The Secret Code Behind the Myth of Snack Wholesale Scale | Series Insight (2)

(Author Tang Jiansheng is a senior expert in consumer insights and business analysis)

The snack wholesale industry can create the myth of ten-thousand stores, thanks to a counterintuitive business model: franchisees earn profits, headquarters earns scale.

Unlike traditional franchise models, snack wholesale centers on “symbiotic empowerment,” building a business closed-loop through extreme efficiency in products, pricing, and supply chain. This allows franchisees to first achieve profitability, then the headquarters leverages scale effects to reduce costs and earn supply chain profits. This is the underlying secret behind the rapid expansion of leading companies. To complete this closed loop, three core issues must be addressed simultaneously: what to sell (popular products), how much to sell (competitive pricing), and how to deliver (efficient, low-cost supply chain). These three are interconnected and indispensable, supporting the myth of ten-thousand stores and creating a competitive barrier that traditional brands find hard to cross.

Popular Products: Dual-Drive of Traffic and Profit

Snack wholesale centers abandon the traditional retail “scattershot” product selection approach, adopting a three-tier product mix: “standard products for traffic attraction + white-label products for profit + own/custom brands for gross margin enhancement.” This achieves an efficient “traffic- conversion-profit” closed loop. Industry trends show a gradual decline in white-label share, with an increasing proportion of own/custom brands, continuously optimizing overall gross margins. Each product has a clear commercial mission.

Branded standard products are the most efficient traffic entry point and core “traffic base,” mainly focusing on fast-moving giants like Coca-Cola, Yibao, Wangwang, covering high-frequency, stable-repurchase categories like cola, chips, bottled water. These products have the lowest gross margins, some even near loss, but thanks to transparent pricing, high demand frequency, and low consumer decision costs, they quickly embed the store’s “affordable” image in consumers’ minds. Prices for branded standard products are on average lower than offline supermarkets, with significant price attractiveness. These products contribute nearly 40% of customer flow, with brands trading small profits for large traffic, laying a foundation for new customer acquisition, increased purchase frequency, cross-selling, and future profit conversion.

White-label bulk snacks were once the core of store profitability and key to stable earnings for franchisees. Top companies’ product structures include white-label + own/custom brands accounting for about 60%-80%. White-label products focus on high cost-performance and high turnover, covering all categories like puffed snacks, baked goods, cooked foods, candied fruits, dominating store revenue. They reduce quality control costs by sourcing from the same factory and source, lower terminal costs through small specifications and customization, and avoid marketing costs by offering bulk weight and small packaging, maintaining high gross margins. Compared to online, they significantly lower consumers’ trial barriers. The combination of branded products attracting customers and white-label products generating profits forms a complete profit cycle. However, white-label products face issues like homogenization, inconsistent quality, and low repurchase rates. Leading companies are gradually replacing white-labels with customized and own brands.

Own/custom brands are the long-term competitive moat and core gross margin drivers in snack wholesale. Leading companies aim to increase their share continuously. After establishing channel trust, their own brand products have gross margins much higher than standard or white-label products. They follow a development path of “building channel trust first, then pushing own brands,” bypassing middlemen to significantly cut costs and upgrade channel branding—something traditional brands struggle to achieve with their “product first, then channel” approach. Top snack wholesale companies have professional large-scale product selection teams, leveraging digital capabilities for rapid product iteration. The proportion of customized SKUs continues to rise, and through direct sourcing and collaborations with well-known IPs, they strengthen the differentiation and overall gross margins of their brands.

Competitive Pricing: Efficiency-Driven Structural Advantage

The markup rate of snack wholesale centers is far lower than traditional supermarkets and snack brands. This structural advantage forms an insurmountable moat. The core logic is using a combination of “low gross margin × high turnover × scale” to offset gross margin differences through efficiency, creating an optimal quality-price matrix. Low prices are not gimmicks but industry norms.

This price advantage is comprehensive: prices are clearly lower than supermarkets and e-commerce, with no subsidies, relying solely on full-chain cost compression. Targeted cost control strategies for different categories make low prices sustainable. Even with relatively low overall gross margins, leading companies can achieve substantial net profits through high turnover and scale effects, creating a positive flywheel of “low price → scale → efficiency → even lower prices.”

Cash procurement is key to low prices. Leading companies secure significant discounts by paying cash, with zero credit terms, volume commitments, or capacity buyouts, saving factory capital costs, locking in capacity, and planning production. This yields substantial procurement discounts and priority during peak seasons. Efficient cash flow not only enhances bargaining power with suppliers but also ensures overall supply chain stability.

Efficient, Low-Cost Supply Chain: The Foundation of Store Expansion

If products and prices are the front-end weapons of snack wholesale brands, the supply chain is their backbone. Top companies optimize supply chain efficiency to build core capabilities that traditional brands cannot replicate. The efficiency gap is the core competitive difference among brands.

Leading companies set up multiple regional warehouses, creating a 300-kilometer distribution circle, achieving a “store location equals warehouse location” layout. T+1 replenishment times far surpass traditional brands. Proximity-based warehousing reduces loss, improves replenishment efficiency, and enables stores to operate with “small inventory, high replenishment frequency,” reducing capital occupation. Their inventory turnover days are much lower than traditional brands, greatly improving capital efficiency, reducing spoilage and expired goods, and allowing rapid SKU adjustments based on regional demand.

Digitalization further enhances supply chain efficiency. Brands use data-driven decision-making, AI algorithms for precise product selection, flexible pricing, and early warning of expiring goods. AI image recognition scales, smart ordering systems, and other digital tools significantly reduce labor costs, support frequent product updates, and shift supply chains from “passive response” to “proactive prediction.” This provides a solid data foundation for rapid iteration and precise development of own brands.

Dilemma of Traditional Brands: Visible Scale Benefits but Locked in Mode

Traditional brands are not unaware of the value of scale but have struggled to replicate the scale myth of snack wholesale. The core reason lies in the high difficulty of reconstructing the entire business chain and the four fundamental contradictions rooted in their entrenched operational logic, making it hard to adapt to new industry rules.

First, misconceptions about franchise models. Traditional brands see franchising merely as a “light-asset expansion tool,” not as a symbiotic empowerment system with partners. They are reluctant to abandon the control and quality assurance of direct operations, yet fail to grasp the core logic of snack wholesale: “supply chain feeding back to franchisees, enabling franchisees to profit first.” This results in a double loss: “directly operated stores with heavy assets losing money” and “franchisees lacking control, leading to chaos.”

Second, misaligned understanding of pricing and brand positioning. Traditional brands wrongly equate “premiumization” with “brand premium,” which becomes a fatal constraint in a rational consumption market. Their definition of price differs fundamentally: traditional brands treat “price” as a marketing tool, lowering prices as a passive defense that sacrifices profits, risking losses and falling into a vicious cycle of “not lowering prices means death, lowering prices means death.” In contrast, snack wholesale brands see “low prices” as a structural benefit driven by core supply chain capabilities, making low prices sustainable.

Third, the gap in supply chain thinking leads to cost structures that are hard to match. Traditional brands follow a “trade thinking” supply chain—simply buying and selling—lacking control over product manufacturing and specifications, unable to reduce costs through customization or direct sourcing. Snack wholesale brands adopt a “manufacturing mindset,” focusing on controlled production, direct sourcing of white-label products, specification customization, and zero marketing costs to build price advantages and dominate supply chain discourse. This thinking and capability gap prevent traditional brands from competing on cost despite scale advantages.

Fourth, the underlying constraints of capital market logic. This is a fundamental barrier for traditional brands. Listed companies are constrained by quarterly financial reports and cannot tolerate strategic losses for scale. They follow a “profit-driven growth” model, constantly delivering profits to investors. Conversely, snack wholesale brands backed by venture capital can “burn money for scale,” following a “growth-driven profit” approach, spending years building scale barriers before eventually turning a profit. The patience gap prevents traditional brands from keeping pace with industry evolution and participating in new industry rule-making.

Core of the Model: Scale is the Result, Efficiency is the Cause, Symbiosis is the Foundation

The myth of ten-thousand stores in snack wholesale is built on extreme efficiency in products, prices, and supply chain. The core goal is always to make franchisees profitable. Leading companies’ franchisees achieve stable monthly net profits, with very low store closure rates. This profitability attracts more entrepreneurs, creating a positive flywheel: “more franchisees → larger procurement scale → lower supply chain costs → stronger price advantage → more traffic.” Once in motion, this generates powerful development momentum.

The brutal reality of business is that when models evolve, it’s not about who works harder but who adapts better to new rules. The decline of traditional brands stems from a disconnect between old models and new industry rules. They see the future but cannot take the first step. As the dual oligopoly of snack wholesale surpasses 70% market share and stores are everywhere, hidden risks like brand homogenization, declining single-store revenue, and intense competition also emerge. In the next article, I will analyze the major challenges facing the rapidly growing snack wholesale model after reaching ten-thousand stores and where the industry’s core competitive points lie.

First Financial exclusive release, this article reflects only the author’s views and does not constitute investment advice.

(This article is from First Financial)