---
title: "Six Reductions in Two Years: What's Wrong with Bestore?"
description: "Bestore has been reduced again. Recently, Bestore was significantly reduced by Capital Today, an early institutional investor that had accompanied it for over a decade, pushing the snack giant into the spotlight. Besides Capital Today, Hillhouse Capital has also made multiple clearance reductions over the past two years. Frequent selling by investors has raised concerns about Bestore's growth prospects. Indeed, apart from investors leaving, Bestore's performance has not improved for years. According to financial reports, Bestore's revenue in 2022 was 9.44 billion yuan, a year-on-year increase of 1.24%."
author: "向真"
publisher: "New Distribution"
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published: "2023-06-03"
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# Six Reductions in Two Years: What's Wrong with Bestore?

> Bestore has been reduced again. Recently, Bestore was significantly reduced by Capital Today, an early institutional investor that had accompanied it for over a decade, pushing the snack giant into the spotlight. Besides Capital Today, Hillhouse Capital has also made multiple clearance reductions over the past two years. Frequent selling by investors has raised concerns about Bestore's growth prospects. Indeed, apart from investors leaving, Bestore's performance has not improved for years. According to financial reports, Bestore's revenue in 2022 was 9.44 billion yuan, a year-on-year increase of 1.24%.

Bestore has been reduced again. Recently, Bestore was significantly reduced by Capital Today, an early institutional investor that had accompanied it for over a decade, pushing this snack giant into the spotlight again. Not only Capital Today, but over the past two years, Bestore has also been subject to multiple clearance reductions by Hillhouse Capital. Frequent selling by investors has raised concerns and doubts about Bestore's growth prospects. Indeed, besides investors leaving, Bestore's performance has not improved for years. According to financial reports, Bestore's revenue in 2022 was 9.44 billion yuan, a year-on-year increase of 1.24%. Although Bestore's revenue still maintains positive growth, the growth rate has continued to slow, hitting an eight-year low in 2022, with revenue growth hitting a bottleneck. In terms of net profit attributable to the parent, it recorded 335 million yuan in 2022, a year-on-year increase of 19.16%. Although this figure is significantly higher than the previous year, most of the profit came from government subsidies, and after deducting subsidies, it only increased slightly. Bestore's total operating revenue and year-on-year growth from 2015 to 2022, source: Wind. In the past few years, Bestore has made many attempts to maintain capital confidence. On one hand, while laying out offline channels, it also saw the dividends of online channels and tried a strategy of exchanging marketing for growth. On the other hand, amidst the encirclement of industry players, Bestore has been "grasping both ends" of the high-end market and the lower-tier market. It launched high-end brands such as "Xiaoshixian" and "Liangpin Feiyang," attempting to use more vertically positioned sub-brands with higher customer unit prices to increase profit margins. On the other hand, Bestore also launched a chain snack store brand "Lingshi Wanjia" targeting the lower-tier market, entering the snack bulk retail track, one of the few hot tracks in the food industry, attempting to exchange scale for growth. However, from the performance results, these layout actions have not been lasting or effective, and Bestore still lacks a strong cash cow business. From 2020 to 2021, Bestore experienced "increasing revenue without increasing profit" for two consecutive years, with net profit continuously declining. Although it rebounded in 2022, compared to the aggressive store expansion and capital investment, profit growth still fell short of expectations. Through these diverse new attempts, it is not difficult to see Bestore's anxiety in seeking new growth engines. Investors are no longer willing to accompany. Capital Today, which has accompanied Bestore for 13 years, chose to leave. On May 17, Bestore announced that Dayong Co., Ltd. planned to reduce its shareholding by no more than 24.06 million shares, or no more than 6% of the company's total share capital, through centralized bidding or block trading. Before this reduction, Dayong Limited held as much as 30.30% of the shares, making it the largest external shareholder of Bestore. Behind Dayong Co., Ltd. is Capital Today. In 2010, Capital Today invested in Bestore and became an early shareholder, then transferred the shares to Dayong Co., Ltd., holding Bestore shares through Dayong Limited. With this reduction, Capital Today may cash out up to 700 million yuan. It is worth noting that Xu Xin, the helm of Capital Today, known as the "Queen of Venture Capital," has invested in well-known brands such as Wahaha and Yifeng Pharmacy, and is known for her keen sense of consumer capture in the primary market. Over the past decade, Capital Today's steadfast companionship with Bestore has been considered an important basis for its optimism about Bestore's growth prospects. This significant reduction and cash-out by Capital Today directly reflects the change in investor sentiment. Investment institutions that are not optimistic about Bestore are not only Capital Today. Since March 2021, Bestore has been subject to clearance reductions by Hillhouse Capital four times, with the latter cashing out a total of approximately 987 million yuan, and its shareholding ratio has dropped to 5%. Looking back to 2017, Hillhouse Capital was also optimistic about Bestore, investing twice within three months that year, injecting a total of approximately 821 million yuan. But six years later, Bestore has not become the "high-growth consumer company" Hillhouse expected, nor has it brought considerable returns. If calculated based on Bestore's market value at the time of writing (11.529 billion yuan), Hillhouse Capital still holds Bestore shares worth 576 million yuan. Adding the 987 million yuan previously cashed out, Hillhouse Capital's initial investment of 821 million yuan over six years has only returned 1.563 billion yuan. This means its annualized return rate is only 11.33%. In the primary market, which pursues tenfold or hundredfold returns, this return rate is not impressive, but the reason Hillhouse Capital is eager to clear out may be that Bestore can hardly bring better returns to Hillhouse. Major shareholder reductions since Bestore's listing, data source: Bestore financial reports, compiled by Lianxian Insight. Not only external investment institutions are leaving, but also the other entity planning to reduce its stake in May this year - Hanliang Qihao, Hanlin Zhihao, Hanning Beihao, and Hanliang Jiahao - are all employee shareholding platforms of Bestore. These shares used to incentivize core employees before listing just passed the 36-month lock-up period at the end of March this year. Once unlocked, they were sold off in large quantities, reflecting internal employees' concerns about Bestore's development prospects. At the same time, the secondary market has also expressed a negative trend. Bestore's stock price has continued to decline and hit bottom. Although net profit rebounded in 2022, the capital market is not buying it. As of the time of writing, Bestore's stock price has fallen by two-thirds compared to the high point after its listing in 2020. Both the primary and secondary markets have expressed doubts about the sustainability of Bestore's growth through actions, which is closely related to its development model over the past years. Channel layout swings, reliance on marketing expansion: Bestore's "pain" of development. Unlike other snack players, Bestore, founded in 2006, started offline. After the first store opened in Wuhan in 2006, the store-centric expansion speed was extremely fast, and by 2012, its store scale had exceeded 1,000. However, with the popularity of the mobile internet trend in China in 2010, asset-light e-commerce brought new imagination to multiple industries, so Bestore also began to test e-commerce. From officially laying out e-commerce channels in 2012, launching social e-commerce strategy and omni-channel system development in 2014, to continuously deepening the construction of online marketing systems, Bestore's online layout gradually deepened. Benefiting from this, Bestore's e-commerce revenue continued to rise. In 2016, Bestore's online revenue reached 1.425 billion yuan, and by 2021, it had grown to 4.858 billion yuan, more than tripling from 2016. Driven by online business, Bestore's total revenue also continued to grow. In 2016, Bestore's annual revenue approached 4.5 billion yuan, more than 20 times that of 2010, and by 2021, it doubled again to 9.3 billion yuan. Compared to Laiyifen, which also started offline, Bestore's attitude towards embracing online is clearly more active and its steps are bigger. In 2012, Bestore laid out e-commerce; in 2016, online revenue accounted for 30%; by 2021, its online revenue share exceeded 50%, forming a situation where online and offline are evenly matched, while Laiyifen's online revenue share in 2021 was still less than 15%. After reaping the dividends of online channel layout, Bestore's hidden concerns quickly emerged. According to Bestore's financial reports, before 2019, the gross margins of its three main businesses rose steadily, with e-commerce business having the fastest gross margin increase. But after entering 2020, the gross margins of the three businesses began to decline, with e-commerce business declining the fastest. In addition to rising raw material prices and increased production and operating costs due to the three-year pandemic, another important reason for the shrinking gross profit of e-commerce business is the ebb of platform traffic dividends. Gross margin trends of Bestore's main businesses from 2016 to 2022, data source: Bestore financial reports, compiled by Lianxian Insight. On one hand, the dividend period of e-commerce has passed, platform traffic costs continue to rise, and Bestore's channel marketing expenses have also increased. Since 2015, Bestore's sales expenses have risen steadily, reaching 1.756 billion yuan in 2022, a new high, far higher than Three Squirrels, Qiaqia Food, and Yanjin Shop in the same track. Sales expenses of Bestore from 2015 to 2022, data source: Bestore financial reports. On the other hand, new forms such as live streaming and short videos have accelerated the iteration and reshuffle of the e-commerce industry, lowering the threshold for new brands to enter the market. A large number of new brands have emerged through traffic investment and top anchor live streaming, intensifying industry competition. Platforms are also constantly changing traffic allocation rules in the involution, and many small and medium-sized merchants known for content have replaced track leaders as traffic support targets. According to Huaan Securities' analysis, with the decentralization of online traffic, the online business of track leaders will continue to face pressure. This is indeed the case. New brands represented by Wangxiaolu, Wangbaobao, a1 Snack Research Institute, and Xuanma have begun to rush into sales rankings, seizing market share originally belonging to the "three giants" of leisure snacks. According to a research report by BOC International, in 2021, the top three companies in the snack sector by market share - Three Squirrels, Baicaowei, and Bestore - had a combined market share of 17.3% on Alibaba's platform, a year-on-year decline of 3%. Similarly, in December 2021, Wangxiaolu's sales rose against the trend by 37.2%. Affected by this, the already fragmented leisure snack industry saw further decline in concentration. According to a research report by Pacific Securities, in the first half of 2021, the market share of the top three in the leisure snack track (CR3) was 16.88%, a year-on-year decline of 7.10%, and the market share of the top five (CR5) was 19.52%, a year-on-year decline of 7.18%. As e-commerce dividends ebb and a large number of new players seize market share, Bestore has been slow to find new growth points, and its revenue growth quickly fell into a decline. In 2020, Bestore's revenue was 7.894 billion yuan, a year-on-year increase of only 2.32%, ending the double-digit growth that had continued for many years. While barely maintaining positive revenue growth, Bestore's profitability has not improved. In 2020 and 2021, Bestore experienced increasing revenue without increasing profit for two consecutive years. Although it grew in 2022, most of it was government subsidies, and after deducting subsidies, it only increased slightly by 1.46% year-on-year. Bestore is also aware of these issues, so as online traffic competition intensifies, Bestore has increasingly emphasized offline channel layout. In 2020, Bestore's direct-operated and franchise store scales were 718 and 1,698 respectively, and by the end of 2022, they had increased to 998 and 2,228, with total store scale exceeding 3,000. Affected by this, Bestore's online revenue share in 2022 also fell back to below 50%. Source: Bestore official Weibo. For the e-commerce business, which still accounts for nearly half of revenue, Bestore, like many players in the same track, competes for traffic by increasing marketing. In the past few years, Bestore has frequently appeared in popular variety shows and dramas such as "Flowers and Boys · Camping Season," "Xiao Min's Family," and "Ode to Joy 2," and has invited traffic stars like Dilraba and Yang Zi as spokespersons. The action of heavily investing in marketing is not unique to Bestore. In fact, the sales expense ratios of many players in the leisure snack track are around 20%. The over-reliance on marketing is closely related to the current situation of low technical barriers and widespread OEM labeling in the leisure snack track. When product homogeneity is obvious, marketing intensity largely determines brand sales, and track competition has evolved from product competition to marketing competition. Taking Bestore as an example, its R&D expense ratio has been less than 1% for years, and production mostly relies on outsourced OEM. This asset-light, R&D-light model can bring rapid growth in the early stage, but it also easily brings hidden dangers. Bestore has experienced multiple food safety issues. Low barriers, marketing dependence, and market fragmentation are all problems troubling Bestore. Perhaps this is the underlying logic for Hillhouse Capital and Capital Today cashing out - the leisure snack track has considerable scale, but brands are easily replaced, making it difficult to grow a leader with sustained high growth. To escape the current growth dilemma, Bestore has been continuously seeking new business growth points in the past few years. Ineffective high-end strategy, difficult lower-tier market: Bestore struggles to break through. Bestore's "first axe" to improve growth is targeting the high-end market. In early 2019, Bestore proposed the "high-end snack" strategy, subsequently launching the children's snack brand "Xiaoshixian," the healthy meal replacement brands "Liangpin Feiyang" and "Kongduoka," and "Jietangyou" for diabetic patients. In the plan, the average customer unit price of these sub-brands is generally higher than Bestore's main brand, which will effectively increase Bestore's gross margin and revenue. According to statistics from Lianxian Insight, in the same category, the unit price per gram of Kongduoka, Jietangyou, and Liangpin Feiyang is significantly higher than Bestore's, with Jietangyou having the highest price, followed by Kongduoka and Liangpin Feiyang. For example, a flaxseed soda cracker from Jietangyou has a unit price per gram almost five times that of similar Bestore products. Price comparison of hot-selling items of Bestore and sub-brands on Tmall, data source: Tmall, compiled by Lianxian Insight. However, the market performance of these brands is mostly lukewarm. Xiaoshixian's brand awareness and sales are not as good as large brands like Nestlé, Mars, and Want Want, nor does it have hot-selling single products like Miaokelanduo or Cheese Doctor, and it is even less well-known than "Xiaolulanlan," the children's snack brand of Three Squirrels in the same track. Liangpin Feiyang, which was highly anticipated and for which a dedicated R&D team was built internally, disappeared from financial reports after one year; Kongduoka and Jietangyou were launched later and still need market verification. The failure of Bestore's high-end strategy is partly due to the fact that its high-end positioning has not penetrated to the product R&D level, remaining more at the packaging and marketing level, with R&D expense ratio remaining low, making consumers unwilling to pay. On the other hand, it is also due to fierce market competition. Besides snack brands in the same track as Bestore, such as Three Squirrels and Laiyifen, there are also many players in segmented vertical tracks, such as ffit8, Wonderlab, and Super Zero in the healthy meal replacement market, and Miaokelanduo in the children's snack track. Intense competition makes it difficult for Bestore to break through. After the high-end strategy did not achieve obvious results, Bestore began to enter the lower-tier market. Taking advantage of the discount store and near-expiry store craze, at the end of 2022, Bestore launched the snack bulk retail store brand "Lingshi Wanjia." This chain brand, with the slogan "Cheap is the absolute truth," targets the lower-tier market, and its store distribution is also focused on Hubei, Bestore's own base. This choice is also a last resort. The offline snack market is regionally distinct. Chain snack stores such as Snack Busy, which started in Hunan, Laopo Daren in Zhejiang, and Zhao Yiming Snacks, which is deeply rooted in Jiangxi, mostly dominate their respective regions, forming a regional separatist situation. If Lingshi Wanjia rashly expands nationwide, the probability of encountering strong resistance is high. From the development history of these brands, becoming a regional leader first and then seeking national expansion is also a more common choice. According to the latest news, Bestore plans to open 1,000 new stores in 2023, a large portion of which will be Lingshi Wanjia stores. Specifically for Lingshi Wanjia, most of the expansion plans will focus on Hubei, with obvious regional limitations. This is also the difficulty of attacking the lower-tier market. Currently, players in the same track like Snack Busy have started national expansion after intensive financing. In the future, Lingshi Wanjia will inevitably go national beyond Hubei, which means street battles in counties across the country will inevitably begin. While betting on Lingshi Wanjia, Bestore also co-invested with Hei Ant Capital in Zhao Yiming Snacks, which also targets the lower-tier market but is deeply rooted in Jiangxi. Regarding the reason for the investment, Bestore explained that bulk retail snacks cater to consumers' new pursuits of snack richness, price, and experience. The company is rapidly expanding and laying out this business through various models such as investing in Zhao Yiming Snacks. This means that by investing in Zhao Yiming Snacks, Bestore focuses on accelerating market layout and penetration. From these actions, it is not difficult to see that Bestore has begun to transform from an initial self-owned snack brand to betting on channel brands. This also stems from the attributes of the track Bestore is in: many players, low industry concentration, and fragmented market. Compared to stores that only sell their own products, channel brands that can accommodate multiple brands can meet the expectations of more diverse consumers and wider regions, and can also reduce supply chain shortages and inventory turnover problems caused by excessive SKUs. But bulk retail snack stores cannot "solve all worries." First, it is difficult for Bestore to compete with third-party chain stores like Snack Busy on key SKUs. Competitors in the same track such as Yanjin Shop and Three Squirrels will likely not enter Lingshi Wanjia, and third-party snack chain stores will have richer SKUs. Taking Snack Busy as an example, Yanjin Shop is one of the large brands with the richest SKUs in Snack Busy stores, and Snack Busy is also Yanjin Shop's largest customer. Such a close cooperative relationship is difficult to replicate with Lingshi Wanjia. Second, bulk retail snack stores reduce costs through buyout models, lower prices, and attract consumers, but such a business model is prone to falling into the quagmire of low-price competition, which is also a challenge for Bestore's future profitability. In addition, whether Lingshi Wanjia, which takes the low-price route, will affect the high-end positioning of the main brand and backfire on Bestore's revenue is also unknown. Besides the main snack business, Bestore has also attempted to enter the catering industry. In 2021, Bestore opened a Tbreak Bestore tea break in Wuhan, mainly offering tea drinks, Western desserts, coffee, and other products. It has now disappeared from Dianping. In 2022, it launched Tbreak coffee, and currently two of the three stores are "temporarily closed." From these diverse business attempts, it is not difficult to see Bestore's anxiety after the e-commerce dividend ebbed and growth hit a bottleneck. But based on the above analysis, whether it is laying out high-end or focusing on the lower-tier market, it is difficult to help Bestore gain growth opportunities. Therefore, in the industry's view, it is natural for capital to abandon it. The greater uncertainty lies in the difficulty of breaking through in new businesses, while the moat of old businesses is not stable, and a large number of new consumer brands are still eager to compete for Bestore's market. How to combine offense and defense and strengthen its own advantages requires Bestore to provide answers as soon as possible. (The header image of this article is from Bestore's official Weibo.)


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