Image credit: Visual China

Recently, Bestore Co.,Ltd. (603719.SH) has been embroiled in public opinion due to being reported by counterfeit bloggers for 'faking ingredient lists', with related topics appearing on multiple hot searches and attracting widespread attention.

Previously, bloggers 'Song Brother Da Hu' and 'Bounty Hunter Ashes' jointly released multiple videos questioning Bestore Co.,Ltd.'s ingredient lists for suspected falsification. Among them, cassava starch was found mixed in lotus root powder products, while the ingredient list for hot and sour powder products showed sweet potato powder, but test results showed no detection of sweet potato, cassava, or potato components.

On November 5, Bestore Co.,Ltd. responded to Blue Whale News reporters, stating, 'After preliminary investigation, the various indicators of the relevant products in our company and the manufacturer's multiple inspections conducted this year are all qualified. We are currently cooperating with the market supervision department's random inspections. The results need to be awaited for the market supervision department's publication, and the company is conducting internal investigations such as reviewing inspection records.'

In addition, Bestore Co.,Ltd. also stated that the lotus root powder mentioned by the bloggers was respectively inspected by different authoritative third-party testing institutions in June, July, and September 2024, including multiple tests including specific gene component identification, with the test conclusion: no detection of cassava components. The hot and sour powder mentioned by them was tested by two testing institutions in September and October 2024, with all indicators of the product qualified, and previous test results also showed that the sweet potato powder cake contained sweet potato-derived components and no detection of corn, wheat, or cassava-derived components.

Image source: The testing report of 'Guixiang Nut Lotus Root Powder' and Sour Spicy Noodles provided by Bestore Co., Ltd.

On the afternoon of November 4, Bestore Co., Ltd. has already released a statement on its official Weibo account, 'After preliminary investigation, various indicators of the related products in multiple inspections conducted by the company and manufacturer in this year are all qualified. Currently, the local regulatory authorities have sampled the company's relevant products and initiated an investigation.'

Image source: Bestore Co., Ltd. official Weibo

Subsequently, the market supervision department of Dongxihu District in Wuhan issued a situation report, stating that recently, a whistleblower provided clues about Hubei Bestore Co., Ltd., located in Dongxihu jurisdiction of Wuhan, suspected of commissioning production. The clues involved 'Sour Spicy Noodles not detecting sweet potato starch' and 'Guixiang Nut Lotus Root Powder detecting cassava genes.' The market supervision bureau of Dongxihu District in Wuhan attaches great importance to this matter, has initiated an investigation, and will handle it in accordance with the law and regulations.

Regarding the doubts raised by anti-counterfeit bloggers about the historical reports of lotus root powder not covering batches before July, Bestore Co., Ltd. stated that the lotus root powder in question was inspected by different testing institutions in June, July, and September 2024, including multiple tests including identification of specific genetic components, with the conclusion that no cassava components were detected. The product batch inspected in June is 2024-3-10.

Lanjing News journalists noticed that currently, 'Lotus Root Powder' and 'Sour Spicy Noodles' products are no longer available in Bestore Co., Ltd.'s official flagship stores on multiple platforms, and several official related live broadcasts have disabled comments.

In response, Bestore Co., Ltd. mentioned that both products have not been taken down and are still being sold normally. Due to the recent increase in purchases, some online channel products are sold out, while offline channels currently have sufficient supply, allowing consumers to make purchases as usual.

Fujian Huace Brand Positioning Consulting Founder Zhan Junhao believes that in handling public relations crises, Bestore Co.,Ltd. should continue to cooperate with regulatory authorities, promptly disclose investigation results, and respond to public doubts with a transparent and fair attitude. At the same time, it can rebuild consumer trust by inviting third-party authoritative institutions to conduct tests, carry out consumer communication activities, etc. In addition, companies should take this opportunity to strengthen internal quality management, ensure product quality, and avoid similar crises from happening again.

In addition to the product counterfeiting scandal, Bestore Co.,Ltd.'s performance is also at a critical juncture. According to the third quarter report released by Bestore Co.,Ltd. for 2024, the company achieved a revenue of 5.48 billion yuan in the first three quarters, a year-on-year decrease of 8.66%; net income attributable to shareholders was 19.3903 million yuan, a year-on-year decrease of 89.86%.

One of the important reasons affecting performance is the pricing strategy that Bestore Co.,Ltd. has been implementing since last year. Bestore Co.,Ltd. also mentioned in the third quarter report that the company has implemented a price reduction strategy for some products in the store channel since November 2023, which has had a certain impact on gross margin. Financial report data shows that Bestore Co.,Ltd.'s net margin for the first three quarters was 0.3%, a year-on-year decrease of 90.57%; the gross margin was 26.84%, a year-on-year decrease of 5.96%.