A new buzzword has emerged in the capital market: "children's snacks." As post-90s generation, our snacks from childhood to adolescence and adulthood had no clear demarcation, mainly consisting of foods suitable for all ages like Xizhilang jelly, Lay's potato chips, Weilong spicy strips, Mimi shrimp crackers, and Want Want milk. In other words, there has always been a conceptual gap between infant food and adult food. On June 15, 2020, China's first group standard for children's snacks, "General Requirements for Children's Snacks," was officially implemented, which for the first time proposed the concept of "children's snacks"—foods suitable for children aged 3-12, consumed outside regular meals to supplement nutrition, balance nutrition, or increase water intake, and to relax and delight the mood.
01 Children's snacks are hot With the introduction of the concept, the children's snack track has become hot, and capital has flocked in. According to statistics from Yilan Business, in the second half of 2021 alone, there were 14 financing events for children's snack brands, with multiple brands securing several rounds of financing within the year. Duomaomao received three rounds of financing totaling tens of millions of RMB in 2021, mainly invested by Xingnahe Capital, 37 Interactive Entertainment, Yiling Capital, Houwei Capital, and Wenshi Capital. The brand primarily provides nutritious, tasty, and fun children's snacks, mainly biscuits. In 2021, Fruit and Vegetable Group completed two rounds of financing, invested by Zhongwei Investment and Xianfeng K2VC, focusing on various children's snacks centered on vegetables and fruits. Shugele completed a tens of millions of RMB angel round financing, invested by Yisan Capital and Vertex Ventures China, offering dried vegetable children's snacks such as carrot sticks, pea crisps, purple sweet potato sticks, and corn sticks. Subsequently, Xiaohuangxiang, Cheese Doctor, and Qiutian Manman also secured financing. Brands are flourishing with different focuses around children's snacks.
Behind the explosion of the new children's snack track is the continuously expanding market share and the shortcomings and market gaps exposed by traditional snack brands. Public information shows that China is already one of the largest snack food markets globally. According to iiMedia Research data, from 2006, the domestic leisure snack industry grew by 422.51% over 10 years, with the market size reaching 1,156.2 billion yuan in 2021, and it is expected to reach 1,329.6 billion yuan by 2021, with a new trillion-yuan market gradually forming. Yilan Business predicts that from 2019 to 2023, China's children's snack market will continue to grow at a compound annual growth rate of 10%-15%.
Traditional children's snack brands can no longer meet the huge market demand, and at the same time, they are exposing various shortcomings. During the childhood of the post-90s and post-00s generations, snacks were seen as a scourge by parents, who uniformly classified them as "junk food." Although these snacks were not as harmful as claimed, they were also nutritionally empty and could not meet the various elements needed for the growth and development of children aged 3-12. Parents generally used snacks as rewards for children eating well, and at that time, snacks only served to satisfy cravings. "Eat well, and I'll reward you with a Xizhilang jelly later" was the best motivation for us to eat regular meals as children.
02 The logic behind the children's snack track We can analyze the business logic behind the explosion of the children's snack track from the following aspects.
From a product perspective, new children's snack brands have broken the stereotype that children's snacks are nutritionally empty. For example, Shugele's various vegetable dried products use fresh vegetables that are blanched and dried, making them healthy from raw materials to appearance, and they can also supplement the various elements that children lack when they don't like eating vegetables. New products have also expanded the application scenarios of children's snacks. Traditional children's snacks were only consumed as a treat after meals, with a snack attribute. New children's snacks, however, have expanded the scenarios to breakfast and dinner. For instance, Xiaohuangxiang's children's cereal, butter hand-grabbed pancakes, and breakfast cereal can appear on children's tables as regular meals, having both snack and meal attributes. In addition to nutrition and consumption scenarios, new children's snacks also fully consider the busy lifestyle of this generation of parents. Based on this, most products are designed to be convenient and quick, with no strong operational requirements, ready to eat, and can quickly appear on children's tables. For example, Xiaohuangxiang's cereal products only need to be mixed with yogurt or hot water.
From an industry market perspective, the three-child policy and the subsequent improvement of birth support measures and financial subsidies will have a positive impact on the basic children's market, and current layout is conducive to future industry competition. According to the Seventh National Population Census report released by the National Bureau of Statistics, the population aged 0-14 exceeds 250 million, accounting for 17.95% of the national population, up 1.35% from the sixth census. Coupled with the current two-child and three-child policies, and after the improvement of subsequent measures and the easing of the pandemic, China will experience a small wave of births. Under the demographic dividend, the industry market potential is huge and worth exploring.
From a consumer psychology perspective, this generation of parents has experienced food scandals such as gutter oil, toxic milk powder, and smelly foot pickled vegetables, making them more cautious in choosing children's snacks. Health and no additives have become the consumer psychology for parents choosing children's snacks. Seizing parents' consumer psychology, the cleanliness of the ingredient list has become a gimmick for children's snacks. Taking Duomaomao's small steamed buns as an example, the ingredient list includes edible potato starch, wheat flour, rock sugar, eggs, skimmed milk powder, protein powder, calcium carbonate, ammonium bicarbonate, and vitamin B1. Apart from necessary nutritional elements, there are basically no other additives. Most brand product ingredient lists are this clean. Requiring a clean ingredient list increases the premium and added value of products, making brands and companies more profitable. The price of children's snacks is generally more than twice that of traditional snacks.
There is another more important factor worth discussing. Duomaomao founder Febe once said: "The taste memory of the first bite in life is expected to last a lifetime." As the first industrial food that "people" come into contact with at birth, doing a good job in children's snacks makes it easier for future product line expansion to be accepted by the market. Taking Weilong as an example, as a childhood memory for the post-90s and post-00s, it sells over 10 billion packs annually, holds the "global sales leader" position, and is sold in more than 30 countries and regions. According to Weilong's publicly disclosed financial reports, revenue in 2019 was 4.909 billion yuan, a year-on-year increase of 43%; in 2020, revenue was 7.2 billion yuan, a year-on-year increase of 7.2 billion yuan. It can be said that Weilong's empire was built bite by bite by us.
"Cultivating consumers from childhood" has become a consensus among snack brands, and listed brands such as Three Squirrels, New Hope, and Bestore have also launched children's snack brands. In 2020, Three Squirrels launched "Xiaolu Lanlan," which generated over 120 million yuan in revenue in the first quarter of 2021; New Hope established the brand "Xiangba Planet" in early 2021; Bestore launched the brand "Bestore Xiaoshixian." According to Bestore's financial report, by the end of 2020, Bestore Xiaoshixian's revenue reached 223 million yuan, with a net profit of 25.4098 million yuan, and it is currently showing obvious growth. The explosion of the children's snack track is driven by multiple factors, with policy promotion and changes in consumer habits being the main ones.
03 Does the current situation deserve praise? Market demand and products are already in place, but there is still an important hurdle to overcome. In fact, this generation of parents tends to prefer traditional brands when choosing children's snacks, with Lay's potato chips, Fujiya lollipops, Want Want milk, and Mimi shrimp crackers still being their daily first choices. They trust the product quality of these brands more, which is the trust accumulated by traditional brands over a long period. Before new brands open up the market, they need to make their products solid. Children's snacks are harder to break out than internet-famous snacks and rely more on word-of-mouth among consumers rather than blindly promoting online.
Moreover, the current new children's snacks on the market are not as excellent as advertised; most products are only nominally good. Recently, Dingmang Research Institute released the "Children's Snack Industry Research Report," evaluating more than 400 products in the children's snack category, including children's shrimp crackers, teething sticks, melting beans, seaweed sandwich crisps, and children's small steamed buns. The evaluation found that 93.4% of children's snacks implement the same execution standards as ordinary food, 37.5% implement enterprise standards, 56.1% implement national standards, and only 6.3% implement the general requirements for children's snacks. Products implement ordinary food standards but are priced more than twice as high as ordinary food. The "children's label" has become a tool for brands and companies to make money, and parents have become the "suckers" being harvested. Just wanting to choose a reliable snack for children has become a difficult task?
New snack brands generally tend to sell through online channels, making it difficult to get products in front of actual consumers. Children's snacks are impulse purchase products. Apart from holiday shopping, common consumption times include outings, amusement parks, on the way home from school, and travel. These needs can only be met offline. Therefore, parents prefer to buy from supermarkets, community convenience stores, and other channels. Even if they develop offline channels, these brands find it hard to compete with low-priced traditional snacks, so currently developing only online is a wise and conservative strategy. As industry policies gradually improve and the production processes and labeling of children's snacks become clearer, those brands that are only nominally good will be gradually eliminated, and the vacated market share will be more conducive to the development of new brands.
The industry has not yet reached a white-hot stage. New brands should build trust by making good products and promoting well, rather than harvesting consumers under the banner of "children's snacks," and they will surely gain consumer recognition.
Source: Yilan Business (ID: yilanshangye)