Summary of Key Points
The fresh snack market has recently become very popular, with leading brands such as Yili, Jinli Men, and Jiduo Quan discussing their Series A financings, aiming for valuations of 2-3 billion yuan. However, none of these financings have been finalized yet. One of the brands, Yili, gained attention due to its first-month revenue of 6.2 million yuan at its Heshenghui store in Beijing, which led to a valuation of 2 billion yuan (equivalent to an annual income of 500 million yuan, or a 4x market sales ratio, with a per-store valuation of 20 million yuan). Nevertheless, investors are hesitant to invest. The reasons include concerns about potential profit ceilings, the financing parties being too shrewd, and the uncertainty of the business models. Yili itself also faces challenges such as high costs for freshly prepared products, supply chain pressures, and competition from larger players entering the market. This valuation seems more like a reflection of market sentiment rather than being based on solid reality.
1. Why Have Fresh Snacks Suddenly Become So Popular?
In the past, mass-produced snacks (like those by Zhao Yiming) were successful with their low prices and wide variety, allowing them to open thousands of stores. However, as the benefits of the lower-tier markets have diminished, consumers are becoming more averse to additives and pre-prepared foods. The new demand for "freshly prepared, short-shelf-life products that are visible to customers" has emerged—such as snacks made on-site, openly baked goods, and plenty of samples, with safety information clearly displayed on packaging. Data shows that this market is expected to grow from 5 billion yuan to 18 billion yuan between 2020 and 2025, at an annual growth rate of 40%, making it a target for both investors and brands.
2. The Confidence and Doubts Behind Yili's 2-Billion Yuan Valuation
What is the basis for this confidence?
- The Heshenghui store generated 6.2 million yuan in its first month (an average of 206,000 yuan per day), which requires a high footfall in a top-tier shopping district to achieve.
- Over 90% of the company's 100 direct-operated stores are profitable, with zero closure rates.
- Freshly prepared products account for 70% of their offerings, and they focus on "handcrafted, light snacks." They use bright yellow decorations and conveyor belt display cabinets to create a luxurious feel, and have hired experienced staff from Liulai for sophisticated operations.
How much doubt surrounds this valuation?
- A valuation of 2 billion yuan corresponds to an annual income of 500 million yuan, which is a high market sales ratio (especially for a brand with hundreds of stores).
- The performance at the Heshenghui store was exceptional and may not represent the average.
- Their goal of opening 1,000 stores and achieving 5-8 billion yuan in revenue has not yet been verified, meaning the current valuation is based on future projections.
- The labor costs for freshly prepared products account for 10-13% of sales, and it's uncertain whether these costs can be covered (with each store requiring an investment of 1.5-2 million yuan and a payback period of 12-18 months).
3. Why Are Investors Reluctant to Invest?
First, there are concerns about profit ceilings: Investors argue that while fresh snacks are appealing, their sustainability is uncertain. The success of the first store may be due to its location in a sought-after area and initial traffic, which may not be replicated as more stores open.
Second, the financing parties are too sophisticated: Brands like Jiduo Quan have professional financial teams that can calculate potential returns, leaving investors worried about making a profit. Additionally, Jiduo Quan offers franchise opportunities, so they don't urgently need funds, giving them more bargaining power.
Third, the business models are not yet proven: The three brands use different strategies—Yili expands slowly with direct operations, Jiduo Quan focuses on franchising, and Jinli Men targets large, premium stores. Investors are risk-averse when dealing with unproven models.
Fourth, due diligence is difficult: No one wants to invest heavily without a thorough investigation to avoid potential pitfalls.
4. What Hurdles Does Yili Need to Overcome to Achieve Its Goals?
First hurdle: Supply chain: Short-shelf-life products require cold chains and rapid logistics, which increases distribution costs, making it challenging to expand into smaller cities like those served by mass-produced snacks.
Second hurdle: Pricing: High prices (45-55 yuan per order in core markets) may not be affordable in lower-tier areas. Adding longer-shelf-life products could compromise the brand's "fresh, handmade" image.
Third hurdle: Food safety: Freshly prepared products are more susceptible to issues; a single hygiene problem could significantly damage a brand's reputation.
Fourth hurdle: Competition from giants: Established players like Juewei and Lemon Xiangyou have advantages in supply procurement, prime locations, and franchise networks, making it difficult for smaller brands like Yili to compete.
5. What Will the Future Hold for the Fresh Snack Market?
Possible challenges include:
- Limited product variety: Most fresh snacks (such as roasted chestnuts and sweet potatoes) are traditional, making it hard to introduce innovative products that appeal to a broader audience.
- The "impossible triangle" of short-shelf-life, nationwide expansion, and affordable prices has yet to be achieved by any brand; balancing these criteria is difficult.
- Competition from giants: Larger companies will have more resources, making it harder for smaller brands to compete in prime shopping areas.
In summary, while Yili's approach of crafting premium chestnuts as a luxury snack is innovative, its valuation seems to deviate from the traditional logic of agricultural product processing. Whether it can succeed depends on its ability to overcome challenges related to the supply chain, pricing, and competition.