifying high-quality product standards, focusing on the health and nutrition of segmented groups, and meeting the needs of consumers' life scenarios. This also made BESTORE the first snack company to take the high-end route at that time.

In 2020, Bestore achieved revenue of 7.894 billion yuan, a slight increase of 2.32% year-on-year. In 2021, Bestore achieved revenue of 9.324 billion yuan, a year-on-year increase of 18.11%. However, since 2022, Bestore has begun to go downhill, with revenue increasing by only 1.24%. In 2023, revenue fell by 14.76% year-on-year.

Some market insiders said that it is difficult for high-end snacks to become the mainstream in the snack market. Today, the main purchasing group in the snack market is mainly young people, whose overall consumption capacity tends to be more affordable and popular, and this group is also more sensitive to prices.

Faced with the downward trend in performance and the continuous homogenization of the snack industry, in 2023, Bestore also gave up the high-end slogan it had initially called out and launched large-scale price reduction measures, but this does not seem to be able to completely reverse the direction of development. It is difficult to surpass mass-market enterprises in price competition. Not to mention that even retail supermarkets have begun to deploy their own snack brands to seize this track.

"Looking at the industry, online consumer traffic has shifted, competition has intensified, various offline snack models have blossomed, and a series of new species have emerged. Looking at users, consumption has entered a rational era, people are holding their purse strings tighter, and the consumption levels of different groups of people are more differentiated and distinct. How to meet the needs of different users is also a test before us." In an internal letter released last year, Yang Yinfen, chairman and general manager of Bestore, also expressed his views on changes in demand in the snack sector.

Today, Bestore is still trying to catch up with the new "driving point". In the hot snack mass-market track, Bestore laid out Zhao Yiming snacks early, but the subsequent development was not satisfactory.

In February 2023, Guangyuan Juyi Company (hereinafter referred to as "Guangyuan Juyi"), a wholly-owned subsidiary of Bestore, invested 45 million yuan and jointly invested in Zhao Yiming Snacks with Black Ant Capital, and obtained 3% of Zhao Yiming's equity. In October 2023, the company transferred its 3% equity in Zhao Yiming Snacks at a price of approximately 105 million yuan and obtained an investment income of approximately 60 million yuan.

However, in November, just after the transaction was completed, Snacks is Busy and Zhao Yiming Snacks announced a strategic merger. The National Enterprise Credit Information Publicity System shows that Snacks is Busy and Zhao Yiming Snacks completed the industrial and commercial change registration on the day the merger was announced. Regarding this "lightning transaction", Liangpin Shop believes that "during the period of holding shares, Zhao Yiming never consulted the shareholder Liangpin Shop on the merger with Snacks is Busy", and concealed major transaction information. In November 2023, it formally filed a lawsuit against Zhao Yiming Snacks on the grounds that it deliberately concealed major company matters during the cooperation period between the two parties and damaged the right of small shareholders to know.

The case is still under trial. Although the two companies have not yet settled their feud, this move has undoubtedly directly cut off the rhythm of cooperation between Bestore and snack wholesalers on the market. From the results, Bestore has not given up on the snack wholesale track and is actively developing a new brand "Snack Wanjia" to expand its new snack chain business.

Nowadays, the snack market is changing. New mass-market companies such as Snacks is very busy, Zhao Yiming, and Haoxianglai are occupying the new market, while traditional snack companies such as Bestore, Three Squirrels, and Qiaqia Food are also constantly exploring new growth paths. Three Squirrels reiterated its 10 billion yuan goal, and Qiaqia Food has deepened its efforts in new channels... The challenges brought about by the continuous changes in the industry are always in front of Bestore. (Produced by Siwei Finance) ■

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