As the development of bulk snack retail heats up, the cycle has begun to trigger early. In a previous article, the author predicted that within less than a year, mergers and consolidation in the bulk snack industry would form an initial structure. In fact, since August 9, when Ai Snacks fired the first shot, the Warring States era of the snack industry is likely to accelerate. The biggest difference between the Warring States era and previous competition is that past competition was a market's unconscious elimination, but the Warring States era is a series of business actions centered on leading players, driven by strategy as the underlying logic. The author believes that whether there is unconsciousness and self-drive is an important sign of whether bulk snack retail has entered the Warring States era, and behind the Warring States era is the fact that bulk snack retail bypasses distributors to directly cooperate with manufacturers. So, are snack distributors' good days over? Next, the author will discuss this with everyone.
The Hot Bulk Snack Retail In the past two years, there have been many players in bulk snack retail. Currently, the main players include Zhao Yiming, Snacks Are Busy, Snacks You Ming, Ai Snacks, Laopo Daren, Snacks Youxuan, etc. In terms of store numbers, Laopo Daren has about 1,000 stores, Snacks Youxuan about 800, Snacks Are Busy over 2,000, Snacks You Ming over 1,000, Zhao Yiming over 1,200, and Ai Snacks over 1,000. Their models all choose leisure food SKUs, ensure good sell-through, and rapidly expand store numbers through financing. The author observed a characteristic: Ai Snacks' national expansion is still rough but meticulous. First, the areas open for franchising are still adjacent to previous provinces, which puts less pressure on the supply chain and makes it easier to form a whole. Bulk snack stores, or snack collection stores, have evolved from the first generation to the fourth generation over time. First-generation stores are basic, only selling leisure food; second-generation stores gradually introduce brand image management; third-generation stores are larger, with more SKUs and more unified decoration; fourth-generation stores begin to add entertainment elements like Don Quijote, children's areas, and increase family stickiness. In fact, if we have to say, the large-store model of snack collection stores is infinitely close to KA hypermarkets. Starting from the word "large" alone obviously cannot see the whole picture. Besides being large, the comprehensive functions and rapid evolution of snack collection stores are unprecedented in the industry.
Currently, hypermarkets and even convenience stores face very similar difficulties. The first is severe homogenization. The author has mentioned more than once that no matter how many SKUs there are, the SKUs that really make money are well-known big brands and famous white-label products. Some say, "The leisure food sales of convenience stores next to snack stores will drop by 20%, and this is just the beginning."
Regarding capital entry, the author will briefly list: currently, Snacks Are Busy raised 240 million yuan in Series A, Zhao Yiming raised 150 million yuan, Snacks You Ming raised a bit over 100 million yuan, Ai Snacks raised tens of millions of dollars, Snacks Are Busy raised 240 million yuan, and just strategically invested in Qiahuo Puzi. This move achieved a counter-encirclement of channels by snack collection stores, but the effect remains to be seen. The business model of snack collection stores is basically cutting out the previous transit links and distributor links, directly negotiating with manufacturers, just like investing in Qiahuo Puzi, gaining a certain say. Distributors' business is definitely affected. The author talked with a big distributor of cola. Even though they have achieved annual sales of over 100 million yuan, snack collection stores still have an impact on them. Although the impact at this stage has not yet reached the point of shaking the foundation, the spillover effect has basically emerged. For small and medium distributors, this is the most intuitive feeling. Snack collection stores bypassing distributors to negotiate direct procurement and supply with brands has become increasingly frequent. For example, snack collection stores have become the main business of Yanjin Pu Zi, contributing 211 million yuan in revenue, accounting for 7.31% of total annual sales, surpassing two traditional supermarkets, Walmart and Bubugao. Therefore, manufacturers are already co-developing specially supplied packaging with snack collection stores. With special packaging, it's not just about solving channel issues. Special packaging will reconstruct user perception, and it can even be said to reconstruct the product in users' minds, which is very scary. Once a new category builds a new building in users' minds, the old packaging will collapse. The most direct result is that consumers will change their purchase terminals and turn to snack collection stores.
Evolution Analysis of Bulk Snack Retail's Future Development Competition is inevitable. Snack collection stores, as a definite opportunity, have clarified the future direction of leisure food evolution. The 13,000 stores in 2022 have already played their cards. Therefore, whoever survives in the end will own the just-upgraded market, just like a group of people burning firewood, you ultimately enjoy the warmth. Currently, with the boost of capital and some regional reasons, the industry has basically entered the "Warring States era." Various snack collection brands have each occupied the market according to their financing amounts. The market is never static. The battle of snack collection stores has actually begun. The author previously reminded everyone to pay priority attention to entrepreneurs in Sichuan and Hunan, not casually. Sichuan, as a major leisure food consumption province, has always been a battleground for strategists, not to mention the accumulation of various industrial chains. Ai Snacks' controlling stake in Dinosaur and Teddy is a manifestation of valuing the Sichuan market. Previously, Dinosaur and Teddy had deeply cultivated the Chengdu market with over 300 stores. Let me show you a set of data: In 2022, Sichuan Province's food industry achieved operating revenue of 855.5 billion yuan, ranking third nationally; achieved total profits of 115.48 billion yuan, accounting for 20.1% of the national total. Why must the Sugar and Wine Fair be held in Chengdu? This is the reason. From a sensory perspective, Chengdu has over 60% of Fortune 500 companies settled, and there are many nationally famous leisure food stores. Taking Chengdu is roughly equivalent to taking the entire southwest, which is also one of the reasons why well-known bulk snack brands lay out large warehouses in Chengdu. Ai Snacks founder Tang Guangliang believes that the Sichuan market can open 3,000 stores, accommodating three snack collection store brands, one thousand each. From this statement, Ai Snacks suddenly rushed into the area originally built by Snacks You Ming and Snacks Are Busy, which was well-prepared. The arrival of new players is bound to take a share, and may even change the deployment of Snacks You Ming and Snacks Are Busy. To put it more fantastically, it can even directly threaten the relatively smaller mainstream local player Snacks You Ming. But blindly expanding stores for snack collection stores is not advisable. It is necessary to have a target, implement a regional intensive strategy, and in terms of core competitiveness, it is supply chain optimization and integration, grouping high-quality production capacity, which actually provides space for assortment.
In product selection, through data feedback, foot traffic measurement, traffic line distribution, and other high-tech digitalization, select excellent SKUs, and deploy private brands around them to form a unique combined price system. Only in this way can prices be truly controlled and channels mastered. Snack collection stores must be channel-oriented. Bulk retail is a price war and a method of mobile marketing. In actual snack collection stores, it is used to combine certain leisure foods to form local price advantages. From manufacturers to store terminals, only the distributor link, which was very important in the traditional past, is bypassed. Branded packaged snacks are generally 15-20% cheaper than other channels; branded beverages are generally 20-40% cheaper than other channels. It's hard to say that what's cheaper isn't the distributor's profit. For convenience stores, the impact is not yet fatal, but it is gradually emerging. The advantage of convenience stores in cities is still good location and selling cigarettes. The shorter the shopping process, the better. "Lazier" users will directly use flash warehouses, direct delivery. Those who really need snack stores are those without flash warehouses or high-end convenience stores, or consumers who need some higher-end, more unique SKU needs. So when snack stores enter cities, the focus is on high-end SKUs while maintaining extreme cost-effectiveness; when going to rural areas, they do mid-to-low-end SKUs but ensure large quantities and cheap prices. In fact, for hypermarkets, snack collection stores have almost reached a point where they can affect survival. The continuous shrinking of sales, accompanied by the rise of differentiated high-end formats like membership stores, and also encountering snack collection stores armed to the teeth. It can be said that now is not the time to collect channel fees or barcode fees, but even if free, it's difficult to attract high-end SKUs to enter, because the sales per square meter is too low, and it's simply incomparable with snack collection stores. Distributors often become the direct pressure bearers. Whether in hypermarket scenarios or convenience store scenarios, affecting business has become a foregone conclusion. According to the author's understanding, under the extremely rapid involution, some small and medium distributors close to related categories have clearly felt a bit overwhelmed, and "surviving" has become a more realistic goal. For big distributors, although they have strong SKUs, they are also affected, and the total supply will definitely be limited by snack collection stores. The practice of exchanging space for time is only suitable for distributors with thousands of SKUs. For those specializing in categories, the impact is self-evident. How should snack distributors grasp the trend in this new era tide, and how to find their best strategy?
On October 10, 2023, the [5th China FMCG Conference] will be held in Shenzhen, with a [Snacks and Discounts] forum. At that time, three core topics will be deeply discussed around the snack and discount track, brand owners, and distributors!
Enlightenment for Snack Distributors Today is an era of change. Snack distributors should abandon the fixed thinking and habits formed over the past 20 years, quickly scale up, and coordinate their dispersed production capacity together. In terms of supply chain, through rapid supply chain integration, actively mobilize resources, and form cooperation mechanisms. Fighting alone is hard to compete with emerging formats. Objectively speaking, even big distributors find it difficult, let alone more small and medium merchants. At the same time, they should improve efficiency, become one-stop supply chain service providers, and strive to be multi-functional snack distributors with what others have and what others don't, seeking a certain say in the industry chain, not just taking goods. The past idea of goods being king should be changed. Now, channel being king and access being king should be added. While continuously extending upstream and downstream, they still need to have products with their own unique competitiveness. They cannot just sell what others sell. Find a product that suits their supply chain characteristics to sell. For example, if they have more transportation capacity, actively explore new categories, use the extra capacity to complete the distribution of new products, which is also a test of the market. The zero-supply model is destined to be broken, but from the distributor's perspective, just waiting cannot get the desired results. Waiting for hypermarkets to cancel entry fees, waiting for the market environment to improve, relying on luck to do business, time may not be on your side.
For snack distributors' category management, deepening is also a reasonable option. Select the best among SKUs to form a product portfolio with their own characteristics. Just like watching "Game of Thrones," each family has its own sigil, making it easier to identify on the battlefield. For example, combining beverages with leisure food for combined sales, similar to Don Quijote's "passionate products," are all goals to learn from. The core of optimizing product portfolio revolves around "flexibility": flexible product selection and flexible combination should become a required course for snack distributors. It can be said that competition in homogeneous products is about who has more money, more resources, lower channel costs, and better brand task achievement. But big distributors are limited, not everyone meets these conditions, and ordinary distributors also have to live. Differentiation needs to be deeply imprinted in the minds of new-era distributors.
Regarding the most important thing for waist-level distributors, there used to be a meme online called "if you can't beat them, join them." Previously written, it's not shameful to act as an agent for white-label products or do OEM for big brands. When snack distributors build their own warehousing systems, they can actively connect with bulk snack brands, because nationalization is not as simple as imagined, and some distributors' advantages have not yet been replaced. The author believes that distributors still have structural opportunities in the bulk snack field. Nationalization will definitely require a lot of warehousing space. Self-building and jointly building central warehouses will be the future play, but it will indeed eliminate some distributors. I don't want to give useless comfort. Competition has already begun, and even within bulk snack retail, differentiation has started. Some distributors' business will definitely be difficult. Selling their business was previously seen as a fallback, but now it's not safe either. In the industry, there was a distributor who sold a 50 million yuan business for 1.4 million yuan, and some peers even thought 1.4 million was a "good price." So we must take the initiative into our own hands. By acting as agents for some SKUs that bulk snack retail finds hard to connect, we can assist snack collection stores in forming a manufacturer + distributor product loop. The author has always believed that completely bypassing distributors is a false proposition. Therefore, staying at the table is the primary task now. Even if profits are a bit less, we must join the supply chain. The current trend of snack collection stores is regional intensive. Major brands continue to expand outward in small ranges from their headquarters. Therefore, in places not covered, distributors can still play a decisive role. With the expansion of nationalization, points will definitely be spread more. Therefore, the author suggests a two-step strategy: on the one hand, cooperate with bulk snack retail to do channels well; on the other hand, connect their years of methodology with production capacity, self-develop or act as agents for fist products. If distributors can make a good white-label product, it's roughly equivalent to having the right to bargain with bulk snack retail.
With the advent of the Warring States era, industry competition will only become more intense, and the requirements for distributors will only become higher. Previously, it tested whether you could get goods and sell them. Now it tests comprehensive capabilities, that is, the evolution of distributors to full-chain distributors. In the future, the test for distributors will definitely be strategic capability. Learning to do the stock market is one of the directions to improve. Now many owners of physical enterprises hire entrepreneurial coaches. Is it because they don't understand business? No. They hope to reduce costs and increase efficiency through more professional management methods and explore better business models. Is there a better path to reduce costs and increase efficiency?
From October 9 to 11, 2023, the [5th China FMCG Conference] will be held in Shenzhen. At this conference, a special parallel forum [Snacks and Discounts] will be set up. At that time, founders of leading snack store brands, executives of first-line FMCG brands, national excellent distributors, and deep observers of the snack discount industry will gather in Shenzhen to deeply exchange views on the topic of "snack discounts" and jointly explore the future and opportunities of snack discounts!