The popularity of the snack track is also driving leisure snack brand 002847.SZ back to rapid growth.

On August 2, Yanjin store released its semi-annual report for 2023, with revenue of 1.894 billion yuan during the reporting period, an increase of 56.54% over the same period last year, and a net profit of 246 million yuan, an increase of 90.69% over the same period last year.

Compared with the previously announced results forecast, Yanjin store's performance in the first half of the year slightly exceeded expectations. The day after the results were released, Yanjin stores closed down 3.31% at 81.99 yuan per share.

Yanjin store, which has been criticized by the outside world for its single channel and missed e-commerce dividend, is experiencing changes in channel structure.

The most important change is to continuously reduce the proportion of direct KA channels and increase the proportion of distribution channels and e-commerce channels. In the first half of this year, the revenue contributed by distribution channels and e-commerce channels increased by 58.04% and 155.17% respectively compared with the same period last year.

One of the important driving forces to promote the growth of distribution channels is the active expansion of snack chain stores.

The trend of Yanjin stores' offline channels to "drop straight to promote generation" means that it is increasingly relying on the rapidly expanding snack store chain channel.

The extremely scattered competition pattern of snack brands determines that Yanjin stores, which have been transformed into upstream suppliers, may lose part of their bargaining power and bury hidden worries at the profit end.

High performance under three rounds of incentives

Compared with the negative growth of peer three squirrels (300783.SZ) and quality shops (603719.SH) in the first quarter of this year, Yanjin stores walked out of a steep growth curve under three rounds of equity incentives.

From 2020 to 2022, the revenue growth of Yanjin stores was 39.99%, 16.47% and 26.83%, respectively.

The background for achieving this achievement is that Yanjin issued three rounds of equity incentive plans in 2019, 2021 and 2023 respectively. If the agreed performance of the three rounds of incentives is completed, a total of 9.9367 million shares will be awarded, with a market value of more than 800 million yuan.

At present, the first round of equity incentive of Yanjin store has been completed. The assessment target of the second round of incentive scheme is that the growth rate of revenue and deducted non-net profit from 2021 to 2023 is not less than 28%, 38%, 66% and 42%, 31%, 101%, respectively.

The third round of equity incentive assessment requirements are based on 2022, with revenue growth of no less than 25%, 56% and 95% from 2023 to 2025.

According to the semi-annual report report just handed over by Yanjin store, the revenue growth rate of 56.54% and the deducted non-net profit growth rate of 103.47% enabled it to achieve its equity incentive target for the first half of the year.

Split up, Yanjin store realized revenue of 1.001 billion yuan in the second quarter, an increase of 57.59% over the same period last year, and net profit of 134 million yuan, an increase of 98.91% over the same period last year.

On the other hand, three squirrels and quality stores fell into negative growth in the first quarter of this year, down 34.48% and 18.94% respectively from the same period last year.

Yanjin store to achieve high performance benefits from the channel adjustment action, it is slowly "decoupling" direct KA business super.

In the first half of this year, Yanjin store dealers contributed 192 million yuan in revenue from super channels, down to 10.15%, compared with 32.18% in 2020.

Instead of giving up the traditional KA channel, Yanjin gave the job to the dealer. As of the first half of this year, Yanjin stores directly operated 1365 KA stores of 28 large chain stores, compared with 2148 KA stores of 49 large chain stores in the same period last year. It marked in the financial report that "some supermarkets and stores have been transferred to be operated by dealers."

Distribution channels including chain supermarkets and convenience stores such as busy snacks are the main source of revenue for Yanjin shops. It contributed 1.311 billion yuan to it during the reporting period, accounting for 69.21%.

The e-commerce channel had the highest growth rate during the reporting period, with an increase of 155.17% to 391 million yuan over the same period last year. According to the Guojin Securities Research report, the monthly sales of Yanjin stores climbed to 80 million yuan during the reporting period with the help of Douyin and community group buying.

The distribution channel accounts for nearly 70% of the channel structure, so that Yanjin stores no longer have to worry about the efficiency of the direct KA channel "Nakajima", but also save the entry cost of KA. The net interest rate improved significantly, from 6.77% in 2021 to 13.36% in the middle of this year.

And due to the reduction in the proportion of direct operations, the inventory turnover efficiency of Yanjin stores has also been greatly improved, with the number of inventory turnover days reduced from 105.25 days in 2020 to 67.9 days in 2022.

Take advantage of chain retailers

While the channel changes, it also lays hidden worries for Yanjin shop.

Although the entrance fee of KA channel is high, the gross profit is also higher than that of other channels. Consumers who buy snacks offline have the characteristics of immediacy and are relatively insensitive to the price. Yanjin shop directly engaged in KA business channel share reduction process, but also the decline of Yanjin shop gross profit margin process.

From 2017 to 2022, its gross margin gradually fell from 46.8 per cent to 34.7 per cent, compared with 35.3 per cent in the first half of this year. But it is still higher than three squirrels and boutiques, both of which had a gross profit margin of around 25% last year.

Trade wind (ID:TradeWind01) repeatedly called Yanjin store to ask about channel planning and gross margin expectations, but could not get through.

On the other hand, with the increase in the number of stores, Yanjin stores rely more and more on downstream chain brands, which may lead to the dilution of their brand value and become the supplier role of snack chains. The scattered competition pattern of the upstream leisure snack industry determines that Yanjin shops may not have a say in cooperation.

A food and beverage analyst at an AMC brokerage in Beijing told ID:TradeWind01 that channels will be the core competitiveness of leisure snack tracks. He describes the impact of the expansion of offline chains on snack brands "like online channels in previous years because the competition in the snack industry is' bad'".

Looking around, Yanjin shops, which do not want to pay admission fees to merchants, may also pay to chain stores in the future. In the first half of this year, snacks were busy announcing that the number of stores exceeded 3000, while Zhao Yiming and Youming, the other two chain customers of Yanjin stores, each exceeded 2000 stores.

By the end of 2022, snacks have become the largest customer of Yanjin store. In 2022, the former contributed 7.31% of its sales, almost equal to the sum of 2-5 customers such as Walmart Inc and Bubugao.

There are precedents for brands to open their own stores, but the current situation is not optimistic. In 2016, three squirrels who wanted to pay less for communication fees on e-commerce platforms began a "store expansion campaign" with little success. In 2020, the growth rate of its stores was as high as 170%, but the growth rate of revenue was only 67%, coupled with the sharp impact of the epidemic on offline formats.

In 2022, a total of 549 offline stores of the three squirrels were closed, and only 45 new ones were opened. Offline stores in Shanghai, Chongqing and other areas were completely closed, with only 23 remaining at the end of the reporting period.

The chairman of Yanjin store has publicly said that he wants to build "Huawei of the snack world". This means that 95% of Yanjin's products are self-developed and self-produced, which is different from other brands generally choosing ODM OEM.

But Huawei will not give up offline terminal channels. It translates the successful experience of the smartphone market to the field of new energy vehicles, not only because of its excellent research and development capabilities, but also because Huawei has more than 5500 authorized experience stores to achieve high coverage channel network that can be reused and better able to sell cars.