The new story of bulk snack retail is getting harder to tell, at least according to Chen Jie (pseudonym). Chen Jie, a young man, operates several Zhao Yiming Snacks stores in the urban area of Ma'anshan, Anhui. The latter is one of the brands with the most stores in the domestic bulk snack industry. Just last year, Zhao Yiming Snacks (hereinafter referred to as Zhao Yiming) strategically merged with Snacks Busy from Changsha, and the newly formed Mingming Busy Group became China's largest bulk snack company, with a total of over 13,000 stores. "Zhao Yiming has reached saturation." As a franchisee who has invested real money to open a nearly 300-square-meter store, Chen Jie clearly no longer has much confidence. When I met Chen Jie in mid-August, he was preparing to open another Zhao Yiming store, but more than half a month later, he told us he had decided not to proceed. Franchisees are undoubtedly the biggest contributors to the rapid expansion of bulk snack stores like Zhao Yiming over the past year. They spend generously, investing nearly a million yuan to secure storefronts in prime commercial areas or core streets of their cities, recouping their investment in 10 months, then following Zhao Yiming to conquer new cities. At one point, some of them believed this chariot would never stop. But is that really the case? Recently, topics such as "bulk snack business is hard to do" and "from county towns to nationwide, frequent scandals and accusations of being a cash grab" have emerged densely online. What is the truth? So, we visited dozens of Zhao Yiming stores in Ma'anshan City, Anhui Province, and Yichun City, Jiangxi Province. The former is a "war zone" where Zhao Yiming and another bulk snack brand, Haoxianglai, are engaged in a price war, while the latter is the birthplace of the Zhao Yiming brand. After nearly a month of research and analysis, I found that this business, which was once called the first year of China's bulk snack stores in 2023 and seemed to have unlimited prospects, seems to have transformed from a victor's prize for adventurers into a hot potato that some distributors find hard to let go. "A city of 800,000 people has 40 snack stores," Payback period has more than doubled Chen Jie began to feel clearly from this year that business is not good. After graduating from university in 2018, Chen Jie spent some time addicted to gaming. Two years ago, to learn the cashier system and help manage the family vegetable business, Chen Jie joined a Zhao Yiming store, unexpectedly hitting the golden period of rapid development in bulk snacks. In two years, Chen Jie rose from clerk to store manager, and the number of local Zhao Yiming stores expanded from 4 to nearly 30, with many people making a fortune and gaining fame. So, Chen Jie also developed the "ambition" to save 1 million yuan before the age of 35, planning to "put the energy from gaming into life and work hard"—just a year ago, Chen Jie and a friend opened a Zhao Yiming store in Ma'anshan. Ma'anshan, a city striving to become Anhui's "Hangzhou-Jiaxing-Huzhou," has become a must-fight place for many brands to establish a foothold in Anhui and Jiangsu due to its connection to the "Hefei Metropolitan Circle" and "Nanjing Metropolitan Circle." Ma'anshan's strong local consumption capacity is also seen as a blessed land for bulk snacks. Especially in Huashan and Yushan districts of Ma'anshan, which in 2023 ranked first and second among the top 20 counties and cities in Anhui for per capita disposable income, reaching 75,000 and 72,800 yuan respectively, only 10,000 yuan less than Shanghai's 84,800 yuan. But now, the blessed land has become a battlefield of "devastation." Chen Jie gave us a set of data: "Ma'anshan's urban area has a total population of only about 800,000, but now there are nearly 30 Zhao Yiming stores alone, and over 40 including other brands, averaging less than 20,000 people per store." This "other brand" mainly refers to Haoxianglai. In September last year, Wanchen Group, whose advantageous market is mainly north of Anhui, first integrated its four snack brands into "Haoxianglai," then acquired Zhejiang's Laopo Daren, taking the first step southward. Two months later, Zhao Yiming and Snacks Busy hastily announced a merger, halting the fierce price war to jointly face the enemy. The north-south war has begun, and Anhui, located on the border, is an unavoidable key province, with Ma'anshan being the most fiercely contested bridgehead—the so-called competition is about who can open more stores here. Anhui is the focus province for the rivalry between Zhao Yiming and Haoxianglai, with comparable store numbers. Source: Founder Securities If we simply look at foot traffic, local snack stores are still lively. During our visits, we noticed that from 7 to 9 PM is the peak business hours for bulk snack stores, with long queues at the checkout counters of many stores. Whenever a new store opens, customers even drive to carry away drinks by the box. But in Chen Jie's eyes, this liveliness is only superficial. As a franchisee, he cares more about the payback period—compared to two years ago, Zhao Yiming's payback period has doubled. Chen Jie revealed that although the cost of building a Zhao Yiming store was high more than a year ago, the payback period was short. Taking his 300-square-meter store as an example, based on local wage and rent levels, annual employee wages are at least 300,000 yuan, rent is around 250,000 yuan per year, plus equipment, decoration, and initial goods totaling about 700,000 yuan, the cost of opening a new store is at least 1 million to 1.5 million yuan. But at that time, high-quality storefronts with high foot traffic were relatively easy to find, so there were stores with monthly revenues of one million, and payback often took only a little over a year, or even 8 months. Now, even though Zhao Yiming has reduced the cost of building a store to around 700,000 to 1 million yuan through a series of subsidy policies, on the one hand, the profits squeezed out by the brand do not go into the franchisee's pocket but are eaten up by rising rents and high transfer fees; on the other hand, high-quality storefronts on the market have basically been swept clean, so the payback period has extended to more than 2 years or even 3 years. But even with a three-year payback, Chen Jie still thinks this is a relatively optimistic estimate. He even believes that as market competition intensifies, franchisees may face not payback but continuous losses after three years. "Those entering this year are already drinking soup; next year, they might not even have soup to drink," Chen Jie warned. This is not an empty statement. Luo Zhi, a franchisee who has opened 16 Zhao Yiming stores, occasionally livestreams on Douyin. In a recent livestream, he showed the store's business data as of September 14: key metrics such as average transaction value, number of transactions, and revenue all showed significant month-on-month declines, with an average gross profit of only 29,000 yuan per store, which may not cover rent, utilities, and labor costs. Key indicators for Luo Zhi's Zhao Yiming stores are declining year-on-year. Source: Douyin livestream screenshot Having been in the snack industry for a long time, Chen Jie has long lost the ambition to make big money. "Zhao Yiming won't give you the truly good storefronts," Chen Jie knows he is not one of those big franchisees who open a dozen stores, so he is not worth Zhao Yiming's favor with good storefronts. He added, "Even if you're lucky enough to find a good storefront that was missed, within two months, a Haoxianglai will open next to you to share your business." Perhaps Chen Jie didn't expect his prediction to come true faster than imagined. When we first met Chen Jie in mid-August, he was preparing to open a new Zhao Yiming store in a surrounding township to avoid the "flying war" in the city. But a month later, he got the qualification to open the store but decided to give up because he found that two Haoxianglai stores had already opened near the storefront he liked. Even in the birthplace Business is still "hard" If in Ma'anshan, the "difficulty" of Zhao Yiming franchisees is hidden underwater, then in Yichun, Jiangxi, the "difficulty" of business here is visible to the naked eye. We visited more than a dozen Zhao Yiming stores in Yichun and often saw only one customer in the store, or even none—staff repeatedly wiping shelves and stuffing new products into already full snack cabinets. Having no customers in the store seems to have become the norm for some Zhao Yiming stores in Yichun. Source: Caijing Wuji During the hottest weather in August, the Zhao Yiming store on Gao'an Road in Yichun's urban area even had no air conditioning, and staff had to rely on electric fans to get through the hot summer. A staff member told us that the store's air conditioner had been broken for over a year because the air outlet was blocked by the signboard. It hadn't been repaired because the cost of changing the signboard was too high. A female store manager who joined Zhao Yiming in 2022 told us that opening a Zhao Yiming store now is not as profitable as in previous years. When asked about the reason for the decline in performance, the manager first instinctively answered, "Because there are too many," then added, "The overall environment is also bad." Both answers from the store manager may be true. Since 2009, Yichun has been plagued by population decline, losing nearly 500,000 people in 15 years. In 2023, even its GDP fell into negative growth. The economic difficulties have led to the emergence of a number of chain brands skilled in "low-price business," and Zhao Yiming is one of them. Before the strategic merger of Zhao Yiming and Snacks Busy, the two sides had launched a price war in Yichun. After the merger, perhaps because this is where Zhao Yiming started, all Snacks Busy stores changed their signs to Zhao Yiming. From the brand's perspective, this might be a happy family story. The underlying logic of the bulk snack industry is not complicated: the more stores a brand has, the lower prices it can get from upstream suppliers. But for Zhao Yiming operators, the merger means the overdrawing of market consumption capacity. The previous competition was "life-and-death; if I squeeze you out, I alone enjoy the traffic of the entire location." But with the merger, the excessive number of snack stores opened during the competition has become redundant. Apple Maps shows that Yichun has at least 25 Zhao Yiming stores. Within a one-kilometer radius of the female store manager's store alone, there are 5 Zhao Yiming stores. Some of these stores were registered even after the beginning of 2024. That is, even though the economic aggregate is shrinking, Zhao Yiming still chooses to expand. Yichun actually has more than 25 Zhao Yiming stores, and the high density has affected the survival of the stores. Source: Baidu, Apple Maps Foot traffic is the lifeline of offline snack stores. Every new store opening nearby means the loss of some customers, especially as Zhao Yiming's store formats continue to iterate, and older-generation products are often ruthlessly abandoned by consumers. Don Quijote is a leading retail brand in Japanese discount stores. Its founder, Takao Yasuda, after decades of struggle, realized: "In the offline retail competition in a stock market, only by winning the hand-to-hand combat between stores can you have the opportunity to win the positional warfare and gain greater advantages in supply chain, marketing, logistics and distribution." At another Zhao Yiming store on Wen Ti Road in Yichun, we met three elementary school students who came to "enjoy the air conditioning." Their original "base" was another Zhao Yiming store around the corner, but this new store is closer and has added benches to sit on, so they all come here. Although elementary school students may not understand the ins and outs of the retail industry, they cast an honest vote with their feet. To some extent, this vote is also a microcosm of the internal competition for traffic within Zhao Yiming. And the difficult business has also made many store owners think of "crooked ideas." On Xiaohongshu, there are many reports of "ghost scales" at bulk snack stores like Zhao Yiming. "The first time I weighed, three bamboo shoots cost me nine yuan. The payment felt wrong, so I asked them to re-weigh... The final price dropped from 20 yuan to 11 yuan." On Xiaohongshu, "Qianye"'s experience of encountering a ghost scale at Zhao Yiming received 2,374 likes and 1,213 comments, with many people saying they had experienced similar situations. In the post, "Qianye" specifically pointed out, "When the price came out wrong, the cashier's expression was also very calm." Clearly, the staff did not think that shortchanging was a serious matter. Qianye's experience resonated with many people. Source: Xiaohongshu At the same time, the food safety issues brought by bulk snack quality control are also a bomb hanging over franchisees' heads. Not long ago, according to a notice from the Guangdong Provincial Market Supervision Administration, two batches of samples—cream-flavored melon seeds sold at the Zhao Yiming snack store in Shanwei City's urban area and spicy sauce peanuts (Sichuan pepper and chili flavor) sold at the Zhao Yiming food store in Rongcheng District, Jieyang City—were found to have excessive coliform bacteria. Zhao Yiming was exposed for food safety issues, with products from two stores found to have excessive E. coli. Source: Internet Small franchisees have become victims of multi-party games "Let me show you why our store's business is bad." In the early morning of August 16, Chen Jie rode an electric bike with us, circling a few blocks around the Zhao Yiming store where he was the store manager. During the ride, he specifically asked us to time how long it took to ride from one bulk snack store to another and predicted it would not exceed 3 minutes. Indeed, when the second Zhao Yiming store came into view, only 2 minutes and 53 seconds had passed. Chen Jie revealed that according to past site selection standards, this store might not have qualified for Zhao Yiming franchise. But as competition in the snack market has intensified over the past two years, in order to compete for franchisee resources, Zhao Yiming has gradually relaxed its franchise requirements, even requiring franchisees to open stores more densely and engage in price wars to "squeeze out" competitors. Within less than 200 meters, there are three bulk snack stores. Source: Caijing Wuji field photography "Because if you don't open and don't fight a price war, you're giving the market to Haoxianglai," Chen Jie understands why the brand arranges this, because even if Zhao Yiming doesn't do it, Haoxianglai will. Since 2024, various factions have introduced more favorable and identical franchise policies, even using the same wording. For example, the latest franchise policies of both Zhao Yiming and Haoxianglai waive franchise, management, and service fees. For competing stores, both sides claim "the company will fully support," providing subsidies for activities (including but not limited to price wars). Just a week before we arrived in Ma'anshan, Haoxianglai opened 5 stores simultaneously in Ma'anshan—to be precise, they should be re-openings, because these 5 stores had closed during the "war" with Zhao Yiming last year. This was once seen by Zhao Yiming as a phased victory, but now the opponent has made a comeback, with some even facing Zhao Yiming directly at the two large corners of an intersection, continuing to sound the price war—still the familiar taste, the familiar recipe. From Zhao Yiming's perspective, price wars and denser store openings are common means to compete for market share, and some stores are even destined to be pawns, only to consume the opponent's cash flow. But for franchisees, these actions mean rising costs and further compression of profit margins. The two stores mentioned earlier that are engaged in a price war changed their special discounts from 8.8% to 5.8% within just one day. Although the company subsidizes to ensure a 15% gross margin for the stores, even if they can make a profit, it's just hard-earned money. In addition to facing challenges from declining foot traffic and price wars, franchisees also have to be wary of "backstabbing" from "predecessors." During our visits, we learned that some professional franchisees extract profits from newcomers who have aspirations for the industry. They usually adopt two methods: one is to raise the rent of new stores through group bargaining, compressing the living space of newcomers; the other is to transfer stores early to arbitrage. Thanks to their rich experience, these professional franchisees are often more sensitive to market trends than ordinary people. Once they foresee a possible decline in future revenue, they will transfer the store. Generally, they set the transfer fee as the total profit of the store for the next two years under current market conditions. Some even fake performance by inflating sales to raise the transfer fee, in order to deceive newcomers who are new to the industry. As for the possibility of a future market downturn? That's not something they consider; the successor can only hope for the best. From another perspective, these industry chaos are also a manifestation of the game between professional franchisees and Zhao Yiming. The hollowing out of new franchisees' profits is definitely not good for Zhao Yiming. Once a store closes, the brand's total revenue and reputation will be damaged. But on the other hand, Zhao Yiming needs to use these franchisees' capital to boost business scale, so it can only turn a blind eye. So the question arises: Now that the community of interests between Zhao Yiming and franchisees has cracked, when the dividends completely disappear, what will be the outcome of this game of hot potato? And how should the small franchisees trapped in the mire deal with themselves? **From a community of interests to mutual betrayal in just one night Obviously, not all franchisees are willing to deeply cultivate the snack industry. In the past, many were willing to follow Zhao Yiming to expand territory because there were still dividends to be mined. Specifically, the Zhao Yiming team is responsible for finding high-quality storefronts in major cities and handing them over to financially strong franchisees to operate. The former gains greater scale, and the latter gains substantial profits. When a city's dividends are exhausted, franchisees transfer the risk to later entrants and follow the brand to the next battlefield. But now, the major markets nationwide have basically been divided up. As we analyzed earlier, after the merger of Zhao Yiming and Snacks Busy, the total number of stores has exceeded 10,000, and the "Wanchen system" has reached 6,200 stores. To further expand scale, they can only snatch meat from the opponent's mouth. Are those franchisees who chase trends and dividends still willing to follow Zhao Yiming into hard battles? The answer may be known to both the brand and franchisees: when profits are insufficient to satisfy each other's appetites, defection happens overnight. In fact, Zhao Yiming has already taken the lead in putting shackles on franchisees. This year, Zhao Yiming and Haoxianglai both did the same thing: embedding their logos into the floor tiles—not a surface coating that can be scraped off, but logos embedded inside the tiles. The floor tiles of newly opened Zhao Yiming and Haoxianglai stores are marked. Source: Caijing Wuji field photography The reason for this is to raise the cost of "switching sides" for franchisees. In the market battle in the snack industry, "switching sides" is a common tactic, which is to buy off the opponent's franchisees to change their signs from Zhao Yiming to Haoxianglai, or from Haoxianglai to Zhao Yiming—now they have to pry up the floor tiles. "Franchising is not like being a fan. If you make money for franchisees, they will follow you. If not, they will part ways," Chen Jie doesn't think "switching sides" is a big deal. During his time as a store manager, he had heard of many cases of "defection," and even Zhao Yiming's internal staff sometimes proactively advised some poorly performing franchisees to "switch sides" and "recover" through the opponent's subsidies. But obviously, Zhao Yiming and Haoxianglai, locked in a fierce battle, now have no time to care about the survival difficulties of franchisees. In order to compete for the top position in the industry, regardless of whether franchisees have the intention to defect, they choose to cut off this retreat that is not really a retreat. However, this measure may indeed retain small franchisees to live and die with the brand, but for those big franchisees, it means little. In the upgraded price war, they have already found new arbitrage space, even if it means backstabbing the brand they once allied with. Whether it's Zhao Yiming, Snacks Busy, or Haoxianglai, they all have special subsidies for price wars. For example, Zhao Yiming's latest franchise policy for the third quarter clearly states that for highly competitive stores, "subsidies are not capped." Zhao Yiming's third-quarter franchise policy. Source: WeChat public account "Zhao Yiming Franchise" As a result, some franchisees choose to bet on both sides, operating snack brands from different camps simultaneously, with the left hand and right hand fighting a price war, not only extracting subsidies from the brand side but also siphoning off foot traffic from surrounding snack stores. In the final analysis, when Zhao Yiming cannot give franchisees the expected returns, franchisees will dig for profits as much as possible within their capabilities. Adding logos to floor tiles can only treat the symptoms, not the root cause. And what is truly worrying is that the money-burning war has just begun. The so-called dividends in the past were essentially eating the market share vacated by small and medium-sized snack stores that were squeezed out. But as industry concentration increases, the duopoly pattern of "Mingming Busy" (composed of Snacks Busy and Zhao Yiming) and "Wanchen system" is becoming clearer. What lies ahead is likely a hard battle that requires "going hungry." In terms of capital, Zhao Yiming does not have an advantage. Wanchen is a listed company with relatively abundant financing channels. But for Zhao Yiming, once the investors behind it decide to stop supporting, this snack war that cannot do without subsidies at every moment will be difficult to sustain. At that time, franchisees, especially small ones, may suffer a comprehensive defeat in the competition. Obviously, this retail boxing match, with both sides and their franchisees on IV drips, has reached its most critical moment—whether to be knocked out with one punch or to maintain the advantage of being the largest store network until the end—the most key variable is whether Zhao Yiming can maintain its relationship with franchisees during the ebb tide of dividends. But perhaps, for Zhao Yiming's small franchisees, whether struggling in the red sea or reluctantly cutting losses and leaving, neither is a good outcome.