A Closer Look at China’s Snack Food Market

On 24th Feb. 2020, one of the top snack food chain store brands Bestore went public in China. On the first day of the IPO, the valuation of Bestore increased by 44% and reached 6.87 billion RMB. One day before this, another top snack food brand Baicaowei was sold to Pepsi company by Haoxiangni at a price of 705k USD (around 4.95 billion RMB).


According to iiMedia’s research, Bestore, Three Squirrels and Baicaowei are the TOP 3 snack food brands in China for 3 consecutive years. However, the total market share of top 5 brands are still less than 10%, which means the competition is still intense and the market still has big potential.


FACING PROBLEMS BUT BIG POTENTIAL


Snack food brands are facing the same problem: high revenue but low profit because of high operation and marketing cost. Take Bestore as an example, the gross profit margin is around 29% in 2018 and net profit margin is less than 10% after deducting operation and sales-related cost.



iiMedia’s report shows in 2018, the sales volume of China’s snack food market was 62.1 billion RMB with a 23.4% YOY growth rate. In 2020 the sales volume is expected to reach 90 billion RMB.



OMNI-CHANNEL SALES STRATEGY


Although offline retail stores and supermarkets are still the main sale channels for snack food, e-commerce channel is increasing fast. In 2013, online channels only accounted for 0.3% of all sale volume. In 2018, this number increased to 8%.



Top brands start to develop omni-channel strategy. Three Squirrels was focusing on online channels. Last November, they started to develop offline stores. The difference between Bestore’s online and offline sales is getting smaller. And the acquisition by Pepsi will certainly help Baicaowei’s online & offline business.


WHAT’S THE FUTURE?


Chinese customers’ demand on high quality snack food keeps increasing.In the end, the food quality is still the most important factor for a food brand. However, when we look closer at these 3 top brands, we find the product categories, tastes, packaging and target audience are all very similar. Many snack food brands are still using OEM model, producing similar products which is hard to control quality.


In the future, instead of increasing marketing cost and lower price, the competitive market will force brands to pay more attention on quality control, increase R&D investment and produce more high quality food to differentiate, which will be a more sustainable business model.

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