Analysis of the Impact of Mingming Mangmang's Gross Margin and Low-Price Strategy on Franchisee Profitability

Now I will systematically analyze the impact of Mingming Mangmang’s gross margin and low-price strategy on franchisee profitability.

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Mingming Mangmang was formed by the merger of “Lingshi Mangmang (Snack Busy)” and “Zhao Yiming Snacks” in November 2023, and is a leading enterprise in China’s bulk snack industry. According to its post-hearing document set from the Hong Kong Stock Exchange, the company adopts a typical “low gross margin, high turnover” operating model [0]:

Time Period	Gross Margin	Adjusted Net Profit Margin
2022	7.5%	1.9%
2023	7.5%	2.3%
2024	7.6%	2.3%
First 9 Months of 2025	9.7%	3.9%

• Gross margin increased from 7.5% in 2022 to 9.7% in the first nine months of 2025, representing a 2.2 percentage point growth
• Adjusted net profit margin doubled from 1.9% to 3.9% over the same period
• Compared with its competitor Wanchen Group, Mingming Mangmang’s gross margin (9.3%) in the first half of 2025 was still 2.1 percentage points lower than that of Wanchen Group (11.4%) [0][1]

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Mingming Mangmang’s low-price strategy is built on the following business model:

1. Procurement Cost Advantages Driven by Scale Effects
   • As of November 30, 2025, the company has a total of 21,041 stores (including 21,018 franchise stores, accounting for 99.9%)
   • Adopts a “direct supply from manufacturers” model, simplifying intermediate circulation links
   • The average selling price of products is approximately 25% cheaper than similar products in offline supermarkets
   • The average number of SKUs per store is twice that of supermarkets of the same scale [0]

2. Revenue Structure Characteristics
   • In 2024, 99.5% of the company’s revenue came from selling goods to franchisees
   • Franchise fees and service revenue accounted for less than 0.5%
   • The essence of the business model is “exchanging scale for profit”, achieving small profits but quick turnover by supplying goods to a large number of franchisees [0]

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Despite the continuous improvement in the company’s gross margin and net profit margin, the survival status of franchisees is not optimistic:

• Intensified industry competition has triggered frequent price wars
• Profit margins on some traffic-driving products (such as beverages) are only RMB 0.2 per unit, essentially equivalent to selling at a loss
• Profit margins on pre-packaged puffed food are only RMB 0.1-0.3 per unit [2]

• The industry average payback period has lengthened to approximately 29 months
• Typical store investment cost: RMB 850,000-1,000,000 per store
• Monthly turnover needs to reach RMB 300,000 to break even (based on RMB 60,000 in gross profit)
• In actual operations, many stores struggle to reach RMB 300,000 in monthly turnover [2]

• Franchisees are facing more severe overstocking issues than before
• Handling of near-expiry food has become stricter; stores found with near-expiry food are immediately closed
• Inventory turnover pressure continues to increase [2]

• Stores are overly dense in some areas (e.g., 3 stores can be opened in a single town)
• New franchise stores can be opened with only 500 meters between existing stores, lacking effective protection
• Resulting in severe dilution of customer traffic per store [2]

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Indicator	Mingming Mangmang	Wanchen Group
2024 Revenue	RMB 39.344 billion	RMB 32.329 billion
2024 Net Profit	RMB 913 million	RMB 823 million
First Half of 2025 Gross Margin	9.3%	11.4%
Number of Stores as of June 2025	16,783	15,365
Operating Model	Focus on Turnover Rate	Focus on High Gross Margin

The two companies have chosen different strategic paths: Mingming Mangmang pursues extreme turnover and traffic monetization, while Wanchen Group tends to focus on higher unit product profits [1].

• Severe Homogenization
  : 56.4% of consumers believe that products in snack collection stores are highly homogeneous
• Vicious Cycle of Price Wars
  : Products, pricing, and store decoration styles are highly similar, leading to low consumer loyalty
• Risk of Capital-Driven Premature Maturity
  : After rapid expansion, enterprises find themselves in a “catch-22” situation
• Low Net Profit Margin
  : The industry’s net profit margin is only 2.5%-2.75%, equivalent to earning only RMB 1 for every RMB 40 sold [2][3]

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1. Limited Room for Negotiations with Upstream Suppliers
   • As the scale base expands, the room for further price reductions narrows
   • Profit margins of upstream suppliers are continuously compressed, casting doubt on the stability of cooperation

2. Sustained Pressure to Concessions to Downstream
   • Competitors are following up with price reduction strategies, making it difficult to end price wars
   • Franchisees’ gross margins are repeatedly compressed, and profit margins continue to narrow

3. Transforming to Full-Category to Seek Breakthroughs
   • Mingming Mangmang launched its Version 3.0 store model and “Zhao Yiming Budget Supermarket” in February 2025
   • Added categories such as general merchandise and daily chemicals, stationery and trendy toys, baked goods, and frozen food
   • Has not yet involved fresh produce categories such as vegetables and fruits [1]

1. Market Scale Still Growing
   • The market size of bulk snacks reached RMB 140 billion in 2024
   • The compound annual growth rate from 2020 to 2024 was approximately 47%
   • The number of stores is expected to exceed 45,000 in 2025 [3]

2. Capital Market Support
   • Has passed the Hong Kong Stock Exchange hearing, and will gain financing capabilities after listing
   • Stable shareholder structure (the two founders control 61.83% of voting rights)
   • Industry shareholders such as Haoxiangni and Yanjin Shop provide resource support [0]

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Mingming Mangmang’s low-price strategy faces severe challenges in sustaining franchisee profitability.

1. In the short term
   , the company has maintained a relatively stable gross margin through scale effects and supply chain integration, but franchisees’ profit margins are being continuously compressed by fierce market competition.

2. In the medium term
   , the industry’s dividend period has passed, and issues such as excessively high store density, severe homogeneous competition, and frequent price wars have led to longer payback periods and increased profitability difficulties for franchisees.

3. In the long term
   , if the company cannot achieve differentiated breakthroughs and refined operations, relying solely on scale expansion and low-price strategies will be difficult to sustain the profitability of franchisees. While the company’s strategic direction of transforming into a full-category “hard discount supermarket” is correct, its effectiveness remains to be seen.

• Carefully evaluate the competitive situation in the regional market
• Pay attention to incremental opportunities brought by the company’s full-category transformation
• Prepare mentally for a payback period of more than 30 months
• Strictly control inventory and operating costs

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[0] The Paper - “Snack Chain Mingming Mangmang Passes Hong Kong Stock Exchange Hearing: Over 21,000 Franchise Stores” (https://www.thepaper.cn/newsDetail_forward_32333925)

[1] Sina Finance - “Mingming Mangmang vs. Wanchen Group: Turnover Rate vs. Profit Margin Showdown Between Two Bulk Snack Giants” (https://finance.sina.com.cn/stock/stockzmt/2025-11-03/doc-infwcefv1408600.shtml)

[2] CBNData - “Franchisees Struggle to Recover Costs: Is the Bulk Snack Business No Longer Profitable?” (https://www.cbndata.com/information/294592)

[3] 21st Century Business Herald - “Behind the Frenzy of Bulk Snacks: Urgent Need to Balance Scale, Low Prices and Profitability” (https://www.21jingji.com/article/20250307/herald/96b0e79c69079c39586b3748f153afb6.html)"