Channel transformation! New opportunities arise in China's snack industry
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For China's trillion-yuan snack industry, channel transformation may become the key variable in determining future winners.
According to Wind Trading Desk news, a UBS research report released on October 14 shows that China's snack industry is at a crucial turning point. Although overall market growth is slowing, channel fragmentation and decentralization trends—especially the rapid rise of snack discount stores—are creating structural growth opportunities that cannot be ignored.
Snack discount stores are the main growth engine in the current market. This channel achieved an astonishing compound annual growth rate (CAGR) of 38% from 2019 to 2024. The number of stores has surged to 45,000. Even so, the bank believes the market is far from saturated, and expects the total number of stores to exceed a ceiling of 70,000.
At the same time, the growth focus of e-commerce channels in the industry is shifting to content platforms, whose entertainment, social, and O2O conversion abilities bring new opportunities to brands. The Southeast Asian market also provides emerging growth space for Chinese snack companies going abroad, and is expected to grow at a 6% CAGR from 2024 to 2029.
Market size has exceeded one trillion, industry annual growth rate will slow to 2-3%
The report points out that in 2024, the size of China’s snack market has reached 1.1 trillion RMB. However, UBS predicts that between 2024 and 2027, the compound annual growth rate (CAGR) of the industry’s total sales will slow to 2-3%.
Against this backdrop, it’s easy for investors to lose interest in the sector. However, the report emphasizes that the real story is hidden in the evolution of channels. The market share of traditional channels (such as supermarkets and grocery stores) is shrinking, while emerging channels represented by snack discount stores are rapidly rising, becoming a new battleground for brand growth.
“Game changer”: the rise of snack discount stores
Snack discount stores are undoubtedly the most eye-catching “dark horse” in this round of channel transformation.
According to data from iiMedia, this channel achieved a high sales CAGR of 38% from 2019 to 2024. UBS predicts that between 2024 and 2027, it will continue to grow rapidly at a CAGR of 14%. Its contribution to the overall sales of the snack industry is expected to rise from 9.0% in 2024 to 12.5% in 2027.
This innovative retail format has rapidly expanded thanks to the following core advantages:
- Product diversification and customization: Snack discount stores usually offer a rich variety of SKUs. In addition, they provide customized products based on consumer demand, such as small packages or bulk snacks sold by weight, which lowers the barrier for consumers to try new products.
Rapid expansion of store networks: The number of snack discount stores has rapidly increased from about 1,000 before 2020 to over 45,000 by mid-2025, with a CAGR close to 90%. Based on demographics and market size, UBS forecasts that the store capacity ceiling of snack discount stores could exceed 70,000, indicating more than 30% further growth potential.
Supply chain optimization and cost advantages: Snack discount stores purchase directly from upstream manufacturers, greatly shortening the traditional retail value chain (snack producer/brand—distributor—retailer), thereby improving channel efficiency and offering products at more competitive prices. UBS analysts estimate that the pricing of the snack discount store channel can be 25% lower than that of traditional large chain supermarket (KA) channels.
Currently, a dual oligopoly landscape has formed in the snack discount store market, dominated by the “Snack Busy Group”—created by the merger of “Snack Busy” and “Zhao Yiming”—and the “Wancheng Group”, which integrates five major brands. Together, the two groups account for nearly two-thirds of store share in the market.
It is worth noting that the single store payback period for snack discount stores has lengthened from about 1 year in the early stage to about 2 years currently, and it is expected to further extend to more than 3 years in the future, reflecting the impacts of intensified market competition and increased store density.
New trend in e-commerce: content platforms become main battleground
As one rises and the other falls, the influence of traditional channels is weakening. According to Euromonitor data, the share of sales from traditional channels composed of large supermarkets, hypermarkets, and small grocery stores is expected to shrink from 80% in 2015 to 50% in 2025.
Meanwhile, emerging channels are rapidly seizing market share. Among them, specialty retailers led by snack discount stores and e-commerce channels have become the biggest beneficiaries. The report points out that the growth momentum of e-commerce channels is also shifting from traditional platforms to content platforms that can better stimulate spontaneous consumption.
Content platforms such as Douyin and Kuaishou, with their entertainment value, social interactivity, and scenario-based consumption, are better able to inspire consumers’ spontaneous, passive, and lifestyle-integrated purchases. NielsenIQ’s survey shows that 91.8% of respondents use content platforms daily, higher than the 86.4% for comprehensive e-commerce platforms, and content platforms far surpass traditional media platforms in attracting customers.
Overseas opportunity: huge potential in Southeast Asian market
Overseas markets are becoming new growth opportunities for Chinese snack companies, with Southeast Asia the prime testing ground due to cultural similarities and market competition factors.
Since 2021, the growth rate of the snack industry in five Southeast Asian countries—Indonesia, Malaysia, Singapore, Thailand, and Vietnam—has consistently exceeded that of China.
According to Euromonitor data, in 2024, the total snack market size in these five countries is only about 24% that of China’s, but is expected to grow at a 6% CAGR from 2024 to 2029. By 2029, the market size is expected to reach 29% of China’s market.
Brand insights: adapting to channel changes is key
Faced with structural channel reform, snack companies need to take proactive strategies to adapt to the new environment.
UBS analysis emphasizes that brands not only need strong product capabilities but must also successfully execute omnichannel strategies, implement agile marketing plans, and establish consumer-driven innovation cycles—or risk being eliminated by the rapidly changing channel environment.
At present, leading snack brands such as Weilong and Yan Jin Puzi have already established a strong presence in the snack discount store channel. Meanwhile, online channel operation strategies also need to balance sales growth and profit margins, with some brands shifting from merely chasing growth to strategies that balance sales and profitability.
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