The snack market is too crowded and can’t accommodate more people

The snack industry is experiencing fierce market competition. With the entry of new players such as Cha Yan Yue Se, traditional brands and hypermarkets are facing challenges of price wars and market saturation. In addition, online channels are also showing signs of recovery.

The snack market has become a popular direction for new consumption.

Recently, Cha Yan Yue Se officially launched its mass-market snack business and opened its first offline snack grocery store in Changsha. In addition to Cha Yan Yue Se, leading tea brands including Heytea, Nayuki’s Tea, Mixue Ice City, and Shanghai Auntie are all developing snack businesses.

Judging from some official data currently disclosed, these tea brands have achieved some results in cross-border operations.

Take Cha Yan Yue Se as an example. From July 2023 to June 2024, Cha Yan Yue Se's snacks have achieved sales of RMB 100 million in e-commerce channels, with 1.44 million fans on its Taobao store, and sales of its popular instant noodles have exceeded 700,000. It is reported that Cha Yan Yue Se's retail products currently account for 30% of its total revenue.

However, it is worth discussing that when the novelty that cross-border business brings to consumers gradually fades away, can the entire retail track still accommodate one dreamer after another?

In this field, mass-market brands have set up stores everywhere. After the merger of Snacks Mang and Zhao Yiming, the number of stores has reached 10,000, and the number of stores of Haoshanglai is approaching 10,000... Everyone in the consumer market wants to do snack business, but little do they know that this field has already been overcrowded.

Low prices are hurting the snack industry

An organization has summarized the pricing rules of current snack channels: the pricing of popular mass-market retail stores is basically 20% to 40% lower than that of traditional retail stores. In more detailed terms, the prices of supermarkets are generally 20% to 75% higher than those of mass-market stores; convenience stores are 44% to 85% higher; and the deviation of e-commerce channels is around 7% to 59%.

As industry competition becomes increasingly fierce, the low-price strategy has become a consensus in the snack industry. To this end, many leading snack food companies have launched a wave of price cuts.

However, as the entire snack market has already been in a state of internal competition, many snack shops that seem to focus on cost-effectiveness may not be as cheap as advertised.

For example, as a new cross-border player, Cha Yan Yue Se's snacks do not have many discounts. Take Cha Yan's French fries as an example. The price in the new store is 2.5 yuan per bag, and the total weight of a bag is 20 grams. The member price is only 20 cents cheaper. Compared with some mainstream French fries products on the market, such as Crispy Shengsheng, Lay's, and Three Squirrels, this price is actually not cheap.

In fact, although the cheapness of hypermarkets seems to have become a consensus in the consumer market, consumers have questioned more than once how long the "cheapness" can last, or whether the claimed "value for money" route is really cheap.

Last year, a reporter conducted on-site statistics and found that in a certain hypermarket retail store, the price of a box of Mengniu pure milk was several yuan higher than the same product in the supermarket. This situation is not accidental, and most of the products involved are common mass brands. This also indirectly exposes a long-standing drawback of the hypermarket snack market: the low-price route can only rely on white-label products.

Of course, it has long been no secret that white-label products are the cause of the "price war" in the snack market.

However, the reason why this problem persists is that mass-market snack brands have been unable to gain pricing power in the supply game with non-white-label brands. In addition to Mengniu milk, Coca-Cola is also a typical example.

Previously, an announcement on the Internet showed that some mass-market snack brands would remove Coca-Cola and Sprite from their stores, on the grounds that Coca-Cola was raising prices in a number of sales channels across the country.

Although some brands later denied it, Huachuang Securities Research Report also predicted that the proportion of traffic-generating products (brand type) in mass-market snack SKUs is declining. Once consumers are surrounded by white-label products, the "price-performance ratio" of the snack market becomes a false proposition for capital's self-entertainment.

This easily reminds people of Pinduoduo's past. In the early days, Pinduoduo also rose by the low prices of white-label products. But now Pinduoduo has risen rapidly by relying on its own scale and has already reversed this situation and gained the right to speak in the game with non-white-label products. However, due to the differences in their offline and online models, it is difficult for mass-market snack brands to have this ability to reverse the situation.

In fact, in the period of downward consumption, the "price war" has been going on until now. Not only are the mass-market brands somewhat exhausted, but even the traditional brands are somewhat unable to survive.

In the past, all snack brands advocated high-end products, and Bestore was the first traditional snack brand to lower its profile and start a price war. However, in the first half of 2024, Bestore's gross profit and net profit both fell due to the price war, with operating income down 2.52%, non-net profit down 93.97% year-on-year, and net cash flow of -90.81%.

As for gross profit, from 2019 to 2023, the comprehensive gross profit margin of Liangpin Puzi was 31.87%, 26.89%, 26.77%, 27.57% and 27.75% respectively. In the first half of this year, it dropped again to 26.39%.

It is worth mentioning that among a series of leading snack brands, Bestore has the highest average customer spending.

The "Ranking of Average Customer Price of Major Well-known Snacks in 2024" shows that Liangpin Puzi ranks first with 58 yuan, while the average customer price of latecomers such as Snacks Are Very Mang, Haoshanglai, Zhao Yiming, Love Snacks, and Tangchao is only 30 or 40 yuan.

Three Squirrels was also affected by the "cheapness". In 2021, the gross profit margin of Three Squirrels was still above 29%, but by 2023, it had dropped to 23.33%.

If the current consumption trend does not change, and everyone continues to simply chase after prices as before, treating low prices as a panacea, it may not be a matter of making less money, but rather damaging the foundation of the snack industry, with the snack mass-market model being the first to be affected and the most.

Data shows that from 2017 to 2022, the compound growth rate of the snack mass-marketing model was as high as 114.6%, but by 2022-2027, this figure was greatly reduced to 27.3%. Times have changed, and perhaps this market should think carefully about whether there are better means worth using besides virtual price.

After all, you can’t make money by offering truly low prices, but fake low prices will lose consumers.

Traditional brands and mass-market players have their own agenda

Looking at the entire snack market, traditional brands such as Three Squirrels and Bestore are no longer as popular as mass merchandisers such as Zhao Yiming. Currently, these two types of snack manufacturers have gone through a period of fierce competition and are on the verge of a handshake, while many traditional brands are also moving towards mass merchandising channels.

Bestore, Yanjin Shop, Ganyuan Food, Jinzai Food... once became the supply chain of mass-market brands. Mingminghenmang currently cooperates with more than 700 brands, including Yanjin Shop, Weilong, Baixiang, Ganyuan, Daliyuan, and Haoshangni. Wanchen also has many cooperative brands, including Shanghaojia, Xiangpiaopiao, Meikelando, Liuliu Orchard...

The influx of traditional snack brands into hypermarkets is, to some extent, both a compromise made by the industry after the overall consumer market downturn forced it to make way for the consumer, and also a recognition by many brands of the new trend following the innovation of snack channel innovations.

But more importantly, the snack market is facing a cold winter, and former rivals have to huddle together for warmth.

As of now, traditional snack brands are deliberately changing their channel focus.

Taking Yanjinpuizi as an example, data shows that the current leading mass-market snack brands have become Yanjinpuizi’s largest customer. In 2023, the revenue from the mass-market channel accounted for about 20% of the brand’s total revenue.

From 2017 to 2023, the proportion of direct-sale supermarket channels in Yanjinpu has been decreasing, from 53.57% in 2017 to 8.13% in 2023. In contrast, the proportion of new retail channels including bulk and quantitative packaging has risen sharply to more than 70%.

It was the growth potential of the mass-market channel that prompted Yanjinpu to make a strategic investment of 350 million yuan in Mingminghenmang Group.

Coincidentally, Qia Qia is also re-arranging its channels, and its growth rate in the mass-market channels is no less than that of Yanjinpuizi.

In January 2023, Qia Qia Food's revenue from the mass-market channel was only 5 million, but by December 2023, this figure increased to 30 million, and in January 2024, it had grown to almost 50 million. Qia Qia even set an annual sales target of 300 million to 400 million in the mass-market channel in 2024.

Why do traditional brands attach so much importance to wholesale channels?

On the one hand, snack consumption is indeed declining. In 2023, the market size of China's snack industry is about 1,124.7 billion yuan, a year-on-year decline of 3.5%. On the other hand, convenience stores, supermarkets, discount stores, mass-market snack stores, community group purchases, e-commerce platforms... In the context of constantly changing sales channels, snack brands must keep up with the market rhythm.

It is not difficult to understand why mass-market players open their doors to traditional brands. This type of enterprise is good at expanding channels and strengthening supply chains, but product research and development and innovation are a major weakness. Cooperation may be able to meet the needs of both parties in a short period of time.

However, this mutual "compromise" may not be a long-term solution.

One thing that needs special attention is that non-white-label products are not the only ones in mass-market snack shops. Previously, the founder of a mass-market brand publicly revealed that among the 15 categories of the brand, white-label products accounted for 77% of the number and 73% of the total sales. It is not easy for non-white-label products to become the mainstream of mass-market snack shops.

Therefore, although Yanjinpuzi entered the hypermarkets with the intention of turning the hypermarkets into one of their own channels, at the same time, they also became the role of attracting traffic to the hypermarkets.

It is reasonable to predict that as many mass-market snack brands mature and grow stronger, the next step for mass-market snacks will be to gradually eliminate white-label products with poor quality and efficiency, try to cultivate their own brands, and then start full competition with traditional brands.

Hypermarkets will tacitly work towards this goal, but traditional brands do not seem to have found an effective solution. The only good news is that hypermarket snacks need to take their time to compete with traditional brands with their own brands.

Therefore, even after passing the stage of mutual fear, everyone in the snack industry begins to support and utilize each other, which seems to be a win-win situation. But the problem is that once one party can stand on its own, the other party may be ruthlessly suppressed and eliminated by the opponent.

Online brands also want a piece of the pie

In the domestic snack market worth more than one trillion yuan, offline sales have always outperformed online sales. According to statistics, the former accounts for 80% of the total, while the latter only accounts for 20%. This is one of the reasons why offline mass-market snack stores can be opened all over the streets overnight.

But what’s more interesting is that a “mass sales trend” seems to be emerging in the online snack market.

In June 2024, Tmall released the first wave of 618 rankings. In the food store sales rankings, "Bibi Zan", which started as a white-label brand, stood together with leading brands such as Wufangzhai, Three Squirrels, and Nongfu Spring, and finally ranked ninth.

Bibizan is a typical online mass merchandiser. In its Taobao store, there are all kinds of bread and pastries, nuts and roasted seeds and nuts, meat stews, dried fruits and candied fruits... The biggest feature is cheapness. A pack of instant noodles costs less than 0.3 yuan, and they are often sold by box. 63 quail eggs cost 9.9 yuan, and 15 milk crepe cakes cost 19.9 yuan.

On e-commerce platforms such as Taobao, there are countless businesses similar to Bibizan, and some stores even use famous brands to attract traffic.

For example, on the beverage list, a store ranked fourth, and its products included Yuanqi Forest, Guozishuole, Master Kong, Pocari Sweat, Uni-President, Heytea, Nayuki Tea, Nongfu Spring...

Most of them are sold through combination bulk sales, and the price per bottle is lower than most offline channels. For example, the average price per bottle of Yuanqi Forest 900ml large-package iced tea is around 6 yuan, and the price per bottle of Oriental Leaves 500ml is around 4 yuan.

Even the leading brands such as Three Squirrels put on the shelves in the online live broadcast room, and most of the products on the shelves are bulk packaging. It is reported that in the Douyin live broadcast room of Three Squirrels, there are often 20, 30, 50 small packaging units in a bag, and a pound of dried mango and dates with walnuts contain more than 80 pieces. Currently, Three Squirrels has about 40 accounts on Douyin.

Similar to the consumption trends catered to by offline channels, Mintel data shows that 26% of Chinese consumers tend to pursue more affordable food and beverages, and 45% tend to reduce spending by stockpiling through promotions.

In essence, there is not much difference between online mass merchandising and offline stores.

What’s more interesting is that although online channels have always been crushed by offline channels in terms of market share in the snack market, there is a difference in the growth rate.

Nielsen IQ data shows that in 2023, online sales in China's retail market will increase by 5.7%, while offline sales will decrease by 3.6%, showing a narrowing trend. Among them, the growth rate of online sales of food categories is not high, only 0.8%. However, in contrast, sales in offline channels fell by 3%.

There are signs that online snack consumption is recovering. According to a report from Magic Mirror Insight, the online snack market has shown a warming trend in the past year, with sales reaching 136.51 billion yuan, a year-on-year increase of 8.6%, and sales volume increasing by 26.8% year-on-year. Last year, the sales of food and beverage categories on Douyin e-commerce were about 122.8 billion yuan, a year-on-year increase of 58%.

The use of the "mass merchandising concept" has added a bit of impetus to the online snack market, especially with the opening of a large number of offline mass merchandise stores and the internal circulation between brands. Although the online mass merchandise gameplay has existed since ancient times, branding has just begun, which is enough to make Zhao Yiming and others vigilant.

Bibizan is a typical example. Currently, the number of its SKUs exceeds 1,000, but statistics show that on e-commerce platforms, the average price of Bibizan's products is 17.6 yuan, which is lower than most leading brands. Last year, Bibizan began to invest in marketing, upgrade its brand positioning, and even officially announced Guli Nazha as its spokesperson.

Compared with pure online mass-market brands, many offline brands have also started live streaming on Douyin, but their model is still to sell vouchers online and then attract consumers to make purchases in offline stores. It has not deviated from the original model, so it is difficult to say who has more opportunities at the moment. But it is clear that in the battlefield of snack mass-marketing, both sides have begun to "draw swords" from a distance.

All in all, there has never been a moment of peace in the snack industry.

Nowadays, traditional brands have been pulled off the high-end throne by hypermarkets and entered into a brutal state of internal competition. Hypermarket snacks are constrained by white-label products and face the covetous eyes of online competitors. Against this background, the entire snack track has long been overcrowded, and the entry of cross-border players such as Cha Yan Yue Se is actually not a good time.

Fortunately, the top players have not paid attention to the newcomers yet. Because they all know that before long, Cha Yan Yue Se will also start to seek a breakthrough in the crowded snack market like them. Copyright statement: Dao Zong You Li, a new media in the Internet and technology circles.