Bin Shen
Vice President at Lunar Capital
Lunar Capital focuses on private equity investments in China’s increasingly attractive consumer market. Over the past years, we have conducted in-depth analysis on the development of the consumer industry and its various subsectors. In particular, we are very optimistic about snack food. We are bullish on this industry and are aggressively pursuing opportunities to invest and build better businesses. We have a clear goal of building a snack-food platform that will allow our businesses to realize key synergies and ultimately achieve value creation.
According to the Macroeconomic Forecast Report by the People’s Bank of China, despite the slowdown or “stabilization” of China’s GDP growth rate, consumption as a percent of economic growth continues to rise. We believe consumption on food will continue to grow as per capita disposable income increases and aspirational consumers pursue a higher quality life through products and services. These trends are in line with the “new normal” of economic growth in China, which is actively promoted by supporting government initiatives. We often cite that China’s per capita expenditure on snack food items lags far behind that of developed countries, which highlights an enormous potential of growth within the market.
While the Chinese snack food industry is quite robust, it is also highly fragmented. Most brands are only strong regional players, with no clear leading national brand. According to AT Kearney’s market research, the top 4 brands in the beef jerky sector represent a mere 20% of total market share. However, due to the strong consolidation trends in the snack industry, we believe brands with regional advantages have a clear opportunity to become national brands through channel expansion, product revolution and acquisition-led growth.
Lunar is actively involved in operations of Yonghong, our beef jerky snack business, and has enhanced management and expanded sales channels to enter new markets. In addition, Lunar has optimized Yonghong’s brand image and products, and positioned the brand to become the nation’s leading beef jerky business.
E-commerce is disrupting the way consumers purchase products and has triggered drastic changes in the industry. Across our portfolio of snack foods, apparel brands, beverages and home appliances, traditional sales channels have inevitably been impacted, presenting both opportunities and challenges for Lunar to address. Our analysis of the e-commerce sales model has led us to develop a task force to assist our businesses in developing online channels, building a complete online-offline sales model. Using Yonghong as an example, we opened flagship stores on online supermarkets such as Tmall, JD.com and YHD.com. In addition to showcasing our products via different online channels, we designed special products and developed distribution strategies distinct from offline sales. As a result of these efforts, Yonghong has achieved strong results in e-commerce to date.
In order to capture the opportunities in the Chinese consumer market, we will continue to practice and refine our operationally-involved strategy that has driven Lunar’s success thus far. We firmly believe that our dedication to running and improving businesses will allow us respond innovatively to the ever- changing market while fully benefiting from the existing long-term macroeconomic trends.
