Introduction: With the rapid development of bulk snack stores, the future market landscape will continue to evolve.

Author | Gou Gou Review | Gou Gou Layout | He Wen

Recently, financial reports from companies such as Yanjin Puzi and Ganyuan Foods have been released. According to market sources, Snacks Are Busy has become Yanjin Puzi's largest system customer! In recent years, channel evolution has given rise to the new bulk snack channel, and cooperation between established snack companies and emerging snack channel operators has become a focus of external attention. One side needs channel layout, the other needs brand traffic, and as this channel continues to expand, brand owners will inevitably pay more attention to it and actively embrace it. But at the same time, many brand owners also face challenges brought by environmental changes, such as declining sales and price impacts.

Actively Embracing Bulk Snack Stores

Recently, Yanjin Puzi released its 2023 semi-annual performance forecast, reporting net profit of 240 million to 250 million yuan during the period, an increase of 86.29% to 94.05% year-on-year. Non-GAAP net profit achieved 230 million to 240 million yuan, an increase of 98.89% to 107.69% year-on-year. In recent years, Yanjin Puzi has grown rapidly, and one of the main reasons is its implementation of an omni-channel strategy. In 2022, Yanjin Puzi achieved revenue of 2.894 billion yuan, an increase of 26.83% year-on-year. In that year's annual report, Yanjin Puzi mentioned that while maintaining advantages in traditional KA and KB supermarkets, it focused on developing e-commerce, CVS, snack specialty stores, campus stores, etc., and deeply cooperated with popular bulk snack brands such as Snacks Are Busy, Snacks You Ming, Dai Yonghong, Hao Xiang Lai, Lao Po Da Ren, Tang Chao, Snacks You Xuan, etc., breaking through channels like e-commerce, live streaming, and community group buying. In the first quarter of 2023, Yanjin Puzi's revenue increased by 55.37%. In research activities, the company mentioned that the reason for revenue growth was the continuous structural optimization of sales products and sales channels, with rapid development and expanding share of snack specialty channels, e-commerce, and other sales channels.

From the information disclosed above, bulk snack stores, as a snack channel that has expanded rapidly in the past two years, have greatly helped Yanjin Puzi in product sales through cooperation. Not only Yanjin Puzi, but many snack brand owners' performance reports also reflect this. For example, Ganyuan Foods' performance forecast shows that in the first half of 2023, it expects to achieve revenue of 808 million to 830 million yuan, a year-on-year increase of 32% to 35%. Besides adjusting and optimizing product structure and expanding product channels, the main reason is opening up new performance growth points through bulk snack stores. According to disclosures, bulk snack system customers have become Ganyuan Foods' third-largest customer. In addition, Black Sesame and Qinqin Foods also mentioned factors such as omni-channel layout and deepening cooperation with emerging channels like bulk snacks and live-streaming e-commerce when announcing their first-half 2023 performance growth.

Taking Yanjin Puzi as an example, it was originally an OEM manufacturer for brands like Three Squirrels, with its own factories and mature supply chain system. Combined with its big single product strategy, it can effectively use scale production to reduce costs. At the same time, when expanding channels like KA, it can eliminate intermediate links and achieve direct supply from the manufacturer. Therefore, Yanjin Puzi's product gross margin is relatively high among listed peers.

For bulk snack stores represented by Snacks Are Busy, their profit model is to use brand products to attract traffic and white-label products to make profits. Thus, it is necessary to establish cooperation with more well-known brand owners. Upstream manufacturers like Yanjin Puzi, which have gross margin space and, after years of development, have quality assurance and brand awareness, are just suitable for channels like bulk snacks.

The Rise of Bulk Snack Channels: What Impact Does It Have on Brand Owners?

The FMCG industry has always been channel-oriented. After experiencing large circulation, supermarkets, specialty stores, and e-commerce, the rise of bulk snack channels is a new round of channel transformation in the leisure food market. In the development history of leisure food, whenever a new channel appears, a group of emerging companies will rise, such as Qiaqia Food, which is present in major supermarkets; Lai Yifen, which occupies market share through specialty stores; and Three Squirrels, which started with e-commerce. Correspondingly, in the new changes brought by new channels, not all enterprises benefit; some brand owners face challenges brought by environmental changes.

1. Sales Changes

Different types of enterprises will be affected to varying degrees in sales when facing the rise of bulk snack channels. This mainly depends on the degree of conflict between their original channels and bulk snack channels.

We can simply divide them into three categories: The first category includes production-oriented enterprises like Yanjin Puzi and Ganyuan Foods, which mainly lay out KA supermarket channels through bulk display cabinets and have a rich variety of categories. They can flexibly adjust channel strategies following channel changes. After supermarket traffic shows a downward trend, they carry out omni-channel layout, actively embrace the rise of bulk snack channels, and increase sales. The second category includes large single product production-oriented enterprises like Qiaqia Food and Jinzai Food, which open up national channels with big single products and have a huge distribution network. The rise of bulk snack channels has a greater impact on their original channels, but by balancing the price impact with original channels, they can also enjoy the dividends of this round of channel transformation. The third category includes retail-oriented enterprises like Three Squirrels, Liangpin Puzi, and Lai Yifen, most of whose products are OEM-produced, have their own specialty stores, focus on brand marketing, and have high premiums. The convenience and cost-effectiveness of bulk snack stores will impact brand specialty stores, leading to declining sales.

Contrary to Yanjin Puzi's revenue growth, in the first quarter of this year, the four major A-share leisure snack enterprises collectively experienced a situation of not selling well. Liangpin Puzi's revenue was 2.385 billion yuan, a year-on-year decrease of 18.94%; Three Squirrels' revenue was 1.900 billion yuan, a year-on-year decrease of 38.48%; Qiaqia Food sold 1.336 billion yuan, a year-on-year decrease of 6.73%; Lai Yifen sold 1.212 billion yuan, a year-on-year decrease of 7.8%.

2. Price Impact

Not only sales, but the rise of bulk snack stores also affects brand owners' price systems. In the past, leisure food brand owners usually connected with terminal sales channels through intermediaries. However, with the rise of bulk snack stores, some intermediaries sell goods to bulk snack stores, which then sell to consumers at prices below market prices. But this affects the entire price system of brand owners.

In this case, if brand owners choose to cooperate directly with bulk snack stores, they can only make compromises in price. In addition, as bulk snack stores grow larger, the possibility of triggering industry price wars is high. However, a competitive strategy centered on "thin profits" is difficult to support the long-term development of some brands that focus on brand marketing and have high premiums, such as Three Squirrels and Haoxiangni.

3. Brand Power Is Weakened

As channel influence increases, brand owners' discourse power is gradually weakened. In the past, brand owners established consumer mindshare through advertising and marketing strategies. Some big single products, such as Qiaqia melon seeds and Weilong spicy strips, successfully shaped the image of "product as category." Although large supermarkets have certain discourse power, it is still weaker than that of brand owners. Bulk snack stores, based on communities, have effectively integrated traditional offline scattered channels such as convenience stores and mom-and-pop shops, and brand power has shifted from manufacturers to the channel side. Today, brand owners need to queue up to cooperate with bulk snack stores. In addition to introducing major brands, bulk snack stores have also introduced many white-label products and have the ability to support white-label enterprises to suppress major brands.

It can be said that the rise of bulk snack stores is an inevitable trend. Facing the above challenges, the only thing brand owners can do is adjust themselves.

How Should Brand Owners Respond?

The rise of bulk snack stores is not accidental but the result of multiple factors. First, it meets consumers' demand for cost-effectiveness and follows the consumption trend of consumption upgrading in lower-tier markets. Therefore, bulk snack stores can be said to be a product of environmental changes.

For brand owners, the challenge they face is not just the rise of a single channel, but the transformation of the entire consumption environment and consumer psychology. From online to community, and then to lower-tier markets, the distance between products and consumers is getting closer, and consumers are reached through multiple channels. In this diversified channel landscape, brand owners need omni-channel layout, and bulk snack stores are undoubtedly an aspect that cannot be ignored.

1. Frontend

It can be seen that enterprises with outstanding manufacturing capabilities and demand for channels, such as Yanjin Puzi and Ganyuan Foods, have actively embraced bulk snack channels in this round of channel evolution and seized opportunities. For enterprises with advantages in the frontend, such as Liangpin Puzi, Three Squirrels, and Lai Yifen, the rise of bulk snack stores will inevitably affect their store operations. Facing the crisis, Liangpin Puzi first launched a sub-brand store "Snack Player" to expand bulk snack business and sell third-party products, and later invested in "Zhao Yiming" snack stores. Three Squirrels is not far behind. In June this year, the company began exploring and launching a batch of community snack stores positioned as private label, and achieved good results, with official disclosure of daily sales of 20,000+.

Whether it is deep bundling with bulk snack stores or laying out community snack stores, it reflects brand owners' emphasis on the bulk snack channel.

2. Backend

This round of bulk channel rise is an upgrade of efficiency and a competition of supply chains. In the future, the possibility of bulk snack stores integrating upstream is very high, and snack manufacturers must also establish their own advantages in the supply chain. As mentioned earlier, Yanjin Puzi has its own factories, which can reduce production costs through scale advantages and achieve direct supply from factories, eliminating intermediate links, improving distribution efficiency, and reducing terminal costs. Three Squirrels, which started with e-commerce, has also been building its own factories in the past two years, transforming from an asset-light model to an asset-heavy model, thereby ensuring that its community snack stores can compete with bulk snack stores in price and efficiency. This trend will not change, and it is expected that upstream brand owners will continue to deepen their supply chains in the future.

3. Products

In terms of products, to meet consumers' pursuit of diversity and convenience, brand owners are required to have relatively rich SKUs and launch products in different packaging and specifications, such as fixed-weight packs and bulk packs. For example, Ganyuan Foods entered the snack specialty channel in April 2022. In September, the company sorted out more than 50 products with different flavors and packaging forms to match the sales of snack specialty channels. The main categories include the old three samples, nut combinations, peanuts, seasoned nuts, and baked puffed products from the Anyang factory. Packaging is mainly bulk weighing and small fixed-weight packs of 1-3 yuan per pack. In addition, to stabilize the price system, brand owners will also enter this channel through product special supply.

Final Thoughts

On the one hand, from the recent financial reports of companies like Yanjin Puzi and Ganyuan Foods, it can be seen that some brand owners have already enjoyed the dividends of bulk snack stores. But on the other hand, with the rapid development of bulk snack stores, the future market landscape will continue to evolve. While brand owners' channel power increases, their discourse power will relatively weaken. Only by keeping up with market dynamics and actively responding to channel changes can they survive and develop. This requires brand owners to pay attention to the development of snack stores and community stores, increase related investments, and improve the competitiveness of products and services. At the same time, strive to improve production efficiency and reduce costs to meet consumers' demand for high-quality products.

The bulk snack store track is already surging. If you want to join this track or learn more, come to the "5th China FMCG Conference and 1st China FMCG Distributor Conference", which will be held grandly in Shenzhen. At that time, we will invite heavyweight guests to share on "Snacks and Discounts" and hold a roundtable forum. Welcome to join!