The market value has shrunk by 26 billion, and the overall price has been reduced. Good shops have set off a ＂price war＂ for snacks？

The first good shop of "high-end snacks" finally bowed to reality.

On November 29th, Yang Yinfen, the helm of Liangpin Store, issued an open letter to all internal staff, announcing the start of comprehensive price reduction.

In the open letter, Yang Yinfen explicitly mentioned that the average price reduction of more than 300 sharp goods and explosive products was 22%, with the highest drop of 45%, focusing on snacks with cost optimization without affecting quality and high repurchase rate; And this will also be the largest price reduction since the establishment of the good shop for 17 years.

As a representative of high-end snacks, the product image of the good shop has always been "high price and high quality".

However, as people’s consumption concept becomes more rational, and more and more cheap snacks rise, people have increasingly disapproved of high-end snacks. Judging from the performance data, the revenue of good shops has declined for five consecutive quarters, and the revenue in the first three quarters of this year has dropped by 14.33%, which shows that high-end snacks are really getting harder and harder to sell.

From the current point of view, the choice of comprehensive price reduction by good shops is undoubtedly in line with the current development trend of the snack industry, but also to save the declining revenue. However, will this affect the corporate positioning of "high-end snacks" in good shops? How effective can a good shop achieve this large-scale price reduction promotion?

"brandishing a knife" to cut prices greatly

In January 2019, Liangpin Store officially adopted "high-end snacks" as its corporate strategy and brand strategy.

In order to successfully create a corporate image of "high-end snacks", good shops have spared no effort in marketing. From 2019 to 2022, the marketing expenses of good shops reached 1.581 billion, 1.288 billion, 1.672 billion and 1.756 billion respectively, and the total marketing expenses in four years reached 6.297 billion.

After the high-end transformation, the performance of good shops has also rebounded briefly. In 2018, the revenue and net profit of good shops were 6.378 billion and 238.5 million respectively, and the growth rates of revenue and net profit were 17.56% and 520.68% respectively. We must know that in 2017, the net profit of good shops also fell by 61.16%.

However, high-end is not the long-term development trend of the snack industry after all, but popularization and high cost performance. In the past two years, snack shops with high cost performance have become a new development trend in the snack industry. According to the data of China National Business Information Center, snack shops occupy about 10% of the snack market in 2022. Last year alone, they sold 6.4 billion retail sales of "snacks are busy", which is close to the annual operating income of three squirrels and qiaqia food.

Under this trend, the brand image of "high-end snacks" has become a shackle that restricts the development of good shops. In terms of performance, the revenue of good shops has declined for five consecutive quarters. In the first three quarters of this year, the revenue and net profit of good shops were 5.999 billion and 191.3 million, down by 14.33% and 33.43% respectively.

In desperation, good shops have to follow the industry trend to start big price cuts. On November 29th, Yang Yinfen, the newly appointed chairman and general manager of Liangpin Store, issued an open letter entitled "Crossing the Economic Cycle with Consumers, Good Family and Partners" to the employees of the company. In the open letter, Yang Yinfen explicitly mentioned that the average price reduction of more than 300 sharp goods and explosive products was 22%, with the highest drop of 45%, focusing on snacks with cost optimization without affecting quality and high repurchase rate.

For this big price cut, the good shop is actually a "desperate". Judging from the profit rate data, the gross profit rate of good shops in the first three quarters of this year was 28.54%, and the net profit rate was only 3.18%. After the sharp price reduction, the profit rate data of good shops is likely to further decline. From the stock price point of view, investors are not too enthusiastic about the big price reduction of good shops. On November 30, the stock price of good shops fell slightly by 0.77%.

Can you turn the tide?

At present, with the intensification of competition in the industry, the situation of good shops is really not optimistic.

In addition to the decline in revenue mentioned above, the market share of good shops is actually getting smaller. According to the data of Euromonitor and China Merchants Securities, the market share of good shops is only 1.6% in 2022. With the emergence of more and more new competitors in the snack industry, the position of good shops in the industry has been challenged.

From the stock price point of view, the stock price of good shops has also continued to decline in the past two years. As of the close of December 1st, the share price of Liangpin Store closed at 21.32 yuan/share. Compared with the highest point of 86.52 yuan/share in July 2020, the share price of Liangpin Store has dropped by more than 70% and its market value has evaporated by 26 billion yuan.

As Yang Yinfen mentioned in the open letter, "Behind a series of changes, there is only one core purpose: to return to the image of a good shop next door and move towards the route of good quality and close price. No change, we really may lose our qualification at the poker table. " For this large-scale price reduction, Yang Yinfen obviously has high hopes, but what needs to be considered is-how big is the effect of this price reduction? Can it really help good shops turn the tide?

In fact, after the overall price reduction, good shops face more challenges. First of all, after the price reduction, the good shop has actually cut into the more competitive cheap snack market. In addition to the popular snack collection shops, three squirrel, Yanjin shop and other snack giants are also in this price range. For the brand that once only focused on high-end snacks, it is obviously not so easy to compete with these snack giants.

Secondly, after the overall price reduction, good shops also need to adjust their own business strategies, whether to continue to retain the brand image of high-end snacks is a question worth thinking about. As mentioned in the above, as of the third quarter of this year, the gross profit margin of good shops was 28.54%, and the net profit rate was only 3.18%. If you choose to reduce the price, it will definitely have an impact on the profit rate data. If you want to ensure that the profit does not decline, you must adjust other expenses, especially marketing expenses.

Finally, there is how to ensure the quality of products. After announcing the overall price reduction, Yang Yinfen repeatedly stressed internally that the price should "go down" and the quality should "not go down". Good shops will never be low-quality and low-price, but adhere to the high-quality route and return to the initial heart of "the quality of conscience, everyone’s shop". However, good shops do not build their own factories, so how to ensure the quality does not decline after the price reduction is also a big challenge for good shops.

For good shops, it will certainly bring good changes to choose a comprehensive price reduction instead of just paying attention to the high-end snack market. However, in order to reverse the current business situation, price reduction is only the first step, and there are obviously many things that good shops have to do.