In recent months, more brand owners have been adding my WeChat via the official account, and most of them talk to me about snack discount stores. "We have always supplied through distributors, and now we want to switch to direct supply, but the prices required by the snack system are all below our landed cost, and our shipping system can't change. Is there a way to handle this?" Also, "The regional company has been doing this, and the volume is getting bigger, but we still don't know enough about this channel. What model is it exactly, and how will it develop? We want to study it in depth." More common are requests like: "We mainly did online before, and this year we plan to expand offline. Is there a way to connect with snack store systems?"
More and more brands are paying attention to the snack store channel and seeking to supply it.
But just last year, many brands thought that selling snacks at low prices couldn't last, and they had to resist businesses that affected their price system. Some leading brands have even adjusted their logistics models for snack store systems this year, with goods going directly from factories to the snack store central warehouses. Why the rapid change? The reason is simple: snack discount stores have completely exploded.
According to estimates, in 2022, the number of snack discount stores nationwide was between 8,000 and 10,000, with a scale of about 30 billion yuan. It is expected that by the end of 2023, it will reach 22,000 to 25,000 stores, with sales scale reaching 70-80 billion yuan. Industry insiders reveal: Now a leading snack store company can ship 500 million yuan to stores per month, and the pure monthly increment is between 60-80 million yuan. And the speed is still increasing.
No brand can ignore such a fast-growing channel. But the problem is that snack stores use a buyout model rather than credit sales, and they carefully select categories and SKUs. Even first-tier brands have extremely low bargaining power when entering leading snack store systems. Things are changing so fast that brands have shifted from neglect to attention, and even anxiety. If they don't embrace it, they lose sales. If they embrace it, they worry about impacting their traditional channel pricing. Many brands have adopted measures like changing specifications, packaging, or customizing products for snack store systems... Despite this, many distributors' businesses have still suffered declines of 30% or more. Some distributors say bluntly that they may not survive this year.
Why do small snack stores have such a huge impact on the upstream and downstream of the FMCG industry?
Some say this is a bubble blown by capital that will burst sooner or later. Is that really the case?
To figure out these issues, we have done a lot of work over the past six months. We visited snack stores in different regions, compared prices, observed customer flow changes, and talked with consumers. In a store in Chengdu, a young girl said: "I don't know why, but every time I come in, I unconsciously buy a lot of things." We saw customers queuing to check out at this store, while a Liangpin Shop 10 meters away was almost empty. Is it selling at a loss for publicity? The owner told me, "Our profitability is very good." We had in-depth exchanges with the founders of snack store systems to understand what they are really doing. We interviewed franchisees from different systems and regions, carefully inquiring about their input-output and store operating data. We consulted investors on why they invest real money in this track and what their logic is. We had in-depth exchanges with brand owners and distributors to understand their real situations, impacts, and coping strategies. We distributed over 100 survey questionnaires and collected a large amount of valuable first-hand information. We also did extensive desk research, comparing the development of foreign retail formats. During this process, I discovered some interesting phenomena.
First, most people have narrow information and can only see part of the picture.
Cognition depends on the information environment. Since everyone is in a specific environment and can only judge based on what they see and hear, most people have a partial perspective.
Second, without deep thinking, one can only see the surface.
Many people think of snack stores as low-price competition. But few ask why they can achieve low prices, and sustain them. Staying at the surface makes it impossible to understand what changes are happening now and what the long-term impact will be.
Third, those whose interests are affected will instinctively resist.
Facing negative impacts, people instinctively resist. When their business is impacted, they label it as "it's just...", which prevents many from understanding new things and seizing opportunities.
These are common phenomena when people face things they don't understand. As a professional media, New Distribution has always been committed to providing professional reports and interpretations for the FMCG industry, helping our users deeply understand industry changes.
Therefore, we believe it is necessary to comprehensively sort out and systematically interpret the currently hot snack hard discount channel, providing our users with a basis for judgment and decision-making. Hence, we wrote the "China Snack Hard Discount White Paper (FMCG Industry Insights 2023)", systematically sorting out and interpreting the past, present, and future of snack hard discount from the perspective of the FMCG industry.
The white paper is divided into five parts:
1. Background Analysis: The Background of the Rapid Outbreak of Snack Hard Discount 2. Model Deconstruction: The Hard Discount Model of Low Gross Margin and High Turnover 3. Landscape Interpretation: The Landscape and Evolution of the Snack Hard Discount Industry 4. Survey Summary: Impact and Responses of Brand Owners and Distributors 5. Trend Insights: Supply Chain Revolution under Consumer Sovereignty
Through this report, you will understand:
Bulk snack stores have accelerated expansion since the end of 2022, but it is a validated business model, not a new thing burned by capital.
Many people fail to understand snack stores and their true impact because they only see the surface of low prices.
But the core of interpreting snack stores is not the "bulk" format, but the "hard discount" business model under the economic cycle. Bulk snack stores are actually a combination of the hard discount business model and the snack category. Why can snack stores grab market share? On the surface, it relies on low prices, but the core question is: why can they achieve low prices? And why can low prices be sustained? In the white paper, we provide a detailed breakdown.
In addition, we elaborate on the industry landscape and evolution:
What are the core coverage areas and store numbers of the current major snack discount systems? What are the core trends in industry expansion? What stage is the snack hard discount industry in now? What is the overall market capacity? What are the evolution trends? Will a single chain system with 10,000 stores emerge? We will give you a global grasp from a cyclical perspective. Moreover, we conducted detailed surveys for brand owners and distributors. What is the cooperation situation, problems, and future trends between brand owners and snack discount stores? What are the specific strategies and current situations of companies cooperating with snack systems? What important findings do we have? What are the processes and precautions for brand owners to connect with new channels? The white paper will answer these one by one. What is the actual impact of snack discount stores on distributor businesses? What are the states and countermeasures of different distributors? What important findings do we have? And under the trend of local supply chains being squeezed, how should distributors respond? You can find answers in the white paper. This white paper, from the perspective of the FMCG industry, through extensive surveys, interviews, and research, analyzes the cooperation trend between brand owners and snack hard discount, interprets the impact of snack hard discount on local commercial systems, and helps brand owners and distributors objectively and deeply understand industry trends and meet challenges.
Our research methods:
First, data. Data represents facts and rational reasoning.
Second, history. Is this truly new, or has it existed before? What are similar cases, and what are others' experiences?
Third, logic. What is logic? Simply put, it is the framework and rules of thinking.
Study data to understand the current state. Study history to know how the present came to be. Combining the two, through underlying logic, we judge the future direction: Hard discount is essentially not a retail format, but a business model pursuing ultimate efficiency, accompanied by a supply chain revolution under the era of consumer sovereignty. Channels are from the brand/factory perspective, while supply chains are from the terminal/consumer perspective. The discourse of the era will gradually shift from channel changes under brand sovereignty to supply chain revolution under consumer sovereignty. It is not a complete substitute for traditional supply chains; for a period, it is a squeezed coexistence, which will scatter the existing system. What trend insights do we have? The white paper will present them one by one at the end. For example, high-quality factories, including some major brands' own factories, become OEMs for channel products/brands. Offline retail has limited shelves, and more small and medium brands/white labels will form a symbiotic relationship with regional hard discount. Hard discount impacts local commercial systems, reducing the terminals available to distributors, and distributors whose breakeven points are broken will exit the market.
Written at the end
October 9-11, 2023, the 5th China FMCG Conference will be held in Shenzhen. On the morning of the 10th, we have specially set up a parallel forum on [Snacks and Discount Stores]. At this forum, we will officially release the "China Snack Hard Discount White Paper (FMCG Industry Insights 2023)". The full version is nearly 80 pages, and pre-sales start today. Through detailed data, rich charts, and concise text, we let you understand the past, present, and future of snack hard discount in the shortest time. Epistemology determines methodology. Understanding and cognition of things determine current strategies and future directions. From the perspective of the industry chain and long cycle, re-examine current and future development. In the complex surface, clarify the context, see the essence, discern trends, and seize opportunities. Welcome to add WeChat to contact us. Attached is the outline of the full version of the "China Snack Hard Discount White Paper (FMCG Industry Insights 2023)".