---
title: "Anxiety on the Snack Shelves"
description: "The payback period for snack discount stores is getting longer as competition intensifies. Franchisees face squeezed profits and extended timelines, while the industry undergoes rapid expansion and consolidation."
author: "晴山"
publisher: "New Distribution"
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published: "2024-10-04"
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# Anxiety on the Snack Shelves

> The payback period for snack discount stores is getting longer as competition intensifies. Franchisees face squeezed profits and extended timelines, while the industry undergoes rapid expansion and consolidation.

**Payback Periods Are Getting Longer**

"This used to be a clothing store, but in the first half of this year, it suddenly became a bulk snack store." Zhang Qing (pseudonym), who runs a supermarket in Binzhou, Shandong, told New Distribution that recently, more and more chain snack stores have appeared around him, some of which are quite large.

As Zhang Qing said, since last year, many bulk snack stores have appeared on the streets of Binzhou. Discount stores such as Snack Busy, Snack Youming, and Zhao Yiming Snacks have sprung up like mushrooms. These stores have their own unified brand logos and decoration styles, usually with bright and lively colors like red, yellow, and orange on their storefronts, which easily attract attention. "Products bought here are on average 20%-30% cheaper than in supermarkets and convenience stores. Plus, some stores have promotional activities when they first open, making them even cheaper. At first, business seemed pretty good," Zhang Qing said.

According to him, as more stores opened, there are now nearly 10 within a 3-kilometer radius. "With more stores, competition has become fiercer." Wang Ning (pseudonym), also in Binzhou, joined a leading brand in the industry last year. According to him, "Business this year has been particularly tough." Although the peak hours are from 7 to 9 PM, with some customers buying large bags and others loading boxes of drinks into their cars, Wang Ning said, "These are just appearances; it looks like business is good, but I just want to recoup my investment quickly." He added, "Before joining, the brand said the payback period would be short, but after opening, it wasn't the case. Coupled with market changes and increasing competition, the payback period is getting longer and longer." Taking his nearly 300-square-meter store as an example, based on local rent and labor costs, he needs to spend at least 200,000-300,000 yuan annually on employee wages, 200,000 yuan a year on rent, plus decoration, equipment, and initial inventory, totaling about 650,000 yuan. The cost of opening a new store is at least 1 million yuan. "But the market is already saturated; snack stores are everywhere, and business is really tough now. We have to run promotions frequently to keep business lively," Wang Ning said.

Wang Ning recalled that in 2022, some high-quality locations that newly opened could easily recoup their investment in about a year or even less. "But now it's different. Good locations have been snapped up, and with severe market competition, the payback period is three years or even longer, and that's an optimistic estimate." He said that even though the brand has introduced a series of subsidy policies and the cost of building a store is decreasing, the profits squeezed out by the brand are not going into the pockets of franchisees. "As market competition intensifies, franchisees may face not payback but continuous losses."

Wang Hua (pseudonym), who chose to join a regional snack store in a county town at the beginning of this year, said he chose that regional brand because they claimed no franchise fee, high profits, and a full range of products. Plus, the chosen location was near a middle school with many students, so he decided to open the store. But after opening, even during so-called peak hours, business was terrible. "Now I can sell about 700 yuan a day, with a gross margin of about 16%. After deducting monthly rent of 1,700 yuan, wages for two employees at 2,300 yuan each per month, plus utilities, it's definitely a loss-making business." Facing poor business, Wang Hua said he is considering switching to the catering business.

**The Track Is Too Crowded**

**Franchise Competition**

Recently, Chayanyuese officially launched its bulk snack business, opening its first offline snack and daily necessities store in Changsha. Besides Chayanyuese, leading tea drink brands including Heytea, Naixue Tea, Mixue Bingcheng, and Shanghai Auntie are all expanding into the snack business. In the snack discount sector, the leading bulk brands have already spread their stores everywhere. After the merger of Snack Busy and Zhao Yiming, their stores total 10,000, and Haoxianglai is also approaching 10,000 stores.

Leading brands in the track are making frequent moves. In January this year, Mingming Henmang announced two major actions: first, the company plans to invest over 1 billion yuan in the next six months for national market development, focusing on the northern region; second, the company announced its latest national franchise recruitment policy. At that time, Mingming Henmang disclosed that the over 1 billion yuan investment would mainly be used to increase policy support for franchisees, competitive marketing support, development of key city locations, and expansion of direct-operated stores.

Behind Mingming Henmang's heavy investment in the northern market and franchise recruitment is another leading bulk snack enterprise, Wanchen Group, which is entering the southern market. At the end of 2023, Wanchen Group's brand "Haoxianglai" held a franchise recruitment conference in Hunan Changsha, the home base of Snack Busy, and its first store in Hunan had already opened. The official website of Haoxianglai also announced the goal of "exceeding 10,000 stores by 2025." As of May 2024, Wanchen's snack retail sector had over 6,000 stores nationwide.

According to industry research reports, the number of stores in the industry doubled in 2023, reaching 30,000 by the end of the year. It is expected that in 2024, some blank markets will still see store openings, and ultimately, the revenue from bulk snack channels may approach that of online channels, with an industry scale of about 130 billion yuan and a total of 50,000-60,000 stores.

Everyone in the consumer market wants to do snack business, and it seems overcrowded. Many brands in the industry have begun to compete for franchisees by lowering franchise fees, accelerating expansion. For example, according to content published by the official account "Zhao Yiming Franchise" in early May, they implemented a "five zero" franchise policy: zero franchise fee, zero management fee, zero training fee, zero service fee, and zero profit on decoration, with a one-time subsidy of 100,000 yuan for opening a store. As of April 2024, the brand opened more than 400 stores per month, with a second-store rate of 65% and a success rate of 95% for new stores.

In fact, other bulk snack brands are also offering significant discounts in their franchise policies. According to the franchise policy published by the official account "Haoxianglai Brand Snacks" at the beginning of this year, they offer zero franchise fee, zero service fee, zero management fee, and zero delivery fee. According to franchise information published by "Snack Youming YUMMY" in February this year, Snack Youming's franchise also implements zero franchise fee, zero management fee, zero training fee, and zero service fee.

In this regard, an industry insider said that China's leisure snack market is on the rise overall. With the derivation of consumption scenarios, such as camping and watching short videos, there is a demand for snacks. The leading enterprises in the bulk snack track have reached a scale of 10,000 stores, which is the sales channel they are building. The reason for lowering franchise fees to expand is largely that they hope franchisees everywhere can continue to sell their products.

In addition, the flavor of brand competition can also be smelled in some brands' franchise policies. Taking Ai Snacks as an example, according to content published by the official account "i Ai Snacks" on June 20, new franchise stores that open within 300 meters of a certain leading brand will receive a subsidy of 200,000 yuan, within 100 meters a subsidy of 300,000 yuan, and within 50 meters a subsidy of 400,000 yuan.

In this regard, industry insiders said that franchise competition, franchise subsidies, and declining franchise fees are common in many industries. The way enterprises compete for franchisees is similar to competing for C-end consumers, that is, by lowering prices, and even subsidizing, which is the result of industry competition extending from the C-end to the franchise end. The above insider said, "The risk in this situation is that due to the decline in franchise fees, the level of service and support provided by brands to franchisees will also decline, which will affect the survival rate of franchise stores and the entire brand system."

**Anxiety Intensifies**

Recently, several listed leisure snack companies disclosed their semi-annual results for 2024. According to data from iMedia Consulting, from 2010 to 2023, the market size of China's leisure food industry continued to grow, from 410 billion yuan to 1,124.7 billion yuan. It is expected that by 2027, the market size will reach 1,237.8 billion yuan. This huge trillion-yuan consumer market naturally attracts brands to enter, and industry competition continues to intensify, with different performances among major enterprises.

In the first half of 2024, the performance of the "three giants" of high-end snacks diverged: Three Squirrels' net profit for the half year surpassed its full-year profit last year, while Bestore and Lai Yifen saw significant declines in net profit. Among them, Bestore and Lai Yifen both experienced declines in revenue and net profit attributable to shareholders. Bestore achieved revenue of 3.886 billion yuan, a year-on-year decrease of 2.52%; net profit attributable to shareholders was 24 million yuan, a year-on-year decrease of 87.38%. This is also the second consecutive interim report in which Bestore recorded a decline in net profit, and the decline has widened.

On the other hand, Lai Yifen, known as "China's first snack stock," after experiencing a double decline in revenue and net profit in 2023, suffered another "Waterloo" in the first half of this year. According to the financial report, in the first half of 2024, Lai Yifen's revenue was 1.792 billion yuan, a year-on-year decrease of 15.05%; net profit was 15 million yuan, a year-on-year decrease of 72.56%.

For a long time, Three Squirrels, Lai Yifen, and Bestore have been regarded as the three giants of China's OEM snacks. But the three giants didn't sprint for long before they encountered the siege of new models such as online traffic peaking and offline bulk snack discount stores.

At present, in the current snack market, bulk snack brands and traditional snack enterprises are all dividing up the snack market. According to Wanchen Group's 2023 annual report, its bulk snack business covered 4,726 stores and achieved revenue of 8.759 billion yuan. By this calculation, Mingming Henmang, with over 10,000 stores, must have a revenue scale above this. In 2023, Bestore, Lai Yifen, and Three Squirrels had revenues of 8.046 billion yuan, 3.977 billion yuan, and 7.115 billion yuan, respectively. It is not difficult to find that bulk snack enterprises have not been developing for long, but in terms of revenue scale, they have already caught up with traditional snack leaders.

In this regard, industry insiders said that the development of bulk snacks will inevitably impact traditional snack enterprises. Typical traditional snack brands like Bestore and Lai Yifen have certainly been affected by bulk snacks because the total market is fixed; as bulk snack stores and revenue continue to increase, they will naturally take a larger share of the market cake, and traditional snack enterprises will get a smaller share. The reasons for the impact are multifaceted, including price, category quantity, marketing methods, and business model combinations.

Of course, the industry generally believes that with the entry of strong players, industry competition is becoming increasingly fierce. "It is expected that the concentration of the bulk snack track will become higher in the future. Large leading enterprises will occupy the vast majority of market share, while mid-sized brands in the middle will likely choose to be integrated, and small brands with a scale of 500 stores or even less than 100 will quickly disappear in the industry reshuffle," said an industry insider.

The above insider said that in the current fiercely competitive environment, it is difficult for a single company to achieve orderly and healthy expansion. In addition, the gross margin of the bulk snack industry is not high. Only by integrating resources and occupying the market can efficiency be improved and costs controlled. Although integration brings significant scale effects in the short term, it also places higher demands on management, quality control, and supply chain stability.

Currently, as competition in the leisure snack industry intensifies and integration accelerates, the industry is gradually entering the second half. The key competitive factors are shifting more toward efficiency. Chain brands with outstanding supply chain, franchisee, and internal management capabilities will ultimately win through efficiency improvements. Those franchisees who dream of recouping their investment in a short time are now facing the anxiety of how to get rid of losses on their shelves.


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