Knockout of the new lo-mei market

Text: Xinzhi Business Observation

The competition for lo-mei is intensifying.

At the same time, a large number of new forces of lo-mei are pouring in, not only with a variety of brand choices, but also with a sharp increase in categories, and the market competition is extremely fierce.

The market is ushering in a new reshuffle.

01

As soon as the day dawned, Xiao Li delivered his blessings in the store's WeChat group on time: "Dear friends, a new day has begun, and today is a good day to eat meat~"

Since the opening of her lo-mei shop, Xiao Li has posted similar words in the group every day.

In April this year, Xiao Li, under the influence of a friend, joined a new lo-mei brand. After paying a franchise fee, the other party provided the support of the store's location selection, decoration, and opening promotions, and Xiao Li's store opened smoothly.

At the beginning of the store, due to the strong promotion efforts and the novelty of the residents in the surrounding communities, the daily turnover of Xiaoli store was basically three or four thousand yuan, and at most more than five thousand yuan.

However, before the excitement lasted for two months, Xiao Li noticed that the turnover in the store began to drop significantly.

With the decline in turnover, Xiao Li also found a fatal problem, that is, the operating costs of the store are too high - first, Xiao Li's store is located in Chaoyang District, Beijing, every inch of land is expensive, and the monthly rent of the store alone is nearly 20,000 yuan, and secondly, the labor cost in Beijing is high, and two clerks need to be paid 12,000 yuan a month.

In other words, this store does nothing, and the monthly fixed expenditure is 32,000 yuan.

At the same time, the profit of marinated products is not as high as Xiao Li imagined - the marinated products distributed from the factory are sold to customers after simple processing in the store, and the purchase cost, transportation cost, water and electricity costs of the store, and the daily loss of dishes that cannot be sold are combined together, and the number is also difficult to ignore.

The daily turnover must reach a minimum of 2,000 yuan, so that the store will not operate at a loss, such a figure makes Xiao Li suddenly realize how impulsive his decision to open a lo-mei shop was.

In order to save labor costs, Xiao Li could only give up Saturdays and Sundays and weekends to replace the clerk to look at the store.

Rao is like this, and all kinds of changes still make the turnover of Xiao Li's store continue to decline. Lo mei is a business that is very affected by the weather, when it is hot, customers are reluctant to eat, and when it is cold, people are not willing to go out. In the just-ended November, after Xiao Li deducted miscellaneous operating costs, he found that the net profit of the store this month was less than 400 yuan.

Recently, it has snowed heavily in Beijing, and the people are reluctant to go out, let alone come to buy braised products, Xiao Li's lo-mei shop has a daily turnover of only seven or eight hundred, which is purely operating at a loss.

In an interview, Xiao Li was not even sure whether his lo-mei shop would be able to open until next year's Spring Festival.

02

Marinated products are not an easy business to do, not only for ordinary franchisees like Xiao Li, but also for the entire marinated meat industry.

Public data shows that the profitability of the lo-mei industry is declining - this is related to the fact that the profit level of the lo-mei industry is too affected by the upstream, Guolian Securities research report shows that the upstream livestock and poultry meat, soy products, vegetables and other raw material procurement accounts for about 80% of the operating costs of the marinated products company.

Lo mei has a history of more than 2,000 years in the mainland, spanning the north and south, the industrial chain is all over the country, and there are characteristic representatives of lo mei food in various places - this is the advantage of the lo mei industry, but also a disadvantage, its advantage is that the public acceptance of lo mei is high, the market is large, even if it is a new brand, it is easy to break into the market, and has its own place.

The disadvantage is that this has led to a low ceiling for the development of lo-mei brands.

Lo-mei is generally divided into two categories in residents' homes, one is accompaniment, which is commonly known as "accompaniment lo-mei" in the industry, and the other is used as a snack food, that is, "leisure lo-mei", the most typical of which is the duck neck.

Among them, the industry concentration of lo-mei is quite low, which is mainly due to the vast territory of the mainland, the regional characteristics of lo-mei are very obvious, and the different preferences of consumers around the country also make it difficult for lo-mei enterprises to choose.

The only thing that can really break the geographical restrictions of consumers is leisure lo-mei, which is also the fundamental reason why juewei food, Zhou Heiya, Huang Shanghuang and other lo-mei industry giants have taken root in leisure lo-mei. At the same time, due to the low threshold of the lo-mei industry, there are still a large number of "newcomers" who come in to share the cake - public data shows that as of now, there are more than 180,000 lo-mei-related enterprises in the mainland.

Among them, the main enterprises involved in the upstream of the food industry include Honghui Fruits and Vegetables, New Hope, Wen's Shares, Muyuan Shares, Zhangzidao, Tianma Technology, Dahu Shares, Chenguang Biotechnology, etc.; the main enterprises in the midstream include Zhouheiya, Juewei Food, Huangshanghuang, Ziyan Food, Lu Jiangnan, Lu Sanguo, etc.; and the downstream sales channels mainly include all kinds of supermarkets and chain stores of marinated food production enterprises.

The threshold is low, the industrial chain is huge, and there are many competitors, resulting in a low concentration of the entire lo-mei industry. Even the three giants in the industry have a share of no more than 20% in the entire lo-mei industry.

This has also led to a spectacle in the lo-mei industry, that is, the market size is getting wider and wider, but the development status of lo-mei companies is showing a downturn that does not match it - in 2022, due to the rise in duck prices, the net profit of the three giants of lo-mei has declined sharply, among them, Zhou Heiya has recorded the largest annual net profit of 92.62%.

Consumers complain that the price of lo-mei is getting more and more expensive, but the profits of lo-mei companies are declining instead of increasing.

In fact, many lo-mei companies belong to the state of "the main business is not satisfactory, and the side business is not settled", even the industry's No. 1 Juewei food has not escaped this strange circle.

Over the years, Juewei Food has been investing in the field of catering consumption, with frequent foreign investment activities, but it has failed to generate a net inflow of funds. According to the data, the net cash flow generated by Juewei's investment activities was -526 million yuan, -871 million yuan, -799 million yuan, -932 million yuan, -1.058 billion yuan and -1.026 billion yuan respectively, which was not only negative, but also the difference between outflow and inflow was getting larger and larger.

The more money was burned, but the light of day never came.

03

For lo-mei brands, expanding their stores is the best way for them to open up the market.

For example, Juewei Food, one of the "Big Three", was established in 2005 and has 9,000 stores by 2017. Then, Juewei was successfully listed, and with the help of capital, Juewei Food maintained a record of opening more than 1,000 stores per year, and expanded 6,000 stores in 5 years from 2017 to 2022.

With the support of a huge offline store network, Juewei Food's performance and stock price have also soared, and its market value once exceeded 60 billion in February 2021.

As of the end of 2022, the total number of stores in Zhou Heiya is 3,429, and Zhou Heiya expects the total number of stores to reach about 4,500 in 2023, and the goal of 100 cities, 1,000 counties and 10,000 stores will be achieved in the next 5 years. At the end of 2022, the number of stores was 3,925, and it plans to open 2,000 new stores in 2023, and plans to exceed 10,000 stores by 2026.

As of now, the number of its national chain stores has exceeded 6,100, second only to Juewei Duck Neck, surpassing Zhou Heiya and Huang Shanghuang.

Other lo-mei brands also adopt the "store expansion" method, and quickly expand their market share by opening a large number of stores in a short period of time. This method can not only quickly open up awareness and increase exposure for the brand, but also the distribution of a large number of stores can also facilitate consumers' access to the product and improve convenience.

In order to attract investors to join, many lo-mei brands will send a "franchise gift package", from store location selection to decoration, from the store's surveillance cameras to the large lo-mei display cabinet, there will be a team to provide reference opinions. At the same time, in order to improve the attractiveness, each lo-mei brand will generally compress the franchise fee, and the lower the popularity of the brand, the lower the franchise fee.

Taking Beijing as an example, the cost of opening a lo-mei shop is about 200,000 yuan, including the rent of the store (which generally starts in half a year), and there is no upper limit.

However, the expansion of stores eventually led to the rapid saturation of the lo-mei market, and the competitive pressure was too great, and the life span of lo-mei stores was not long. In fact, Huang Shanghuang, who is also one of the "Big Three", has already given his own answer to the question of "closing the store".

In 2020, the number of Huangshanghuang stores once reached 4,627, which became its highlight moment. However, due to the repeated impact of the epidemic, Huangshanghuang began a "wave of store closures", and in 2021, the number of its stores shrank to 4,281, and in 2022, it once dropped to 3,925.

Although Huang Shanghuang shouted to open 2,000 stores in 2023, judging from the data released in the first half of the year, I am afraid that the situation is not optimistic - in the first half of 2023, Huang Shanghuang has 4,213 stores, of which 600 new stores are opened and 312 stores are closed, with an average of 1.7 stores closed every day.

As of October 30, the investor relations record table shows that in the first three quarters, Huangshanghuang actually expanded 1,004 stores, and 404 new stores were opened in the third quarter.

Judging from the performance in 2023, Juewei Food achieved revenue of 5.631 billion yuan in the first three quarters, a year-on-year increase of 9.99%; Although Zhou Heiya has not yet announced its third-quarter results, from its semi-annual report, Zhou Heiya has achieved revenue of 1.4 billion yuan in the first half of the year, up 19.79% year-on-year, with little pressure, while Huang Shanghuang's main revenue in the first three quarters was 1.581 billion yuan, a year-on-year decrease of 2.29%.

At the same time, Ziyan Food achieved operating income of about 2.816 billion yuan in the first three quarters, a year-on-year increase of 2.68%.

On the track of lo-mei, Huang Shanghuang is losing ground, not only the number of stores has been surpassed by Ziyan Baiwei Chicken, but even the revenue is facing downward pressure and falling behind.

In such a situation, the traditional lo-mei triumvirate is only afraid that there is a danger of reshuffling and reshuffling.

04

Under the predicament, lo-mei companies are also seeking a way out.

As the expansion of offline stores becomes more and more difficult, many lo-mei brands have already shifted their attention to online, and live streaming has become the first choice for enterprises. It is worth mentioning that the first to seize the live broadcast e-commerce outlet was not the three giants of lo-mei, but the new lo-mei brand Wang Xiaolu, which sold more than 700 million a year.

The main reason why Wang Xiaolu was able to stand out is that it made up for the blank area on the lo-mei line and seized the market in time.

With the explosion of Wang Xiaolu, since 2023, major lo-mei brands have increased their investment online.

As of June 30, 2023, the company's online channel revenue was 214 million yuan, accounting for 15.2% of the total revenue. Juewei has also increased its investment in live streaming and held a number of activities on Douyin.

However, as the live streaming gradually builds its peak, how much dividends the lo-mei industry can still get needs to be verified by time.