On November 30th, Liangpin Store (SH603719, share price of 19.38 yuan/share, market value of 7.8 billion yuan) announced the largest price reduction for the first time in 17 years. The average price of more than 300 products sold in the store was reduced by 22%, with the highest drop of 45%, mainly focusing on snacks with cost optimization but high repurchase rate.
It seems no coincidence that Yang Yinfen, the new chairman and general manager of the company, has only been in office for three days. In a short period of time, good shops have successively announced "coaching change" and "price reduction".
A few days ago, Yang Yinfen bluntly said in an open letter to all the staff: "At present, what is before us is not only the problem of living hard, but the problem of living or not."
This year, the leisure snack industry is surging, and the discount snack industry is gaining momentum. Recently, two big discount snack head enterprises, Busy Snacks and Zhao Yiming Snacks, announced their merger. The industry believes that the price reduction of this good shop has a certain relationship with the forced force of discount snack enterprises.
Yang Yinfen Data Map Image Source: Every reporter Chen Qingshe
"Facing the most difficult challenge since starting a business"
Just taking up the post of new chairman and general manager, Yang Yinfen made a big move.
The price reduction of good shops is mainly aimed at offline stores. Among them, nuts such as macadamia nuts, pine nuts, pistachios and cashews, meat snacks such as pork jerky, duck neck and roasted sausage, spicy strips, dried beans, bread cakes and melon seeds with high repurchase rate are the main force to reduce prices.
For a long time, good shops have adhered to the positioning of high-end snacks. Why is the price reduction announced now? Shen Meng, director of chansons Capital, said in an interview with national business daily that the reason for the price reduction may lie in the adjustment of consumption structure and the downward movement of consumer demand, forcing enterprises to respond to market changes by reducing prices, otherwise they may lose their share.
Zhu Danpeng, a food industry analyst in China, also believes that the leisure snacks in China have entered the parity cycle due to the macro-economic environment and the lack of confidence of consumers, and this strategic adjustment of good shops is timely.
On November 29th, Yang Yinfen sent an open letter to all employees. According to an open letter obtained by the reporter of national business daily, Yang Yinfen analyzed three reasons for the price reduction:
In terms of industry, online consumption flow has shifted, competition has intensified, various offline snack modes have blossomed in an all-round way, and a series of "new species" have emerged;
On the user side, consumption has entered a rational era. In addition, the letter wrote: "The real problem that consumers think we are’ expensive’ also shows that the price of our products must be more close to the people."
On its own, the company has developed for 17 years, with bloated institutions and overstaffed people, and bureaucracy and departmentalism have emerged. Externally, the development is sluggish, and the scale and profitability are declining.
"Earth-shaking changes are taking place inside and outside. Family, what reason do we have to remain unchanged? " Yang Yinfen bluntly said in an open letter.
Yang Yinfen also said: "I said in August this year that the 17-year-old good product is facing the most difficult challenge since it started its business. At present, this challenge is still intensifying. If we want to break through the encirclement, good products must’ fade’ to be old and reborn like a soaring eagle. "
In fact, the current performance of good shops has fallen into a bottleneck. In the first three quarters of this year, good shops realized operating income of 5.999 billion yuan, a year-on-year decrease of 14.33%; The net profit of returning to the mother was 191 million yuan, a year-on-year decrease of 33.43%.
Image source: every data map
"and discount snacks are different development paths."
For the food industry, product quality and safety is the lifeline of enterprises.
After the price reduction, will the product quality of the good shop also change? Yang Yinfen said in an open letter: The company must adhere to the development route of high-quality snacks, but the company should think about "quality" from the perspective of consumers.
"We are taking a differentiated road, which is essentially a different development path from discount snacks." He said.
In this regard, Shen Meng believes that, generally speaking, the cost of enterprise price reduction is partly to compress its own profit space, partly to optimize its own cost structure, and a considerable part is to squeeze the profits of suppliers.
At present, the fast-moving discount snack enterprises have relatively low sales prices at product terminals, and the very important reason is to establish purchasing advantages in the supply chain. Then, what is the difference between the current strategy of good shops and the discount snack enterprises? Where will their "cutting costs" start?
National business daily reporter noted that the leisure and snack industry is not a high gross profit margin industry. According to the 2022 annual report of Liangpin Store, the gross profit margin of the company’s main business is 27.67%.
According to good shops, the space for price reduction comes from measures such as improving supply chain efficiency, improving lean production, optimizing operating costs and introducing gross profit red line. "Cut" into the enterprise to cover the needs of more consumers.
Yang Yinfen said that good shops and discount snacks are two completely different species. Good shops adhere to the logic of channel plus products, and establish a long supply chain that traces the origin of raw materials. The company has to design packaging, research and development, and formulate product quality standards, which is determined by the company’s self-operated model.
Therefore, the two have formed a completely different price logic, and the methods of "squeezing water" from the supply chain are also different. For good shops, "squeezing water" is not an extreme squeeze on suppliers, but through lean management in cost control, production efficiency and commercial efficiency, so that every supplier in the industrial chain becomes a participant, contributor and beneficiary of reducing costs and increasing efficiency.
Image source: every data map
Will a new round of "price war" come?
The price reduction of good shops has become the "headline news" of today’s leisure snack industry. What impact will this have on the industry?
The reporter of national business daily noticed that another big news of the leisure snack industry in November was that the snacks of the head discount snack enterprises were very busy and merged with those of Zhao Yiming.
With regard to the above merger, Founder Securities once analyzed that there was a price war trend in the discount snack industry before, and the accelerated integration of head brands is conducive to shaping a benign industry competition pattern. It is difficult for head brands to defeat each other by virtue of price wars, and the price war may slow down.
Discount snack products have always been known for their high cost performance. Now, with the price reduction of good shops, will the price advantage of discount snacks be weakened, and will the industry structure also undergo new changes?
Not only discount snack enterprises, but also the reaction of other leading leisure snack enterprises has also received attention.
According to media reports, Baicaowei said that there is no similar price reduction action at present.
According to another report, Three Squirrels (SZ300783, share price of 18.82 yuan, market value of 7.547 billion yuan) said that the company has been implementing the strategy of "high-end cost performance" for a long time this year, improving quality and reducing prices through supply chain integration and strengthening internal management, and keeping the terminal price at a benign level under the premise of ensuring basic profits, which will continue to advance in the future.
Image source: every data map
Previous reports show that the three squirrels have already implemented the strategy of "high-end cost performance". Talking about the future of the snack industry, the company mentioned "delicious is not expensive" in its recent reply. "The snack industry has broad development space and opportunities, and the consumption demand of delicious is not expensive, which has promoted the great change of the global supply and demand relationship."
Shen Meng analyzed that the price reduction of higher-priced enterprises will squeeze the space of lower-priced enterprises, forcing lower-priced enterprises to maintain consumers by reducing prices. The temporary competitive advantage formed by price reduction will bring pressure to other homogeneous competing products. If other brands lack sufficient differentiation, they must follow up the price reduction.
Zhu Danpeng also believes that with the decline in the price of head brands, the whole industry may be affected, and everyone may compete to reduce costs and increase efficiency in the future. He said that as for how to better achieve cost reduction optimization, suggestions can be achieved through the optimization of supply chain and the improvement of store operation efficiency.
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