Click "Read the original" for details In fact, the snack industry's market size is growing rapidly, but concentration remains low. In a report released last year, the Ministry of Commerce stated: Chinese people consume 2 trillion yuan worth of snacks each year. This is a massive market. According to iiMedia Research, the demand for leisure food in China is continuously growing, and it is estimated that it will exceed 3 trillion yuan by 2020. From the successive rise of snack companies such as Three Squirrels (300783.SZ) and Bestore (603719.SH), to the emergence of new snack brands like Zhong Xue Gao, Original Wheat Hill, Single Grain, and Wang Bao Bao, the trillion-yuan snack industry is flourishing and expanding. With the rise of young consumer groups, the snack market is facing transformation and upgrading. Against the backdrop of severe homogenization, companies urgently need to find innovation and differentiation. "Today's market is no longer one where you can achieve good results simply through marketing and communication. Consumption upgrading remains the mainstream. To better meet consumer needs, breakthroughs in products are essential," a relevant person in charge of Zhong Xue Gao told Times Weekly. -01- Products Urgently Need Innovation In fact, although the market size of the snack industry is growing rapidly, concentration is low, and there is still no absolute leading brand. This is both an opportunity and a challenge. Looking back at the history of the snack industry, the 1990s can be seen as the era of Snacks 1.0. During this stage,旺旺 (00151.HK) and Uni-President (00220.HK) established factories in mainland China, becoming household names with hit snacks such as Want Want Senbei, Want Want Snow Rice Cracker, and Little Master Instant Noodles. Since then, the snack industry has continued to expand, with the rise of Qiaqia Food (002557.SZ), Xiangpiaopiao (603711.SH), Lai Yifen (603777.SH), Bestore, and Three Squirrels. In recent years, leveraging the trend of online consumption, some emerging snack brands have appeared. For example, new players such as Akuan, Emotional Snacks, and Single Grain have quickly become popular through precise marketing using new marketing tools like short videos and KOLs. The coffee brand "Saturnbird" completed a B-round financing of over 100 million yuan this year, led by Sequoia Capital, with existing shareholder FreeS Fund following. The internet-famous ice cream "Zhong Xue Gao" exceeded 3 million yuan in 64 minutes during the 2019 Double 11, surpassing Haagen-Dazs; on November 1 this year, it became the top seller in Tmall's ice cream category. The snack market is a huge cake, and currently, there is a chaotic battle between new and old brands, but it is not easy to get a piece of this cake. "The snack industry suffers from severe homogenization, and innovation and differentiation are the breakthrough points." A research report from Guojin Securities points out that innovation includes both product and marketing aspects. The purpose of product innovation is to satisfy consumers' curiosity and enhance their shopping experience. Marketing innovation focuses on conveying brand value and emotional meaning to resonate with consumers. Product homogenization has always been a problem in the snack industry. Take the most popular nuts category, for example: it grows quickly but has low barriers and severe homogenization. Companies such as Wolong, Qiaqia, Be & Cheery, Three Squirrels, Bestore, and COFCO have all launched their own daily nuts products, making it hard for consumers to distinguish them. "Creativity is an important measure of whether a brand can continuously attract consumers. It's not just about creating new flavors or products, but about capturing consumers' attention," the aforementioned Zhong Xue Gao person in charge said frankly. The company requires that any cross-industry collaboration must be based on producing a unique original product; simply putting two logos together is something Zhong Xue Gao will not do. Recently, Qiaqia Food launched two new products. Wang Bin, Vice President of Qiaqia Food, stated that through innovation and product upgrades, Qiaqia brings consumers more nutritionally comprehensive nut foods and is committed to creating new categories. -02- Omnichannel Layout In the turbulent snack industry, in addition to innovation capabilities, the support of the capital market is equally important. In recent years, snack brands have successively listed on the capital market, and emerging snack brands have also received consecutive financing. On February 24 this year, Bestore successfully listed; internet-famous companies such as Zhong Xue Gao, Wang Bao Bao, and Saturnbird also completed multiple rounds of financing in a short period. When brands stand on the same capital starting line, the next development direction and who will continue to thrive become new topics. Entering November, the A-share third-quarter reports concluded. Among the top four snack companies—Three Squirrels, Bestore, Qiaqia Food, and Lai Yifen—three saw revenue increase but profits decline, with only Qiaqia Food achieving growth in both revenue and net profit. The financial reports show that Three Squirrels' revenue and net profit attributable to shareholders in the first three quarters were 7.231 billion yuan and 264 million yuan, respectively, with year-on-year growth of 7.7% and -10.62%. During the same period, Bestore achieved revenue and net profit attributable to shareholders of 5.53 billion yuan and 264 million yuan, respectively, with year-on-year growth of 1.29% and -16.15%. Lai Yifen achieved revenue of 2.999 billion yuan, a year-on-year increase of 2.9%; net loss was 37.587 million yuan, a year-on-year decrease of 349.46%. In the view of food industry analyst Zhu Danpeng, the overall performance of the snack industry in the third quarter was poor, but for different reasons. Among them, the profit declines of Bestore and Lai Yifen are stage-related issues: Bestore's base is in Wuhan, Hubei, and Lai Yifen's commercial center is in Shanghai, both severely impacted by the epidemic. Three Squirrels' decline is a structural issue that requires further adjustment in the future. It can be seen that Qiaqia Food, which started offline and counterattacked online, performed well this year. Qiaqia Food stated that in terms of sales channels, its long-term focus has been offline. The downstream sales network covers more than 1,000 distributors and 600,000 terminal stores in all provinces across the country, achieving full-scenario coverage of offline channels. At the same time, the company follows industry trends and increases investment in online sales channels. In fact, as the cost of acquiring traffic online continues to rise, a balanced offline layout has also become an important part. Therefore, snack giants are all focusing on the "online + offline" omnichannel layout. In the first half of 2020, Three Squirrels opened 38 new investment stores and 209 alliance stores; during the same period, Bestore opened 25 direct-operated stores and 47 franchise stores. "The leisure food industry still has room for growth and is expected to expand. Consumption upgrading is driving the industry towards higher quality, health, and personalization, with integrated online and offline channel development," said Chen Wen, an analyst at Wanlian Securities Research Institute. Source: Times Weekly, Author: Li Jing