Zhai Yuanyuan: The snack war has moved from third- and fourth-tier cities to Beijing. The author has learned that Zhao Yiming Snacks, one of the three major bulk snack brands, recently opened its first store in Changping District, Beijing. Caption: Zhao Yiming Snacks' first store in Beijing. Last year, after the merger of Zhao Yiming and Snacks Busy, the "Mingming Busy" group was formed, becoming the first enterprise in the industry to exceed 10,000 stores. Currently, it has over 13,000 stores nationwide, covering more than 20 provinces and cities, including first-tier cities like Beijing, Shanghai, and Guangzhou. Coincidentally, another snack brand, Haoxianglai, also chose the same street in Changping, opening directly across from Zhao Yiming's first Beijing store. The two are neighbors, and the competition is intense. The bulk snack track has become a red ocean. According to iiMedia Research data, at the end of 2021, there were only about 2,500 bulk snack stores in China; in 2022, about 13,000; and by October 2023, they exceeded 22,000. It is estimated that by 2025, the number of bulk snack stores will reach 45,000. These snack brands, once known for low prices and flourishing in lower-tier markets, are now flooding into first-tier cities. However, switching from lower-tier markets to first-tier cities, facing completely different consumer groups, higher store costs, and labor costs, will bulk snack brands suffer from a lack of adaptation? Does the strategy of "encircling cities from rural areas" apply to the snack track?

Bulk Snack Brands Flood into Beijing Unlike 2023, which was called the first year of China's bulk snack stores due to crazy expansion in lower-tier markets, in 2024, bulk snack brands have appeared in Beijing, Shanghai, and Guangzhou. In Beijing, brands have collectively targeted "Banjieta Village," an urban village near Tiantongyuan in Changping District. As a gathering place for Beipiao (migrants working in Beijing) with a floating population larger than the local population, Banjieta Village attracts a large number of migrants due to its proximity to Tiantongyuan, convenient transportation, and cheap flat rents. Public data shows that Banjieta Village, with a registered population of only 2,437, once gathered over 40,000 floating residents. The needs of tens of thousands of people support a bustling commercial street. Zhao Yiming and Haoxianglai both flocked to this street. Zhao Yiming's store is on the west side of the north-south road, larger at about 200 square meters. Haoxianglai's store is on the east side, slightly smaller at about 120 square meters.

Caption: Zhao Yiming snack store in Changping, Beijing. Caption: Haoxianglai snack store in Changping, Beijing. The difference in store size directly determines the number of SKUs they can display. Comparatively, Zhao Yiming has more snack categories, especially bulk weighed snacks. For well-known brands like instant noodles, chips, and water, there is almost no difference between the two; other products come from different suppliers. The author recently visited both stores. From a shopping experience perspective, Zhao Yiming gives a more direct impression of being cheaper. Their price tags show two prices: member and non-member. Non-member prices are basically the same as Haoxianglai's, while member prices are a few mao or one yuan cheaper per jin. Customers can enjoy member prices by simply registering. The labeling is more detailed; bulk weighed snacks generally indicate how many pieces/bags per jin.

Caption: Left: Haoxianglai shelf; Right: Zhao Yiming shelf. In fact, both stores have their own price advantages. They have items priced higher than competitors and items cheaper than competitors. Zhao Yiming's first Beijing store opened five days earlier than the neighboring Haoxianglai store. An insider told the author that Zhao Yiming has been open for nearly two months. Initially, foot traffic was okay, and on good days, daily revenue could reach 20,000-30,000 yuan. With the opening of Haoxianglai across the street, business began to decline. On the worst days, daily revenue was only about 10,000 yuan. A daily revenue of 10,000 yuan obviously cannot cover the basic expenses of a store, including rent and labor costs. The insider said that opening a Zhao Yiming store in Beijing requires an investment of over 1 million yuan. Rent is also high; annual rent alone exceeds 300,000 yuan, and transfer fees are particularly high. There are also several employees (one employee per 80,000 yuan monthly revenue), so it is impossible to recoup the investment within a year. Based on his past experience, even a mid-to-upper performing store takes one and a half to two years to break even. High costs are the biggest challenge bulk snack brands face when entering the Beijing market. Two months after opening, Zhao Yiming has already experienced layoffs. Initially, the store had over a dozen employees, but the owner found business below expectations and cut half of them. Competition makes profitability even more elusive. Can one street with tens of thousands of people support two snack stores? It seems the two stores did not conduct proper research before opening. The insider revealed that they did not know both had chosen the same location before opening. Haoxianglai selected the site earlier, in July, while Zhao Yiming chose in August, a month apart. But Haoxianglai did not open immediately after selecting the site; Zhao Yiming discovered Haoxianglai was also renovating after opening.

No Price War, Price Increases Coming In the heartland of bulk snack stores, third- and fourth-tier cities, the snack war is well known. The war is mainly between two giants: Wanchen Group and Mingming Busy Group. Haoxianglai belongs to Wanchen Group. Last year, Wanchen Group merged its four brands "Lu Xiaochuan," "Haoxianglai," "Laiyoupin," and "Adiadi" into "Haoxianglai Brand Snacks." "Snacks Busy" and "Zhao Yiming Snacks" strategically merged last year to form the "Mingming Busy" group. Haoxianglai has about 10,000 stores nationwide, with its official staff saying the most stores are in the north, especially Shandong and Northeast cities. The price war is most fierce in the southern market where the two giants originated. Originally, snack brands designated the 8th of each month as member day, offering 8.8% discount on purchases. But as competition intensified, deeper discounts appeared. An insider told the author that in Hunan's lower-tier markets, the price war is extremely fierce. The battle between brands is hand-to-hand, with stores opening directly opposite each other. They offer 6.8% and 4.5% discounts daily. Later, perhaps because some franchisees couldn't bear it, the daily 4.5-6.8% discounts were changed to only Wednesday, Thursday, and Friday. However, the price war has not yet started in Beijing. Lower-than-expected foot traffic has made franchisees unwilling to engage in price wars. A Haoxianglai store employee said that Banjieta Village has not particularly high foot traffic, much less than stores in other areas, and few people enter the store. They chose this location initially only because of the evening rush hour foot traffic. To increase profits, franchisees have privately reached a tacit consensus: no price war. The insider revealed that when Zhao Yiming opened, it planned to launch a 3-day 8.8% discount, but the Haoxianglai store owner negotiated with the Zhao Yiming store owner, and both canceled their promotional plans. If snack brands known for low prices continue to discount, they will inevitably compress their already thin profit margins. According to the two brands' official franchise recruiters, Haoxianglai's comprehensive gross margin is around 18%-20%, while Zhao Yiming's is around 18%. A gross margin of 18%-20% is almost negligible compared to new tea drinks and coffee, which have 30%-60% margins. Pricing power is firmly in the hands of the brands; neither Zhao Yiming nor Haoxianglai franchise stores have independent pricing power. A Haoxianglai franchise manager said that in principle, stores nationwide must purchase uniformly from the group, without diverting goods or private cross-shipping, and pricing is uniformly set by the group. However, as stores enter first-tier cities, brands are trying to address pricing differences across regions. For first-tier cities with higher store costs, Haoxianglai's internal franchise team has submitted a proposal to increase snack prices by 2% in first-tier city stores. Compared to Zhao Yiming, Haoxianglai entered the Beijing market earlier, opening its first store in Fangshan, Beijing, in June last year, and it was a directly operated store. The franchise manager said the company prepared for a long time and was very cautious about entering the Beijing market, only opening franchising after a year of operation. Currently, Haoxianglai has 20 stores in Beijing, with another 20 signed and awaiting opening. According to the franchise manager, Haoxianglai's Beijing stores have a monthly revenue of about 800,000 yuan, or daily revenue of 20,000-30,000 yuan.

Snack Track Growth Slows, Market Nears Saturation For snack brand franchisees, the payback period in the Beijing market is longer than in lower-tier markets. Costs in Beijing are more than half higher than in lower-tier markets, but revenue has not correspondingly increased by half. An insider said that in Hunan, a snack store's daily revenue is about 14,000-15,000 yuan, and rent and labor costs are lower there. A store in a northern city has a monthly revenue of about 520,000 yuan. Franchisees who have entered the Beijing market are clearly dissatisfied with the business conditions of new stores. But brands have not stopped expanding into first-tier cities, and have even relaxed franchise policies. Originally, franchise stores required an area of about 120-150 square meters; now in Beijing, stores of 100 square meters can also franchise. Not only in first-tier cities, but nationwide, snack brands are recruiting franchisees to the greatest extent, such as waiving the usual franchise fee of tens of thousands of yuan and the 1% transportation fee. The competition in the bulk snack track is visibly white-hot. In marketing, leading players are trying to penetrate brand awareness by binding celebrities. Zhao Yiming signed Jay Chou as spokesperson, and Haoxianglai is catching up. An insider told the author that Haoxianglai has also signed a celebrity and will announce it soon. In addition, Haoxianglai spent 300 million yuan on a promotional video with consulting firm Hua & Hua, which previously successfully planned and packaged brands like Mixue Bingcheng and Haidilao. Besides the two giants, many regional brands with thousands of stores are also joining the competition, such as Snacks Youming with over 3,500 stores and Retail Youxuan with over 2,000 stores. The new snack industry has "two superpowers and multiple strong players." Traditional snack giants, though under pressure from new snack brands, still hold significant market share. Additionally, cross-industry players are competing for the market. Last month, Sexy Tea was reported to have officially launched bulk snack business, opening its first offline snack and grocery store in Changsha. According to public data, from July 2023 to June 2024, Sexy Tea's snacks achieved sales of 100 million yuan on e-commerce channels. An insider said that stores are opening everywhere now. The increased density of same-brand stores and the proliferation of different brands have made the snack business difficult. Undeveloped markets are shrinking, and the areas that can be covered are becoming saturated. In a single region in Hunan, there are over 40 Snacks Busy stores. An obvious trend change is that industry growth has slowed, as seen in the number of new store openings. In 2023, Wanchen Group's bulk snack stores grew by 4,494 net, an average of 375 new stores per month. In the first half of this year, Wanchen Group's bulk snack stores reached 6,638, a net increase of 1,912 from the end of 2023, an average of 319 new stores per month. Although the low-price strategy is a killer feature of bulk snacks, based on white-label products, low prices are not directly linked to corporate profit growth. Sales growth sometimes does not mean profit growth. Take snack brand Liangpin Puzi as an example: it joined the price war last year, cutting prices on hundreds of products. But in the first half of 2024, when the price reduction strategy was implemented for the full year, revenue not only did not grow, but net profit fell by more than 80% year-on-year. In 2023, when the price reduction strategy was not yet implemented for the full year, net profit also fell by 46%. In addition, there is a hidden risk in the industry: some consumers, while price-sensitive, do not have high acceptance of white-label snacks. Especially in first-tier cities, acceptance of white-label snacks may be even lower. The "money prospects" of bulk snack retailers are full of challenges.