Introduction: When it comes to leisure snacks, each generation may have different answers—it could be candied hawthorn, old-fashioned popsicles, potato chips, chocolate, or Three Squirrels and Bestore. From brands to categories, the snacks we eat are constantly changing. I remember the first time I tried Three Squirrels in 2014; I realized that ordinary nuts could be packaged conveniently with cute names and IP, rather than being piled up in stores and supermarkets.
Time flies; the small Taobao shop has gone public, and Bestore, which started near school gates, was acquired by PepsiCo for nearly 5 billion yuan. Let's review the development history of leisure snack enterprises, explore the changes and constants in snack food entrepreneurship, and predict the future. I will guide you through:
1. What is the leisure snack industry; 2. Typical enterprises and models in the leisure snack industry; 3. Emerging star enterprises in recent years; 4. Summary of the changes and constants in the leisure snack industry, and predictions for the future.
-01- What is the Leisure Snack Industry
1. Definition of the Leisure Snack Industry Leisure snacks are pre-packaged foods that are ready to eat, consumed during leisure time beyond main meals, and have recently shown a trend toward becoming a "fourth meal." The categories covered are extensive, mainly including: nuts and fried seeds, biscuits and pastries, candies and preserved fruits, dairy products, dried tofu, puffed foods, fish products, meat products, beverages and teas, and desserts.
Generally, the development of China's leisure snack industry can be divided into three stages: the first stage from the 1970s to the 1990s, dominated by candies and biscuits; the second stage from the 1990s to the early 2000s, when domestic snacks and international brands competed on shelves; and the third stage starting from 2010, when brands began to focus on scenarios and emotions.
With the post-90s generation becoming the main consumer force, and driven by community and digital economy, we can feel that the leisure snack industry seems to have entered a fourth stage. More and more new brands are emerging, such as Guantea, which focuses on matcha snacks for "matcha addicts"; Hey Juice, a detox fruit and vegetable juice brand for women with high demands on body and quality of life; and Le Pur Yogurt, invested by Coca-Cola, with prices much higher than other yogurts but maintaining strong user stickiness.
Data source: Dongwu Securities Research Institute
2. Leisure Snack Industry Chain From the perspective of the industry chain, the leisure food industry chain is divided into upstream, midstream, and downstream as shown in the figure below. Different enterprises have varying degrees of emphasis on different links. Based on the focus of enterprises, we can roughly divide the "upstream," "midstream," and "downstream" of the leisure snack industry chain into:
- The technology layer, centered on raw material processing and R&D;
- The production layer, centered on upstream farming, processing, logistics, and warehousing;
- The operation layer, centered on sales and brand marketing.
Each layer can be taken alone or combined to form different models. For example, Three Squirrels initially focused entirely on the operation layer, but through recent development, it organized upstream fragmented productivity, unlocked the production layer's skills, and evolved from an online snack brand to a brand retailer.
Data source: EO Intelligence
3. Current Status of the Leisure Snack Industry According to data from the China Food Industry Association, the domestic leisure food industry market size is expected to reach 2 trillion yuan in 2020, with a compound annual growth rate of 12.1% from 2016 to 2020. We can see sub-industry data in the figure below.
Data source: Dongwu Securities
From the figure, it is clear that baking and leisure dairy products are high-quality tracks with high growth rates and low concentration, but these two categories have higher production complexity and certain technical barriers compared to nuts and fried seeds.
Currently, the total retail sales of leisure snacks in China mainly come from offline channels. As of 2018, online retail accounted for no more than 14%. However, in terms of growth rate, online snacks are growing twice as fast as offline.
Data source: China Industry Information Network
However, limited by the randomness and impulsiveness of leisure snack consumption, the pattern of offline retail as the main channel may be difficult to change. Even if an online closed loop of "planting grass + purchase" is formed, due to the delay in express delivery, it is difficult to form a perfect consumption experience, and consumers may turn to takeout. I believe this is one of the reasons why some leisure food retail enterprises use offline stores to open takeout services.
4. Characteristics of the Leisure Snack Industry I will introduce the characteristics from three dimensions: "product," "market," and "consumer."
(1) Product
- Since the raw materials of leisure snacks are mainly agricultural and sideline products, their prices are susceptible to fluctuations due to natural conditions; 2) Product homogeneity is severe, and most enterprises invest little in R&D; 3) The main consumers of leisure snacks are young women, who pursue novelty, leading to generally short product life cycles, averaging 2 years. This group values word-of-mouth and content, which places demands on enterprises' innovation and marketing capabilities. How to create hit products with craftsmanship is a problem enterprises face.
(2) Market
1) Low entry barriers, fierce competition, and low overall concentration. According to the National Bureau of Statistics, as of 2018, there were nearly 3,000 leisure food manufacturing enterprises with revenue above 20 million yuan, far more than other enterprises, with a CR10 of about 30%, compared to 60% in European and American markets, leaving much room for improvement; **2) Fragmented categories. According to Taobao data on leisure snack subcategories, there are no weak categories in terms of sales volume or sales amount; **3) Overall gross margin is low; 4) Online concentration is higher than offline.
(3) Consumer
- Consumers' purchases of leisure snacks are seasonal, regional, and cyclical; 2) Compared with developed countries, the unit price of leisure snacks in China is still at a low level. With the continuation of consumption upgrading and the improvement of consumption levels, the retail price of leisure food will maintain an upward trend.
5. Main Business Models in the Leisure Snack Industry Let's look at two figures:
Data source: China Industry Information Network
Data source: Bestore Prospectus
The above two figures show the main models in China's leisure snack market and the models adopted by major enterprises. We can see that the same category can adopt different sales channels, mainly depending on the genes and perspectives of the founding team.
Traditional distribution can be said to be the main model in the first and second stages of leisure food, mainly for two reasons:
- At that time, internet infrastructure was not like today, and logistics and online shopping were in their infancy. Consumers were mostly accustomed to buying goods in supermarkets, hypermarkets, and convenience stores;
- The supply side held the discourse power in the market, and consumers were still at a primary stage. Enterprises only needed to advertise on TV and occupy channels.
This model is like the "production layer" enterprises mentioned in the industry chain section. Its core is to use scale to lower costs, then use this low cost to open channels, and then use the channels to bargain with upstream. In my view, the snack industry is a pure 2C industry. If enterprises do not invest in brand and R&D, they are typically at the bottom of the smile curve and may gradually be eroded by competitors on the shelves.
Emerging e-commerce began to explode around 2010 to 2015. We entered the era of Marketing 3.0. Thanks to the popularity of the internet, consumers gained the right to choose and supervise. At this time, the status of consumers became a complete person. Enterprises must start from values and services to win consumer favor. Three Squirrels is a typical winner of this stage.
Still from the industry chain perspective, enterprises emerging in this stage are mainly "operation layer," with the core being OEM products + user experience design. For upstream, they mainly screen and supervise; the rest is brand building, and then use the brand to improve their own production and supply system. The disadvantage is that most of the money earned must be fed back into the brand, resulting in low net profit margins, which makes it difficult for R&D to keep up.
Speaking of chain operations, this mainly originated in the second stage and is essentially a brand management company. The core is the "production layer," but it also grasps the "operation layer" because the profit of this model mainly comes from franchisees, and the premise of earning this money is to enable franchisees to make money steadily. Therefore, enterprises must not only ensure the stability of the supply chain but also consider how to attract more customers to stores. After reaching a certain scale, they usually expand in multiple directions. On one hand, they control the supply chain upstream; on the other hand, they make overall upgrades or acquisitions to adapt to market changes.
Overall, enterprises adopting this model mainly face three major problems:
**1) How to set standards (e.g., products, supply chain, franchisees); **2) How to build a stable supply system; 3) How to empower franchisees.
Actually, there is a fourth model, which is my own idea, and I welcome discussion. I believe that the future brand form mainly revolves around the word "connection." This connection is not just connecting consumers and brands, but creating together to connect more people. What plays this connection role is called content. Continuing to look at the industry chain, the focus of this brand's work is at the end of the downstream, that is, on consumers. The brand and consumers become an organic whole, integrating upstream resources. The essence of the brand is not a product with leading sales in a certain positioning, but an ecosystem connected by content and values, changing with user changes.
The main work of the brand is user operation and enhancing user participation. I call it a user operation management enterprise, where product R&D, channel selection, etc., are all decided by users. We can think of the enterprise as the center of a network, and users as nodes spreading outward. Le Pur Yogurt is a good case: most of its products are developed with the participation of 1% of enthusiastic users in discussions, while Le Pur acts as a connector and standard setter, then explores good food with users, continuously weaving a larger network.
6. User Profile of the Leisure Snack Industry Data source: Mob Research Institute
-02- Typical Enterprises and Models in the Leisure Snack Industry Each of the following cases will have two lines: the story line and the current situation line. The story line describes the environment and strategies adopted by the enterprise at the beginning of entrepreneurship, while the current situation line shows the enterprise's current status and recent moves. We will analyze the common points in the two lines, combine with the third part, and lead to the fourth part, which is the changes and constants in the leisure snack industry.
1. Three Squirrels Three Squirrels was founded in 2012. Before starting the business, founder Zhang Liaoyuan had been working at Zhan's Food Company for nearly 10 years, gaining a full and deep understanding of the nut industry.
Initially, Three Squirrels seemed to have few opportunities:
In terms of supply, although the company was close to the origin of pecans in Ningguo City, Anhui Province, and Lin'an City, Zhejiang Province, its products could not completely differentiate from other merchants; Selling nuts online was not a new business; big sellers like Xinnongge and Bestore had started in 2010 and had orders exceeding 10,000 during Juhuasuan activities; Offline, "Laiyifen" with thousands of stores was also a popular store on Taobao.
If there is one thing Three Squirrels did most successfully, it was creating hit products, IP, and seizing the Taobao dividend. At that time, domestic nuts and fried seeds were mainly concentrated offline, with severe product homogeneity and no added value. Zhang Liaoyuan keenly seized the window of online dividends, focusing on the pecan category, and through thoughtful user experience design and heavy marketing spending on Taobao, quickly achieved the number one sales in the nut category on Taobao.
Three Squirrels' model is the standard "Xiaomi" approach: leveraging marketing, OEM products + thoughtful design + deep user engagement + low prices (mainly reflected in promotions at the time), seizing internet traffic dividends to quickly capture the market.
Current situation line: Three Squirrels went public in July 2019. According to the first half of 2019 annual report, 88.62% of Three Squirrels' operating revenue came from online. Currently, Squirrel is implementing three major strategies:
**1) "Full category," "full channel," "full sinking" to promote performance growth; **2) Digitally driven, achieving supply chain front-loading and organizational efficiency; 3) Deepening IP entertainment strategy.
(For convenience, I will use One, Two, Three to refer to the above three strategies)
If we condense the content of Strategy One in the annual report, it points to the following:
- Use rapid reverse customization of the supply chain to provide users with more products they love; 2) Expand channels to reduce risks from concentrated sales channels and provide momentum for sustained profitability; 3) Expand consumer groups and find new growth points.
Strategy Two means using the big data accumulated at the consumer end to guide key links from upstream to midstream to downstream, making organizational operations more efficient.
For Strategy Three, in my view, besides brand building, it also uses animated films to deeply cultivate the post-05 generation and use them to connect with their parents. This not only broadens the consumer base but also cultivates future users.
2. Bestore The founder of Bestore is Yang Hongchun. After graduating from university in 1997, he worked in a home appliance company for 8 years, rising from a small quality inspector to regional sales general manager. In 2005, he happened to hear the boss of Robust say that moving snacks from all over the world to customers' doorsteps is a business that can turn a small business into a big enterprise and brand. He kept thinking about this and spent more than half a year researching.
In August 2006, Yang Hongchun and his friend opened the first "Bestore" store opposite Wuhan Plaza. Bestore adopted a chain operation model. According to what we mentioned earlier, its core must be the supply chain, then extending to standard design and quality control, as well as franchisee incentives and management. Let's look at Bestore's decisions at that time:
1) Initially, because of small scale and few orders, suppliers were not enthusiastic about cooperating according to Bestore's requirements. Boss Yang could only impress others with sincerity, paying factories in advance to cooperate, and gradually building relationships.
2) Bestore's procurement staff are all self-trained. From university, procurement staff must have sold goods in stores for at least 6 months and done quality testing in the lab for more than half a year before they can do procurement. In addition, Bestore changed the previous temporary bulk form and adopted standard small packaging to prevent food from being exposed to air, which can cause spoilage or unsanitary conditions.
3) Polish the model store. In 2007, Bestore's store count increased to 28. At this time, it encountered expansion bottlenecks. Bestore decided to start with franchisees from well-known clothing brands like Adidas, Nike, and Li Ning. These people have been doing franchising for a long time, understand the value of brands, are easy to communicate with, have mature operating experience, and have connections.
4) In terms of franchisee incentives and management, Boss Yang designed a four-step plan from store manager to shopkeeper to partner to franchisee, leveraging employee strength for rapid expansion. With more stores, information management was needed to better manage stores. He simply took out all the company's profits of 10 million yuan to launch a store information management system. With this system, Bestore achieved unified management of product prices and orders across all stores, supporting the rapid expansion of stores.
Current situation line: Bestore went public earlier this year. From the prospectus, its operating revenue sources are relatively balanced, with online and offline revenue roughly split 46:54.
In the company's development plan, we can see several major strategies for Bestore in the next three years.
**1) Brand development plan; **2) Omnichannel operation plan; **3) Modern logistics distribution center construction plan; **4) Information system construction plan; 5) Investment and acquisition plan.
(As usual, we will continue to divide into One, Two, Three, Four, Five to summarize)
The core of Strategy One is the comprehensive upgrade of user touchpoints, ensuring that in every marketing environment, consumers' satisfaction with the brand can be achieved through touchpoints such as products and employees.
The core of Strategy Two has two points:
- Open up omnichannel data to achieve an operational closed loop; 2) Seek growth through expansion.
Strategies Three and Four can be seen as infrastructure construction belonging to Strategy Two.
Strategy Five also confirms what we mentioned earlier: expansion to upstream and downstream, investment and acquisition plans. Here we can also see Bestore's ambition and the founder's original intention, "moving snacks from all over the world to customers' doorsteps."
There are many more related cases. Next, let's look at emerging star brands in recent years, and then make an overall summary.
-03- Emerging Stars in Recent Years
1. Guantea Let's first look at Guantea's development history:
Founded in Beijing in 2015, the first SKU, matcha milk sauce, sold out 1,000 portions in 30 minutes; in 2016, received 3 million yuan in angel round, achieved industrial mass production, and began to focus on online channels; in 2017, received 10 million yuan in pre-A round, began to build offline stores; in 2018, received tens of millions of yuan in A round, used for product R&D, team upgrade, and store expansion.
(1) Persistence in quality Guantea's founder, Guan Mingzhu, chose matcha as the entry point. At that time, matcha was still a niche category in China, but it represented a health trend and could be perfectly integrated with many foods.
Initially, because she had no experience in the food industry, she found a partner from a traditional industry. The partner told her that she could achieve the same taste and effect with 20% of the cost, using pigments and additives, which was the current situation in China at that time. But on that day, Guan Mingzhu stopped cooperating with the partner.
From a product perspective, Guantea focuses on high-quality matcha products. Whether in packaging design or the product itself, it carries the "health" and "freshness" of matcha. "Quality," "health," and "freshness" can be said to hit the hearts of female consumers, and also form a clear difference from other products that cut corners, building a quality barrier.
From a price perspective, the average order value of 100-120 yuan is indeed not cheap. Most products on the market are priced in the 30-60 yuan range, but it should be noted that the cost of these products is usually only one-fifth of Guantea's.
In the supply chain, Guantea's matcha raw materials are directly sourced by the team after visiting tea gardens in Japan. After picking, they are steamed and physically ground with natural stone mills. Each SKU is produced by different OEM factories using a "materials processing" method for standardized production. During production, Guantea assigns a staff member to supervise quality control at the factory long-term. Teams that can do this are rare in China.
(2) Subtraction thinking and limited-time hit products Unlike other food teams, Guantea does not rush to build product barriers through crazy new product launches, but limits the speed of online product launches, using the hit product logic, launching one hit product every six months. For example, in 2016, Guantea launched matcha nama chocolate, selling 1,000 boxes within 1 hour, and the matcha milk sauce mentioned earlier is also a typical hit.
Many popular online stores are actually popular because of a single SKU. The famous snack brand "Three Squirrels" has many snack categories, but its most profitable category is nuts. Therefore, Guantea's online store does not need fast product iteration; it only needs to ensure the quality and taste of the products launched to attract and retain more users.
But offline stores are different. Many matcha teams in the domestic market are deeply engaged offline, so offline competition is particularly fierce, and imitation among peers is serious. Therefore, continuously launching new products is necessary to maintain Guantea's vitality. To ensure quality, the R&D cycle is at least three weeks.
2. Le Pur Yogurt Similarly, let's look at Le Pur's development history:
Founded in Beijing in 2015, opened a 35-square-meter store in Sanlitun, selling out every day; in March 2016, received angel round; in July 2016, received pre-A round; in August 2016, received A round; in September 2017, A+ round; in 2018, received strategic investment of hundreds of millions of yuan, including from Coca-Cola.
It can be said that Le Pur has developed very rapidly and is favored by the capital market. Let's continue to analyze:
(1) The most expensive yogurt It is said that Le Pur yogurt was created by a group of foodies. The story began in 2015. The initial founder, Nan Mao, after trying hundreds of flavors of yogurt, finally determined Le Pur's formula, then opened the first store in Sanlitun and quickly became an "internet celebrity" in a short time.
Let's look at Le Pur's products: In the eyes of most consumers, yogurt should be a cup of fermented milk, stirred evenly, and the same from the first to the last sip.
As a set-type low-temperature yogurt, the product uses German whey-filtered yogurt production technology, using three times the fresh milk and three times the lactic acid bacteria, then removing 2/3 of the weight of water. In terms of ingredients, it also emphasizes naturalness, giving the yogurt a fresh taste and natural layering, which is the first difference between Le Pur products and other yogurts.
Visually, they hired top domestic graphic designers to design the brand visual, and Louis Vuitton's exclusive packaging design team to design Le Pur's new packaging, which is indeed impulsive enough.
Le Pur's main business revenue is online. It should be noted that low-temperature yogurt is usually placed in offline freezer cabinets. To deliver products to consumers online, it must rely on cold chain logistics. However, when most cold chain logistics deliver products to consumers, the ice packs in the foam boxes have already melted. So Le Pur also built its own cold chain logistics system to ensure no temperature break throughout the process. But I don't think this is the main reason why Le Pur has millions of users despite being three times more expensive than other yogurts.
(2) Strong user operation Le Pur's product development theory revolves around the 1.9.90 principle.
What does that mean? 1% of core seed users participate in the initial development of products. 9% of sub-core seed users participate in product interaction and promotion, creating a core community with content and stickiness. The remaining 90% of users are turned into sticky fans through the above touchpoints and occasional activity operations.
Interestingly, the vast majority of Le Pur users are post-95s, a group that likes sharing, creating, and quality. Le Pur relies on this system to continuously meet the needs of users at different levels, also creating a continuous source of power for its own development.
-04- Changes and Constants in the Leisure Snack Industry Finally, it's time to summarize. Here are the main points.
1. The following are the changes: (1) In the leisure snack industry, power is constantly shifting to consumers. From the initial "any color as long as it's black Ford" to users starting to participate, spread, share, and supervise; (2) Health, freshness, quality, good looks, fun, and substance are becoming increasingly important; (3) Upgrading seemingly ordinary and common products can have great imagination space; (4) The shift from channel thinking to user thinking: our scenarios and what we operate are all users, regardless of online or offline. If we divide, users become cold data, and whether you segment or invest, you cannot achieve refinement. This is also why omnichannel user data operation is popular today when traffic dividends are exhausted.
2. The following are the constants: (1) Good quality is the eternal pursuit of consumers; (2) The essence of channels is a medium for communicating with consumers, not just where goods sell well; (3) Innovation is the source of all power.
-05- Predictions for the Future With the continuation of consumption upgrading, there are many products worth redoing in the future. For the leisure snack industry:
1. From a product perspective Currently, the better tracks are baking and leisure braised products. Of course, there are many categories with room for exploration. High quality, natural, and healthy are inevitable trends. Imagine what it would be like to eat cakes baked with milk from the noblest cows, the freshest eggs, and various natural plants? From a category perspective, the stronger the scenario and the more content that can be extended and added, the easier it is for users to participate and become sticky.
2. From a price perspective Price increases are a trend, but it also depends on whether the value of your product is easily perceived, and whether the product content and brand content can support the price. Behind this is that consumers are increasingly willing to pay for value beyond the use value of the product. To put it bluntly, consumers will pay a premium for your content, but only if the product and content are both OK.
If you just tell me you make a healthy and thoughtful braised egg and sell it for 5 yuan, I may not buy it because I can't perceive it.
3. From a user operation perspective The phrase "user-centric" has been shouted and heard too much. So what is our KPI? The quality of user operation often determines the growth speed and ceiling of a brand. Be sure to abandon the cold numbers on the operation backend, because these are all living people. Instead of staring at conversion rates and click-through rates all day and planning strategies, it's better to talk directly with users. As mentioned earlier, brands and users should be seen as an organic whole. In the future, brands should be built with an attitude of "openness," "connection," and "participation."
4. From a channel perspective There are many meanings of channels. I think talking about opening stores in which tier cities, social e-commerce or platform e-commerce is meaningless. This is entirely a strategic choice of the enterprise itself. Let me share my personal views on channels.
My definition of a channel is: the medium for communicating with users, the intersection of enterprise behavior and user behavior. If you don't understand, I'll give an example later.
First, we all know that online enterprises are moving offline, and offline enterprises are also developing online. In addition, they have opened up data at both ends. Behind this is one word: omnichannel refined operation. This also means that the boundaries of traditional channels are gradually disappearing. In my view, this is called "users are channels."
In the past, we called offline stores and e-commerce platforms channels, but this completely fragmented users. The real channel is the intersection of enterprise behavior and user behavior, the path users come from.
No matter how we talk, we can't avoid the two books "Growth Hacker" and "Traffic Pool." It's actually a matching problem. User behaviors differ, and we need to select, optimize, and build environments that match them.
For example, suppose I am the founder of a beauty brand and recently invested in Xiaohongshu. After testing, we found the content most suitable for top influencers, mid-tier bloggers, and ordinary users. Let's take influencers as an example: influencer attributes - content style - user type - transaction location form an initial channel. The channel is this line, not Xiaohongshu.
Finally, we must continuously screen and optimize, build all links in the channel, and eventually connect them into a stable network.
Source: New Consumption Insider (ID: cychuangye)