Text|Zhijin Finance Dazhao.With the efforts of Chinese foodies, there is never a shortage of new tricks in "eating circles".
In 2023, snack discount stores of various brands such as Zhao Yiming Snacks, Laiyoupin, Snacks are Busy, Sugar Nest Snacks, Snack Preferred, and Love Snacks will spring up like mushrooms after a rain. Subsequently, the integration, acquisition, and shareholding incidents of the mass snack industry came and went, starting a battle for new channels.
According to iimediaresearch, the market size of China's snack collection stores will be 80.9 billion yuan in 2023 and is expected to reach 123.9 billion yuan in 2025.
While snack discount stores are rapidly expanding their stores to seize market share, as of October 2023, the number of snack collection stores in China has exceeded 220,000 units.
Dongxing** research report pointed out that at present, snack discount stores are in the stage of rapid "horse racing". Due to the pursuit of low prices, the profit margin of snack discount stores is low, and the ultimate chain management and scale effect are the magic weapons to win, therefore, under the intensifying competition, the pressure on the head brand increases.
At the beginning of 2024, snack discount stores have set their sights on "nationalization".
The snack group is very busy and revealed that it plans to invest more than 1 billion yuan in the next six months for the development of the national market, focusing on the northern region. Almost at the same time, Wanchen Group also announced that in order to speed up the process of nationalization of the brand, it plans to invest about 1.2 billion yuan in the next six months for brand building, chain construction, operation team building, franchisee support in the process of national market development, focusing on the layout of the southern market.
Several major snack discount brands have the meaning of short-term combat, if you invest 1 billion, I will invest 1.2 billion, which is simply "close to the face".
The pattern of "Wanchen in the north, busy in the south, Ming in the west, and one in the east" formed before has gradually evolved into a situation where the Wanchen system and the very busy department compete for hegemony. With the influx of a large amount of capital and the promotion of "nationalization", the spheres of influence of the two giants will inevitably overlap in the future.
Tan Zhiwang, a partner of Wushi Innovation Capital, once told the outside world that the markup rate of snack discount stores is the lowest among all chain formats, with a gross profit of less than 10 points for goods and less than 20 points for stores, adding up to a gross profit of about 30 points. Intuitively speaking, products with a factory price of 5 yuan, snack discount stores can sell for 65 yuan, while the traditional supermarket price is more than 10 yuan. The ability of this low markup rate lies in the fact that snack mass stores "do not charge manufacturer fees, do not press the ** business account period, and do not return goods", so snack mass stores can often get "naked prices".
The higher gross profit margin attracts more and more participants, and in this young track, the store is the biggest battlefield, and the air is full of "gunpowder smell".
In 2023, the competition in the mass snack industry will intensify, and there will be a round of adjustment in the core areas of each company from 2024 to 2025.
Although the snack discount store is a new format that has only become popular in China in recent years, the format has appeared overseas for a long time, and its essence is a retail format that achieves small profits and quick turnover, rapid store expansion and continuous growth driven by business scale and turnover efficiency.
Since its listing around 2005, Dollar General and Dollar Tree, the largest discount store chains in the United States, have continued to grow in operating income for nearly 20 years, and both companies have 10,000 stores. Japan's 100-yen store brand Daiso and soft discount store brand Don Quijote have also grown steadily over the years.
According to Deloitte's data, in the list of the world's top 50 fastest-growing retail brands from 2015 to 2020, seven companies entered the discount store retail format.
Overseas mature chain discount stores sell a wide variety of products. For example, daily consumables account for the largest proportion of the products sold in the store, usually more than 70%, including various daily cleaning products, packaged foods, health medicines, pet supplies, tobacco, etc., in addition to fixed $1 products and seasonal products to attract customers.
A review of Dahler's historical same-store revenue performance shows that the company's same-store sales have been growing positively for 31 consecutive years, and in the early 90s, the subprime mortgage crisis in 2008, the impact of the new crown epidemic in 2021 and other deteriorating U.S. economic conditions, Dale's same-store sales growth rate is better. Reflecting the impact of the recession on consumers' purchasing power, consumers are more sensitive to products**.
Consumers usually live within a radius of 3-4 miles from the store and about 10 minutes by car, and the dense layout provides a convenient shopping experience for consumers, covering an average of about one community chain discount store per 10,000 people in the United States. About 75 percent of its stores are located in towns with populations of 20,000 or less, concentrated in population centers with a high proportion of low-income earners, and more than half of its customers earn less than $50,000 a year.
Compared with overseas mature markets, the domestic snack discount store format is still in the early stage of development, and the main SKUs in the store are snacks and beverages, and there are basically no other categories of consumer goods.
In addition, there are obvious differences between domestic and foreign discount stores, and the core ** merchants of Dale include Coca-Cola, Pepsi, Mars Foods, Nestle, Procter & Gamble, Unilever, General Mills and other leading brands in sub-categories. In order to ensure profits, most snack discount stores in China mainly sell white-label products.
However, the reason for choosing to start from the snack field can also be understood, there are many manufacturers in the snack industry, the supply is abundant, the category demand is relatively optional, it is easy to generate inventory and there is a discount on the tail goods, and the channel bargaining power is usually higher, which is conducive to taking goods and stocking up in the early stage of opening a store. In addition, the demand for snacks is usually stimulating, and snacks require the sales side to buy immediately, so offline chain discount stores that can be fully close to consumers are naturally more suitable for snacks.
Moreover, the logic of store location is similar, snack discount stores are generally opened in the core of the county, at the crossroads. The advantage of this kind of site selection is that through the display at the gate, the brand image of several sides can be displayed, and then consumers can intercept the flow of consumers on the road to and from work or pick up and drop off their children in the county, so as to increase the number of people entering the store. And through the layout of this core area, it radiates and serves the residents of the surrounding communities.
Excluding the population of 19 first-tier cities and new first-tier cities in China, there are 190 second- to fourth-tier cities in China, with a population of about 7400 million people, which provides a lot of growth potential for snack discount stores, and in the future, domestic snack chain discount stores may grow into 10,000-store-level chain brands such as Zhengxin Chicken Chop and Mixue Bingcheng.
This is also one of the important reasons why snack discount stores are favored by capital, according to the statistics of Enniu data, in 2023, the snack industry will have more than 10 annual financings, and there will be financing news basically every month.
Cost performance is king, and discounted consumption is a new consumption trend since 2023.
In the past year, supermarket chains such as Yonghui Supermarket, Jiajiayue, BBK, and Hema have launched discount zones, and this discounted retail trend has further evolved into a fierce battle for discount stores in the snack field.
Kaiyuan ** pointed out in the research report that behind the trend of discounting large supermarket chains, consumers are facing the new economic cycle and consumption environment, and the demand for essential consumer goods has changed, that is, the pursuit of the most extreme low-price satisfaction under the premise that the quality cannot be reduced.
From affordable goods such as a carton of milk and a bottle of shampoo to luxury goods such as leather bags and watches, discount retail has penetrated into all aspects of residents' consumption and has become a familiar consumption habit and lifestyle.
The 2023 McKinsey China Consumer Report believes that this reflects the characteristics of Chinese consumers who "choose more wisely and have not downgraded their consumption".
The snack discount store has the characteristics of "good price", "good thing", "good shopping" and "good buying", which is highly consistent with the consumption characteristics mentioned above. Judging from ** only, the goods in the snack discount store are discounted compared with offline traditional and online e-commerce**, taking Oreo's birthday cake and biscuits as an example, the price of the product ** supermarket is 9 yuan, and the e-commerce platform ** is about 69 yuan, while in the snack discount store only 54 yuan, the overall discount is about 6% off - 8% off, full of attractiveness.
In the final analysis, the essence of mass merchandising is the contention of product cost-effectiveness, especially in lower-tier cities, where the competitiveness of the product is directly determined.
One of the reasons why snack discount stores are low prices is that they have strong chain management capabilities. It cooperates directly with well-known brands, eliminates middlemen, and reduces costs through large-scale centralized procurement and direct transportation. In addition, the stores are located in third- and fourth-tier cities, and the rent of shops and the remuneration of employees are cheaper.
But low prices have never been able to form a core competitiveness. Being able to make the best to a very low level and continue to make money is the core ability that mass snack stores really need to build.
For consumers, low prices are indeed attractive, but product quality and environmental services are also important factors for people to consider. On the Black Cat complaint platform, many netizens have complained about the food quality of discount snacks; A few days ago, it was even revealed that the franchise store of a certain brand was closed, which was suspected of poor management.
This practice of sacrificing quality in exchange for low prices not only affects the health of consumers, but also reduces the consumer experience and product repurchase rate, which in turn affects the long-term development of the brand.
It should be pointed out that even if snack discount stores can maintain low price advantages and achieve profitability through iterative optimization of the first chain, low prices and discounts should not be the only selling points of snack discount stores.
In the future, how to develop with a long-term strategy is a question that enterprises should think about. For example, in addition to low prices, create more popular product categories, form more loyal customers, and strengthen user stickiness. As for how to create a popular model, it is necessary for mass snack companies and manufacturers to jointly develop or cooperate with other brands to create cross-border products.
Wang Xing, the founder of Meituan, summed up a rule, "The cheap defeat the expensive, the best defeat the poor, the serious defeat the rash, the patient defeats the impetuous, the diligent defeat the lazy, and the reputable defeat the unreputable." ”
There is nothing wrong with this sentence itself, but after returning to the essence of business, we can find that simple cheap cannot defeat expensive, but only cheap and high-quality.
Reference: Channel Reform Leads Enterprise Growth, Chain Discount Store Format Has Broad Prospects - Industry In-depth Report", Open Source**.
Blue Book of China's Snack Wholesale Industry, CIC Consulting.