BESTORE is making innovations to get rid of homogenization dilemma


BESTORE, the snacks brand who has just submitted the IPO application, took another move. On August 27, before its coming 12th anniversary, BESTORE released a new VI image and announced the specific steps of its internationalization strategy.


Yang Hongchun, the founder and chairman of BESTORE, said in an interview with 21st Century Business Herald that the company would enter the brand management stage, which was an inevitable choice to get rid of industry dilemma such as homogeneous competition and price war.


Following LYFEN, YANJINPUZI and Three Squirrels, on June 29 this year, BESTORE also entered the capital market. According to its prospectus, BESTORE intends to publicly issue no more than 41 million shares, raising RMB 773 million yuan, which will be used for multiple projects such as the construction of omni-channel marketing networks, construction of warehousing and logistics systems, digital upgrade of information systems and transformation and upgrading of the food R&D center and testing center.


Although the domestic snacks industry has entered the fast track of development in recent years, a series of problems have also emerged, such as product homogenization and price war. "Although the consumer side is constantly forcing the industry to innovate and upgrade, and many companies are trying to do so, but overall they are still difficult to get out of product homogenization." said Zhu Danpeng, an analyst of China food industry. He believes that BESTORE's leading upgrading in the snacks industry may lead to a loss of some consumers in the short term, but in the long run, the direction and trend are right.


Making multi-dimensional improvements to get rid of homogenization


Under the trend of snacks "becoming the fourth meal", leisure food has become the fastest-growing business segment in the food and beverage industry. According to Yiou Intelligence data, the market size of leisure food in 2017 was RMB 634.2 billion yuan, with a compound growth rate of 10.3% compared with 2016, and it is expected to reach one trillion RMB level in 2020.


Judging from the sales scale, BESTORE's sales currently ranks first in the snacks industry, followed by Three Squirrels, LYFEN, Be & Cherry and YANJINPUZI. But in Yang Hongchun's view, competition in the industry has just begun. "Because this is a trillion-RMB market but no company now occupies more than 10% of its share, so the industry is still in the early stage of competition." he said.


According to its prospectus, from 2015 to 2017, BESTORE's revenue was RMB 3.149 billion yuan, RMB 4.289 billion yuan and RMB 5.424 billion yuan respectively, with a net profit of RMB 45.358 million yuan, RMB 98.955 million yuan and RMB 113 million yuan. However, the company's gross profit margin has been declining year by year. The gross profit margins of the main business in 2015, 2016 and 2017 were 32.93%, 32.88% and 29.52% respectively.


Last year, the gross profits of HAOXIANGNI (002582.SZ), LYFEN (603777.SH) and YANJINPUZI (002847.SZ) all declined, which were 29.3%, 43.87% and 46.86% respectively, reducing by 5.43%, 1.5% and 2.25% compared with 2016. The underlying reasons cannot be unrelated to the low threshold of the leisure food industry, a large number of companies, serious homogenization of products and fierce competition.


Taking charcoal-grilled cashew nuts as an example, basically, all major food brands are selling this product. The reporter found on the Tmall platform that for every 100 grams of charcoal-grilled cashew nuts, the price of Three Squirrels' promotion pack is around RMB 16 yuan, Be & Cherry between RMB 13 yuan and 20 yuan, BESTORE RMB 12.5 yuan, and Sampleman, Enjoyynature, Weinihao and other brands between RMB 7 yuan and 11 yuan.


Yang Hongchun believes that it is a systemic problem to overcome homogenization and form differentiation. Innovation must not only be geared towards the source (i.e., consumers), but also the manufacturing side and the supplier's production plant. " In addition, innovation will also come out of the realization of large-scale agriculture, as well as the improvement of several factors and lean management of the industrial end, so that overall improvement will be achieved."


In Zhu Danpeng's view, to get rid of product homogenization, the key to make a breakthrough is the ability of integrated marketing and the barrier of producing area. "We can start from the upstream. For example, Chilean cherries, if there are three major distributors who get all sales channels to China, then they will have the right to speak and can form the barrier of producing area." Zhu Danpon judged that, the barrier of producing area would become the key to the leisure food industry in the future.


Since 2016, BESTORE has started its cooperation with Zhangzidao Group (002069.SZ) to develop a production line of seafood snacks. In the past two years, the two sides have furthered their cooperation, from squids to abalones, shrimps, clams, scallops and other seafood categories, which not only allows BESTORE to be distinguished from other brands in terms of category, but also increases its unit price.


Paving the way for international development


After nearly 12 years of development, BESTORE has formed more than 1,000 product portfolios, covering meat snacks, roasted seeds and nuts, confectioneries, dried fruits, vegetarian delicacies and so on, and its SKU is the most among snack food brands. The number of product categories of Be & Cherry is about 1,000, and the SKU of LYFEN and Three Squirrels is 700 and 300 respectively.


With the increasingly high demands for living quality, brand image and the like of young consumer groups, as well as rapidly updated consumption concepts, BESTORE is forced to make innovations and upgrades.


For the reasons behind the upgrading, BESTORE believes that there are three main points: "First, as BESTORE continues to expand its scale, the business direction will also be constantly extended; second, enterprises are facing new pressure of market competition; third, the traditional VI looks relatively old-fashioned.”


It is known that the most notable change in the brand upgrade of BESTORE is that the cartoon image "BESTORE Sister" on the Logo has been replaced by a variant of the Chinese character "良" which looks like an engraved stamp. In addition, the main color is changed from orange to the more eye-catching bright red, forming a contrast color with the dark blue background; the lower part of a left-falling stroke and a right-falling stroke of the character "良" in "良品铺子(BESTORE)" has also been removed, echoing with the font in the Logo.


At the same time, the paper shopping bags in BESTORE's offline stores also begin to be replaced. In addition to the new logo, there is also a “√”-like pattern on the new shopping bag. “We have developed a detailed and complete plan, and these upgrades will be applied in the store decoration, advertising, signboards, product models, office supplies, clothing, packaging systems, displays, printed publications, etc.” said Duan Wen, brand director of BESTORE.


According to Duan Wen, in the past two years, many internationally renowned brands have coincided with each other in advocating minimalism in their updates. For example, Starbucks removed the words outside the mermaid, CK changed the lowercase letters to uppercase letters, and Audi flattened the "four circles" originally with metallic texture. "After the VI upgrade, BESTORE's brand image looks younger, more fashionable and more distinct, which will trigger more recognition in the hearts of consumers." said he.


Meanwhile, the new VI image is also meant to pave the way for international development of the company. In April this year, BESTORE launched its overseas layout, and up to now, it has brought more than 100 kinds of delicious snacks into 20 countries such as the United States, Australia, Britain and France. It is known that small parcels within 30 kilograms can be delivered directly to consumers through the cross-border logistics system from cross-border e-commerce platforms such as Tmall, and Amazon; in addition, in some countries, BESTORE entrusts overseas distributors to expand business channels such as convenience stores and Chinese supermarkets.