At the end of last year, BESTORE, a leading brand in the high-end snack market, caused a huge shock in the consumer industry, and its unexpectedly large price reduction strategy became the most eye-catching hot topic at the time.
In recent years, the three squirrels of the "No. 1 Internet Snack Stock" and the "No. 1 High-end Snack Stock" BESTORE have encountered a series of severe challenges, including a significant decline in performance, dilution of profits and continuous stock price**. Since 2019, the revenue of Three Squirrels has shown a continuous trend, and at the end of last year, BESTORE, which is facing an existential crisis, announced the first large-scale price reduction in the 17 years since its establishment. At the same time, Laiyifen, the "first stock of leisure snacks", was not spared, and also fell into a growth dilemma. These leaders in the snack industry are experiencing unprecedented market challenges.
However, will BESTORE's price reduction strategy really curb the risk of declining performance? This problem has to be analyzed from multiple aspects.
It's not that price reductions are useless, but that white label replacement is more cost-effective
In 2023, BESTORE seems to be in an unprecedented predicament. Once known as the "snack brother", it is now facing the test of life and death. So, what is the reason for this?
Judging from the financial data, in the first three quarters of 2023, BESTORE's total revenue and net profit attributable to the parent company have both declined sharply, especially in the third quarter, the net profit attributable to the parent company decreased by as much as 98% year-on-year, which undoubtedly casts a thick shadow on the company's prospects.
First of all, the stall of the e-commerce channel is one of the important reasons why BESTORE is in trouble. Since last year, BESTORE's online revenue has shown signs of weakness, and in 2023, this trend has not only not been reversed, but has intensified. However, the lack of e-commerce is not a problem unique to BESTORE, and the three squirrels who rely more on online channels are also having a hard time. With the end of the e-commerce bonus period and the slowdown in traffic growth, these snack brands with e-commerce as the main battlefield have undoubtedly been greatly impacted.
On the other hand, with the increasing transparency of information on the Internet, BESTORE's "high-end" image has also been challenged. More and more consumers are beginning to realize that the so-called high-end snacks are actually just "factory OEM goods". In this case, they are more inclined to look directly for "homologous factories" to buy cheaper products. This trend is especially evident on social media, for example, the number of notes on Xiaohongshu about "snack substitution", "snack homology" and "snack business" exceeded 4,500 in just 90 days. Well-known brands such as BESTORE and Three Squirrels have become frequent customers who have been "replaced".
In addition, in terms of the first channel, BESTORE is also facing fierce competition from mass-selling snack stores. These emerging brands quickly grabbed market share with lower** and more extensive store layouts. According to the data of Narrow Door Restaurant, Zhao Yiming, who started in 2019, will open 1,441 stores in 2023 alone, almost three times as many as BESTORE. Although the quality of these mass-market snack stores has been controversial, it has undoubtedly brought great pressure to traditional snack brands such as BESTORE.
Although the executives of BESTORE have emphasized the differences and different positioning with the mass merchandiser snack store in interviews, these "differences" do not seem to avoid a head-to-head confrontation between the two. In a recent exclusive interview with FBIF, Yang Yinfen also admitted that the current predicament of BESTORE is closely related to "the siege of mass snack stores in the industry". In the face of such a severe market environment, it remains to be seen whether BESTORE can find a breakthrough and successfully break through.
There are no winners in the snack industry
The snack industry, which was once a glorious market field, is now standing at the crossroads of change, as if it is a microcosm of an era, reflecting the various dilemmas and challenges faced by the traditional industry in the changing times. After the epidemic, the consumer market began to gradually recover, which undoubtedly brought a ray of life to the snack industry, and at the same time gave birth to unprecedented development opportunities. However, this opportunity is not easy to grasp, because in this era of change, every link of the industry is full of variables, and any link can become the starting point of disruption.
The traditional snack market has entered the stage of stock competition, the competition for market share is extremely fierce, and the phenomenon of involution is becoming increasingly serious. The three snack giants, BESTORE, Laiyifen and Three Squirrels, as the leaders of the industry, are also difficult to escape the storm of competition. The revenue and net profit of BESTORE and Laiyifen both declined, which undoubtedly brought huge operating pressure to these two companies. Although the three squirrels have increased in profits, their revenues have stagnated, which also exposes the company's difficulties in market expansion.
Delving into the reasons behind these predicaments, we can find that the decrease in online revenue and the increase in fixed costs are the main reasons for the decline in BESTORE's net profit. During the epidemic, online sales became the main sales channel of the snack industry, but with the gradual control of the epidemic, consumers' consumption habits began to change, and the growth momentum of online sales began to slow down, which undoubtedly brought a huge impact to BESTORE that relied on online sales.
At the same time, the increase in fixed costs has further increased the operating pressure of BESTORE. Yifen has been hit by the double blow of a sharp contraction in business and a decline in online sales revenue. **Business used to be a big income for Laiyifen**, but with the intensification of market competition and the change of consumer consumption concepts, the income of **business began to decrease significantly. At the same time, the decline in online sales revenue has also seriously affected Laiyifen's revenue.
However, the dilemma faced by these three snack manufacturers is far more than that. With the rise of new channels such as community**, mass merchandising and live streaming, the traditional snack sales model has been hit like never before. These emerging channels have attracted a large number of consumers with lower**, more convenient ways to buy and richer product choices, so that the market share of the traditional snack sales model is constantly being eroded. In this era of change, the future of the snack industry is full of uncertainty. There doesn't seem to be a real winner who can laugh at it. Because in this era of change, any link can be the starting point of disruption.
BESTORE has a long way to go
At present, several major giants in China's leisure snack field are represented by BESTORE, most of which rely on OEM production, so the overall innovation, upgrading and iterative advantages have not yet been fully demonstrated. In this situation, the plight of the snack food giant is almost doomed. With the change in the competitive landscape of the market, the early high-marketing investment strategy has lost its effectiveness, and these snack food giants have not yet built enough competitive barriers.
Especially when the quality control of snack food giants frequently has problems, consumers are beginning to realize that these high-end snack brands are actually relying on foundries. As a result, the high-end snack strategy of storytelling and marketing in the past no longer works. "Nowadays, consumers are more interested in affordability, and they buy whichever brand has more discounts. A consumer admitted.
Although casual snacks are a trillion-level huge market, with high consumption frequency and wide coverage of people, BESTORE, an old snack company, has encountered a bottleneck on this track. At the same time, some new directions are emerging on the casual snack track. For example, snack stores are expanding their market downwards through multi-category aggregation and low-price strategies, while brands such as Panda Momo and Xue Kee Roasted Foods are moving up the market through products with short shelf life, freshness and high unit value. These emerging brands are favored by capital.
If the snack food giants still stick to the old business model and only carry out some superficial explorations without making fundamental breakthroughs from the factory end and the first chain end, then their market share will only gradually shrink. Taking BESTORE as an example, although it has been trying to explore ways to grow, the net profit in the financial report has continued to decline. This is because its exploration is too scattered and lacks focus, and it does not really focus on a core pain point to carry out reform and innovation.
Perhaps it's time for the "radical" BESTORE to slow down and think deeply. Only by finding your true positioning and business model can you be invincible in this highly competitive market.