Lai Yifen, born 17 years ago from a humble nut shop, has grown into a chain brand with about 2,300 sales outlets, annual sales exceeding 3.1 billion yuan, and cumulative consumption of over 450 million person-times. It is now a leader in leisure snack chain stores. Among top leisure snack food companies, Lai Yifen is the only one that has not introduced large-scale venture capital or burned money on e-commerce. Facing fierce competition, Lai Yifen insists on its own path. Curious about its development model, we interviewed President Yu Ruifen and reconstructed the path of how Lai Yifen turned a small category into a big brand over 17 years. "LYFEN" is the abbreviation of Lai Yifen and also its English logo. The letters L, Y, F, E, N represent love, youth, fun, vitality, and innovation respectively. A simple logo embodies the essence of Lai Yifen's brand culture, and the love and protection for the Lai Yifen brand left the deepest impression on us.
Different from Retail Outlets
Suppliers Are Our "Workshop Directors"
Today, with leisure snack chain stores across the country, Lai Yifen is the earliest and the focus of industry attention. When media and insiders discuss how Lai Yifen started and succeeded, Yu Ruifen cites two most direct reasons: business model and word-of-mouth benefits. Lai Yifen's business model is to sell leisure snacks through direct-operated chain stores, with no distributor links, only the most direct suppliers. Yu Ruifen introduced: "Unlike retail enterprises such as supermarkets, Lai Yifen and its suppliers share a win-win philosophy. We do not rely on entry fees or advertising fees for profit, but completely on product sales and services. We treat our suppliers as our 'workshop directors.'" In Yu Ruifen's view, everyone talks about direct procurement and direct supply, but Lai Yifen's direct procurement and supply business model started 17 years ago. "All our products come from the places of origin and the source of raw materials, connecting with the best suppliers nationwide or worldwide." Among all Lai Yifen product brands, self-owned brands account for over 98%, and over 70% of core products have exclusive production suppliers. The products produced by suppliers represent the Lai Yifen brand. Yu Ruifen introduced that to protect the brand, Lai Yifen manages strictly from three aspects. Interview and inspection, strict screening. When selecting suppliers, their character, philosophy, and values are important considerations for Lai Yifen. "The importance suppliers place on quality control system construction and cost investment directly affects our evaluation. At the same time, whether suppliers are willing to invest costs is an important judgment factor," said Yu Ruifen. Lai Yifen never takes supplier evaluation lightly. Quality control review, veto power. For supply chain quality management, Lai Yifen has a team of about 40 people, plus two third-party institutions. While inspecting products, Lai Yifen also invites third parties to supervise and complete improvement work. After suppliers meet all hard requirements, the quality control team strictly evaluates production factories according to national standards. The quality control team has veto power over whether a supplier can cooperate with Lai Yifen. Treat suppliers as workshop directors. It is rare for business owners to position suppliers as part of company management, but Yu Ruifen is one of them. "Lai Yifen has always managed suppliers as workshop directors. We have taken the lead in the industry and persisted for over 10 years, organizing excellent suppliers to visit advanced factories abroad to learn every production process. Lai Yifen needs suppliers to have an international perspective and advanced production concepts together with the enterprise," Yu Ruifen told us.
No Advertising 8 Years Ago
Brand Achieved Word-of-Mouth
The second reason is word-of-mouth benefits. "For 8 years, we never advertised. Today, the Lai Yifen brand is well-known in East China entirely through word-of-mouth among consumers," Yu Ruifen introduced. "We have insisted on quality for 17 years. If the path is right and we persist in making good products, every brand can create word-of-mouth benefits." "Making snacks that are both delicious and healthy is what we have always pursued," Yu Ruifen said, reflecting on food safety in the industry. "Our products are developed by ourselves and produced by suppliers according to Lai Yifen's standards. We complement and share resources with universities like Jiangnan University and Shanghai Ocean University. We need to be guardians of food safety, supervise each other, and persist in making good products." To satisfy consumers' desire for novelty, Lai Yifen also has raw material origins worldwide, exploring different products globally. Currently, factories in over 20 countries do OEM production directly for Lai Yifen. "Consumers' tastes are changing, and they seek novelty. We launch about 150 new products each year, with product development based on consumer tastes and quality, customizing products as needed," Yu Ruifen introduced. Currently, Lai Yifen's products are mainly divided into four categories: nuts, preserved fruits, fish products, and meat products. One category, small walnut kernels, has achieved the world's number one. By the end of last year, Lai Yifen had sold over 10 billion small walnuts.
70% of Sales from Members
Stores Upgraded to the Eighth Generation
In consumer services, specialization, differentiation, and professionalism are key factors to attract attention. The reporter learned that member management and consumption experience are Lai Yifen's unique charm. Introducing a membership system, 70% of sales from members. Lai Yifen introduced a membership system in 2011. Now, it has 12 million members, and 70% of sales come from these members. Why is member brand loyalty so high? Yu Ruifen said, "Trust is mutual. We win consumer trust with craftsmanship quality and sincere member activities." It is reported that Lai Yifen's points are equivalent to cash and can be exchanged for any product in stores. All these detailed management measures are to make consumers feel trusted. Enhancing consumption experience, store environment upgraded to the eighth generation. Consumers have higher requirements for shopping environment experience. Lai Yifen has upgraded its store environment to the eighth generation to meet the times. According to Yu Ruifen, in the latest store version, consumers can see a "transparent factory" and even source products through store TVs. "We should transparently show the production process to consumers, let them understand the story behind the products and witness Lai Yifen's strength and strict quality control, so they can buy with confidence. For this purpose, Lai Yifen will continue to create series of champion and star products, push them to the front end, and gradually let visitors gain in-depth understanding of Lai Yifen's quality management through cameras and screens," Yu Ruifen said.
Building Lai Yifen's Snack Empire
Youthful Upgrade
Now, Lai Yifen has become a leader in the leisure snack industry, but facing industry competition and consumer changes, Lai Yifen is also undergoing a youthful upgrade. The Lai Yifen logo has become more cartoonish and fashionable, and its development plan is more dynamic. In the future, Lai Yifen will develop products for segmented groups. "Among Lai Yifen's 12 million members, post-85 consumers account for about 30%, and post-90 consumers account for over 10%. So for Lai Yifen, how to continue leading post-90 and post-00 consumption is a topic to study," according to Yu Ruifen. In the future, Lai Yifen will cooperate more with variety channels and Disney to convey Lai Yifen's happy consumption concept to a greater extent and enhance consumer experience. To fully display the transparent supply chain and let consumers truly feel Lai Yifen's fully automated logistics supply process, Lai Yifen is currently building the world's first snack museum, expected to open in the first quarter of 2017, with an annual visitor flow of 200,000 person-times. Now, Lai Yifen has put its brand label on the small category of leisure snacks. Perhaps as President Yu Ruifen said, it is easy to talk about strategy, but difficult to execute. For 17 years, Lai Yifen has achieved today's results through steady progress, and we will wait and see for its future development. Face to Face
Yu Ruifen Talks About Two Major Crises for the First Time in 17 Years
As the pioneer of domestic leisure chain stores, Lai Yifen is undoubtedly a successful model today. The so-called success models are summaries of failures and challenges. Recalling the entire entrepreneurial journey, what major turning points did Lai Yifen experience? Yu Ruifen: SARS and the financial crisis were our two major turning points. In 2003, SARS swept the country, and Shanghai was one of the two most affected cities. Facing store closures and loss of consumers, Lai Yifen was inevitably affected to some extent. We calculated that with over 30 stores at the time, our cash flow could maintain operations for six months without any sales. At the same time, we found through testing that SARS affected sales by only 30%, and the closure wave caused many store rents to drop rapidly. So, in the crisis, we saw "opportunity" and decisively expanded against the trend, acquiring storefronts at low cost, roughly doubling our staff and store count, and rapidly expanding our chain scale. The financial crisis starting in 2008 was Lai Yifen's second turning point. Lai Yifen not only faced the financial crisis but also a trust crisis. Due to some false reports, Lai Yifen's food safety issues became a national public opinion topic. As a result, Lai Yifen's performance dropped by at least 40%. However, because Lai Yifen insisted on building a benign value chain and a conscience value chain, the product quality withstood repeated inspections by various testing departments, and Lai Yifen's brand reputation remained standing. In addition, the team was united. At that time, through the efforts of 10,000 employees working day and night, after six months, Lai Yifen's sales recovered to the same level as the same period. Lai Yifen also improved its management system in this baptism and grew stronger through challenges.
Our Products Are Priced Higher, and There Is a Reason
According to some consumer surveys, Lai Yifen's products are relatively expensive. Is this due to product costs? Yu Ruifen: People often say Lai Yifen's products are expensive, but there is a reason. We insist on purchasing the best raw materials and using the best processing techniques, which increases costs. For example, sugar can reduce costs, and salt can reduce costs, but we are committed to providing healthy products, so we insist on developing and producing low-sugar, low-salt, or even additive-free products. Therefore, costs rise accordingly, leading to higher prices. You mentioned that Lai Yifen attaches great importance to food safety. How does the company ensure quality control? Yu Ruifen: Lai Yifen attaches great importance to food safety and has added a double defense line. Now, after each batch of products leaves the factory, in addition to the supplier providing inspection reports, Lai Yifen also seals the warehouse for 48 hours for physical, chemical, and sensory inspections. Only after passing these inspections will products be sent to stores. So our products are not directly sent from the factory to the store. Lai Yifen has recently invested in building a very leading CNAS (China National Accreditation Service for Conformity Assessment) certified laboratory. Once certified, Lai Yifen's certification reports will be recognized by the state and society.
Why Didn't E-commerce Achieve First Place?
The e-commerce competition in the leisure snack industry is fierce. How does Lai Yifen view the development of e-commerce? Yu Ruifen: China's total retail sales are 327.4 trillion yuan, and e-commerce food sales account for only 10.8%. Currently, we rank fifth in e-commerce. Why didn't we achieve first place? For brand protection, Lai Yifen emphasizes steady development and has not easily introduced large-scale venture capital. Compared with other similar enterprises, Lai Yifen actually has more room for e-commerce development. In the future, after consolidating the foundation, we will accelerate the development of e-commerce. For more children's food and beverage hit products, click "Read Original" to go to Nanjing on June 6 to meet industry experts and shop for good products. See you there! ↓↓↓