Mingming is very busy: How did the 'Pinduoduo of the snack industry' achieve its success?

While traditional retail struggles with single-digit growth, a group of 'snack bandits'—bulk snack stores—have launched a surprise attack along the streets and alleys, reshaping our entire imagination of 'buying snacks.' Last year, the industry's GMV exceeded 100 billion, with over 40,000 stores. This track not only achieved speed but also produced a 'efficiency monster' that caught the attention of capital: $湖南鸣鸣很忙商业连锁股份有限公司(25080.HK) (hereinafter referred to as Henmang). In two years, the number of stores increased tenfold to nearly 20,000, with annual revenue approaching 40 billion, turning chips, spicy strips, and small biscuits into 'life essentials' comparable to water, electricity, and coal.

So the question arises: In today's e-commerce dominance and offline pressure, how can this company, which doesn't advertise or collaborate, but only talks about 'cheap,' tear open the market and grow against the trend? Is it really just a 'snack transporter,' or is there more to it? This time, Dolphin Research leads everyone into Henmang's operational backend to dissect how it rewrites retail rules with 'extreme efficiency' and 'ultimate low prices.'

Below is the detailed content:

What kind of business strategy does Henmang employ?

Before delving into the analysis, let's briefly introduce the company's background: Henmang was established in 2019, with two major brands under its umbrella, 'Snacks Henmang' and 'Zhao Yiming Snacks.' Snacks Henmang started in Changsha, Hunan in 2017, and Zhao Yiming Snacks began in Yichun, Jiangxi in 2019. Both focus on bulk snack stores and expand through a franchise model. In November 2023, the two brands merged, deeply integrating various operational management aspects.

According to the prospectus, as of now, Henmang has over 20,000 stores, with a GMV of 55.5 billion, currently the largest leisure food chain retailer in China.

1. The core profit comes from supply chain price differences

To understand Henmang's business model, we first need to clarify what kind of money the company makes. According to Henmang's prospectus, as seen in the chart below, 99% of Henmang's revenue comes from selling goods to franchise stores, with only 1% from self-operated stores and franchise fees.

In other words, Henmang's revenue structure is highly singular, essentially acting as a 'middleman,' purchasing in bulk from upstream and selling to downstream franchise stores, profiting from the supply price difference. Therefore, unlike companies that primarily rely on franchise fees, Henmang's performance depends on the expansion and actual operation of franchise stores, which can be completely compared to the business model of freshly made tea drinks represented by Mixue Bingcheng and Gu Ming that we analyzed earlier.

However, unlike the vertical integration business model of freshly made tea drinks that extends upstream with self-produced raw materials, Henmang's products are entirely sourced from upstream suppliers. According to the prospectus, Henmang has already partnered with about 50% of the companies on the 'Hurun China Food Industry Top 100 List.'

Retail format iteration: extreme 'speed' and 'savings'

Before the emergence of bulk snack stores, the mainstream channels for domestic consumers to purchase leisure snacks were traditional offline supermarkets, mom-and-pop stores, snack brand specialty stores (such as Liangpin Shop and Laiyifen), and online e-commerce channels. To help investors understand the differences between Henmang's bulk snacks and other retail channels, Dolphin Research has detailed the channels using the classic retail framework of 'multi-fast-good-saving' in the table below:

As can be seen, four leisure snack retail channels emerged in sequence:

1) Traditional distribution channels: high cost + low efficiency. Represented by supermarkets and grocery stores, traditional distribution channels are the earliest channel form in China, covering a large sinking market and serving as the cornerstone of China's offline retail network, currently accounting for over 60%. However, on one hand, the distribution channel hierarchy is lengthy, with layers of markups, combined with various entry fees and barcode fees, leading to high costs for brand owners, profits being eaten away by intermediaries, and ultimately passed on to consumers, resulting in inflated product prices. On the other hand, due to goods passing through multiple levels of warehousing and transfer before reaching the shelves, low turnover rates lead to generally low freshness of snacks, and for brand owners, they also face long payment terms and inability to quickly respond to market changes, resulting in low efficiency.

Snack brand specialty stores: high cost + high efficiency. In the early 21st century, snack brand specialty stores represented by Laiyifen emerged, for the first time elevating snacks from bulk, non-standard products to a branded level. Additionally, compared to the lengthy channel hierarchy of traditional distribution, snack brand specialty stores cut out distributors, adopting short-chain operations (factory—brand central warehouse—brand store), and established high-standard store systems, improving product freshness and purchase experience, and achieving complete self-control over information flow in logistics, warehousing, and other aspects, greatly enhancing efficiency.

However, the downside is that to build brand image, snack brand specialty stores are generally located in prime locations such as core business districts, leading to high store operating costs, ultimately resulting in high product premiums, low customer flow and repurchase rates, and difficulty in improving store efficiency.

E-commerce: low cost + high efficiency: Around 2010, with the large-scale penetration of mobile internet and the establishment of the 'Four Links and One Reach' express network, e-commerce experienced explosive growth. Compared to offline snack brand specialty stores, e-commerce platforms maintain short-chain price advantages through B2C models, and driven by data, rely on efficient information feedback to allow brand owners to quickly iterate products in response to demand-side changes, elevating operational efficiency to a new level, and simultaneously giving rise to pure e-commerce brands represented by Three Squirrels.

However, in recent years, as the traffic dividend of e-commerce gradually disappears and enters a stock market, the traffic costs that brand owners have to pay are rapidly rising. On the other hand, for leisure snacks, which are low-ticket, high-frequency, non-standard categories, e-commerce fulfillment costs are not low and cannot achieve the most 'savings.'

Bulk snacks: the culmination of low cost + high efficiency. To achieve the most 'savings,' minimize markup rates, and simultaneously consider consumer shopping experience, bulk snacks combined the two formats of snack brand specialty stores and e-commerce, emerging around 2017.

Firstly, on the backend, bulk snacks inherited the flat supply chain of snack brand specialty stores, cutting out traditional channel distributors, directly sourcing in bulk from brand owners to minimize prices, and adopting factory-central warehouse-store short-chain operations to ensure rapid product turnover.

On the frontend, bulk snacks avoided the high rents of core business districts, adopting uniform community near-site locations, and store operations used e-commerce's data-driven model to monitor the sales situation of each product and the overall store efficiency and conversion rate in real-time, making timely adjustments to maximize efficiency.

In terms of pricing, the full-channel markup rate (the price difference between factory and terminal retail price) for bulk snacks is only 30%-40%, half of the traditional distribution channel (markup rates generally exceed 70%-80%). As seen in the chart below, the price of the same brand and specification product in the bulk snack channel is the lowest on the market, 20%-30% lower than e-commerce.

Extreme low prices naturally bring extreme high turnover. Comparing various retail formats, it can be seen that Henmang's inventory turnover days reached a 'terrifying' 11 days, and globally, there is basically no second company, meaning bulk snacks essentially represent the highest efficiency of domestic offline retail formats.

Hard discount, earning hard money

Through the comparison and analysis of the four retail formats above, it is clear that Henmang, representing bulk snacks, follows a standard hard discount route, with low product prices stemming from optimizing the supply chain, improving operational efficiency, and lowering its own gross profit margin to benefit consumers, following a standard low-margin, high-volume model.

However, compared to hard discount retailers like Costco and Aldi, Henmang acts as a 'hard discount wholesaler,' replacing multiple intermediaries in the traditional retail chain, earning the supply chain price difference between directly connecting upstream brand suppliers and downstream franchise bulk snack stores. To ensure downstream franchisees' profits (store-end gross profit margins generally range from 18%-22%), Henmang can only improve its bargaining power with hundreds of upstream suppliers through scale effects to obtain the lowest purchase price, while ensuring efficient product turnover to maintain its thin profit margin, clearly a 'tough business.'

According to the prospectus, as seen in the chart below, Henmang's gross profit margin has remained at an extremely low level of 7%-8% over the past three years. (In the first half of 2025, after the internal integration of Henmang and Zhao Yiming Snacks, enhanced bargaining power led to an overall improvement in gross profit margin)

In comparison, the same franchise business, the same 'middleman' business of freshly made drinks like Mixue Bingcheng and Gu Ming, due to controlling the entire industry chain from R&D to production to transportation, have higher pricing power, with gross profit margins generally reaching over 30%.

In terms of net profit margin, Henmang's net profit margin is only about 2%, which also means Henmang's system has an extremely low tolerance for errors, and any operational risk in any link could lead the company into a loss state. Therefore, Henmang must maintain efficient operations at all times and continuously expand its scale to enhance its moat.

Rapid store opening, 'rural encircling urban'

In our previous analysis of freshly made tea drinks, we mentioned that for all high-frequency, standardized physical franchise chain formats, locking in quality locations and continuously densifying the network is the only way to activate front-end traffic and back-end supply chain scale effects, thereby achieving a growth flywheel of traffic → scale → low cost → lower prices → more traffic.

Henmang also understands this well. In terms of store numbers, Henmang entered the fast lane of store opening in 2022, with the number of stores soaring from less than 2,000 in 2022 to over 20,000 today, adding 7,800 stores in 2024 alone, equivalent to an average of 22 stores per day, approaching the speed of 'store opening king'—Mixue Bingcheng.

The rapid store opening also drove Henmang's revenue from 4.3 billion in 2022 to 39.3 billion in 2024, with a CAGR of 202%. (The rapid growth in 2024 is related to the consolidation of Snacks Henmang and Zhao Yiming Snacks at the end of 2023)

In terms of single-store revenue, looking at the breakdown of volume and price, the most impressive aspect is that despite the rapid store expansion and densification in recent years, Henmang's daily single-store order volume not only wasn't diluted but instead increased by nearly 20% from 385 orders/day to 458 orders/day, proving Henmang's hard discount price advantage successfully captured traffic from other leisure snack channels, completing its market share enhancement, which Dolphin Research considers a very commendable point.

The average order value decreased by 12% from 36.8 yuan/order to 32.3 yuan/order, indicating that with the increase in store density, consumers reduced one-time stocking needs and increased impulse purchase frequency, also showing that the essence of the hard discount model is 'price for volume.'

In terms of store distribution, as seen in the chart below, Henmang's stores in third-tier and below cities account for nearly 70% (58% of stores are located in counties and towns), representing an extremely sinking retail format. In recent years, as the focus of new store locations shifted towards first- and second-tier cities, Henmang's share in sinking markets gradually declined, similar to Gu Ming, adopting a 'rural encircling urban' expansion strategy.

So why does Henmang choose sinking markets as its main battlefield? Dolphin Research believes that on one hand, the consumer group in sinking markets is more price-sensitive, making the 'hard discount' value proposition most attractive and sticky in sinking markets, reducing customer acquisition costs; on the other hand, from a competitive landscape perspective, due to the lack of efficient foreign new retail formats like Sam's Club and Hema in sinking markets, Henmang actually fills the 'hard discount' gap in sinking markets first, with relatively low competition difficulty.

High franchise threshold, but winning in certainty

The above discussion covered how Henmang achieved explosive growth through large-scale store expansion in just three years, so the question is why Henmang is so favored by franchisees? Below, we compare it from the franchisee's perspective with franchising a tea drink:

Dolphin Research mentioned in 《'Pinduoduo of the Fresh Drink World' Mixue Bingcheng: What Gives 'Snow King' the Confidence to Reign?》 that franchisees consider three factors when choosing a brand to franchise: initial investment (capital threshold), payback period (ROI), and the brand's own appeal (success guarantee).

Firstly, in terms of initial investment, since Henmang's store area is around 140㎡-190㎡, much larger than tea drinks, and requires large-scale stocking and display, the initial investment is generally high, between 800,000-1 million yuan, significantly higher than the capital required to franchise a tea drink (300,000-500,000 yuan).

In terms of payback period ROI, based on research information, after deducting rigid rent and labor costs, Henmang's store-end net profit margin is roughly 8%-10%.

Based on the first half of 2025's 458 orders/day and 32 yuan/order, the average monthly store turnover is roughly 440,000 yuan, with a payback period of nearly 2 years, slower than the payback period of franchising a leading tea drink brand (the payback period for leading tea drink brands like Gu Ming and Mixue Bingcheng is generally within 2 years)

In the case where neither initial investment nor payback period is advantageous, Dolphin Research believes the real reason lies in the certainty of investment returns.

Firstly, in store operations, although leading tea drink brands currently optimize the supply chain for standardized production at the raw material end to minimize store staff's operational difficulty, each drink still relies on staff's on-site manual preparation. During peak periods, when order volume surges, there is a risk of product quality instability. In contrast, Henmang's bulk snack operation involves selling factory-made finished products, and staff only need to perform extremely low-difficulty tasks like stocking and scanning, so human factors have almost no impact on product quality.

Additionally, in terms of competition intensity, Dolphin Research mentioned that due to the high uncertainty and rapid changes in consumer taste preferences, tea drinks rely on frequent product iterations at the brand end, and blockbuster products are crucial for store-end sales, with seasonal hits contributing over 40% of sales. If brand R&D can't keep up and there's no new product to take over, store-end revenue may experience a cliff-like decline.

For bulk snacks, although consumer preferences for leisure snacks still change quickly, Henmang only handles the selection process, effectively avoiding the risk of product R&D failure, making its risk resistance significantly better than tea drinks.

As seen in the chart below, even during the most intense price war in 2024, Henmang's closure rate was only 1.9%, far lower than leading tea drink brands.

Therefore, considering the above analysis and the sluggish economic environment in recent years, with declining capital risk appetite, many franchisees seeking stability are more inclined to choose Henmang's bulk snack business model, which is one of the important reasons for Henmang's rapid expansion against the trend.

6. Light asset + heavy control mode operation

Since 98% of the company's stores are franchise models, franchisees bear the actual store opening & operation costs, and the company doesn't need to build factories to produce actual raw materials like tea drinks, eliminating the manufacturing process, resulting in very low fixed asset investment. As seen in the chart below, Henmang's fixed asset ratio is only 2.6%, representing a highly light asset operation model.

From a capital expenditure perspective, the company's funds are concentrated on supply chain, logistics center, and digital system construction, aiming to maximize operational efficiency and strong control over each link while rapidly expanding with light assets (detailed analysis below).

Digital intelligence is the soul of efficient operation

From the analysis of the business model above, it can be seen that the core of Henmang's entire business model operation is to achieve strong control over each link while ensuring the system operates efficiently. So how does Henmang achieve this?

In fact, similar to our previous analysis of Dongpeng Beverage, Henmang's efficiency is also inseparable from its highly digitalized operation system. However, compared to Dongpeng's 'one code per item' and 'five codes in one' achieving strong control over the logistics flow, Henmang aims to empower efficiency across all front-end and back-end links to maximize store efficiency for each franchise store.

To give investors a clearer understanding, Dolphin Research briefly introduces the operational mechanism: In fact, the core of Henmang's digital intelligence operation system relies on the company's self-developed 'smart retail middle platform' system (including business middle platform, data middle platform, AI algorithm middle platform, and front-end application modules), successfully connecting all front-end and back-end operational links, achieving a complete closed loop of data and business flow.

Firstly, as the front-end touchpoint of the data flywheel, the store's POS system uploads SKU-level sales, inventory, membership, and other underlying data to the data middle platform in real-time for each transaction.

The data middle platform, as the intelligent decision-making brain, uses embedded AI algorithms to automatically generate precise location, product selection, and replenishment suggestions for each store based on hundreds of data dimensions such as historical sales, inventory, region, and social media hot topics, and automatically generates replenishment lists to ensure timely and accurate store ordering. Additionally, the algorithm analyzes the price elasticity of each SKU, automatically providing pricing and promotion suggestions to ensure maximum sales without damaging the hard discount image.

However, it should be noted that the effectiveness of the above capabilities depends on the continuous accumulation of large-scale real transaction and operational data, so only when store density is large enough and underlying data assets are sufficient can the middle platform system's data analysis be more accurate, which is one of the reasons Henmang needs to open stores quickly and on a large scale.

Furthermore, in actual store operations, each store is equipped with the 'WanDianZhang AI Store Inspection System,' which monitors multiple details such as product display, employee behavior, and store image around the clock. If any abnormalities are found, offline supervisors are responsible for implementing corrections in-store, compared to the overall manual store inspection control method of freshly made tea drinks, Henmang's 'AI proactive inspection + manual review' control mode is significantly more efficient.

For the back-end link, in procurement, the business middle platform's order management system (OMS) quickly and batch aggregates and automatically consolidates large-scale purchase orders for the same SKU across stores and regions based on the replenishment list produced by AI algorithms, achieving maximum bargaining power with suppliers.

After the price is determined, the algorithm decides which regional central warehouse (DC) to send the goods to based on factors such as store stockout severity, inbound distance, and inventory levels, minimizing inbound logistics costs.

In warehousing, as of the first half of 2025, Henmang has 40 warehouses nationwide (22 self-operated, 18 third-party), with all stores located within 300km of the nearest warehouse, ensuring delivery within 24 hours to alleviate store inventory pressure. Whether Henmang's self-operated or outsourced warehouses, all are digitally managed with WMS (Warehouse Management System).

WMS automatically allocates storage locations based on historical sales and forecast data provided by the data middle platform according to product sales, and provides the most efficient picking route to pickers based on order conditions and product storage locations, allowing manual operations to achieve the most efficient steps guided by the system.

Additionally, unlike e-commerce facing highly fragmented C-end consumer orders, requiring large-scale split picking in warehousing, severely affecting efficiency, Henmang warehouses serve standardized store orders, primarily picking whole boxes (accounting for nearly 95%), with a relatively simple overall process, and warehouse turnover rates generally only require 5-7 days.

In distribution, although completely outsourced to third-party fleets, it is actually based on strong digital control with TMS (Transportation Management System). TMS algorithms plan delivery routes and vehicle scheduling in advance based on store delivery timeliness and loading rates, maximizing vehicle load rates and minimizing single-item delivery costs to industry lows.

Additionally, third-party drivers need to install Henmang's driver-side app, strictly following the system-planned order and route for delivery, and all vehicle GPS tracks, in-transit stay durations, and other data are uploaded to the data middle platform in real-time. Only by accurately and efficiently completing delivery according to system instructions can drivers receive full freight.

From the above analysis, it is clear that Henmang's efficient operation does not rely on a single technological breakthrough but is a perfect combination of business model and algorithmic decision-making. The reason Henmang can deeply utilize AI algorithms for precise decision-making fundamentally lies in the massive high-quality data generated by its 'hard discount,' price-for-volume model. The business model provides the 'soil' for algorithm application, while algorithmic decision-making injects 'soul' into the business model, and the synergistic effect of 1+1>2 is the core secret of Henmang's ability to run fast and steadily in the leisure snack track.

Conclusion: The success from 0 to 100 relies on building a continuously self-reinforcing low-cost ecosystem

Through the analysis of the entire text, it can be seen that Henmang not only solves the problem of 'expensive snacks' but also, in the context of consumption stratification, creates a highly efficient retail ecosystem that benefits price-conscious consumers, small investors seeking stable investments, and upstream manufacturers desiring efficient distribution. This is the fundamental reason for its ability to achieve a scale of ten thousand stores in just a few years.

In terms of the business model itself, as retail is inherently a 'tough business,' belonging to the most challenging model in consumer goods, Henmang's success largely depends on its construction of a complete cost leadership strategy, achieving a 'low cost, high turnover, strong repurchase' business loop through supply chain restructuring, digital empowerment, and deep integration of AI algorithms.

However, in Dolphin Research's view, as an efficient 'selection and distribution platform,' the biggest problem with Henmang's business model is that consumer loyalty is actually driven by price rather than brand emotional loyalty. Therefore, this also means that Henmang's biggest risk does not come from changes in upstream suppliers or consumer demand but from its own efficiency decline or being caught up. For this reason, Henmang needs to continuously invest substantial funds and effort into optimizing and upgrading its supply chain and digital systems to maintain its low-price competitiveness.

But at least for now, Henmang's current 11-day turnover efficiency is basically unmatched in domestic offline physical retail. In Dolphin Research's view, if Henmang wants to continue enhancing its moat in the future, besides continuously optimizing the supply chain & algorithms to further improve efficiency barriers and strengthen the 'Henmang = cheap' low-price mindset, it also needs to gradually increase the development of its own brands in the product dimension, converting the traffic brought by the low-price mindset into high-stickiness repurchase, further transforming price advantage into profit advantage, completing the transition from 'transporter' to 'selection officer,' and strengthening its product barriers, which is also the inevitable path for almost all hard discounts.

In the next article, Dolphin Research will explore Henmang's growth space and investment value, stay tuned!

<End of text>