****Source | Bohu Finance Recently, Mingming Henmang knocked on the door of the Hong Kong Stock Exchange with an impressive report card. According to the prospectus, Mingming Henmang's retail sales reached 55.5 billion yuan in 2024, with annual revenue of 39.3 billion yuan and over 14,394 stores. Among them, Mingming Henmang opened 8,083 new franchise stores in 2024 alone, equivalent to nearly 22 new stores opening every day in some corner of the country. It is worth mentioning that Mingming Henmang was formed in 2023 through the merger of two snack giants, 'Snacks Are Busy' and 'Zhao Yiming Snacks'. Not only does it lead other competitors by a large margin in scale, but it also achieved '1+1>2' at the capital level. Before the merger, both Snacks Are Busy and Zhao Yiming Snacks had received multiple rounds of financing. The former had well-known VCs such as Sequoia China, Gaorong Ventures, and 5Y Capital behind it, while the latter also secured investors like Hei Ant Capital and Bestore. After the merger to become 'Mingming Henmang', it received even more favor from capital, securing over 1 billion yuan in investment. Therefore, although Mingming Henmang denied IPO rumors after the merger, it was clear where it was ultimately headed. However, now that Mingming Henmang has raised enough capital to sprint towards an IPO, will it continue to adhere to the 'low price, high volume' model? After all, in the snack category where price wars are raging, the capital market ultimately values real profitability. The 'Mixue Bingcheng' of the Snack World Opening Mingming Henmang's prospectus, the bulk snack business is not a complex one. From Snacks Are Busy and Zhao Yiming Snacks to 'Mingming Henmang', it is essentially a brief history of a store achieving scale expansion. Snacks Are Busy started in 2017, while Zhao Yiming Snacks was born in 2019. Both focused on lower-tier markets and made a name for themselves in just a few years through the strategy of 'low prices + rapid expansion'. Before the merger at the end of 2023, Snacks Are Busy already had 4,000 stores, and Zhao Yiming Snacks had 2,500 stores. Together, they formed a 'snack industry giant' with 6,500 stores. This event attracted industry attention, even raising questions about whether the merger constituted a monopoly. Subsequently, relevant authorities imposed an administrative penalty of 1.75 million yuan on the merger of Snacks Are Busy and Zhao Yiming for 'failing to declare the concentration of undertakings in advance as required by law', but clarified that the transaction did not constitute a monopoly. However, the scale effect after the merger of Mingming Henmang indeed put pressure on competitors in the snack industry. This means it will have stronger bargaining power in the supply chain, be able to more effectively control key elements such as price, SKU, and quality, and naturally attract consumers more easily. According to the prospectus, Mingming Henmang's single-store SKU count is generally no less than 1,800, which is twice the average SKU count of supermarkets of similar scale. According to a Frost & Sullivan report, Mingming Henmang's average selling price is also about 25% cheaper than similar products in offline supermarkets. Mingming Henmang stated, 'Our quality-price advantage stems from our supply chain management capabilities. We purchase directly from manufacturers, reducing the intermediate layers common in traditional supply chain models, and leverage the strong bargaining power of economies of scale.' But maintaining the continuous operation of this low-price model is not easy. To this end, after Snacks Are Busy and Zhao Yiming Snacks merged into Mingming Henmang, they further accelerated the pace of store expansion. Data shows that from 2022 to 2024, Mingming Henmang opened 1,089, 4,715, and 8,083 new franchise stores respectively. The number of new stores opened last year nearly doubled compared to 2023. Industry insiders say that Mingming Henmang's 'non-stop sprint' last year was not only to maintain its scale advantage but also to compete for the top spot in store count and tell a good story for its IPO. For example, the industry's 'second brother', Wanchen Group, had 14,196 stores by the end of 2024, but Mingming Henmang still held the 'big brother' position. However, Mingming Henmang's aggressive store opening has caused hardship for a group of franchisees. Some franchisees said that the snack track is already crowded. Now, the 'big brother' and 'second brother' are not only fighting a scale war but also a price war. Stores are getting denser, but profits are getting thinner. They can only hope that after Mingming Henmang goes public, its expansion pace will slow down. But like Mixue Bingcheng, which just went public this year, Mingming Henmang's 'low price, high volume' business model means its store scale cannot develop slowly. Mixue Bingcheng's biggest profit source is not directly selling milk tea, but making money by selling raw materials to franchisees. Similarly, Mingming Henmang's business model also earns the price difference by supplying goods to franchisees. According to Mingming Henmang's prospectus, from 2022 to 2024, 99% of the company's revenue came from selling goods to franchise stores. The franchise model not only enhances Mingming Henmang's bargaining power with upstream suppliers but also helps share the brand's operational and financial risks while increasing brand awareness in the national market. Therefore, Mingming Henmang, as this 'middleman', definitely needs to continue growing bigger and stronger. But how to find a balance between consumers, franchisees, and its own development is the next issue it needs to consider. Bulk Snacks Are a 'Tough Business' However, although both Mixue Bingcheng and Mingming Henmang are in the 'low price, high volume' business, their profitability differs greatly. In 2024, Mixue Bingcheng achieved revenue of 24.83 billion yuan, net profit of 4.45 billion yuan, gross margin of 32.5%, and net margin of 17.9%, all at relatively high levels in the industry. In contrast, Mingming Henmang's gross margin remained stable in the 7.5%-7.6% range from 2022 to 2024, while its net profit margin increased from 1.7% to 2.1%. These figures also reveal the profitability dilemma of the bulk snack industry. First, the bulk snack industry easily becomes a 'middleman'. In Mingming Henmang's cost of sales, a large portion is purchasing leisure food and beverages from manufacturers, accounting for over 90% of total revenue. Although it can improve bargaining power through scale effects, securing satisfactory price differences in negotiations over thousands of SKUs is inherently a 'tough business'. In contrast, although Mixue Bingcheng is also a 'middleman', it controls the entire industry chain from R&D to production to transportation, allowing it to better control costs and pricing and increase profit margins. It is reported that Mingming Henmang plans to launch 30 private-label products this year, no longer relying solely on wholesale price differences but improving gross margins by integrating the supply chain. This is naturally a good thing, but supply chain restructuring obviously takes time. Second, the bigger the scale, the greater the upfront investment. A roadside middleman only needs to set up a stall to resell products, but Mingming Henmang's business model is much more complex. To achieve unified management of over 10,000 stores, it requires significant investment to improve supply chain and operational efficiency. Therefore, Mingming Henmang is currently telling a 'heavy asset' story. After centralized procurement, products are shipped to the group's logistics park and then distributed to the franchise network. Therefore, the funds raised through the IPO will also be invested in store expansion and upgrades, supply chain optimization, and digital construction. Finally, Mingming Henmang must also give way to distributors and consumers. Mingming Henmang's 'low-price mindset' positioning is the main reason it can quickly hit lower-tier market consumers. But low prices, a wide SKU selection, and good quality sound like an 'impossible triangle'. To achieve all these to the extreme, besides supply chain management capabilities, Mingming Henmang must also sacrifice some profits to a certain extent. However, even if Mingming Henmang has lowered its profit expectations, it still does not have a sure win in the snack track. In the past few years, although the domestic leisure snack market has shown positive growth, with market sales reaching 136.51 billion yuan in 2024, a year-on-year increase of 8.6%. But according to Mingming Henmang's prospectus, the food and beverage retail industry is highly fragmented, with the top five chain retailers accounting for only 4.2% of market share. This fragmented competitive landscape indicates that there is still significant market space for new brands and companies to enter, and industry competition remains fierce. The entry barrier for the snack industry is relatively low, and 'low prices' are nothing new. Industry insiders point out that the leisure snack track has entered a 'affordable' cycle, and snack brands have to attract consumers by lowering prices. Before the merger of Snacks Are Busy and Zhao Yiming Snacks, the two had already engaged in fierce price wars in county towns. One would offer 'buy one get one free', and the other would offer 'half price for the second item'. Bottles of water under 1 yuan and small biscuits at 0.5 yuan were everywhere. Zhao Yiming, founder of Zhao Yiming Snacks, once said in an exclusive interview: 'If you want to fight, everyone loses, there are no winners. If you focus on your opponents, you'll kill 800 enemies but lose 1,000 of your own.' In the long run, although market demand for leisure snacks will continue to grow, supply chain capacity will definitely be abundant or even excessive. If snack brands rely solely on price wars or store densification strategies to fight this battle, they will only get more and more tired. Can the Transformation Path Go Smoothly? Realizing the limitations of a single model, Mingming Henmang has begun to explore new store formats for snack discount stores. In February this year, Mingming Henmang officially proposed the '3.0 Money-Saving Supermarket' model, adding categories such as daily necessities, stationery and trendy toys, bakery and fresh food, and low-temperature frozen products. Last year, Snacks Are Busy also tried launching new stores in Changsha, such as 'Super Snacks Are Busy' and 'Snacks Are Huge on Jiefang West Road', featuring oversized snacks as a highlight, attracting many young consumers to take photos and check in. In recent years, the retail industry has been undergoing a 'borderless' transformation melee. The fresh produce unicorn Hema is accelerating its move to lower-tier markets, attacking community discount stores, which helped Hema achieve its first full-year profitability. Cotti Coffee, which does coffee business, also announced a transformation into 'coffee + convenience stores'. FamilyMart, which has been doing convenience store business for over 50 years, has begun to extend its 'tentacles' into clothing, beauty, and other sectors. Clearly, the advantages originally built by factors such as channels, categories, and models are no longer enough to serve as a 'moat' for retail supermarkets. Retail players are trying to cross boundaries and attack each other's territories to find new growth space. This is similar to the recent food delivery war between JD.com, Meituan, and Ele.me. To defend its instant retail delivery market, JD.com had to attack Meituan's food delivery market. But rather than saying JD.com is 'attacking to defend', it's more accurate to say that in the game of a stock market, all players hope to find new traffic and market increments, so 'long guns and short cannons' are inevitable. Compared to the 'low price, high volume' story, 'finding increments' is clearly the new story the capital market wants to hear. But for Mingming Henmang, the new supermarket store format may face a series of uncertainties. On the one hand, category expansion will bring new operational challenges. For example, the loss rate of non-standard products like bakery and frozen goods will increase significantly, adding complexity to supply chain management. On the other hand, adding private-label brands has become a standard move for major supermarkets, such as Pangdonglai, Hema, and 7-11, to quickly respond to market trends and launch innovative categories through an integrated production and sales model. Under the siege of numerous internet-famous products, this not only tests Mingming Henmang's product selection and quality control capabilities but also poses a major challenge to its marketing and promotion capabilities. But in any case, there is no fixed playbook in the business world. The market is changing, and Mingming Henmang must also try to innovate itself. As consumers' excitement threshold for 'cheap' gets higher and higher, the next business chapter for bulk snacks may not be written solely with the word 'low margin'. For Mingming Henmang, to truly ride through cycles, in addition to adhering to the long-termism of 'low price, high volume', it also needs to continuously make efforts in supply chain efficiency and product innovation. From traditional supermarkets to fresh produce megastores, from street snack shops to community snack supermarkets, as long as new retail continues to evolve, players will still have new opportunities.