Net red snacks sell 5 billion a year. Why are three squirrels and good products shops in a hurry to go public?

Source: Retail Owner Internal Reference

Capital to promote listing, three squirrels and good products shop and other "net red" brand transformation road, still has a long way to go.

Core introduction:

1. Why is there a huge gap between the gross profit and net profit of the three squirrels and the good product shop?

2. What are the shortcomings and risks of the "OEM" model of "Internet-based" red snacks?

3. How should Internet Red "Tao Brand" get rid of its dependence on e-commerce?

4. Three squirrels and good products shops are eager to be listed. What changes will take place in the snack market?

Recently, there has been a wave of listing upsurge. First, Xiaomi Meituan, then Pinduoduo also reported applying for IPO in the United States. Now the three squirrel shops are all gearing up to go public.

"Retail Owner's Internal Reference" APP (WeChat ID:lslb168) noticed that if you count the herbal flavor that has been acquired by "miss you so much" before, mainstream Internet snack brands have been listed one after another. What will happen to the snack market in the future?

1. snacks "Internet" new model, why the road to listing twists and turns?

In fact, this is not the first time that the three squirrels have made a listing request. As early as March 2017, the three squirrels submitted an IPO review to the CSRC. In October of the same year, the CSRC website showed that the IPO review status of the three squirrels was changed to "suspend the review" because "the signing lawyer resigned". After that, the three squirrels offered to suspend the review.

On October 31 of the same year, the three squirrels updated the "prospectus and applied for listing again. This time, the China Securities Regulatory Commission issued a statement saying that in view of the fact that the three squirrels still have related matters that need further verification, it decided to cancel the issuance of the three squirrels. Review of application documents.

However, why does such a "net celebrity snack shop" have to join the listing boom even though it is full of twists and turns? What does it mean behind it? These can be found in the prospectus.

1. The difference between gross profit and net profit is more than 10 times, and cash flow is urgently needed to fill it.

Although they all use the "Internet" model to rapidly enhance their brand influence and rely on their own strong "Internet celebrity characteristics" to drive sales, it actually brings a huge gap between gross profit and net profit.

According to the financial report of the subsidiary of the good product shop, from 2015 to 2017, its main business income was 3.11 billion yuan, 4.23 billion yuan and 5.37 billion yuan respectively, but at the same time, its net profit for the same period was only 47 million yuan, 0.105 billion yuan and 0.118 billion yuan respectively.

Visible, in fact, the profit of good products shop is not high. From 2015 to 2017, the gross profit margin of good products shops was 32.7, 32.7 and 29.4 (related to the product line), while the net profit for the same period was only 1.5, 2.4 and 2.2 respectively.

Compared with the good product shop, the three squirrels have less operating costs for offline stores, but the overall revenue share is not much higher. According to the listing prospectus previously delivered by the three squirrels, their gross profit margins from 2015 to 2017 were 0.4 percent, 5.3 percent and 8.3 percent, respectively.


Therefore, it can be seen that the huge gap between gross profit and net profit has reflected the thinness of this "Internet" model, which also reflects the greater need to obtain greater cash flow through listing and help itself develop new models.

2. The disadvantages of the "OEM sales" model are prominent and the core competitiveness is missing.

Why does such a popular online celebrity snack shop produce such a large gap between gross profit and net profit? Where does the "disappeared" money go? The answer is sales.

In terms of selling expenses, from 2015 to 2017, the selling expenses of good products shops accounted for 22.8 percent, 22.2 percent and 19.5 percent of revenue, respectively. The sales expenses of the three squirrels accounted for 20.8 percent of revenue in 2016. The reason why sales expenses account for such a large proportion is mainly related to its business model.

Generally speaking, the three squirrels and the good products shop basically adopt the mode of "OEM sales.

Relevant data show that in 2017, the R & D investment of good products shops accounted for only 0.77 percent of revenue, and the R & D proportion of three squirrels in the first half of 2017 was only 0.24 percent. In this less than 1% of R & D investment, most of them are used for product layout or packaging design, while the investment in production is almost zero, basically using the way of cooperation with a third party.

In layman's terms, in a sense, they have already become unilateral "sellers" rather than "production distributors", which directly leads to the inability to reach the downstream production chain, so there is no excessive product pricing. The bargaining power of the company can only make its own profit by increasing the price at the cost of "purchase.

Lack of R & D strength at the same time, also led to the product homogeneity serious. The biggest difference can only be in product design or publicity, not in taste, and the diversification of products and tastes is precisely the most important for the snack industry.

Therefore, from the perspective of the entire operation process, due to the lack of core production strength and the lack of complete industrial chain integration capabilities, it can only control itself to the end of the system, which will also keep itself in a passive state and cannot be directly controlled, but also Need to bear the responsibility caused by poor control.

3. Food safety issues, or the biggest obstacle to listing

The so-called inability to directly control but need to bear the responsibility caused by poor control actually reflects the most serious problem of food safety.

According to the data, at the end of 2016, the good product shop was on the black list of the Chengdu Food and Drug Administration reporting the results of food safety supervision and sampling inspection; in February 2017, a native cashew product under the good product shop was found in Hubei Province due to excessive mold. The sampling results of the Food and Drug Administration were unqualified.

According to the prospectus of three squirrels, from July 2016 to June 2017, three squirrels were sued by seven consumers for problems such as product shelf life labels that did not meet food safety standards and products that did not meet food safety standards. the products involved include marinated lotus root, snow chrysanthemum, freeze-dried lemon slices, cream melon seeds, Hotan jun jujube, squid shreds, and so on.

After the previous three squirrels failed to submit listing prospectuses twice, industry insiders also disclosed that the biggest problem of rejection of listing is that the fundamental food safety problem has not been solved.

In the final analysis, these problems are the lack of core technology and ability of their own product research and development, the essential lack of control over the source of production, and in essence, the lack of quality supervision of existing third-party cooperative products. The issue of food safety is generally believed by the industry to be the biggest stumbling block on the road to listing, which also shows the degree of attention it needs to attract.

What are the bigger challenges 2. will face after listing?

With the development of the Internet snack industry, the product differentiation between "Tao brands" relying on the development of the Internet is becoming more and more blurred. If you want to be a trendsetter in the industry and take the lead in listing to win the favor of the capital market, the development model must be richer, brands and channels also need to be more perfect, and some core competitiveness must be established.

For the whole industry, APP (WeChat ID:lslb168) believes that there will be several development trends in the snack industry in the future.

1. Increase investment in product research and development, the top priority in the development of listing

Behind the awareness of the lack of core competitiveness, the first thing to do is to manufacture their own production lines, increase R & D investment, and produce products with their own characteristics and can show their own R & D strength, so as to form the core competitiveness of products.

Through control from the source, strict quality inspection of raw material procurement, production environment monitoring, packaging and other links, from Internet sales precipitation to on-site production and research and development, truly attract fans from food taste and safety, and build brands. This is a direction that must be developed even if the company goes public.

2. The "online and offline" two-pronged approach will become the future trend of the industry.

Obviously, the three squirrels are more dependent on the e-commerce model than the good shop, but its advantage is the huge online IP value, and the good shop relies on as many as 2064 in Hubei, Hunan, Jiangxi, Sichuan and other regions. Offline stores, of which franchisees can contribute about 1.9 billion yuan in revenue.


Although the two have their own model of strong advantages, but this is still far from enough. Under the background of today's diversified and fast-paced consumption upgrade, only a richer and diversified model can adapt to various living environments and satisfy various consumer groups.

In particular, with the gradual disappearance of Internet celebrity gimmicks and the continuous reduction of dividends, the three squirrels must get rid of their dependence on e-commerce as soon as possible in order to complete the transformation of risks. This, in fact, three squirrels can really learn more about herbs. Now with the grass flavor online and offline are beginning to increase the layout, in fact, the whole revenue situation is also improving.

On the whole, the emergence of online celebrity "Tao brand" has a certain impact and influence on traditional industries, and it is also more popular because of its high traffic and high popularity. However, in the long run, if there is a lack of complete industrial chain of traditional enterprises, the focus is more on sales, which leads to unstable foundation, which will make it lack some market competitiveness.

With the acceleration of online and offline integration, the problem of Internet snack enterprises has become increasingly prominent. The snack market is bound to be a market shared by online and offline forces. For the three squirrels and good product shops, after getting more funds from the market, they can increase the infrastructure of offline production, sales and quality inspection, so as to finally gain a firm foothold in this industry and become the real main force in the snack industry.