---
title: "Qiaqia and Weilong Both Need a 'New Story'"
description: "In today's rapidly changing business environment, the ability of companies to sustain growth and successfully transform is increasingly important. For consumer goods companies, finding a reliable 'second growth curve' in saturated markets with intensifying competition has become a key proposition determining their future. However, discovering a second growth curve is as challenging as starting a new business, and even industry leaders like Qiaqia and Weilong face this dilemma."
author: "关注消费品的"
publisher: "New Distribution"
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published: "2024-01-25"
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# Qiaqia and Weilong Both Need a 'New Story'

> In today's rapidly changing business environment, the ability of companies to sustain growth and successfully transform is increasingly important. For consumer goods companies, finding a reliable 'second growth curve' in saturated markets with intensifying competition has become a key proposition determining their future. However, discovering a second growth curve is as challenging as starting a new business, and even industry leaders like Qiaqia and Weilong face this dilemma.

In today's rapidly changing business environment, the ability of companies to sustain growth and successfully transform is increasingly important. Especially for companies in the consumer goods sector, how to find a reliable 'second growth curve' in a market that is becoming saturated and competition is intensifying, to drive a new round of business expansion and value enhancement, and to ensure the company's ability to grow sustainably, has become a key proposition determining the future fate of the enterprise. However, discovering a second growth curve is as challenging as starting a new business, and even several companies that have long held leading positions in the market with impressive performance cannot guarantee that they can timely and effectively explore a new growth path suitable for themselves. But such problems are genuinely affecting many companies. Taking the food industry as an example, Qiaqia and Weilong, the absolute leaders in their respective sub-sectors, are both facing the same dilemma.

Among them, Qiaqia, over the past two decades, has gradually become a leader in the domestic snack food market thanks to its deeply rooted sunflower seed products, supply chain construction, and daily consumer education. However, facing an industry that has reached its ceiling, an increasingly saturated market environment, and consumers' upgraded demand for healthy and diverse products, Qiaqia is faced with the problem of how to break through the inherent category limitations while maintaining its original business advantages, achieve new business expansion, and drive continuous improvement in overall performance. Weilong, although not having as long a history as Qiaqia, after enjoying the huge dividends from the hot strip (latiao) hit product, has gradually fallen into a death spiral of price increases and volume declines. Despite continuous increases in product unit prices, consumers' willingness to buy and actual sales have declined simultaneously. How to launch new products to save the main latiao business has also become a major challenge that Weilong urgently needs to address.

So, what bottlenecks have Qiaqia and Weilong encountered in their 'home turf' businesses? Have they found their own second growth curves? And what insights can they offer to companies about to enter the same situation?

**Qiaqia: What to Do When Fewer People Are Eating Sunflower Seeds and Nuts?**

As a leading company in the sunflower seed industry, Qiaqia's fragrant sunflower seeds have established a deeply rooted product image over more than two decades of development. However, on the next page of this success story, there are slowing growth, lukewarm market reactions to new products, and investor skepticism about the effectiveness of its diversification strategy. In 2023, Qiaqia officially faced these challenges: the main business, after years of steady growth, was hit hard by unexpected events, and the second growth curve gradually became difficult, directly falling into the awkward situation of 'difficult to defend sunflower seeds, and nuts not standing out.'

The 2023 semi-annual report showed that Qiaqia's revenue in the first half of the year increased slightly by 0.28% year-on-year, but net profit plummeted by 23.8%. After such an unattractive financial report was released, capital market investors immediately voted with their feet, and Qiaqia's stock hit the daily limit down on the second day of trading. In the third-quarter report released in November, Qiaqia's performance did not improve much. The report showed that in the first three quarters, the company achieved total operating revenue of 4.478 billion yuan, with a revenue growth rate of only 2.16%, compared to the lowest growth rate of nearly 10% in previous years, which can be considered a 'Waterloo' in performance.

Image source: Qipai Pai Drawing

It is worth mentioning that in 2020, Qiaqia Food founder and chairman Chen Xianbao set a strategic goal of 'reaching 100 billion' for the company, requiring the company to achieve total revenue including tax of over 10 billion yuan by 2023. But now, Qiaqia's performance in the first three quarters of this year has not reached half of the set goal, and according to the current trend, it will not be able to achieve the original goal in the next five or even ten years. The reasons for the extreme pressure on performance are closely related to the slowdown of Qiaqia's sunflower seed main business and the entry of the nut second growth curve into a red ocean competition period.

Regarding the sunflower seed main business, at the semi-annual performance briefing held before the National Day holiday, investors raised a series of 'soul-searching questions' about the sluggish performance in the first half of the year, including profit margins falling to historical lows, weak new products, and continuous stock price declines. In response, Qiaqia management gave the most frequent explanation: the increase in the cost of the main raw material, sunflower seeds. Specifically, Qiaqia's sunflower seed products revenue decreased by 2.38% year-on-year to 1.8 billion yuan, while operating costs increased by 8.25% year-on-year to 1.366 billion yuan. The significant cost increase led to a 7.46 percentage point decline in gross margin compared to the same period last year, marking the first time in ten years that the gross margin for sunflower seed products fell below 30%, and it became the main reason for Qiaqia's net profit collapse.

Image source: Qipai Pai Drawing

But as an oligarch in the sunflower seed industry, doesn't Qiaqia have the awareness to expand upstream to control costs? In fact, that's not the case. In the past few years, Qiaqia has repeatedly mentioned its investment in upstream production bases, and both ordinary investors and brokerage sellers often tout Qiaqia's strong control over the upstream as one of its biggest selling points. But why is the moat carefully built by the company so fragile? In response, Qiaqia Food explained that apart from its own production bases, procurement through the order agriculture model accounts for 50% of the company's sunflower seed purchases. However, due to continuous increases in upstream land rent and labor costs, and the impact of adverse weather leading to reduced sunflower seed production, the price of sunflower seed raw materials has risen. At the same time, the surge in export demand for sunflower seeds has also impacted the domestic market. Qiaqia also stated that currently, sunflower seed sales have increased rapidly, and the planting area has grown significantly, but whether this can be transmitted to raw material purchase prices and how much of a decrease is still uncertain. This response also made the market give up its 'fantasy' about Qiaqia's supply chain, clearly recognizing that the advantage Qiaqia has always emphasized is only the role of balanced procurement in stabilizing prices, and it cannot completely eliminate risks.

Stepping outside the event, if the sharp increase in sunflower seed costs this year is a sudden problem, then the 'unsellable' products are a long-term hidden danger for Qiaqia. According to data from Zhiyan Consulting, in recent years, the growth trend of China's sunflower seed production and demand has slowed down; in 2022, China's sunflower seed production was approximately 4.9617 million tons, a year-on-year increase of 1.8%; demand was approximately 4.7477 million tons, a year-on-year increase of 3.4%. Compared to the high growth rates of the past decade, it has entered a mature period of slow growth or even no growth. This is especially true for the oligarch Qiaqia. Qiaqia has tried two completely different paths: raising prices to go high-end and launching new products to penetrate lower-tier markets. But the high-end market for sunflower seeds is too small, and the lower-tier market faces huge resistance due to the low production threshold for sunflower seeds. Qiaqia, which wants to rely on sunflower seeds for a second spring, has gradually turned its attention to other tracks. The second growth curve Qiaqia chose is nuts, which are very similar to sunflower seeds and also in the snack food track.

In 2015, Qiaqia Food founder Chen Xianbao set a new growth tone for the company, establishing the brand strategy of 'based on sunflower seeds, focusing on nuts,' and in 2016 launched the 'Little Yellow Bag Daily Nuts,' officially entering the nut market. In the years after entering, Qiaqia's nuts business advanced rapidly, and with the help of the daily nuts hit product, it broke through the encirclement. From 2016 to 2020, Qiaqia Food's nut product revenue increased from 108 million yuan to 950 million yuan, with a compound annual growth rate of 72.22%, far higher than the company's 10.77% revenue compound growth rate during the same period. The revenue share of nuts once approached a quarter of total revenue. However, as the volume increased, the initial high-speed growth was gradually broken by fierce competition. Taking the semi-annual report data of the past five years as an example, the profit growth rate quickly declined from a maximum of 42% to 6.14% in the second half of 2023, and the revenue growth rate fell to 1.59% compared to the same period last year, meaning the good days for the nut business are gone.

Image source: Qipai Pai Drawing

Investigating the reasons, the deterioration of the market environment and the inadequacy of the company's sales channel construction are the main reasons for the obstruction of Qiaqia's nut business.

From a market perspective, the nut industry has gradually entered a mature period. From 2013 to 2018, the retail revenue CAGR of the nut and roasted seed industry was 11%, and the market space roughly doubled in five years. However, after entering 2020, due to the slowdown in economic growth and weak consumption, sales volume dropped significantly. In 2022, the market size of China's tree nut industry also fell into a decline for the first time.

Image source: Qipai Pai Drawing

On the other side of the slowing market size growth is more intense competition. As an industry with strong homogeneity, low entry barriers, numerous players, and extremely fragmented market, nut merchants must compress their profits extremely to avoid being abandoned by the market. According to a survey by the Prospective Industry Research Institute, the current competitive landscape of China's nut (tree nut) industry is relatively fragmented. In 2022, Three Squirrels ranked first with a market share of 4.68%, Baicaowei ranked second with 2.97%, Wolong Food ranked third with 2.34%, Qiaqia Food ranked fourth with 2.31%, and Liangpin Puzi ranked fifth with 2.15%. Such market shares mean that unless Qiaqia can make disruptive innovations in the nut category, it will continue to struggle in this red ocean.

In addition to intensified market competition, the sales resources Qiaqia can allocate to the nut product line are also stretched thin. In the early stages of nut product development, Qiaqia shared the sales channels of sunflower seed products with nuts, which indeed promoted sales. However, with the development of internet technology and changes in consumer shopping habits, traditional offline sales channels such as supermarkets and convenience stores have gradually shown limitations in coverage, service hours, and meeting personalized needs. They also cannot fully reach and activate a broader target consumer group, especially the younger generation, who are the core consumers of nuts. This naturally puts Qiaqia at a disadvantage compared to snack manufacturers like Three Squirrels that rely on the internet to rise.

**Under the influence of various factors, Qiaqia Food's idea of developing nut products into its second growth engine may also become a pipe dream.** As a company that once relied on vertical segmentation to win the top spot in the sunflower seed industry and made daily nuts popular with market acumen, Qiaqia Food is clearly not ready for the arrival of the stock competition market. But this is not necessarily a bad thing. I hope Qiaqia Food can find its true 'second growth curve' through continuous innovation and product optimization and become an evergreen enterprise.

**Weilong: Trapped in the Death Spiral of Price Increases and Volume Declines for Latiao**

If the sunflower seed oligarch Qiaqia exposed its risk exposure under the influence of unexpected events, then the dilemma faced by Weilong, the leader in the latiao industry, is even more severe. **Unlike Qiaqia, whose net profit decline was caused by cost fluctuations, Weilong's latiao is facing the awkward situation where consumers cannot afford or are unwilling to buy.** Among them, consumers cannot afford it because the price of Weilong latiao has been rising like sesame flowers blooming. From the data, according to the company's financial reports, Weilong's main seasoned flour products (latiao), vegetable products, and soy products and other products have undergone significant price increases in the past few years. Compared with 2019, the latest unit prices have increased by 45%, 24%, and 84% on average, and in the first half of 2023, the unit price increase for seasoned flour products reached 27%, which was jokingly said to have outperformed the 10%-20% increase of LV popular bags.

Data source: Shijie Image source: Qipai Pai Drawing

Such price increases naturally do not please consumers. Zhao Ming, who likes spicy snacks, said that when he was still on campus, Weilong was his favorite product, and a few years ago when he just started working, he could 'arbitrarily' buy Weilong latiao without worrying about the price. But now, the same packaging of Weilong products has increased in price without increasing quantity, and the cost performance is really not high. Some new flavors of latiao even play the role of 'snack刺客' (snack assassin), which is indeed hard to bear.

**The core reason why Weilong chose to raise prices continuously is related to the decline in Weilong's sales.** According to financial reports, in 2022, Weilong's revenue from seasoned flour products decreased by 6.8% from 2.918 billion yuan in 2021 to 2.719 billion yuan, and sales volume also decreased from 193,600 tons in 2021 by 43,000 tons to 150,600 tons. To offset the impact of sales decline caused by relatively high prices, Weilong had to continue raising prices. From January to April 2022, Weilong issued two product price adjustment notices. The past price increases were generally to improve the company's profitability. But this method of increasing total revenue by raising unit prices is like drinking poison to quench thirst, dragging Weilong into a death spiral of price increases and volume declines. If Weilong only wants to make the financial reports look good in the short term of three to five years, it can continue this approach. But don't forget, consumers just want safe, delicious, and affordable snacks. In addition to the declining cost performance, Weilong's increasingly sweet taste has also been criticized, even being called 'non-spicy sweet strips,' and those customers who came because of the spiciness are gradually losing. At this time, other brands that see business opportunities quickly follow up, with Mala Wangzi, also from Pingjiang, Hunan, the hometown of latiao, being the most typical. Unlike Weilong's sweet and spicy taste, Mala Wangzi adheres to the original spicy flavor and has a very affordable price, 'taking in' a large number of consumers who were discouraged by Weilong due to cost performance and taste. It also timely launched creative marketing strategies and became a rising star in the spicy snack industry.

After Mala Wangzi became popular, Weilong naturally did not want to hand over its backyard to others, so it chose to quickly follow up and in September 2023 launched a new sub-brand - Badao Panda. This brand no longer uses the sweet and spicy style but is more inclined to the Bashu flavor, clearly intending to compete with Mala Wangzi in the real latiao track. **But is launching such a sub-brand really a wise choice?** From the perspective of cost performance, the unit price of Weilong's refined large gluten latiao has already exceeded the price of pork, and the price of Badao Panda is even more incomprehensible. A combination pack of 36 small packs sells for nearly 32 yuan, equivalent to 27.7 yuan per 500 grams. How can such 'high-end' latiao win back those consumers who were lost due to high prices? From the perspective of brand positioning, the 'spicy' 'latiao' market is too small, not worth Weilong launching a dedicated brand to target. Just like the sunflower seed oligarch Qiaqia, it would not launch a sub-brand because of Jinge's strength in the multi-flavor sunflower seed category. From the perspective of corporate development, Weilong launching three or five more latiao sub-brands cannot fundamentally change the dilemma of price increases leading to sales declines, leading to further price increases and sales declines. Instead, it should seek more new growth and increments outside the latiao track. Looking at Weilong's product matrix, apart from latiao, the only product that can compete is konjac snacks, but this product has already been mastered by major brands in the market and has no moat at all.

**It can be said that compared to Qiaqia, which is still searching without results, Weilong's more frightening aspect is that it seems not to recognize the bottleneck of the latiao business itself, and instead is fighting fiercely with 'little kid' brands in the arena. If it truly hits the industry ceiling, Weilong, which may not have time to turn around, might pay a more painful price.**

**In Conclusion**

Qiaqia and Weilong, two companies that once led in their respective segments, have sounded an alarm for other consumer goods companies when facing industry bottlenecks and market changes. Qiaqia Food, under the pressure of sluggish growth in its sunflower seed main business, despite achieving short-term high growth through daily nuts, has seen its second growth curve show signs of fatigue as the market saturates and costs rise. Qiaqia must re-examine its supply chain management and product innovation capabilities, find new business breakthrough points, or make disruptive upgrades to its existing product lines to meet changing market demands and consumption habits. On the other hand, Weilong, as the leader in the latiao industry, has also fallen into an awkward negative cycle of price and sales. Over-reliance on the price increase strategy for the single latiao product has led to a decline in consumer purchase intention, coupled with the rise of competitors in the market and changes in taste preferences, making Weilong face unprecedented challenges. Weilong urgently needs to return to the essence of the product, pay attention to consumers' actual needs, and at the same time 'be prepared for danger in times of peace,' broaden its product line, explore more potential growth points, and avoid putting all eggs in one basket. The stories of these two companies remind us again that no matter how brilliant past achievements are, only by continuous innovation, adapting to the market environment, and effectively managing risks can companies continue to move forward in fierce market competition.

In the future business world, whether it is Qiaqia or Weilong, or more companies facing similar transformation challenges, they all need to bravely step out of their comfort zones, explore new business models and product innovation paths, to remain vibrant and achieve sustainable development in the rapidly changing market environment.

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This conference will focus on the theme of **'Supply Chain Revolution'**. Over 3 days, there will be one main forum, one China FMCG Hard Discount Conference, one China FMCG Distributor Conference, more than ten sub-forums and closed-door exchange meetings, and the first-ever [Extreme Supply Chain] Brand Factory Direct Procurement Fair. It will bring together thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country to meet in Chengdu for continuous brainstorming, discussing the challenges and opportunities, changes and solutions in the era of supply chain revolution.

In this era of supply chain revolution, a new business era will be born. I hope every participant will still have a place in this wave, and I believe this will be a conference worth attending!

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