---
title: "Betting on Niche Tracks: Can Snack Giants Rely on Sub-Brands to Weather the Storm?"
description: "AgeClub explores the 'second growth curve' for snack giants like Liangpin Shop, which has launched sub-brands such as 'Xiaoshixian' for children and 'Jie Tangyou' for diabetics. Despite the trend among major players like Be & Cheery and Three Squirrels to expand into niche sub-brands, most have seen limited success, raising the question of whether these sub-brands can help them overcome growth challenges."
author: "大可"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-08-07"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/9GGKckZlW7n_vKjDWiuLcQ"
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# Betting on Niche Tracks: Can Snack Giants Rely on Sub-Brands to Weather the Storm?

> AgeClub explores the 'second growth curve' for snack giants like Liangpin Shop, which has launched sub-brands such as 'Xiaoshixian' for children and 'Jie Tangyou' for diabetics. Despite the trend among major players like Be & Cheery and Three Squirrels to expand into niche sub-brands, most have seen limited success, raising the question of whether these sub-brands can help them overcome growth challenges.

AgeClub explores the 'second growth curve'. Sub-brands like 'Jie Tangyou' are not the first for Liangpin Shop. From the children's snack sub-brand 'Xiaoshixian' to fitness meal replacements 'Liangpin Feiyang' and 'Kong Duoka', Liangpin Shop has launched numerous sub-brands targeting niche segments. In recent years, not only Liangpin Shop but also Be & Cheery and Three Squirrels have strengthened their sub-brand strategies, striving to dig out a 'second pot of gold', but often with much ado about nothing. How are these sub-brands faring? Can snack giants in growth difficulties rely on sub-brands to weather the storm?

**Vertical Sub-brands of Snack Giants: Hot Concept, Mediocre Results?**

In recent years, snack giants like Be & Cheery, Three Squirrels, and Liangpin Shop have established niche sub-brands, becoming a 'landscape' in the snack industry. Liangpin Shop has launched sub-brands 'Xiaoshixian', 'Jie Tangyou', 'Liangpin Feiyang', and 'Kong Duoka' targeting children, diabetics, fitness enthusiasts, and other specific groups. Three Squirrels has introduced 'Xiaolu Lanlan' for children, 'Yangle Ge Maohai' for pets, 'Tie Gongji' for custom gift boxes, and 'Xi Xiaoque' for wedding favors. Be & Cheery has launched 'Yeban Xiaolu' for night snack and braised food scenarios, and 'Jinri Nengliang' for weight-loss meal replacements. Lai Yifen has also launched 'Baobei Yiyi' for children's snacks. It is evident that focusing on 'niche demographics' is the core strategy, aiming to offer products that meet the health and nutritional needs of different groups and various user scenarios. Children's snacks, health foods, and pet foods have become key focus areas.

**The most popular is the children's snack track.** Data shows that China's children's food market reached 144.57 billion yuan in 2021, with a growth rate of 12.5%. Facing a hundred-billion-yuan market, many brands want a share. Liangpin Shop, in conjunction with the China National Food Industry Association, released the 'General Requirements for Children's Snacks' and took the lead in establishing the children's snack sub-brand 'Xiaoshixian'. Be & Cheery launched 'Tong An'an Xiaopengyou' five days later, targeting the children's snack track. Three Squirrels followed with 'Xiaolu Lanlan', which achieved results, while Lai Yifen launched the 'Yizai Children's Snack Series'. With resources poured in, these children's snack brands were once popular, especially Xiaolu Lanlan, which turned profitable in 2021 with omnichannel revenue of 201 million yuan, ranking first in baby snack sales within 22 days of launch, breaking daily sales of one million yuan in 55 days, and achieving monthly sales of nearly 50 million yuan in June 2021. But the success was short-lived; without continuous 'blood transfusion', these sub-brands have seen their presence diminish year by year. The latest performance update for Liangpin Shop's 'Xiaoshixian' was in the 2022 semi-annual report: first-half omnichannel terminal sales reached 219 million yuan, up 21.33% year-on-year. Three Squirrels' 'Xiaolu Lanlan' was once a strategic focus but has been downplayed in financial reports, even lacking presence due to minimal contribution. In the past year, Xiaolu Lanlan not only ended its rapid growth but also slightly declined by 1 million yuan compared to 2021. In 2022, Xiaolu Lanlan achieved revenue of 491 million yuan, accounting for less than 7% of total revenue, with slowing growth. Be & Cheery's 'Tong An'an Xiaopengyou' performance data has been stuck at 2020 levels.

**Secondly, giants have heavily invested in the health snack track focusing on low-calorie, low-fat, sugar control, and meal replacements.** Euromonitor data shows that the overall meal replacement market has grown year after year, achieving impressive performance. In 2022, the domestic meal replacement market reached 11.507 billion yuan, and it is expected to reach 12.867 billion yuan by the end of 2023. In the fitness meal replacement category, Be & Cheery took the lead in 2019 with the 'Jinri Nengliang' series, featuring low-calorie, high-protein snacks like smoked beef and nut bars. Liangpin Shop launched the low-calorie brand 'Kong Duoka' in April 2020, with the slogan 'tasty, not hungry, and weight loss', which was online for three months. In August 2020, it launched 'Liangpin Feiyang' with products like low-fat konjac and whole wheat bread, achieving omnichannel terminal sales of 203 million yuan from launch to mid-2021. At the end of 2022, Liangpin Shop launched the sugar-control staple and snack brand 'Jie Tangyou' to meet the needs of diabetics. However, looking at sales, the 'Jinri Nengliang' series has long disappeared, 'Liangpin Feiyang' still has single items for sale but with few takers, 'Kong Duoka' has started independent entrepreneurship, and the newly established 'Jie Tangyou' has yet to show results.

**Meanwhile, sub-brands in night snacks, instant food, and pet food tracks have not fared better.** Tie Gongji, Yangle Ge Maohai, and Xi Xiaoque all had their moment in 2021: Tie Gongji's Double 11 sales reached 4.65 million yuan, with its Huainan beef soup selling over 1.1 million cups; Yangle Ge Maohai's Double 11 sales exceeded 2.5 million yuan, with pocket cat rice and cat freeze-dried combos almost sold out; Xi Xiaoque ranked first in wedding candy and cake industry within two months of launch, with Double 11 sales over 1 million yuan and average order value over 8,000 yuan. But by 2022, due to continuous sales decline, Three Squirrels proactively 'cut' sub-brands like Tie Gongji and Xi Xiaoque. Be & Cheery's 'Yeban Xiaolu' disappeared and was upgraded to the 'Chao Lu Jianghu' series in 2022, but it did not become a 'main card' for Be & Cheery. A relative exception is the pet brand 'Yangle Ge Maohai', but according to reports, it is no longer under Three Squirrels. It can be said that almost all sub-brands of snack giants have 'failed'. 

**Why Have Snack Giants 'Failed' in Building Niche Sub-brands?**

It is hard to say that snack giants have 'poor vision'. The children's snack track, favored by giants, is predicted by the 'White Paper on Children's Snack Market' to grow at a compound annual growth rate of 10%-15% from 2019 to 2023, with market expectations exceeding 600 billion yuan, making it a new growth point for the leisure food market. Under this trend, many emerging brands have gained financing due to niche advantages and achieved sustained sales growth. In the sugar-control food track that Liangpin Shop currently favors, brands like 'Man Tang Jia' and 'Tangyou Baobao' have announced tens of millions in seed funding and have gained loyal followers through various channels. Vision is never the problem; the failure of giants' 'second entrepreneurship' is due to comprehensive factors.

**First, reliance on OEM production and superficial R&D.** Even the hottest 'Xiaolu Lanlan' has best-selling items like seaweed, freeze-dried cheese cubes, plain rice crackers, cod sausages, baby shrimp chips, magic cookies, hawthorn sticks, and probiotic yogurt melts that all have 'shadows' in Three Squirrels' related products. Under the consistent 'OEM + labeling' model, while the sales of adult brand 'best-sellers' ensure that sub-brand children's food sales won't be too bad, it also tightly 'frames' the product R&D space. Looking at the children's snack sales rankings, the main players in the domestic children's snack market are still big names like Nestlé, Mars, and Want Want. Compared to international giants that continuously innovate and launch hit snacks with iterative updates, Xiaoshixian and Xiaolu Lanlan have not even created a single 'hit' product.

**Second, sub-brands find it hard to break away from the parent brand, resulting in a 'blurred' brand identity.** Notably, Xiaoshixian, as a sub-brand of Liangpin Shop, has not been operated separately in sales, and the same goes for Be & Cheery. Most other sub-brands outside the children's track also operate under the parent brand, even sharing the same sales channels, causing niche products to be lost among the vast array of snacks and making their brand image unclear. The better examples are Xiaolu Lanlan in the children's track and 'Yangle Ge Maohai' in the pet track, which have independent Tmall flagship stores and independent social media presence, establishing stronger brand effects and more 'presence' in sales.

**Third, product lines are highly susceptible to parent company business fluctuations, and new brands may be 'cut at will'.** During the development of sub-brands, while they rely on the parent brand's 'borrowed light' from incubation to startup, this also brings negative effects. On one hand, when the parent brand's goodwill or profitability is damaged, sub-brands suffer accordingly. When the parent brand is severely hit and must 'cut off the tail to survive', sub-brands are the first to be abandoned. On the other hand, the parent brand's support for sub-brands is influenced by multiple factors such as company factions and responsible persons. 'Kong Duoka', although incubated and invested by Liangpin Shop, saw its brand director Duan Wen leave Liangpin Shop in 2022 to become the founder of Kong Duoka, which is now basically fully separated from Liangpin Shop.

**Anxious Snack Giants: Fierce Competition Continues, Growth Hard to Sustain, How to Transform?**

So far, snacks remain a good business. According to the '2022 China Leisure Snack Industry Report' by Mob Research Institute, the leisure snack industry will exceed 1.5 trillion yuan in 2022, with a compound annual growth rate of over 11% as market penetration increases. Meanwhile, per capita consumption of leisure food in China is far lower than in major developed countries, such as Europe, the US, Japan, and South Korea, indicating significant growth potential. Correspondingly, 'snack discount stores' are soaring. Snacks Are Busy added 1,000 new stores in the first half of 2023, an average of 6 new stores per day. New snack brands like Zhao Yiming Snacks and Si Ke Shanzha are also favored by capital. *Investment and financing events in the snack track since 2022, source/Lianxian Insight*

**But for snack giants, the situation is not optimistic.** According to financial reports, in 2022, Liangpin Shop's revenue was 9.44 billion yuan, barely maintaining a positive growth of 1.24%, but the revenue growth rate hit an 8-year low. In the first quarter of 2023, Lai Yifen's revenue was 1.212 billion yuan, down 7.8% year-on-year, with net profit attributable to parent of 71 million yuan, down 23.04%. Three Squirrels was even more disappointing, with 2022 revenue of 7.293 billion yuan, down 25.35% year-on-year, and net profit down 68.61%, delivering its 'worst report card' since listing. As listed companies, sales performance further affects stock prices; the three major listed snack giants are all 'falling'. Liangpin Shop has also faced clearance-style reductions by major shareholders like Hillhouse Capital and Capital Today over the past two years. Each giant is in deep trouble, with 'different difficulties'.

Liangpin Shop's **high-end positioning is gradually being broken by more rational consumer choices, and brand effect is fading.** It has opened coffee shops like 'Tbreak Liangpin Tea Break', offering tea drinks, pastries, coffee, and ice cream. It has also entered the discount store track by investing in the star discount snack company 'Zhao Yiming Snacks' with Black Ant Capital, and incubated a new brand 'Snack Player' to expand the snack collection store format.

Three Squirrels started with e-commerce but is now trapped in an 'encirclement' by e-commerce. For a long time, internet-famous snack brands like Three Squirrels mainly adopted the 'OEM + brand' model, leveraging the internet e-commerce dividend, focusing on marketing and brand building, while production and processing were handled by upstream suppliers. With the further development of e-commerce, especially live-streaming e-commerce, **Three Squirrels' 'label factories' have become 'internet celebrities'**, competing for market share as factory merchants. Taking the most popular macadamia nuts, almonds, and pecans as examples, many factory stores on Pinduoduo with good reputations offer prices only two-thirds or even half of Three Squirrels' prices. Forced into low-price competition, this has affected Three Squirrels' revenue to some extent. Meanwhile, with the rise of Douyin, Kuaishou, and Pinduoduo, the e-commerce landscape has changed, **the internet has begun to decentralize, and online traffic costs and marketing expenses are high**, affecting Three Squirrels' development.

At the same time, snack giants share common embarrassments: **First, high marketing expenses.** According to Wind, Liangpin Shop (603719.SH) and Three Squirrels have sales expense ratios of 18.6% and 21.02%, respectively, both above 15%. This is directly related to their OEM model. Because OEM requires factories to adjust internal capacity, food labels, and external packaging comprehensively, factories have minimum order quantities, and even if snacks are unsold, they are not returned. Under inventory pressure, snack giants are forced to invest increasingly high marketing expenses to strengthen consumer awareness to digest orders from factories, further squeezing profits and R&D expenses. **It can be said that this is driving companies to the brink.**

**Second, there are varying degrees of 'overturns' in reputation.** Liangpin Shop has repeatedly been embroiled in food safety controversies. On the Black Cat complaint platform alone, there are over 1,900 consumer complaints about Liangpin Shop. At the end of 2019, Three Squirrels used a model with 'slit eyes' and thick lips in a Weibo post for sour and spicy noodles, which was questioned by netizens as deliberately uglifying Chinese people, sparking heated discussion and trending on hot searches. **At the same time, food safety issues have also emerged.** Incidents like moldy hand-torn bread, insect eggs in almonds, a pregnant woman accidentally consuming a broken deoxidizer packet, and a consumer finding a 'fried gecko' in Three Squirrels snacks have further eroded consumer confidence in OEM snacks. Be & Cheery has also faced issues, such as recently trending on Weibo for 'only one potato slice in a bag of potatoes' and last year's 'insect egg incident', affecting consumer perception. The root cause of these food safety issues is the 'OEM + labeling' model of snack giants.

It can be said that **the 'growing pains' of snack giants under the current model are inevitable**. The internet has further unleashed the value of e-commerce, and the high-marketing-investment approach has failed. However, snack giants have still not established their moats and industry barriers. Especially under the 'dimensionality reduction attack' of emerging snack brands with more precise cost control, clearer revenue models, and stronger creativity, and the rise of new models like snack discount stores, snack giants are almost powerless to fight back.

Looking ahead, snack giants still have a long way to go. Whether expanding sub-brands or developing main brands, 'telling stories' is not the goal. Strengthening product quality, enhancing product innovation and content marketing, and building a true 'moat' with irreplaceable value may be the hard truth for survival and development.


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