Fortune’s China 500 ranking contained an unexpected leader. Measured by return on equity, or ROE, Fujian Wanchen Food Group ranked first at 88%, ahead of Pop Mart at 56%.
ROE measures how much annual profit a company generates for each RMB 1 (USD 0.15) of shareholders’ equity. Wanchen may be unfamiliar to the broader public, but its Haoxianglai discount snack stores have become a common sight across China.
The company began as an enoki mushroom grower. Within a few years, it pivoted into discount snack retail and increased annual revenue from RMB 500 million (USD 74 million) to RMB 50 billion (USD 7.4 billion). Its share price rose roughly 20-fold over four years.
Yet discount snack retail is fundamentally a low-ticket, low-margin business. How did Wanchen generate such a high ROE, and can it sustain that level of return?
How a high-turnover model lifts returns
Under the DuPont framework, ROE is calculated by dividing net profit by shareholders’ equity. It can be broken down into three components: net profit margin, asset turnover, and the equity multiplier.
When a listed company owns only part of a subsidiary, the calculation should use net profit and shareholders’ equity attributable to owners of the parent, excluding noncontrolling interests.
Wanchen acts primarily as a supply chain manager and brand operator. Franchisees open and operate most of its stores, while the company manages product selection and supply.
Because many of the products come from established consumer brands, Wanchen has limited room to raise retail prices. It must also leave enough profit for franchisees.
In 2025, its snack business reported a gross margin of 12.32%. Its consolidated net profit margin was 4.71%, while its net profit margin attributable to owners of the parent was about 2.61%. Profit margin, therefore, is not the main source of its high ROE.
With margins limited, the explanation lies largely in Wanchen’s asset turnover and liabilities-to-assets ratio.
Traditional manufacturers often tie up large amounts of capital in factories, equipment, and inventory. Slow customer payments can further increase their financing needs and reduce the efficiency of invested capital.
In 2025, Chinese manufacturing enterprises above designated size, a statistical category covering larger industrial companies, recorded an average inventory turnover period of 22 days and an average accounts receivable collection period of about 69 days.
Wanchen and Busy Ming Group, by contrast, source most of their products from third-party suppliers. Unlike traditional food manufacturers, both companies avoid heavy investment in fixed assets.
Their inventory and receivables also turn over quickly.
Wanchen’s inventory turnover period was 18 days in 2025, while its accounts receivable turnover period was just 0.11 days. Busy Ming’s inventory turnover period was about 12.56 days, and its accounts receivable turnover period was 0.44 days.
For comparison, CITIC’s supermarket and convenience store index recorded an inventory turnover period of about 52 days and an accounts receivable turnover period of roughly five days.
These figures mean Wanchen needs relatively little capital to stock products and collects payment almost immediately after a sale. As a result, only a small amount of capital remains tied up in day-to-day operations.
This high-turnover model reflects the operating capabilities of snack retailers such as Wanchen and Busy Ming. It is also central to the long-term viability of discount snack retail, which depends on tracking shifts in consumer demand and responding through flexible, small-batch replenishment.
Leverage keeps the equity base small
High turnover alone does not fully explain Wanchen’s ROE.
Busy Ming’s ROE is about 28%. The two companies have similar margins and turnover ratios, so the main difference lies in their capital structures.
Wanchen’s liabilities-to-assets ratio reached 74.61% in 2025, compared with 35.84% for Busy Ming. Wanchen therefore had a much higher equity multiplier.
The listed company also does not own 100% of its discount snack operations. When calculating the equity multiplier, noncontrolling interests must be excluded from shareholders’ equity, leaving only equity attributable to owners of the parent. This further reduces the denominator used to calculate ROE.
Taken together, Wanchen’s unusually high ROE is driven mainly by rapid turnover, high leverage, and a relatively small equity base attributable to owners of the parent.
Its leverage reflects how it financed its expansion.
Since entering discount snack retail in 2022, Wanchen has completed only one private placement, raising RMB 200 million (USD 29.6 million) in 2024. It has relied more heavily on borrowings and longer supplier payment terms to fund operations and acquisitions.
Busy Ming, by contrast, has relied more on equity financing. Wanchen also benefited from its status as a listed company, which gave it broader access to borrowing. Busy Ming was unlisted at the time and had less collateral.
Whether Wanchen can sustain its current ROE remains uncertain.
As profits accumulate, net assets attributable to owners of the parent will rise. A Hong Kong share offering would add further equity capital. Assuming other conditions remain unchanged, both developments would reduce its equity multiplier and ROE.
The central issue is how Wanchen allocates capital. It could increase dividends and maintain a degree of leverage, or it could retain earnings, repay borrowings, and continue acquiring minority interests.
Even if its equity multiplier declines and its ROE moves closer to Busy Ming’s, Wanchen could continue generating elevated returns as long as it preserves its rapid turnover and profitability.
More profit is reaching listed-company shareholders
Wanchen’s expansion into discount snack retail followed a multistep process.
Its controlling shareholder first incubated some businesses outside the listed company. Wanchen later consolidated them into its financial statements, expanded through acquisitions, and used minority-interest purchases and transfers of existing listed-company shares to align the interests of key personnel at the acquired brands.
Luxiaochan was initially incubated outside the listed company by its controlling shareholder. Haoxianglai, Laiyoupin, Yadiyadi, and Laopo Daren were acquired through mergers and acquisitions.
Since 2024, existing Wanchen shareholders have transferred listed-company shares to Peng Dejian, Zhou Peng, and Zhang Haiguo.
All three came from the founding or core teams of acquired brands. By early June this year, they had joined Wanchen’s ten largest shareholders. Peng and Zhou also delegated their voting rights to controlling shareholder Wang Zening.
The transactions served two purposes:
- First, they turned the sellers of the acquired businesses into shareholders of Wanchen while keeping them involved in operations. This strengthened the alignment of their economic interests with those of the listed company.
- Second, the transactions enabled Wanchen to recover some minority interests in its subsidiaries, allowing a larger share of the discount snack business’s profits to flow to listed-company shareholders.
Wanchen did not initially acquire 100% of the relevant snack brands. Part of the subsidiaries’ net assets was therefore recorded as noncontrolling interests, while the corresponding earnings were recorded as profit attributable to noncontrolling interests.
Through later purchases of minority stakes, some profit that had previously flowed to minority shareholders was converted into profit attributable to owners of the parent.
More specifically, Peng and Zhou transferred minority interests in subsidiaries to Wanchen while acquiring listed-company shares from existing shareholders.
The relevant announcements did not explicitly describe the two sets of transactions as linked. However, the amounts Peng and Zhou paid for the listed-company shares broadly matched the proceeds they received from selling their minority interests. The share transfer prices were also substantially below prevailing secondary-market prices.
Taken together, the transactions suggest a broader strategy of replacing direct ownership in the subsidiaries with ownership in the listed company.
Zhang’s share acquisition differed from those of Peng and Zhou in both price and scale. It more closely resembled a separate arrangement intended to align his economic interests with Wanchen.
The broader structure resembled an exchange of listed-company shares for subsidiary stakes. However, the controlling shareholder transferred existing shares rather than Wanchen issuing new ones.
Net profit attributable to owners of the parent increased, while the company’s total share count remained unchanged. Earnings per share therefore rose, and existing shareholders were not diluted.
According to Wanchen’s financial disclosures, the share of total net profit attributable to noncontrolling interests fell from 50.65% in 2024 to about 35% in the first quarter of 2026.
Most of the remaining minority interests are held by Wang. If Wanchen continues its previous integration strategy, it may eventually acquire those interests and consolidate them into the listed company.
Any future acquisition could be financed through a new share issuance or with Wanchen’s own funds.
What follows the store rollout?
Wanchen’s growth in recent years has been driven mainly by rapid store expansion.
By the end of 2025, Wanchen and Busy Ming operated about 18,000 and 22,000 stores, respectively. Together, they accounted for more than 75% of China’s discount snack market.
Based on Busy Ming’s pace of expansion beyond 30,000 stores, the two companies could operate a combined 55,000–60,000 locations by the end of 2026.
About 60% of both companies’ stores are in lower-tier markets. At this scale, the industry is approaching a practical limit.
Assuming the two companies operate a combined 55,000 stores and hold an 80% industry market share, China would have about 42,000 discount snack stores in third-tier cities and lower-tier markets.
China has about 18,000 incorporated towns. That would imply an average of roughly 2.3 stores per town.
Assuming 15,200 residents per town and annual gross merchandise value of about RMB 4.5 million (USD 666,133.8) per store, average annual spending would need to reach roughly RMB 690 (USD 102.1) per resident. That would represent more than 5% of the average urban resident’s spending on food, tobacco, and alcohol in 2025.
The calculation is approximate, but it suggests that lower-tier markets are moving beyond the stage when companies could grow simply by replicating the same store rollout model.
As the existing store base expands, industrywide store growth will naturally slow.
Wanchen is pursuing two potential growth drivers:
- The first is the development of customized and private-label products, which could improve gross margins.
- The second is the introduction of chilled beverages with short shelf lives, frozen foods, and licensed merchandise, which could increase revenue per store.
These initiatives have not yet produced a visible effect in Wanchen’s financial statements. Revenue growth continues to be driven mainly by new store openings.
Until another growth engine emerges, investors are likely to remain cautious about Wanchen’s future profit growth and valuation premium.
The metrics used to assess the company must therefore shift away from total store count and toward same-store sales growth, store closure rates, the share of revenue generated by private-label products, and gross margins for new product categories.
If store expansion slows while store-level efficiency continues to improve, Wanchen could sustain growth through stronger unit economics and higher margins.
If store openings slow and same-store performance fails to improve, however, continued rapid growth in revenue and profit will become difficult to sustain.
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How might investors value Wanchen?
Investor enthusiasm surrounding discount snack retail helped drive Wanchen’s share price up more than 15-fold from 2023 through 2025.
In 2026, it continued to outperform the broader market, even as technology stocks and other sectors declined.
After those gains, the market’s central debate shifted to whether Wanchen’s valuation already reflected too much future growth.
At the time of writing, Wanchen and Busy Ming traded at trailing price-to-earnings ratios of about 32 times.
Based on 2026 Wind consensus estimates for net profit attributable to owners of the parent, their forward price-to-earnings ratios were 18.3 times and 20.59 times, respectively.
The gap between trailing and forward multiples reflects expectations of continued earnings growth. The relatively modest forward valuations also suggest that investors are concerned that the expansion of the companies’ store networks is approaching a ceiling.
Similar concerns have emerged around other consumer companies with more than 10,000 stores.
Mixue Group, whose revenue grew by about 35% in 2025, traded at a trailing valuation of about 13 times. Guming Holdings, the company behind the GoodMe brand, reported revenue growth of about 46% and traded at roughly 16 times trailing earnings.
Market pricing is no longer driven primarily by historical growth. The central question is how these companies can continue expanding once their store networks encounter bottlenecks.
Even if Wanchen’s growth slows, its asset-light, high-turnover model gives it strong internal cash generation and the capacity to pay substantial dividends.
At a forward price-to-earnings ratio of 18.3 times, Wanchen has an implied earnings yield of about 5.5%. If it distributed all its earnings, its theoretical dividend yield would therefore exceed 5%.
If future funding needs, including spending on acquisitions and factories, decline and Wanchen raises its dividend payout ratio, its dividend yield could become more attractive.
High-dividend consumer companies such as Shuanghui Development offer yields of roughly 5–7%. Over the medium to long term, Wanchen could gradually shift from a high-growth stock toward a dividend stock.
Investors can assess Wanchen through two lenses:
- The upside depends on whether private-label products and new in-store categories can offset slower store openings and raise the revenue ceiling for each location.
- The downside depends on whether Wanchen can convert its rapid turnover and cash generation into dividends large enough to support its valuation if growth slows.
KrASIA features translated and adapted content that was originally published by 36Kr. This article was written by Fan Liang for 36Kr.
Note: RMB figures are converted to USD at rates of RMB 6.76 = USD 1 based on estimates as of August 11, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.