---
title: "Snack Industry Chaos: Low-Quality Low Prices, Vicious Competition, and Lack of Innovation"
description: "As snack stores proliferate, industry chaos is brewing beneath the surface. \"With the economic downturn, everyone is jumping into the emerging business model of snack bulk collection stores, but industry insiders should proceed with caution, because once the label of low quality and low price is formed, it will be difficult to reverse consumer perception,\" said Chen Hai, an industry insider focused on leisure snacks, to Ling Shou. Several leading brands in this emerging model, such as Snacks Busy, Zhang Yiming, Snacks Youxuan, and Snacks Youming, have attracted significant capital in recent years, but as the spotlight intensifies, the strengths and weaknesses of these enterprises are gradually becoming apparent."
author: "晴山"
publisher: "New Distribution"
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published: "2023-04-18"
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# Snack Industry Chaos: Low-Quality Low Prices, Vicious Competition, and Lack of Innovation

> As snack stores proliferate, industry chaos is brewing beneath the surface. "With the economic downturn, everyone is jumping into the emerging business model of snack bulk collection stores, but industry insiders should proceed with caution, because once the label of low quality and low price is formed, it will be difficult to reverse consumer perception," said Chen Hai, an industry insider focused on leisure snacks, to Ling Shou. Several leading brands in this emerging model, such as Snacks Busy, Zhang Yiming, Snacks Youxuan, and Snacks Youming, have attracted significant capital in recent years, but as the spotlight intensifies, the strengths and weaknesses of these enterprises are gradually becoming apparent.

As snack stores proliferate, industry chaos is also brewing beneath the surface. "With the economic downturn, everyone is doing the emerging business model of snack bulk collection stores, but as industry insiders, we should act cautiously, because once the label of low quality and low price is formed, it will be very difficult to reverse consumer perception," said Chen Hai, an industry insider focused on leisure snacks, to Ling Shou. As several leading brands in this emerging model, including Snacks Busy, Zhang Yiming, Snacks Youxuan, and Snacks Youming, have attracted considerable capital in recent years, the pros and cons of these enterprises are gradually becoming apparent as more attention is focused on them.

Behind the low-price competition
Having worked in the industry for many years, Chen Hai is well aware of the low-price competition. "Low quality and low price have always been the key to competition in this industry," he said. In 2021, after visiting several clusters of well-known snack brands, Chen Hai made an assessment. He believed that the business models of these star brands had little value, for the following reasons:

First, the products in the stores are mainly OEM-branded or white-label products. "This can indeed achieve low prices, but the accompanying problem is poor quality," Chen Hai told Ling Shou. One well-known brand in the industry, facing daily quality complaints about its inferior products, responded by establishing a team of nearly 100 people dedicated to handling quality issues. "But the core problem is that once the label of low quality and low price is formed in consumers' minds, it becomes a fixed mindset, and it will be very difficult to upgrade and reverse it," Chen Hai said helplessly.

Second, low-price competition results in gross margins that are too low to sustain the business in the long run. "Consumers who visit these so-called low-price stores tend to choose more well-known brands at low prices, rather than those unknown white-label products, such as bread at 8.8 yuan per jin; consumers may not buy them," Chen Hai said. "In such cases, merchants will slash the gross margin on these products to only about ten-plus percentage points..." Anyone in the physical retail industry should know that a gross margin of ten-plus percentage points cannot sustain a physical business for long, and the cost-effectiveness ratio cannot even be compared...

Third, there is no real innovation. "Most brands in this emerging business model almost all commission small factories for OEM processing. But this model is something Lai Yifen did long ago; Lai Yifen is the pioneer of this industry. In other words, these brands cannot outperform Liangpin Shop in quality control. If they want to do quality control and not use OEM white-label models, they would return to the concept of doing supermarkets and brands. In the final analysis, these brands have not found a real innovation point to upgrade the industry; what they clearly do is disrupt market prices," Chen Hai said. The key consequence is that some big-brand product merchants will not choose to cooperate with these merchants that disrupt the price system. "For example, many big brands will not cooperate with these low-price business model brands for the simple reason that you are disrupting prices," Chen Hai said. Low-price business models play a game of cat and mouse with big-brand merchants. "When these big brands don't let you sell their products, imagine how uncomfortable these snack collection stores will feel." When big brands are unwilling to enter these collection stores, the majority of products in the stores can only be white-label or OEM products, thus forming a vicious cycle, establishing a consumption pattern of low quality and low price, and making business profitability a false concept.

Seizing the opportunity to expand with money
Riding the wave of the times, favored by investors, and using money to expand territory is the top priority for many emerging brands. For example, in February this year, Zhao Yiming Snacks received a 150 million yuan Series A financing co-invested by Hei Ant Capital and Liangpin Shop, which once again attracted industry attention during the off-season for new consumer financing. Previously, brands that received capital support included not only snack collection store formats like Snacks Busy and Snacks Mofa, but also fresh snack brands like Panda Momo and Xue Ji Roasted Goods. As the dividends in the leisure snack industry gradually shift from the brand front end to the supply chain back end, Zhao Yiming has begun to stand out. Before this round of financing, Zhao Yiming Snacks' brand awareness and store scale were not large. Starting in Yichun, Jiangxi in 2015, it developed more than 900 stores in 8 years, which is hardly impressive compared to the scale of the industry dark horse "Snacks Busy" (2,000 stores in 5 years). Facing the competitive situation of bulk snack brands blooming everywhere across the country, Zhao Yiming has no better method than to accelerate its expansion with money. Therefore, after receiving financing, Zhao Yiming Snacks will definitely accelerate its store opening pace—its official website shows that franchisees can go from signing to site selection to opening in just 30 days, and currently Zhao Yiming Snacks is rapidly expanding at a rate of more than 100 stores per month.

Snack collection store brands find it difficult to have differentiated competitive advantages, and the county-level market they rely on for survival is a place that values "first come, first served." When the conditions of various brands are similar, whoever enters the local market first can occupy consumers' minds first. But the problem is that under the rapid expansion, Zhao Yiming Snacks' supply sources and store quality are facing tests everywhere. Ling Shou learned that Zhao Yiming Snacks stores in Shexian, Hexian, Nanfengxian, Taihexian, Gao'an City, etc., have been administratively punished by local regulatory authorities for illegal and non-compliant behaviors. Obviously, Zhao Yiming Snacks, eager to expand, has not done a good job in training and managing franchisees' standardized operations, nor in screening suppliers. Of course, this is also a test that many brands face after rapid expansion.

Moreover, Zhao Yiming, which uses "really cheap" as its slogan, has not actually achieved cheapness. For example, some consumers complained online that a product's member price was 9.9 yuan per pack (250g per pack), while the non-member price was 15.8 yuan per jin. If buying one jin (2 packs) at the member price, it would cost 19.8 yuan, 4 yuan more than the non-member price; a Zhao Yiming Snacks store used product display "tricks" to deceive consumers, placing pork jerky near beef jerky products and selling at prices much higher than e-commerce platforms.

In this regard, an industry insider said that emerging snack collection stores have established competitive advantages through low-price strategies and rapidly expanded the market. But from now on, due to the rise of emerging snack collection stores, low prices have become a common phenomenon. Even in some fiercely competitive regions, continuous price cuts and malicious competition have occurred, posing significant challenges to the survival of individual stores. "Price is the foundation and the guarantee of core competitiveness, but relying on low prices to deal with competition is not feasible. Enterprises must build their own moats and establish their core competitive capabilities—returning to the essence of business, which is product and price," the insider said. Currently, the space for price adjustments is very small, so efforts can only be made on products. Because everyone has focused too much on price and neglected product quality, product quality has had a negative impact on repurchase rates.

**Rapid expansion through franchising**
It is reported that Zhao Yiming Snacks, with its base in Jiangxi, is expanding into surrounding provinces but avoiding Hunan and Zhejiang provinces. Currently, it has opened franchising in all regions of Jiangxi, Guangdong, and Guangxi, and has franchise points in some cities in Anhui, Fujian, Jiangsu, and Hubei. Avoiding the strong competition from Snacks Busy in Hunan and Laopo Daren in Zhejiang should be its intention. According to public information, Snacks Busy, which started in 2017, currently has more than 2,000 stores nationwide, while Laopo Daren, which started earlier, has more than 1,000 stores nationwide. Against the backdrop of capital favor for the snack collection store format, in terms of franchise capital costs, Zhao Yiming Snacks' franchise threshold is not low. The official website's capital budget shows that the company charges a franchise fee of 38,000 yuan, a deposit of 20,000 yuan, and management fees of 800 yuan per month. Other costs include decoration, equipment, initial stock, and working capital, with total costs approximately 600,000 to 800,000 yuan. Store conditions include being located in a business district with daily foot traffic of no less than 50,000 people, with specific site selection in the core shopping street of the business district, store area of no less than 120 square meters, and storefront width of no less than 8 meters. Zhao Yiming Snacks has not yet disclosed gross margin data, but based on the general gross margins in the snack collection store industry, optimistically, the payback period for franchisees is at least about 2 years.

Relevant research reports point out that the current industry dividend for snack collection stores mainly comes from cross-industry substitution, that is, diverting some traffic from supermarkets and e-commerce platforms. But after internal brands begin competing for territory, they will enter a stage of same-industry competition. During the two years of waiting for profitability, not only Zhao Yiming Snacks will accelerate its store opening pace, but brands like Snacks Busy, Snacks Youming, and Laopo Daren are also rapidly seizing market share. The consumer base in county-level markets is relatively small, population mobility is poor, and snack collection stores themselves are highly dependent on foot traffic. Under the premise that franchise brands lack differentiated competitive advantages, store location can determine life or death, and lower and more challenging price wars are inevitable. For franchisees, during the blind expansion of brands, they often bear high risks for the brand.

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