The Zhitong Finance App learned that Huachuang Securities released a research report stating that in recent years, opportunities for a new round of channel transformation on the retail side have surged. First, cost-effective consumption has surged. The mass sales industry has developed rapidly by providing extremely cost-effective products with high turnover/high discounts; second, online traffic is shifting, and e-commerce continues to diversify traditional shelf e-commerce traffic. Casual snack companies have fully benefited from the dividends of this round of channel transformation, and the results of the reform have gradually been realized on the reporting side. As channel transformation entered the 2.0 stage in '24, reducing costs and increasing efficiency in the supply chain is the key for snack companies to win.

Recommended targets: Yanjin Store (002847.SZ), Ganyuan Food (002991.SZ), and Qiaqia Food (002557.SZ), which is leading in supply chain construction.

The main views of Huacheng Securities are as follows:

The transformation of snack channels continues unabated, and brand companies are taking advantage of the momentum

In recent years, opportunities for a new round of channel transformation on the retail side have surged. One is the rise of cost-effective consumption, and the mass sales industry is developing rapidly by providing extremely cost-effective products with high turnover/high discounts; second, online traffic is shifting, and Dokuai Live e-commerce continues to diversify traditional shelf e-commerce traffic and achieve rapid growth. Casual snack companies have fully benefited from the dividends of this round of channel transformation, and the results of the reform have gradually been realized on the reporting side.

Currently, channel transformation has entered the 2.0 stage. The integration of North-South competition between mass sales channels and continuous rapid store expansion, and the snack food category continues to grow in Doukuai e-commerce. Both will continue to support the growth of snack companies' performance. Huachuang Securities believes that production enterprises represented by Yanjin Shop/Ganyuan Food/Qiaqia Food have the advantage of controllable supply chain costs and scale effects, and are expected to rise to the next level in the stage of channel transformation and innovation.

Snack mass sales: competition integration, continuous and rapid store expansion

The snack mass sales industry has experienced rapid growth in 23 years, and the number of stores nationwide has exceeded 20,000. Phase 1.0 of the review: The year 23 was a competition stage for regional leaders. The ultimate single-store model, sufficient capital reserves, and regional supply chain strengthening were the core competitive elements; at the end of '23, industry mergers and integration, and the “South is very busy/North Wanchen” pattern was initially determined.

Outlook 2.0 phase: 24 is the leading national competition stage. Looking at the industry space, Huachuang Securities estimates that the total number of stores in the southern region will cover the total number of people, and the long-term space of the country can reach 60,000 stores; judging from competitive factors, efficiency is king at this stage, and full-link management and operation capability is the key competitiveness; in terms of upstream supply, brand snack merchants will continue to enjoy the dividends of channel 2.0 changes in the three aspects of improving efficiency/increasing the number of product stores entering the SKU stage.

Doukuai e-commerce: the snack category is growing rapidly, seeking balance between scale and profit

Live e-commerce continues to diversify traditional shelf e-commerce traffic. According to Ai Media data, the live e-commerce market reached 2.4 trillion yuan in '23, a year-on-year growth rate of about 66%, and the casual snack category has increased sales potential in live e-commerce channels.

Phase 1.0 of the review: Snack companies build a celebrity livestream+brand self-broadcast matrix to optimize product specifications and increase discounts to promote rapid launch in the snack category. However, intense price wars on live e-commerce channels combined with high investment costs make it difficult for medium- and low-margin brands to make profits in the short term.

Looking ahead to phase 2.0: The snack food category is expected to continue the trend of increasing volume in the live e-commerce channel. In the short term, the channel is still growing, and the profit level is relatively low. Snack companies will find a balance between channel size and profit; in the medium to long term, as competition stabilizes and scale effects are reflected, the profit level of snack companies on this channel is expected to slowly increase.

Snack companies: reducing costs and increasing efficiency in the supply chain is the key, leading multi-category high-turnover production enterprises

Compared with OEM channel enterprises, production enterprises with R&D and manufacturing capabilities have self-built supply chains, controllable costs, and scale effects; multi-category enterprises have multi-category/multi-specification advantages over single-category companies that account for more than 60% of single-category revenue, and can rapidly expand channel sales share and have more space by increasing the number of SKUs entered; high turnover is another core competitiveness of production enterprises. Huachuang Securities believes that multi-category high-turnover production enterprises have outstanding advantages in this round of channel transformation. Channel enterprises are also actively transforming. The reform extends from the supply chain side to the channel side, giving priority to upgrading the supply chain to enhance control.

Risk warning: Macroeconomic growth falls short of expectations, industry competition intensifies, food safety risks.