The internet celebrity economy is represented by young and beautiful fashion influencers, with their taste and vision as the main driving force for product selection and visual promotion. It gathers popularity on social media and relies on a large fan base for targeted marketing, thereby transforming fans into purchasing power.

In recent years, starting from Taobao live streaming sales, there have been more and more live streaming hosts such as Li Jiaqi and Viya, and Luo Yonghao's live streaming sales have repeatedly appeared on hot searches, sparking discussions. Especially this year, due to the impact of the epidemic, many physical stores have also started live streaming sales.

From being an ordinary person to becoming an internet celebrity, from a product to becoming an internet celebrity brand, the transformation of identity will also bring greater challenges, and brand operation under the internet celebrity economy will gradually become large-scale. How to carry out a comprehensive trademark layout may become a gateway for the operation of internet celebrity brands.

Macro perspective: Leisure food conforms to the convenient and healthy consumption characteristics of the "new generation"

After the epidemic, the cultivation of online consumption habits among residents of all social classes has accelerated the growth of market size in many categories. Consumer categories that conform to the new generation's consumption habits of "having money and leisure", such as the "home economy" and "internet celebrity economy," may become increasingly popular.

Analysts from Zhongtai Securities believe that among them, the consumption layout of leisure food through e-commerce channels was earlier, and they may fully enjoy the sustained prosperity of the online economy in the post pandemic era.

The penetration rate of e-commerce may be further improved due to the efforts of Internet aborigines and new online shopping groups in the epidemic situation

From the consumption characteristics of the new generation population:

1) Different individuals exhibit increasingly diverse consumer needs, leaning towards products that showcase individuality and align with their own lifestyle tastes;

2) There are also significant differences in the consumption needs of the same individual in different life scenarios or fields, such as travel, watching dramas at home, and giving gifts during festivals;

3) As the only child generation, the changes in family structure have led them to pursue more humanization and flatness in their work.

From the perspective of convenience in consumption trends, most leisure foods are sealed and packaged, making them easy to store and transport. With a sound logistics network and high compatibility with e-commerce channels, the e-commerce penetration rate increased from 3% to 12% in 2015-19.

Analysts from Zhongtai Securities believe that the new generation of people who enjoy the "convenience dividend" of Internet e-commerce are the main consumers of leisure food. In the post epidemic era, online consumption habits drive leisure food consumption to penetrate into all age groups.

The "homestead economy" promotes the supply side of leisure food or places more emphasis on brand marketing

From the perspective of industry trends, the "home economy" on the demand side is driving up the supply side of leisure food or placing more emphasis on brand marketing. The competition between online and offline leaders in the leisure food industry is intensifying, and differentiated and customized products are in line with the diversified and healthy trend of new consumption.

Leisure food enterprises will further segment their target customer groups to meet the different personalized needs of different groups; And actively expand consumer scenarios, pay more attention to brand marketing to develop new growth points.

Compared with foreign countries, the per capita consumption of the snack food industry has greater room for improvement

Under the trend of consumption upgrading, the consumption of staple foods has decreased, and leisure snacks that satisfy taste pleasure but do not produce satiety are favored.

Compared with overseas markets, there is significant room for improvement in the per capita consumption of leisure food in China. Analysts from Zhongtai Securities believe that, taking nut based snack foods as an example, the consumption trend towards medium to long-term health remains unchanged, and there is room for a doubling in the consumption of snack foods in China.

Industry perspective: Brand effect highlights, leading enterprises in various sub industries are emerging

The compound growth rate of the snack food industry exceeds 10%, and the concentration of leading enterprises has increased

From the perspective of the size of the snack food market, according to Frost data, China's snack food sales reached 1.03 trillion yuan, with a compound annual growth rate of over 10% from 2013 to 2018.

Overall, the leisure food industry has a high degree of marketization, homogeneous products, and a relatively low overall gross profit margin.

Marinated products, nuts, and baked goods meet the consumption preferences of the new generation of people

The heavy salt and spicy properties of braised products can stimulate the taste buds and easily attract the new generation of consumers who pursue freshness and excitement.

Nuts are small in size, easy to store, and have high calorie content, making them suitable for various consumption scenarios.

The popularity of baked goods is closely related to today's fast-paced lifestyle.

(1) Halogenated products are the fastest-growing sector in the leisure industry, with a low chain rate and dispersed competitive landscape

Excluding the short-term impact of the epidemic, the growth of disposable income in the medium to long term drives an increase in sales of brine products. Compared to essential foods, the consumption of braised products has a certain degree of optional consumption.

The consumption preference of halogen product consumers has shifted towards enjoyment oriented, with obvious scale advantages. From the perspective of consumer demand, there are several reasons that support the industry to maintain a high level of prosperity in the long term:

1) During the process of eating spicy food, the body secretes endorphins to calm the pain and produce pleasure, thus becoming addictive to spicy taste.

2) With the development of consumer preferences towards enjoyment oriented consumption, the characteristics of leisure braised food that is delicious but not full have expanded the consumption scenarios. From serving dishes on the dining table to social snacks, the frequency of consumption is expected to increase.

3) The concentration of industry leaders is high, and leading companies have strong bargaining power, enjoying economies of scale, high gross profit, and high ROE to maintain development space.

The logic of increasing industry concentration is constantly strengthening, and in the future, brand chains will gradually replace small workshops, leading enterprises to compete to expand the market.

(2) The average growth rate of the nut industry exceeds 10%, but there is huge room for improvement in per capita consumption

According to data from the China Food Industry Association, the sales scale of enterprises above designated size in China's nut stir fry industry reached 162.5 billion yuan in 2018, with an annual compound growth rate of 10.1% from 2011 to 2018.

The overall concentration of the nut industry is low, but a stable competitive pattern has been formed online. In June 2019, the top three sales figures for Taobao nuts (proportion of online listings) were three squirrels (33%), Baicaowei (15%), and Liangpinpuzi (9%).

According to Tianyancha data, Liangpinpuzi Co., Ltd. is a professional brand chain operation company aimed at becoming the top brand of leisure snacks.

Guide and surpass the inherent brand image and sales model of snacks, and explore more cultural and quality depth.

At present, the traffic cost for new entrants is high, and online nuts have formed strong entry barriers.

Nuts are trending towards packaging, and deep processing may become a new trend in the industry. Analysts from Zhongtai Securities believe that product homogenization is more severe in the nut market, and the development of deep processed healthy and high-end products such as plant protein drinks, nut drinks, and nut meal substitutes may become the direction of industry development.

(3) The baking food market has great potential for growth, benefiting from the trend of health in the medium and long term

The growth rate of China's baking food market is relatively fast, and the industry structure is scattered. High quality listed companies enjoy the dividends of industry development. Analysts from Zhongtai Securities believe that short-term insurance products can meet the demand for health or develop rapidly.

From the perspective of healthy consumption trends, short-term insurance products are prone to occupying more market share due to their advantages such as freshness and health.

Analysts from Zhongtai Securities believe that, as mentioned earlier, the reason behind this can be attributed to the unchanged trend of healthy and convenient consumption upgrading, which has been accelerated by the epidemic.

Leisure food is welcoming the trend of "new consumption", and diversified sales channels are gradually moving towards integrated development

The brand concentration is relatively low, making it difficult to expand the product line

Overall, the concentration of the snack food industry is relatively low, and regional taste differences and high customer acquisition costs affect the efficiency of supply chain integration.

The concentration of leisure food online is higher than offline, and the online leading position is stable

The market share of Alibaba's snack food CR3 increased from 17.8% in March 2018 to 35% in January 2020, with three squirrels, Baicaowei, and Liangpinpuzi increasing by 9.3%, 5.2%, and 0.3% respectively. Three squirrels remained the top market share among Alibaba's snack food in 2019 with a market share of 14.1%.

Under the trend of "new consumption", the diversified sales channels of leisure food are gradually moving towards integrated development

There are two main production methods for snack food: independent production and OEM manufacturing. According to statistics from Bain Company, even though traditional supermarkets currently account for about 60% of sales, the proportion of e-commerce and convenience store channels is continuously increasing, while channels such as supermarkets and grocery stores have shown negative growth.

The infrastructure for new consumption has gradually improved in 2020, and diversified sales channels are gradually moving towards integrated development.

From the perspective of the rise of the internet celebrity economy, brand enterprises are inevitably facing supply chain compression and increased turnover in order to stimulate the maximum increase in sales. At the forefront of new consumption, leading leisure food enterprises may be developing towards the integration of multiple channels.

Online leader: "Low net profit margin+high turnover rate" conforms to the sales characteristics of fast-moving consumer goods in the internet celebrity economy.

1) Online leader: high ROE benefits, high turnover rate, and high leverage

2) Offline leader: high net profit margin, low turnover, and low leverage

The explosive growth of the consumption model in 2020, which uses live streaming as a channel for sales, is due to the compression of the supply chain and the "concessions" of brand merchants. Essentially, it is due to low gross profit and high turnover.

The huge sales volume of live streaming sales lies in the compression of the "lowest price" product supply chain. Analysts from Zhongtai Securities believe that this model is more suitable for online leisure food leaders with "high turnover and low net profit", and is highly efficient for brand enterprises to clear inventory and promote new products.

The economic prosperity of internet celebrities has improved, and the new generation is leading the online economy. Online leaders enjoy advantages in establishing brand effects and promoting new product categories.

Against the backdrop of income differentiation, leading leisure food enterprises may be the first to enjoy demand replenishment

Consumer upgrading driven high revenue growth in the leisure food industry from 2015 to 2018

The consumption upgrading trend driven by the increase in disposable income of residents since 2015-18 has led to a 20% increase in sales volume in the leisure food industry.

Under income differentiation, leading enterprises focus on high-end products to support performance

Numerous consumer brands and e-commerce companies are vigorously digging into the sinking market, which may be due to the higher marginal consumption tendency of the lower middle income class.

From the market performance perspective, the leisure food sector achieved a cumulative excess return of 20% relative to the Shanghai and Shenzhen 300 in 2019.

The differentiation of stock economy has increased, and the market share of leading brands has increased. After the epidemic, the strength of leading leisure food enterprises has remained strong.

Especially after the epidemic, the effect of the leading leisure food enterprises becoming stronger will become more apparent, and the trend of online and offline integration may accelerate.

Investment suggestion: Seize the opportunity for online expansion and development of leading leisure food enterprises

After the impact of the epidemic, the main competition track for leisure food in the future will still be a dual track synchronization of online and offline.

Analysts from Zhongtai Securities believe that the increasing differentiation of the stock economy has led to an increase in the market share of leading brands, and leading enterprises have benefited from the increase in concentration or are the first to enjoy demand replenishment.

Risk statement

Food safety risks are exposed, and the domestic economy is experiencing an unexpected downturn.

2020 may be a turning point for accelerated changes in consumer patterns. The epidemic has accelerated the popularization of "online life" in the lives of residents in society; The upgrading and transformation of consumption channels have cultivated new generation consumption habits, and new consumption forms such as e-commerce and live streaming sales may become more mainstream.

New consumer goods companies represented by live streaming sales and social retail, as well as consumer goods companies with strong supply chain integration and channel marketing innovation capabilities, may face medium to long-term investment opportunities that cannot be ignored.

The differentiation of stock economy has increased, leading brands have increased their market share, and leading leisure food enterprises have benefited from the logic of increasing concentration or are the first to enjoy demand replenishment.