Offline sales of loosely packed products seems to lose competitive edges amid ballooning online community purchase
Yanjin Shop (002847) (Chinese: 盐津铺子), a popular Chinese snack producer, reported on February 27 a net profit attributable to shareholders of the listed company of CNY 150 million (USD 23.766 million), registering a year-on-year decrease of 37.89%.
Though Yinjin’s revenue rose 16.47% in 2021 from the previous year to CNY 2.282 billion, the company posted an operating profit of CNY 168 million, down 39.67% year on year, and a total profit of CNY 165 million, down 39.61% over the previous year.
The first half of 2021 saw an even worse performance, which seemed to result from excessive spending on company transformation and surging prices of raw materials. In the first half year of 2021, the company booked CNY 1.064 billion in revenue, up 12.54% from the same period of the previous year. It also recorded a net profit attributable to shareholders of the listed company of CNY 48.62 million, down 62.59% year on year.
According to the snack firm, dwindling profit was due to deployment of new retail channels in the post-pandemic era, which removed intermediaries and then decentralized. It said outlays in the third and fourth quarters of 2021 returned to a reasonable range.
The brand also wanted to develop a hit product with cost benefits through supply chain advantages. To differentiate itself, the firm said it also optimized products which customers can choose to purchase by weight and launched packaged goodies with a fixed portion..
Established in 2005, the company enlarged its product lines from preserved fruit to baked food, roasted nuts, and other ready-to-eat snacks. Since its inception, Yanjin had stuck to an offline operating model and sells products loose . The strategy of setting up conspicuous brand stalls within supermarkets contributed to a growth of 30% to 50% in same-store sales, according to Cinda Securities. As of late 2020, it had 16,000 stalls in supermarkets across China.
But the proliferation of community purchase, partly spurred by Covid-led changes in consumer habits, seemed to chip away at the snack brand’s market position. “What Yanjin needs most is to develop a popular product sold in bags that seizes consumers’ minds,” said Wen Zhihong, partner at Hejun Consulting Group.
Competitors of Yanjin have banked on better sales. Qiaqia Food (002557) (Chinese: 洽洽食品) bagged a revenue of CNY 5.985 billion (USD 945.513 million) in 2021, up 13.15% year on year. The company also posted a net profit attributable to shareholders of the listed company of CNY 930 million, registering a year-on-year growth of 15.52%.
Three Squirrels (300783) (Chinese: 三只松鼠) posted a net profit of CNY 442.25 million in the first three quarters of 2021, soaring 67% year on year. Bestore (603719) (Chinese: 良品铺子) recorded a net profit of CNY 317.59 million in the first three quarters of 2021, up 20.3% from the same period of the previous year. Weilong (Chinese: 卫龙), a snack company specializing in chilli-flavored strips of wheat flour, recorded a revenue exceeding CNY 10 billion, up 21.1% year on year.
On August 8, Yanjin Shop appointed Zhang Xiaosan, the former deputy general manager of Weilong, for the same position in the company. Later, Weilong employees joined Yanjin in droves, speeding up its hit product strategy.