---
title: "Collection Stores Become a New Growth Driver? White-Label Food Finally Gets Its Due"
description: "Every major channel change presents a new opportunity for traffic shifts in the leisure snack industry. From offline KA supermarkets represented by Walmart, to online e-commerce channels, and from brand specialty stores to snack discount stores, channels are continuously evolving, gradually returning to the commercial essence of leisure food—cost-effectiveness. New Distribution read a research report by Huachuang Securities, 'More, Faster, Better, Cheaper: The Rise and Breakthrough of Snack Discount Stores.' The report mainly introduces snack discount stores as a high-cost-performance brand chain format, directly supplied by manufacturers, bypassing distributor markups, thereby lowering product prices to attract consumers."
author: "怜舟"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-03-23"
language: "en"
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# Collection Stores Become a New Growth Driver? White-Label Food Finally Gets Its Due

> Every major channel change presents a new opportunity for traffic shifts in the leisure snack industry. From offline KA supermarkets represented by Walmart, to online e-commerce channels, and from brand specialty stores to snack discount stores, channels are continuously evolving, gradually returning to the commercial essence of leisure food—cost-effectiveness. New Distribution read a research report by Huachuang Securities, 'More, Faster, Better, Cheaper: The Rise and Breakthrough of Snack Discount Stores.' The report mainly introduces snack discount stores as a high-cost-performance brand chain format, directly supplied by manufacturers, bypassing distributor markups, thereby lowering product prices to attract consumers.

Every major channel change is an opportunity for a new traffic shift in the leisure snack industry.
From offline KA supermarkets represented by Walmart, to online e-commerce channels, and from brand specialty stores to snack discount stores.
Channels are continuously evolving, gradually returning to the commercial essence of leisure food—cost-effectiveness.
New Distribution read a research report by Huachuang Securities—**More, Faster, Better, Cheaper: The Rise and Breakthrough of Snack Discount Stores.**
The report mainly introduces snack discount stores as a high-cost-performance brand chain format, directly supplied by manufacturers, bypassing distributor markups, thereby lowering product prices to attract consumers.
**They shift from earning profit per sale to earning through inventory turnover.** Located near communities, these stores offer prices 25%-30% lower than traditional channels.
**Low price is only part of it; the key is the product, i.e., the store's assortment combination capability, to highlight cost-effectiveness.**
The rise of snack discount stores is a channel born from the integration of snack products and the consumption era context.
Current changes in consumer sentiment reflect the shift of China's consumption era into the fourth society.
The snack industry is one of the affected sectors.
**After the pandemic, snack discount stores are more a product of the times.**
In this article, we aim to answer: How do snack discount stores trade volume for price? Behind the high cost-performance operation, how should the business model be adjusted? Which business segments need to be improved to enhance efficiency?
**Winning with High Cost-Performance**
Snack channels have undergone three rounds of transformation, and the emergence of snack discount stores has propelled the leisure snack market into a phase of efficient operation and rapid rise.
The iteration of domestic leisure snack channels is divided into three stages.
The first stage occurred before 2000, still the era of mass distribution, when foreign companies like Kraft, Dove, and Oishi developed in China, quickly occupying the market. Domestic brands such as Daliyuan, Want Want, and Panpan successively established factories, strengthening supply chain capabilities.
During this stage, in the 1990s, Carrefour and Walmart entered the Chinese market.
In 2000, large supermarkets developed rapidly in China, and Lai Yifen and Bestore also opened specialty store models, gradually moving from online to offline.
By 2012, the e-commerce traffic dividend exploded.
Tmall brands like Three Squirrels and Baicaowei emerged.
These brands focused on brand IP, especially Three Squirrels, which created numerous IP products with a memorable image, appearing very trendy at the time.
**With strong brand power and high online traffic penetration, they lowered prices, educating consumers on cost-effectiveness.**
In 2020, e-commerce platforms accelerated decentralization.
**Unlike the previous standardized centralization, where traffic was controllable, after decentralization, traffic distribution became 'restrained,' making online brand operations more difficult.**
Leisure snack brands gradually returned offline.
Snack discount stores mainly originated in the south, especially Hunan, where the entrepreneurial atmosphere is strong, upstream agricultural products are developed, and downstream consumer demand for snacks is robust.
With favorable timing, location, and people, they could rise quickly.
Founded in 2017, Snack Busy; in 2019, Snack Youxuan; and in 2020, Ai Snacks, are all snack discount store brands from Changsha.
**The leisure snack category is naturally suited for a cost-performance route.**
On the demand side, people focus on 'more, faster, better, cheaper.' Snack SKUs are naturally abundant, and mass consumption emphasizes high cost-performance, especially during the pandemic when people got used to consuming within their living radius, thus gathering around communities.
In this context, community-based snack discount stores emphasize high cost-performance, variety, and convenience.
In-store snack prices are 25%-30% lower than in supermarkets.
On the supply side, it was also an opportune time.
According to Narrow Door data, during the pandemic, stores with 500-1,000 locations saw a closure rate of 40%. For example, clothing stores closed 2,800 stores in the first half of 2022, and convenience stores closed 700.
Clothing categories had the highest closure rate.
With low rents and no heavy equipment, snack discount stores could take advantage of low-priced storefronts, renovate, and start operations.
As Yi Lijun, public relations manager at Snack Busy, told Retail Business Finance, 'Good storefronts are always scarce resources. Some good locations with zero transfer fees were released in 2022. We hope to seize these rare opportunities to expand to counties and towns, allowing more consumers to enjoy high-quality snacks that are tasty and affordable.'
**Moreover, snack products have no cycle restrictions, fast payment cycles, and high production and sales efficiency. With proper store management standards and systems, they can bring consumers a new snack shopping experience.**
The demand and supply sides provided excellent opportunities for the emergence of snack discount stores.
Snack discount stores are the result of optimizing previous leisure snack store models.
**This model focuses on trading price for volume, restructuring the value chain, and further optimizing each profit link in the store.**
Although the average order value is half that of traditional snack stores, foot traffic is 9-10 times higher. The result of high traffic generating revenue is that **even if single-store sales per square meter are twice that of traditional stores and initial investment is high, the payback period is only 1.5-2 years.**
Snack discount stores require higher investment, trading high cost-performance assortments for growth.
Compared to traditional low-investment stores with less competitive products, the former has higher operational efficiency, aligning with consumers' current 'pure shopping' mindset.
The efficient and streamlined model results from the combined efforts of upstream and downstream.
After gaining insights into consumer demand, they quickly update and add SKUs, reflecting supply chain agility on the upstream side.
Stores regularly introduce new products monthly, implementing an elimination system where underperforming products are removed, with a 10%-20% elimination rate for brand optimization.
To avoid distributor markups, they mainly purchase with cash on delivery, **and high turnover allows rapid iteration, with store-level consumer insights feeding back to brands for product development.**
After product updates, new product launches, and cost compression, hundreds of stores operate simultaneously, quickly highlighting scale effects.
On the downstream side, i.e., the store level, the focus is on how to drive in-store traffic.
**They place major brand products in stores to attract consumers to buy low-priced big-brand items. Then, they set up shoulder-and-waist products, which are mostly white-label, with lower purchase prices and higher profits, bearing the profit-making task.**
For example, Snack Busy has 1,600 SKUs, with major brands accounting for about 25%, with thin margins. For instance, C'estbon water sells for 2 yuan externally but 1.2 yuan in-store, with a gross margin of about 5%.
Another 50% are shoulder-and-waist products, with gross margins reaching 30%-35%.
The remaining tail products focus on 'tasty and affordable.'
After establishing the single-store model, they opened franchising, setting strict service quality and systems.
For example, store scoring systems, product display assessments, sales script guidance, business hours, music playback, etc., are assessed monthly, with results published.
Stores scoring above 95 for three consecutive months can continue opening new stores, and excellent stores receive free shipping rewards.
Clear rewards and penalties encourage franchisees to operate diligently.
**They found the optimal solution in store, product, supply chain, franchising, and service. With snacks as the core, they extract the true product quality consumers need—cost-performance and taste—and reverse-engineer the entire model around this goal.**
Keenly grasping consumption society changes seems to be the key to unlocking business traffic.
**The Ceiling Isn't High**
History tends to repeat itself.
Previously, there was the Tmall brand trend; now snack convenience stores are similar, just the difference between internet and offline stores.
As more players enter, like the aggressive promotions of Tmall brands, future price wars will thin profits for snack stores. Once the dividend fades, it comes down to hard power—the backend supply chain and manufacturers.
The essence of retail is efficiency.
**To break out, the first prerequisite is supply chain capability.**
Snack discount stores precisely combine various modules to achieve efficient operation.
**In the early stage of store development, securing prime locations is crucial. The protection distance and coverage radius between same-brand franchise stores is 500 meters. Early layout in coverage areas can provide a first-mover advantage.**
The replicability of the store model weakens the project's model barrier. To increase sales per square meter in regional competition, it's necessary to improve buyer selection and management efficiency.
The product base must be sufficiently rich, with fast iteration, while balancing cost-performance and conversion rates, **keeping consumers fresh and encouraging repeat visits, thereby increasing store traffic.**
Leading stores have nearly 2,000 SKUs, updating 10%-20% of products monthly to further optimize sales per square meter.
For example, Snack Youming already has over 1,000 stores, mainly in the southwest, gradually expanding nationwide, focusing on branding. They waive franchise fees and establish efficient, stable supply chain and warehousing management systems.
Also, Snack Youxuan, in addition to food and household items, sells cigarettes and betel nut, using digital technology to integrate supply chain management.
Currently, brands focus on enhancing store digitalization and supply chain construction to improve organizational sales per square meter.
All stores' strategies are similar.
Similar business strategies among brands are not a problem; many business models are referential.
For example, Zhejiang's Laopo Daren was inspired by Lai Yifen, and Snack Youming and Snack Youxuan are very similar to Snack Busy in site selection, layout, and display.
**When strategies are similar, it tests whether the project has unique advantages and whether those advantages are non-replicable.**
For instance, Snack Youming started in Sichuan and developed in the southwest. Besides snacks, they also do roasted nuts to avoid homogeneous competition.
Snack Youxuan, similar to Snack Busy, is easily diverted by leading players without advantages.
At this stage, brands are racing to expand, possibly leading to regional competition.
Although snack discount stores have relatively low initial renovation, operation, and investment costs, the many SKUs and flavors, plus numerous franchisees, make project management difficult.
Supply chain costs are also a pressure.
**For this reason, brands choose to develop within their own regions, opening franchises, and only expanding externally after the model is validated.**
Once leading brands penetrate other provinces, they will still clash with other brands.
To judge the success rate of external expansion, **the number of stores during the ramp-up period and sales per square meter are key validation indicators.**
Taking Snack Busy as an example, their base is in the Changsha-Zhuzhou-Xiangtan economic circle. Although they rank lower within the province, when expanding externally, they avoided the fiercely competitive Sichuan-Chongqing region, where snack demand is strong but extremely competitive.
Instead, they moved to Jiangxi and then Hubei. When entering a new province, they first open 4-6 pilot stores with joint operations, including discounts and subsidies, temporarily reducing store gross margins.
After the pilot period, they consider expanding the franchise scope.
Generally, 50 stores mark the acceleration phase. After one year of operation, the first batch of stores passes the ramp-up period and enters the next acceleration phase.
Store performance during this period is more indicative.
The ramp-up period represents the time cost of incubating new stores in different regions, and steady-state sales per square meter is the basic foundation of a single store. The ramp-up period should be as short as possible, with steady-state sales per square meter not lower than 90% of the provincial average.
**If the ramp-up period is too long, exceeding one year, it will erode franchisee confidence.**
Shortening the ramp-up period and boosting franchisee confidence gives investors more patience for payback periods, **typically 1.5-2 years, and even if sales per square meter suffer, they still have faith to continue opening stores.**
Leading brands are trying external expansion, but in reality, most brands struggle to succeed, destined for regional oligopoly competition.
In Changsha, it's already a zero-sum market.
In Zhejiang, Laopo Daren's store count within the province is saturated. **If they continue opening stores, it will lower sales per square meter. Additionally, with the countervailing impact of live-streaming e-commerce, the entire industry faces significant survival pressure.**
Considering the business model of snack discount stores—site selection, products, supply chain, consumer base, franchising—they are not a '10,000-store model' by nature.
The prerequisites for a 10,000-store model are: **First, broad-spectrum and high-frequency demand, which can bring large market space, such as Chinese fast food, convenience stores, and community stores—these categories are more mainstream and widely covered;**
**Second, market space is average, but differentiation and branding can be achieved.**
For example, coffee and braised food; Mixue Bingcheng fits both logics.
In contrast, snack discount stores have single-purpose consumer visits and low brand and service added value. That is, consumers just want to buy a bag of cookies, and whether it's a branded store or choosing between A and B brand stores, external interference is minimal.
It's this vague boundary that makes it hard for snack discount stores to break out.
**Embracing the New Channel Era**
The snack discount store trend is cooling, and the rapid expansion phase is ending.
People are still opening stores in 2023, with sales per square meter ramping up in 2024. Within 2-3 years, the industry still has distribution dividends.
**In this competition, production-based snack enterprises have more control over the supply chain, and white-label companies also have opportunities to emerge.**
Snack collection stores themselves have a low proportion of major brand products, and since they mainly sell white-label products, many operators worry that major brands will disrupt pricing, showing resistance with little benefit.
Instead, traditional retailers like Ganyuan and Yanjin Shop have **supply chain strength and rich SKUs, making them more capable of transformation.**
Unlike brands like Three Squirrels, Baicaowei, and Lai Yifen, which have long relied on e-commerce, they have long used OEM, and their products are quickly diverted.
**The white-label products produced by their processing plants have the opportunity to enter snack discount stores. If a hit product emerges, white-label products can enter more channel stores, increase exposure, and leverage the channel to break out.**
From this perspective, we can directly see the importance of channels to snack brands.
After channels gain a first-mover advantage, product strength, production efficiency, and scale determine whether they can last in that channel.
Taking a long-term view, the emergence of snack discount store channels consolidates the advantages of the leisure snack category and addresses the weak quality control and low supply chain efficiency of previous Tmall brands.
Brands like Yanjin Shop and Ganyuan, leveraging their supply chain capabilities and combining with the characteristics of discount store channels, steadily improve efficiency while ensuring product strength.
The emergence of snack discount store channels brings freshness to consumers and vitality to the leisure snack category.
Unlike 20 years ago, whether at the corner store or on supermarket shelves, you'd always see big brands like Want Want and Nestlé. **These brands have limited profits, and store channel margins are thin.**
**Retail discount stores give waist-level brands a chance to shine, and white-label products can stand in the market with more dignity.**
The market is becoming fairer.
When brands at every level have the opportunity to step into the spotlight and all players hold the same cards, what remains is a pure competition of product strength.
Only food brands with sufficient product strength and supply chain capabilities can seize this channel opportunity.


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