Click to read the original article for details The leisure snack industry has long been dominated by three giants: Three Squirrels, Bestore, and Be&Cheery. The latest data shows that in 2020, China's leisure food market reached 1.3 trillion yuan, with a compound annual growth rate of over 11% for five consecutive years. With the continuous expansion of market scale, market dividends have also begun to be released. The three giants have successively entered the capital market, and the "weather vane" of competition in the leisure snack industry has quietly changed. The Vanity Fair of Leisure Snacks Opening the Capital Game On July 12, 2019, Three Squirrels was listed on the Shenzhen Stock Exchange as the "first national snack stock." On February 23, 2020, Be&Cheery changed hands for the second time, being acquired by PepsiCo for $705 million (approximately 4.95 billion yuan), becoming its sub-brand. On February 24, 2020, Bestore was listed on the main board of the Shanghai Stock Exchange via "cloud listing," becoming the "first high-end snack stock." ####| Three Squirrels | Bestore Listing Date | 2019-7-12 | 2020-2-24 Listing Venue | Shenzhen Stock Exchange | Shanghai Stock Exchange First Day Market Cap | 8.477 billion | 6.870 billion Current Market Cap | 17.849 billion | 16.144 billion Table | Retail Circle With Three Squirrels and Bestore successively entering the secondary market, and Be&Cheery backed by foreign PepsiCo, the entire leisure snack industry has begun to accelerate capitalization, forming a pattern of capital competition. Since then, Three Squirrels, Bestore, and Be&Cheery have picked up a new "Three Kingdoms" script. The Three Giants' Scattered Warfare Each Has Its Own Strengths With the intervention of capital and the gradual fading of e-commerce channel dividends in recent years, the three-way melee among Three Squirrels, Bestore, and Be&Cheery has intensified, and competition in the leisure snack market has entered a white-hot stage. This is mainly manifested in the simultaneous expansion of online and offline channels while leveraging their respective advantages to break through in the second half of the leisure snack game. From the online channel perspective, Three Squirrels has the highest market share. According to Alibaba platform data, in June 2020, Three Squirrels' market share reached 10.06%, ranking first; followed by Be&Cheery with 5.7%; Bestore ranked third with 4.72%. However, as e-commerce dividends hit bottom, offline channels represented by supermarkets, convenience stores, and food stores, as the main sales channels and consumption scenarios for leisure food, still have considerable market space, attracting Three Squirrels, Bestore, and Be&Cheery to return from online e-commerce platforms and focus on offline development. ####| Three Squirrels | Bestore | Be&Cheery Founded | 2012 | 2006 | 2003 Headquarters | Wuhu, Anhui | Wuhan, Hubei | Hangzhou, Zhejiang Online Share | 74% | 52% | ## Offline Layout Start | 2016 | 2006 | 2017 Offline Strategy | Opening "Feed Store" and "Squirrel Alliance" stores, coordinating with e-commerce platforms | Mainly franchised stores, supplemented by direct-operated stores | Direct-operated, joint venture, and franchised forms Number of Stores | 1103 | 2701 | #### Table | Retail Circle Data Source | Public data, financial reports, etc. *Note: Be&Cheery started offline in 2003, cut offline in 2010 to become pure e-commerce, began laying out offline distribution channels in 2017, and returned offline in June 2019, opening its first "Be&Cheery·Snack Premium" brand direct-operated store. From the offline layout perspective, Bestore has an absolute advantage in store count and offline store operations. By the end of 2020, Bestore's cumulative store count reached 2,701, with offline channels completing 3.685 billion yuan for the year, accounting for 48%, and online accounting for 52%. It can be said to be the most mature player in omni-channel layout among the three giants. Three Squirrels' offline store count exceeded 1,000 in total, with online business accounting for 74% and offline business accounting for 26%. Although heavily dependent on online business, the revenue from online and offline channels is beginning to balance. Three Squirrels and Bestore have long been ahead in offline layout. In contrast, Be&Cheery, which has been focusing on online, has been slower in offline layout. In June this year, Be&Cheery's first franchised store only started trial operation in Wenzhou. (First offline franchised store - Wenzhou "Be&Cheery·Snack Premium" trial operation) Compared with Three Squirrels and Bestore's respective channel advantages online and offline, Be&Cheery, which ranks second in industry share, may have its obvious advantage more from its strong capital strength, and its parent company PepsiCo, which has strong brand power, channel capability, and innovation capability. In addition to focusing on offline layout, the melee among the three giants is also reflected in their continuous efforts to build advantages in their respective brand positioning to break through in the second half of the leisure snack game. First, Three Squirrels, based on its existing little squirrel super IP, strengthens its IP image by placing dolls in offline physical stores, opening Squirrel Town amusement park, and making movies, building core competitiveness through brand IP-ization and product content-ization. Bestore adopts a differentiation strategy, creating a high-end snack brand image. Through high-frequency TV drama placements, it enhances brand national recognition and influence. Be&Cheery, known for creating hit products, focuses on the product end, targeting segmented audiences and scenarios, and creating a cost-effective snack brand. The Story After Capitalization Advances and Retreats Since Bestore's listing and Be&Cheery's acquisition by PepsiCo, the three snack giants have had both advances and retreats in the year and a half so far. "Advance" is reflected in the accelerated transformation in new business layout and industrial chain extension. In terms of new business layout, Three Squirrels established four wholly-owned subsidiaries: "Tie Gong Ji," "Xiaolu Lanlan," "Yang Le Ge Mao Hai," and "Xi Xiao Que," entering instant food, infant food, pet food, and customized wedding gift businesses. In June this year, it also entered the bottled water market, laying out the water beverage business. Bestore launched its first children's snack professional brand "Bestore Xiaoshixian" in May last year, and then launched the fitness meal replacement sub-brand "Bestore Feiyang" in July last year. It also developed To B business, launching "Bestore Go" for the group purchase market. Be&Cheery followed closely, launching the sub-brand "Yeban Xiaolu" targeting the late-night meat and braised snack market, launching the "Tong An'an Little Friend" series of new products, creating star IP products like "Baobaoguo," and entering the artificial meat market. ####| Brand/Field | Positioning/Sub-category Three Squirrels | Tie Gong Ji | Instant food Xiaolu Lanlan | Infant food Yang Le Ge Mao Hai | Domestic pet food Xi Xiao Que | Customized wedding gifts Bottled water | Mountain spring water, sparkling water Bestore | Bestore Xiaoshixian | Children's snacks Bestore Feiyang | Fitness meal replacement Bestore Go | Enterprise and institution group purchase Be&Cheery | Yeban Xiaolu | Late-night meat and braised snacks Tong An'an Little Friend | Children's snacks Artificial meat | #### Table | Retail Circle In terms of industrial chain extension, Three Squirrels invested in building the Three Squirrels Alliance Factory, cooperating with top suppliers in the industry to achieve integration of production, processing, testing, and logistics, and strive for pricing power. Bestore joined hands with the time-honored restaurant brand Xiahua for cross-border cooperation to enter the crayfish market... "Retreat" is respectively reflected in the large-scale reduction of holdings by capital in Three Squirrels and Bestore, and Be&Cheery also began to show sales fatigue. In the capital market, Bestore and Three Squirrels were reduced by shareholders. Three Squirrels was successively reduced by shareholders such as IDG in September last year, cashing out nearly 1 billion yuan, and was reduced again in January this year. Bestore was reduced by Hillhouse Capital in February this year, cashing out over 1.5 billion yuan. In addition, after Be&Cheery was acquired by PepsiCo at a high price, it has maintained independent operation and has not enjoyed any dividends from PepsiCo's channels and dealer system. According to Magic Mirror data from March 2020, Be&Cheery's sales reached 260 million yuan, a year-on-year decrease of 9.3%. In the view of Retail Circle, the reasons for capital's trust crisis in leisure snacks, besides the often-mentioned product homogenization, are more about the slowdown in revenue growth and profit decline of leisure snack giants. In 2020, Three Squirrels' revenue declined for the first time since listing, achieving revenue of 9.794 billion yuan, a year-on-year decrease of 3.72%. Bestore also performed unsatisfactorily, with full-year operating revenue of 7.894 billion yuan in 2020, a year-on-year increase of only 2.32%. Financial Data of Three Squirrels and Bestore for 2020 and Q1 2021 Brand | Indicator | 2020 | Q1 2021 Three Squirrels | Revenue | 9.794 billion | 3.671 billion Revenue Growth Rate | -3.72% | 7.58% Net Profit | 301 million | 315 million Profit Growth Rate | 26.21% | 67.57% Bestore | Revenue | 7.894 billion | 2.574 billion Revenue Growth Rate | 2.32% | 34.83% Net Profit | 344 million | 102 million Profit Growth Rate | 0.95% | 16.06% Table | Retail Circle Data Source | Corporate financial reports With listing as the starting point, Three Squirrels, Bestore, and Be&Cheery have actually come to a new crossroads between advance and retreat. With e-commerce channel dividends hitting the ceiling, the three giants still have opportunities in offline channel layout. Under the external pressure of capital reduction and the embarrassing situation of slowing revenue growth, the three giants may also find new growth curves in the process of actively laying out new businesses. But in the current situation of internal and external troubles, the three giants also face challenges from segmented snack brands such as Genki Forest, Wangbaobao, Zhong Xue Gao, and Saturday, which focus on single categories like soft drinks, cereal, ice cream, and coffee. Whether they can regain their glory in the future remains to be seen. Source: Retail Circle (ID: retailsphere) Author: Zhuo Wenjun PS: From August 24 to 26, 2021, the 2021 (4th) China FMCG Conference hosted by New Distribution will be held in Shanghai. Centered on "Industry Frontier Collection" + "Practical Exploration New Cases" + "Industry Connection New Growth", with 100+ guest speakers and 10 thematic forums, it will bring an ideological feast on industry trends for FMCG practitioners. Some of the confirmed heavyweight guests so far include: **1. Tao Shiquan, founder of Jiang Xiaobai; **2. Yao Xuhong, general manager of Meiyijia Holdings Co., Ltd.; **3. Bi Chaojiao, general manager of China Resources Snow Breweries (China) Marketing Center; **4. Yang Hongbin, vice president of Junlebao Dairy Group; **5. Jin Yanze, chief data officer of Uni-President Group; **6. Guo Xulin, assistant to the president of Hema Fresh; **7. Li Zhihong, senior vice president and director of Xibei Catering; ... 3000+ industry audience, 1500+ first-line brand executives, 1000+ new e-commerce platforms & regional leading distributors, 3 full days. Everything you want to know about the latest industry trends, changes, models, and business is here! Are you "watching" me?