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SIAL|Discount of Mass-marketed Snacks - Optimize the Supply Chain

2024.02.29

According to SIAL, the best way to cut the price of mass-marketed snacks comes from optimizing the supply chain and reducing the costs of various links in the supply chain. This is also known as the "hard discount" mode, which is specifically reflected in the popularity of mass-marketed snack stores.

For distributors and suppliers, cooperation with mass-market snack stores can save a variety of miscellaneous costs incurred in cooperation with traditional supermarkets and hypermarkets, such as entrance fees, display fees, bar code fees, promotional fees, etc. Moreover, it usually takes supermarkets, hypermarkets and other channels more than 60 days to pay. The delayed payment has the most negative impact on small and medium-sized merchants.

The mass-marketed snack store can promise instant payment, and the mode of "cash purchase" and "large purchase" allows it to obtain absolute bargaining power when facing the merchants. As long as the purchasing scale of the mass-marketed snack store is large enough, the payment period is short enough to ensure a certain degree of profitability. In this case low profits per unit can be acceptable for white brand manufacturers.

Streamlining the circulation chain in the channel and supply chain, the mass-marketed snack store chooses the upstream direct procurement or docking with the first-level distributors, through the self-built warehouses and logistics system through the store to cut reliance on dealers at all levels and KA (supermarket chains, hypermarkets), BC (small and medium-sized supermarkets or stores), GT (wholesale markets, ordinary supermarkets) terminal channel sales, to complete the comprehensive upgrade of business mode.

Zhao Ding, founder of Zhao Yiming snacks, mentioned in a speech:”Take the husband-and-wife store as an example, the traditional circulation of goods from the factory to the hands of consumers, if the cost is 1 yuan, the brand manufacturers may have 29% markup rate, plus all levels of dealers, terminals, the whole chain markup, and ultimately to the hands of the consumer when the price of 2.1 yuan, BC channels, K1 superstores and so on are almost doubled the rate of markup.”

But for mass-marketed snack store, goods of 1 yuan’s cost can be purchased at the price of 1.2 yuan. With reduced intermediate distribution chain markup, consumers only need to pay 1.6 yuan, with the increase rate being only 60%.

The snack food industry has changed significantly over the past few years, featuring ample upstream supply, consumer demand for one-stop shopping, and increased focus on lower price. "What's implied behind this is that the overall markup rate in the snack industry was too high in the past, so the rise of mass-marketed snack store is taking this diverse demand for snacks to the masses at a very affordable price."

SIAL believes that although the expansion of mass-market snack brands is limited by the geographical nature of the supply chain, after a round of financing, the construction of the supply chain, which is costly and slow to produce results, can be slowly rolled out to support the brand to further realize expansion in the country.

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