Sugar, calories, spicy... snacks always evoke the most direct desires in people's hearts. Driven by desire, snacks have become a very good business. Many people marvel at the development of the leisure snack industry. According to the '2022 China Leisure Snack Industry Report' released by Mob Research Institute, the leisure snack industry exceeded 1.5 trillion yuan in 2022, with a compound annual growth rate of over 11% as market penetration increases. There are many players in the leisure snack industry, but few stand out. Over 40 years of development, those well-known snack brands have risen in their best eras, achieving from 0 to 1, but none have grown into true industry giants. Euromonitor data shows that the top three leisure snack players barely exceed 15% market share. Now, a new wave is rising again. Snack discount stores under new business models are prevalent, with low-price competition, financing for land grabs, and franchise expansion, stirring undercurrents in the leisure snack industry. The business world is changeable and cruel, and every change reshapes competitive logic and market landscape. After 40 years of iterative development in leisure snacks, industry players who can grasp the new core competitiveness of the industry can seize a leading position in the new wave, while those who fail to keep up will exit sadly during the industry reshuffle. In reviewing the past and focusing on the present, we attempt to explore the following questions: What evolutions have occurred in the competitive logic of leisure snacks? What are the core competencies at different stages? When the dividend of 'volume' diminishes, what should be the new core competitiveness of the leisure snack industry? And how to obtain it? Foreign Brands Sweep, Domestic Snacks 'Catch Up' From 1980 to 2023, leisure snacks experienced four key development stages. Before the 1990s, the snack industry was in its infancy, with categories limited to common long-shelf-life products like melon seeds and candies, and channels mainly street-side shops and wholesale markets. Entering the 1990s, foreign snack brands accelerated their category expansion in China. During this stage, the Philippine brand Oishi, returning as overseas Chinese, became a childhood memory for many; in 1994, Italian candy giant Perfetti Van Melle's Bebeto bubble gum swept the candy market upon its domestic launch; Oreo, entering China in 1996, became synonymous with chocolate cookies. In contrast, domestic brands lacked technology, capital, and marketing experience in FMCG. This led to a long period where most domestic brands lacked competitiveness against foreign brands. However, it was also the entry of foreign brands that allowed China's snack industry to learn advanced world experience. Subsequently, domestic brands like Daliyuan, Guanshengyuan, and Panpan relied on imitation plus cost-effectiveness, gradually entering mainstream supermarket shelves after a long and arduous struggle. Cost-effectiveness also formed the main tone of the growth trend of China's snack industry. Direct Operation or Franchise: Perhaps Not a Question Starting in 2000, local snack brands began to make efforts. But in the era without e-commerce, the dominance of supermarket KA channels far exceeded any current channel. The snack industry was large and scattered, with no bargaining power in front of supermarkets, urgently needing an aggregated and low-cost channel. Against the backdrop of rapid urbanization, the first snack collection store brand, Laiyifen, was born in Shanghai in 2002. At that time, snack products in Shanghai supermarkets were almost all expensive brands priced at 3-5 yuan, such as Oishi shrimp crackers, Want Want Langweixian, and Glico Caiyuan Xiaobing. Moreover, whether you went to Carrefour or Bailian, the snack categories were highly similar. In comparison, Laiyifen's snack categories updated more frequently, and bulk retail met consumers' different measurement needs, offering higher cost-effectiveness. Relying solely on Shanghai and its surrounding areas, Laiyifen could rank around the 30th place among China's top 100 supermarkets a decade ago. Laiyifen's success proved that the snack collection store model works. The core of this business is retail: do well in channels, master the supply chain, and then keep opening stores. In 2003, Be & Cheery opened its first store in Xiasha, Hangzhou; in 2006, Liangpin Shop was born in Wuhan Hankou Commercial Center, Wuhan International Plaza. Since then, these three snack giants each ran their own markets and completed expansion in their respective regions. Laiyifen dominated Shanghai and advanced into Jiangsu, Be & Cheery carved out territory in Zhejiang, and Liangpin Shop positioned itself in Central China. At this point, there were no national players, but who didn't dream of dominating the industry? To expand stores, the most direct ways were only direct operation and franchising. For a long time, Laiyifen was obsessed with the direct operation model. This obsession came from long-term competitive experience. Strong supply chain bargaining power, unified capital mobilization, and comprehensive talent management allowed Laiyifen to have ample funds, continuously rising revenue, and a good brand reputation in years of competition. But business has no permanent standard answer. In 2012, Liangpin Shop, which received financing from Capital Today, opened franchising, offering a new answer for snack franchising. Compared to franchising in other industries, snack franchising is lighter and simpler: products are standardized, and with a unified visual system, management system, and logistics distribution, it can be replicated. Additionally, through mobile internet management of terminal stores, Liangpin Shop's store count grew geometrically. From 2012 to 2016, over three years, Liangpin Shop's franchise stores grew from zero to 763. By early 2020, Liangpin Shop's franchise stores exceeded 1,400, while direct-operated stores decreased from 1,005 to 775. While Liangpin Shop and Laiyifen were struggling over whether to franchise or operate directly, a new species appeared. Rise of E-commerce Channels, Three Squirrels Overtakes on the Curve In 2012, mobile internet was in a rapid growth stage, and that year's Double 11 Tmall Taobao sales exceeded 10 billion yuan for the first time. In this vast ocean of traffic, Three Squirrels emerged as a dark horse. Using pecans as its traffic-driving hit product, Three Squirrels adopted an OEM model, focusing on its own brand for marketing, gathering traffic, and quickly expanding the market. After entering Tmall, it achieved 1,000 orders per day within two months, and on Double 11, it broke records with 100,000 orders. In just a few months, Three Squirrels' revenue reached over 7 million yuan. Although online channels sacrificed some immediate consumption scenarios, they gained favor through price advantages. Traffic became an important driver for enterprise scale, and Three Squirrels achieved volume growth and overtook competitors by relying on online channels. Without the need to consider offline stores, Three Squirrels could have faster new product cycles, higher fault tolerance for new products, and lower inventory for new products. These advantages increased product repurchase rates and conversion rates, and to some extent reduced inventory and logistics pressure. Compared to offline, all consumption data online can be accumulated, which also helps in new product development. It can almost be said that there are only benefits and no drawbacks. Does this mean that the pure e-commerce model is invincible? Not at all. Starting in 2017, online penetration reached its peak, traffic became increasingly expensive, and Three Squirrels had to spend a lot of money annually to buy traffic. Due to heavy reliance on online platforms and traffic, Three Squirrels' gross margin was very low, far below that of offline-focused Laiyifen and Be & Cheery. In the middle of the battle, diversified channel layout officially became the standard for industry leaders. Snack companies, starting from consumer needs, ensured product quality, leveraged brand power, and coordinated multi-channel layouts online and offline. Under the New Competitive Landscape, Each Seeks New Paths Now, a new round of changes has emerged. Starting in 2019, a new retail format, 'snack discount stores,' became prevalent in lower-tier markets. The rise of snack discount stores is driven by upgrades in channel efficiency and supply chain efficiency. By abandoning brand power, snack discount stores are driven by categories, where category is the brand, leaving room for lower prices. Products in snack discount stores are 20%-30% cheaper than in supermarkets; store areas are generally larger, typically over 120 square meters. At the same time, in-store products are mainly affordable, with bulk sales formats ensuring consumers have a rich selection. Despite low terminal prices, the retail system of snack discount stores remains financially stable. According to CITIC Securities data, the gross margin of snack discount store headquarters is 8%-9%, with a net margin of 1%-2%; terminal snack discount stores have a gross margin of 18%-20% and a net margin of 6%-7%. As the main representatives of snack discount stores, Snack Busy and Snack Preferred have further upgraded on this basis, adding water and beverage categories for traffic attraction. The emergence of snack discount stores successfully adjusted the snack industry to a low-margin format. In this case, snack discount stores need to make money through high efficiency. High efficiency inevitably requires asset-light and high expansion, with focus on store location, supply chain, and franchisees. Snack discount stores choose the franchise model, opening in communities to control rent pressure to some extent, measuring nearby foot traffic, and precise location selection can ensure store repurchase rates. According to Jiemian News reports, this model compresses the original model's 50% gross margin in the channel system to below 30%, reducing channel costs while significantly lowering terminal retail prices, fitting the 'cost-effective mass business' model. It solves the problem of high mall entry fees, passage fees, and promotion fees that raise snack product prices, reduces value loss, and snack discount stores have activated the existing snack market. With high cost-effectiveness and community location advantages, snack discount stores expanded rapidly against the trend during the past two years of pandemic disruption. According to CITIC Securities estimates, there were 10,000 snack discount stores at the end of 2022, with long-term potential for 100,000 stores in the industry. In fact, emerging snack discount stores almost all chose the franchise model for rapid expansion. According to official data, Snack Busy alone added 1,200 new stores in 2022, and after six years, its total national store count exceeded 2,000. Traffic means bargaining power in the supply chain, and major brands have compromised. Qiaqia Food, Yanjin Shop, Jinger, Ganyuan, Xizhilang, and other major brands have begun to join discount snack stores. Yanjin Shop stated in its performance report that it has deep cooperation with popular brands like Snack Busy, Snack Youming, Dai Yonghong, Haoxianglai, Laopo Daren, Tangchao, and Snack Preferred. In 2022, Yanjin Shop's monthly sales in the Snack Busy system reached 20 million yuan. In fact, snack discount stores are a rare format in the large consumer category favored by capital. In February this year, 'Zhao Yiming Snacks' completed a 150 million yuan Series A financing, led by Black Ant Capital, with Liangpin Shop following; in May 2021, 'Snack Busy', established for four years, announced the completion of a 240 million yuan Series A financing, co-led by Sequoia China and Gaorong Capital, with Qicheng Capital and Mingyue Capital following; 'Snack Youming', originating from Sichuan, has received six investments from institutions or individuals such as Yunlu Capital, Cathay Capital, and Xinxian Capital since 2021. No business is a one-time effort. In business competition, you don't know who the winner is until the last moment. For players in the industry, each stage of development tests the company's business acumen and courage, the ability to coordinate various stakeholders, as well as channel strength and operational capabilities. The cruelty of the infinite game of leisure snacks is that companies that keep up with changes cannot rest easy; they only get a ticket to the next round of competition and must always be prepared for new changes. Perhaps years later, a group of mature snack brands may not have imagined that the threat to their position would not be a snack brand, but simple and pure snack stores one after another. *Image source: Three Squirrels official website