Scan the QR code in the image to register The recently opened Be & Cheery offline store is nothing new; it's an old player that follows trends. As early as 2013, the first Be & Cheery physical store was founded in Hangzhou, reaching a peak of over 140 stores. In 2010, Be & Cheery was among the first to transition from a traditional enterprise to e-commerce, fully entering mainstream platforms like Tmall and JD.com. From that year on, Be & Cheery grew its annual sales from 0.23 billion to over 4 billion in seven years. Having tasted success online, Be & Cheery raced ahead on the internet, completely neglecting offline stores. Now it's returning to offline retail—is it due to exhausted traffic, sanctions, or a desire to exploit franchisees? Of course, offline expansion is not just about opening stores; it requires comprehensive strength in product, marketing, supply chain, and operational management. Online: Growth Fatigue In February 2012, Three Squirrels was founded in Wuhu, Anhui, by a five-person startup team. Under the leadership of Zhang Sanfeng, it went from obscurity to dominating China's leisure snack rankings for years. By avoiding direct competition with Be & Cheery, it quickly surpassed its biggest rival. Before 2019, searching for "snacks" on Tmall was almost monopolized by Three Squirrels. Although Be & Cheery didn't miss the e-commerce wave, it remained in second place for eight years. Coming to its senses, it launched new products to capture attention, signing celebrity Yang Yang and creating numerous little-known IP collaborations. Despite this, the snack industry ranking remains Three Squirrels, Be & Cheery, and Bestore. Compared to most brands, Be & Cheery has been relatively comfortable, successfully transforming from a traditional channel retailer to a top-3 online snack brand in China. At that time, after being acquired by PepsiCo, Be & Cheery indulged in a self-satisfying dream. Although both share the "Bai" name, Be & Cheery didn't benefit from Pepsi's channels, let alone brand endorsement. As e-commerce dividends faded and customer acquisition costs rose, companies that once focused online began to rethink. The top snack brand had already started laying out offline stores at the peak of traffic. Focusing on consumers, accelerating offline store expansion, and promoting online-offline integration—Three Squirrels and Bestore have both bet their business on offline stores. Now, Be & Cheery's move offline is driven by circumstances, not awakening. Today, almost all online-focused companies realize that the internet can bring traffic but cannot solve consumer experience issues. Thus, "service + product" has become the core weapon for snack brands. Lai Yifen and Snack Busy, one old and one new, have taught Be & Cheery a lesson: Public domain traffic only benefits others; when brand appeal declines, there's no sentiment to speak of. Compared to Three Squirrels, which started online and moved offline, Bestore has always walked on two legs, never treating online as its main camp. East China's leader Lai Yifen and newcomer Snack Busy seem to focus on offline, not being fooled by so-called "cheap" traffic. Channels: Poor Distribution In June 2020, in an internal letter, Be & Cheery's chairman Qiu Haoqun described the "double Bai" union as "like-minded and highly complementary." Be & Cheery stated that in manufacturing, it has a highly flexible and asset-light supply chain model, while PepsiCo has advantages in agriculture, manufacturing, and global procurement. Together, they would provide more stable, efficient, and optimized procurement and manufacturing solutions with partners. In distribution, Be & Cheery's core strength lies online, while PepsiCo has mature online and offline distribution networks and is renowned for customer management. The two would create a truly omnichannel entity offering real-time services to consumers. However, Pepsi's channels have not been leveraged by Be & Cheery. It's known that terminals are king; China is vast, with many large, medium, and small cities, plus countless districts, counties, and villages. PepsiCo has a large number of sales representatives distributed nationwide, down to towns and villages. The terminal sales force is huge and ever-changing; they are Pepsi's nerve endings reaching consumers, or the front line of channels. This is what Be & Cheery values most and desires most. But Be & Cheery has always been half a beat slow in channel layout: where there are stores, there's often Pepsi; where there's Pepsi, there's rarely Be & Cheery. Take Xi'an's Fengqing Road food wholesale market as an example: Three Squirrels has more agents and temporary distribution points than Be & Cheery. According to suppliers, Be & Cheery's channel distribution is too broad. The Xi'an market has not only wholesale market agents but also local snack brand agents. The Hangzhou headquarters also ships to Xi'an, and the minimum order quantity is acceptable to retailers. Compared to market circulating goods, Be & Cheery's headquarters ships fresher dates than those in circulation. With little price difference, retailers prefer cooperating with Be & Cheery's headquarters. This shows market chaos is a major weakness for Be & Cheery. In channel development, Be & Cheery hasn't inherited Pepsi's fine traditions, using too many "clever tricks" in channel operations without sharing weal and woe with retailers. If Be & Cheery had invested as much in offline channel distribution as in online traffic, perhaps the outcome wouldn't be like this. Offline: Formidable Competitors Now these three brands are collectively called the "Snack Big Three," but behind them lie dark sides: seasonal sales declines, slowing revenue growth, and hitting the ceiling of e-commerce dividends. So, how can the Snack Big Three cross product cycles, team cycles, and founder cycles in the future? Those familiar with e-commerce operations know that online brands must bear various costs like ad placements, direct traffic, and technical services. Without advertising, it's nearly impossible to gain sufficient traffic. For them, the marginal cost of platform traffic conversion is increasingly expensive, and marginal output is decreasing. Traffic-dependent Tmall brands spend more on marketing than on opening stores. Thus, Tmall brands opening offline stores is a calculated move, not proactive. As a big shot once said, most enterprises start with A, busy with B, excel at C, and thrive on D. Now looking at the plight of Tmall brands, they all had to escape the online-first trap to find the bright road offline. As the saying goes, "When one door closes, another opens." Three Squirrels' prospectus shows: in 2018, platform service and promotion expenses totaled 393 million yuan, accounting for 5.1% of revenue. The 2020 annual report shows platform service and promotion fees of 960 million yuan, accounting for 9.8% of total revenue and 56% of sales expenses. Based on 2020 online revenue accounting for 76% of total revenue, for 7.44 billion yuan in online revenue, it paid 960 million yuan in platform fees. That is, Three Squirrels' platform service and promotion fees grew from 393 million in 2018 to 960 million in 2020, a 244% increase; while online revenue in 2020 was 7.44 billion, fees more than doubled, and online business barely grew. In contrast, Snack Busy, which goes against the grain with a franchise-store model, has grown rapidly, creating a high-end, low-price snack store image. Products like Nongfu water at 1.2 yuan, Lay's chips at 2.9 yuan, and Red Bull at 5.3 yuan —the bigger the brand, the lower the price, directly breaking consumers' psychological defenses. This brings great satisfaction to consumers' shopping experience. Its real profit lies in differentiated products and OEM products. Its first store opened in Changsha in March 2017, and within just four years, it has surpassed 450 stores, becoming a dark horse in the snack industry. Looking at another set of data: since Three Squirrels opened its first offline store in September 2016, by the end of last year, it had 785 alliance stores and 164 direct-operated stores. Snack Busy, which opened its first store in Changsha in March 2017, has surpassed 450 stores in four years. From 2018 to 2020, Bestore's direct-operated stores numbered 775, 718, and 750, while franchise stores numbered 1,388, 1,698, and 1,951. To date, Lai Yifen has over 3,300 stores nationwide. For Be & Cheery, opportunities remain but are limited. If it wants to swim against the current in this scramble, it must do difficult but correct things; otherwise, it may struggle to survive. As for franchisees, if you want to enter this business, observe calmly and research deeply. If money isn't blowing in the wind, it's advisable to visit relevant stores for research or apply as a store clerk. Don't listen to one-sided stories. British writer Charles Dickens wrote in "A Tale of Two Cities": It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity. I believe this is a business era of "intertwined sorrow and joy." Pessimists think nothing makes money now, and all traditional business logic is being overturned; while the enterprising see hope in business reconstruction, believing all businesses are worth redoing from scratch! Pioneers have dividends; latecomers must have vision. Pinduoduo in e-commerce, Mixue Bingcheng in beverages, Helen's in small bars, Laoxiangji in catering, and Wuling Hongguang in new energy—what do their rises follow? This is a question entrepreneurs of this era must ponder. Source: Retail Business Finance (ID: Retail-Finance) -END-