---
title: "The Ice and Fire of the Snack Track: Store Closures and Financing Surge in Parallel, the 'Hot War' in Lower-Tier Markets Has Begun"
description: "In the first half of 2023, the snack track showed a stark contrast of ice and fire, with store closures and financing waves occurring simultaneously. On one hand, Zhejiang-based snack discount chain Laoban Daren was rumored to be closing, and the once high-flying brand a1 Snack Research Institute shut down 80% of its stores. On the other hand, the track remained hot: investment and financing activities increased compared to the same period last year, and lower-tier markets saw a wave of snack brand store openings, with regional leaders like Snacks Busy and Zhao Yiming Snacks accelerating expansion. This cold-hot dynamic reflects the industry's adjustment and response to external changes."
author: "向真"
publisher: "New Distribution"
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published: "2023-06-28"
language: "en"
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# The Ice and Fire of the Snack Track: Store Closures and Financing Surge in Parallel, the 'Hot War' in Lower-Tier Markets Has Begun

> In the first half of 2023, the snack track showed a stark contrast of ice and fire, with store closures and financing waves occurring simultaneously. On one hand, Zhejiang-based snack discount chain Laoban Daren was rumored to be closing, and the once high-flying brand a1 Snack Research Institute shut down 80% of its stores. On the other hand, the track remained hot: investment and financing activities increased compared to the same period last year, and lower-tier markets saw a wave of snack brand store openings, with regional leaders like Snacks Busy and Zhao Yiming Snacks accelerating expansion. This cold-hot dynamic reflects the industry's adjustment and response to external changes.

In the first half of 2023, the snack track presented a stark contrast of ice and fire. A notable phenomenon is that store closures and financing waves are occurring simultaneously. On one hand, Zhejiang-based snack discount chain Laoban Daren was rumored to be closing, and the once high-flying brand a1 Snack Research Institute shut down 80% of its stores. On the other hand, the track still has a hot side: investment and financing activities in the first half increased compared to the same period last year, and lower-tier markets saw a wave of snack brand store openings, with regional leaders like Snacks Busy and Zhao Yiming Snacks accelerating expansion. Behind this cold-hot dynamic is the snack track's adjustment and response to external environmental changes. In the first half of this year, consumers became more rational, and their attitudes toward non-essential consumption like snacks became more cautious. As a result, high-end, quality-focused snack brands saw growth stagnate; in 2022, Liangpin Shop's revenue growth rate fell to an eight-year low. In contrast, snack brands focusing on value-for-money and targeting lower-tier markets saw significant growth; Snacks Busy added 1,000 new stores in the first half of 2023, an average of 6 new stores per day. The development of discount snack stores has put immense pressure on high-end brands' store expansion, prompting leading brands to adjust their strategies. On one hand, they are streamlining operations to reduce expansion costs; in 2022, Lai Yifen, a representative high-end snack store brand, increased the number and proportion of franchise stores to ease capital pressure. On the other hand, to seize the rapidly growing lower-tier market, industry giants are also making moves: Three Squirrels increased its store count in lower-tier markets, and Liangpin Shop directly launched a sub-brand "Snack Player" to enter the market. Beyond lower-tier markets, major snack brands are seeking new growth engines, such as Liangpin Shop's sub-brands "Xiaoshixian," "Jie Tangyou," "Liangpin Feiyang," and "Kong Duoka" targeting children, diabetics, and fitness enthusiasts, and Three Squirrels' sub-brands "Xiaolu Lanlan," "Yang Le Ge Mao Hai," "Tie Gongji," and "Xi Xiaoque" for children, pets, and custom gift boxes. However, these new businesses have mostly been lukewarm and have not yet become true second growth curves. But for the entire snack track, we are at the midpoint of 2023, and the second half may see even fiercer battles.

The Ice and Fire of the Track: Store Closures and Financing Waves in Parallel
Recently, several leading players in the snack track have been reported to be closing stores or going bankrupt. Last month, a message about "Laoban Daren going bankrupt and membership cards no longer valid" quickly spread across major media. This leading discount snack brand with nearly 1,000 stores was instantly flooded by consumers, with many queuing to clear their balances. Although Laoban Daren quickly denied the rumors, calling them false, the news also triggered long-standing concerns in the leisure snack industry. By the end of the month, another industry leader, a1 Snack Research Institute, was reported to have closed 80% of its stores. In 2019, a1 opened its first offline store, reaching a peak of over 50 stores. After this round of closures, only 11 stores remain operational, and its coverage has shrunk from major cities nationwide to just Fuzhou and Xiamen. The store closure wave in the leisure snack track is closely linked to intensified competition due to crowding. In the past few years, driven by the ebbing of online traffic dividends and the trough in offline rents, various players in the snack track accelerated store openings to seek growth. On one hand, the store scales of leisure snack giants like Liangpin Shop and Lai Yifen continued to expand; in 2022, Lai Yifen's store count exceeded 3,500, and Liangpin Shop's exceeded 3,000, with plans to open 1,000 new stores in 2023. Discount store brands focusing on near-expiry food, such as Haotesell, Hi-Tego, and Xiaoxiang Life, also saw a wave of openings during the pandemic. Haotesell had over 500 stores by 2022 and announced plans to open 5,000 stores in the next three years. On the other hand, brands targeting lower-tier markets, such as Snacks Busy, Tangchao, and Zhao Yiming Snacks, expanded rapidly. In 2022, Snacks Busy's store count exceeded 3,000, and Tangchao, Zhao Yiming Snacks, and Snacks Youming reached the thousand-store level. According to a research report by Guojin Securities, as of the end of 2022, the total number of snack specialty stores exceeded 10,000, and in 2023, each company's store plans at least double. But a rough estimate of the store counts of several leading brands alone far exceeds 10,000. The real crowding and competition are much greater than imagined. The number of players in the market is increasing rapidly, but the market space is not growing at the same pace. According to Euromonitor data, the terminal sales scale of China's leisure snack industry in 2022 was 482.3 billion yuan, expected to reach 619.6 billion yuan by 2027, with a compound annual growth rate of 5.14% from 2022 to 2027. This pace can at best be described as steady. More importantly, rational consumption has become the main tone, making it harder for non-essential consumption like snacks to grow rapidly. For most players, the market has entered a period of stock competition. Consequently, a large number of brands that misjudged the situation, failed to adapt to the new environment, or could not adjust strategies and businesses in time have closed or gone bankrupt. However, amid the news of closures and bankruptcies, capital enthusiasm for the leisure snack track has not waned, with frequent investment and financing events. According to Xiniu Data, in 2022, there were 11 investment and financing events in the leisure snack track, and in 2023, before half the year is over, 6 snack brands have already received financing or gone public, up from 4 in the same period last year. Since 2022, investment and financing events in the snack track, compiled by Lianxian Insight based on Xiniu Data. Looking at project types, among projects that received financing since 2022, channel brands have the highest number and largest financing amounts. In 2022, snack chain stores and shelf projects such as Xiaoxian Guoguo, Xueji Chaohuo, Linshi Mofa, Snacks Youming, Zhao Yiming Snacks, Xiaoxin Henmang, and Sike Shanzha received financing. Financing amounts reached hundreds of millions; Xueji Chaohuo received 600 million yuan in Series A financing, and Zhao Yiming Snacks completed a 150 million yuan Series A+ round led by Hei Yi Capital with Liangpin Shop following. Since 2022, categories of financing projects in the leisure snack track, data from Xiniu Data, chart by Lianxian Insight. Among the various snack specialty channels, snack discount collection stores represented by Snacks Youming and Zhao Yiming Snacks have become the most frequently financed capital favorites since last year. These snack discount stores, deeply rooted in lower-tier markets and focusing on value-for-money, have attracted capital attention and favor mainly because of the increased demand for stockpiling among consumers in the past two years, and under consumption differentiation, more groups are paying attention to product prices. Snack discount stores not only offer high cost-performance products but also provide a better shopping experience than traditional street-side mom-and-pop stores due to their better decoration and display, thus achieving rapid development. Seeing this, leading snack players like Three Squirrels have also turned their attention to lower-tier markets, and the war with Snacks Youming and Zhao Yiming Snacks is imminent.

The Heat and Involution of Lower-Tier Markets: Homogenization and Price Wars in Parallel
In the past two years, the heat of lower-tier markets has attracted a large number of players. Regional leaders originally rooted in lower-tier markets, such as Snacks Busy, Tangchao, Zhao Yiming Snacks, and Snacks Youming, have been accelerating store expansion, seeking to become national brands with cross-regional layouts. Snacks Busy, which started in Hunan, now has stores across all provinces; Tangchao, rooted in Fujian, has expanded to Jiangxi, Guizhou, and other places; Snacks Youming, starting from Sichuan and Chongqing, has opened stores in Guangdong, Henan, and other places. In addition, relatively smaller medium-sized snack discount stores like Haoxianglai, Haoxingfu, and Dai Yonghong are also expanding. According to a research report by Everbright Securities, as of February 2023, the store counts of these brands all exceeded 500. The current store counts of various snack discount systems, source: Everbright Securities. Seeing discount store brands accelerating their efforts in various lower-tier markets, industry giants have followed suit. Three Squirrels has closed many of its early direct-operated "Tou Shi Dian" (feeding stores) and alliance stores, while launching its own brand community snack stores targeting lower-tier markets with a discount model. In June this year, Three Squirrels opened 10 community snack stores simultaneously, all located in third-tier and below cities such as Wuhu, Ma'anshan, Xuancheng, Chuzhou, Bozhou, and Yancheng in Jiangsu. The layout in lower-tier markets also stems from Three Squirrels' own experience and judgment. According to financial reports, in 2022, among the top 10 stores with the highest revenue for Three Squirrels, Wuhu, a third-tier city, accounted for 3, while only Shanghai, a first-tier city, had 1. For snack brands, lower-tier cities have lower rental costs, and small-town residents prefer offline snack shopping, making the lower-tier market more expansive. Three Squirrels' Tou Shi Dian, source: Three Squirrels official Weibo. Besides adjusting store formats, some leading players have also entered lower-tier markets by directly launching sub-brands. For example, Liangpin Shop launched "Snack Player," a snack discount store targeting lower-tier markets, at the end of 2022. With the slogan "Cheap is the hard truth," it focuses on opening stores in Hubei, Liangpin Shop's home base. In Liangpin Shop's plan to open 1,000 new stores in 2023, a large portion will be undertaken by the new brand "Snack Player." Giants entering lower-tier markets have adjusted their site selection and store formats. Previously, Three Squirrels and Liangpin Shop stores were generally located in mid-to-high-end shopping malls and centers: in 2022, Three Squirrels' top 10 revenue stores were all in shopping centers like Babandao and Wanda, and among Liangpin Shop's top 10 stores by store efficiency, only one was in a residential area, with the rest in shopping centers. But after entering lower-tier markets, Three Squirrels' community snack stores are mostly in residential areas, and Liangpin Shop's sub-brand "Snack Player" has also opened several new stores in Wuhan, all located on streets near residential areas. This is similar to snack discount stores like Snacks Busy that were originally rooted in lower-tier markets. According to public data, over 80% of Snacks Busy's existing stores are community stores, aiming to be "snack collection stores at the doorstep of people's homes." Of the remaining 20%, most are school/industrial area stores, commercial area stores, or township stores, rarely in large shopping centers. But when all brands reach a consensus to come to communities and focus on value-for-money, product homogenization and price involution in the lower-tier snack track have become increasingly severe. Generally, to improve store sales, snack stores prefer to purchase products from international and domestic well-known brands. A near-expiry discount store owner told Lianxian Insight that when purchasing, the store first chooses hot-selling items from first-tier international and domestic brands like Pepsi, Nestlé, Wahaha, and Nongfu Spring, such as Lay's potato chips, Pepsi-Cola, Nescafé coffee, Coconut Palm juice, and Genki Forest sparkling water, then popular internet-famous brands like Wang Xiao Lu's braised chicken feet and Li Ziqi's luosifen, then some regional brands, and finally white-label products. The logic behind this is that big brands do not require consumer education; consumers will stock up when needed, while small brands still need some product education. But this has led to severe product homogenization in snack collection stores, own-brand stores, and near-expiry discount stores, with well-known brands like Lay's, Pepsi, Nescafé, and Li Ziqi's luosifen sold in all stores, with little product differentiation. In snack collection stores like Snack Player, Zhao Yiming Snacks, Snacks Youming, and Tangchao, domestic leading snack brands like Ganyuan, Yanjin Shop, Qiaqia, Jinzi, and Youyou are also common. With homogenized product selection, site selection logic has become increasingly similar, and it is common to see multiple snack discount stores on the same street. According to a report by Economic Observer, on Bayi South Road in Ganzhou, Jiangxi, within a 1-kilometer radius, there are snack discount stores such as Zhao Yiming Snacks, Tangchao, Ling Xiaochuan, Snack Xiaopu, and Snack Station, with Zhao Yiming Snacks and Tangchao directly facing each other. At the beginning of this year, the two stores directly launched a "price war," with discounts continuously dropping from 7.6% to 5%. As the density of snack discount stores increases, such "price wars" may be staged in streets and alleys of counties and towns across the country in the future. But such a bitter war is not beneficial to brands. Compared to ordinary snack stores, snack discount stores, because they focus on value-for-money, already have lower single-store profit margins, and price tug-of-war and involution will only further reduce brand profitability. To offset thin profits, they must rapidly expand scale, using scale to negotiate lower purchase prices and bargaining power. This is also why snack discount stores open faster; for example, Snacks Busy, through scale expansion, has achieved daily revenue per store exceeding that of high-end Liangpin Shop. Comparison of store models between Liangpin Shop and Snacks Busy, source: Everbright Securities, data period: as of end of 2022. But as mentioned earlier, scale expansion leads to excessive density of similar stores, intensifying competition and inevitably spawning "price wars." The logic of trading scale for growth will eventually reach a point where profits cannot be compressed further. True growth still requires more effective operations, more precise product selection, and services. At this time, industry giants joining the hot war also have their own considerations. Three Squirrels told Lianxian Insight that although various brands are rushing in, making competition in lower-tier markets more intense, the market capacity is currently large enough, and the growth potential of lower-tier markets is more obvious. In fact, rushing to lower-tier markets to find new growth is also a breakthrough move for snack giants under pressure, as their new businesses have not shown significant improvement. 

The Development Pressure on Snack Giants: Not Easy to Grab Cake and Seek Growth
Amid the melee in the snack track, the powerlessness and anxiety of industry leaders are growing stronger. In the past few years, industry leaders that have failed to find a second growth curve beyond e-commerce platforms have generally fallen into revenue growth bottlenecks. In 2022, Liangpin Shop's revenue was 9.44 billion yuan, barely maintaining positive growth of 1.24%, but the revenue growth rate fell to an eight-year low, and in the past two years, it also faced clearance-style reductions by major shareholders like Hillhouse Capital and Capital Today. Liangpin Shop store sign, source: Liangpin Shop official Weibo. In the first half of this year, Lai Yifen also struggled; the 2023 Q1 report showed revenue of 1.212 billion yuan, down 7.8% year-on-year, and net profit attributable to the parent of 71 million yuan, down 23.04% year-on-year, with both revenue and net profit declining, the lowest for the same period in four years. Laying out lower-tier markets and taking a low-price route are the breakthrough methods these brands have chosen, but from multiple perspectives, whether it is low-price advantage or product selection competitiveness, it is extremely difficult for giants to seize the market from existing players in lower-tier markets. The most obvious is that industry leaders with a large number of high-end stores cannot quickly turn around. Unlike snack discount stores born in lower-tier markets that have always followed a value-for-money model, Liangpin Shop, Three Squirrels, and Lai Yifen have many stores in high-tier cities, and whether it is offline store decoration or online e-commerce advertising, they have long focused on high-end and quality routes. Under such brand positioning inertia, even if Liangpin Shop, Three Squirrels, and Lai Yifen do community discount stores, it is difficult to surpass regional snack discount stores in value-for-money, and even hard to compete with local mom-and-pop stores. First, the inherent impression of the brand makes it hard for consumers to have a psychological hint of "low price and cheap"; instead, these mid-to-low-end stores will quickly affect their original high-end brand tone. For giants whose current revenue base still relies on mid-to-high-end business, whether they can balance the contradiction between old and new businesses still needs time to test. More importantly, giants with multi-channel and multi-store operations must always adhere to the red line of "cannot arbitrarily set prices." Brands like Liangpin Shop and Three Squirrels have online flagship stores, have entered large supermarkets like Yonghui, Walmart, and RT-Mart offline, and also have higher-end store formats in their self-operated stores. A snack track supplier told Lianxian Insight that with multi-channel layout, even if discount stores want to promote low prices, they cannot affect prices in other channels, so the room for price reduction of their own products is always limited. Under the constraints of brand tone and price system, industry giants are even less smooth in laying out lower-tier markets than mom-and-pop stores. Especially in categories where brand premium is not obvious, such as nuts and dried fruits, nearby low-price discount stores and mom-and-pop stores have lower prices, and whether consumers are willing to pay a higher premium for bulk, unpackaged products is unknown. The same logic can be seen when Baiguoyuan was previously called a "fruit assassin" and trended on Weibo. For weak-brand categories like watermelon, apples, melon seeds, and walnuts, consumers care more about buying a category than a brand. Common categories in snack stores, such as nuts, dried meat, and dried fruits, source: Liangpin Shop official Weibo. The aforementioned snack track supplier also said that the discount model uses bulk sales, which means weak brand power; consumers buying bulk snacks do not care what brand the snack is, as long as it tastes good, they will buy it, so white-label products are more likely to succeed in the discount model. In fact, this is consistent with the current model of most snack discount stores. According to a report by Everbright Securities, snack discount stores usually use lower-priced big-brand products to attract consumers; these traffic-generating products generally account for 20% of the overall category, with a gross margin of only 10-15%, while the core profit comes from white-label products with lower costs and selling prices, which generally account for more than 50%, with a gross margin of around 25%. For this reason, when Liangpin Shop laid out lower-tier markets, it chose to launch a new brand "Snack Player" with a different name, and the products in the store are directly supplied by snack and beverage brand owners. The intention behind this may be to weaken the presence of the main brand "Liangpin Shop," effectively reducing the positioning contradiction between old and new brands, and also allowing Snack Player to better assume the role of a snack collection store, attracting more non-self-owned brands to enter. In contrast, Three Squirrels still chose to use the main brand and launched community snack stores featuring its own brands. According to Three Squirrels, insisting on own brands is to better ensure product quality and service quality; in addition to Three Squirrels' existing full-category snacks, it will also supplement products like beverages and ice cream outside its own brands. This means that Three Squirrels' community snack stores are not limited to selling only own brands but will also consider purchasing products from other brands. As for doubts that having mostly own-brand products affects store profit margins, Three Squirrels said that by forcing refined management in all aspects of the supply chain and reducing brand premium, products can be low-priced while still maintaining certain profits. Three Squirrels store, source: Three Squirrels official Weibo. But whether doing third-party brands or own brands, compared to other third-party channel brands, these brands with strong C-end influence transforming into snack collection stores also have shortcomings in attracting other brands to enter, and the enthusiasm of consumer brands to enter may be somewhat discounted. Seizing the lower-tier market cake is fraught with difficulties, and at the same time, brands like Liangpin Shop and Three Squirrels are also facing challenges in their attempts to break through with new businesses. Since 2019, Liangpin Shop has launched the children's snack brand "Xiaoshixian," the healthy meal replacement brands "Liangpin Feiyang" and "Kong Duoka," and "Jie Tangyou" for diabetics. But these brands have performed mediocrely in the market; Xiaoshixian's brand awareness and sales are not as good as large brands like Nestlé, Mars, and Want Want, and it lacks hot-selling single products like Miaokelannuo or Cheese Doctor. Liangpin Feiyang, which was highly anticipated and for which an internal R&D team was specifically built, also disappeared from financial reports a year after launch; Kong Duoka and Jie Tangyou were launched later and still need market verification. Three Squirrels also launched the children's snack brand "Xiaolu Lanlan," the pet food brand "Yang Le Ge Mao Hai," the custom gift sub-brand "Xi Xiaoque," and the instant food brand "Tie Gongji" in 2020, but only Xiaolu Lanlan can be considered to have considerable growth. In Three Squirrels' plans, Xiaolu Lanlan is also a key focus for future development. From laying out lower-tier markets to testing new businesses, snack giants have always kept up with trends, but this also reflects the low threshold of the snack track and the low moats of track players. In this extremely fragmented track, most domestic brands have not formed high enough barriers to avoid being eliminated in the fast-iterating snack track with frequent hot spots. The financing heat shows that new players are still emerging, the hot war in lower-tier markets will not be the end, and new battles in the snack track will continue.


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