2024-07-31
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Zhao Yiming Snacks has always believed that "there is a god on the front line", that is, all problems will be exposed on the front line.
Text｜Li Xin, reporter of "Chinese Entrepreneurs"
Editor: Mina
Image source: Interviewee
Before founding Zhao Yiming Snacks, Zhao Ding had been working in the roasted nuts industry for more than 10 years. He took his fellow villagers to open roasted nuts shops everywhere, from his hometown of Wuhu, Anhui, all the way to Zhejiang, Hunan, and Jiangxi. He was always on the front line and accumulated a lot of practical experience from his hard work.
In 2019, Zhao Ding decided to establish Zhao Yiming Snacks, a chain brand that focuses on mass-market snacks. Currently, the number of stores has exceeded 5,500. In February 2023, Zhao Yiming Snacks completed a round A financing of 150 million yuan, becoming a highly anticipated company in the eyes of its peers.
In November 2023, Xiao Xiu Hen Mang and Zhao Yiming Snacks implemented a strategic merger to jointly establish Mingming Hen Mang Group. Seven months later, Mingming Hen Mang Group became the first brand in China's snack chain industry to break through 10,000 stores.
There was no celebration at Zhao Yiming Snacks on this milestone. On the day of the official announcement, the company continued to carry out its daily work as planned.
On June 13, the day after the announcement of the 10,000-store opening, Zhao Ding went to Shandong for market research as originally planned. The purpose of this trip was to investigate the practical problems encountered in the development of the Shandong market. He wanted to find the company's shortcomings by conducting in-depth front-line research on franchisee stores.
He told China Entrepreneur,Within Zhao Yiming Snacks, a saying that has been believed from the past to the present is - "There is God on the front line", which means that all problems will be exposed on the front line.
An investor who invested in Zhao Yiming Snacks told China Entrepreneur that the reason they chose Zhao Yiming Snacks was because it was a company that had grown completely from a county town. In addition, the founder Zhao Ding’s long-term background and experience in the snack industry was also one of the deciding factors.
Talking about the 10,000-store mark, Zhao Ding said calmly that compared with 10,000 stores, the company will pay more attention to the average daily sales of each store, as well as store rental-to-sales ratio and other detailed data. For stores with good sales performance, we need to know what is good about them. For stores with problems, we need to go to the front line to find problems, and also look at peers or other excellent cases. Only by looking at various details can we gradually make up for the shortcomings.
One fact that must be acknowledged is that although the snack hypermarket industry is a rapidly emerging new track, the competition is extremely fierce - leading brands are expanding rapidly, and mergers and acquisitions are also underway among brands.
Public reports show that in addition to Mingminghenmang, Wanchen Group has also integrated its four major brands, Lu Xiaochan, Adi Adi, Haoshanglai and Laiyoupin, and merged them into "Haoshanglai". Ai Xiaoxin has also successively acquired the Hu Weihong, Dinosaur and Teddy, and Snack Bubble snack brands; Snack Warehouse has also strategically integrated the Guangdong snack chain Momo.
Huatai Securities pointed out in a research report that in 2023, the snack hypermarket industry will achieve rapid annual growth, with the number of stores in the entire industry exceeding 20,000. This stage is the stage of regional leading competition, with the ultimate single-store model, sufficient capital reserves and regional supply chain strengthening as core competitive elements; it is estimated that the long-term space for stores in the entire industry will reach 60,000 in 2024, and efficiency and full-link management and operation capabilities are the company's key competitiveness.
But when talking about the current competitive situation of snack collection stores, Zhao Ding believes that the competition in the industry is far from being fierce.
"The industry is too competitive, and some companies are struggling to compete, so some unconventional means of competition have emerged, and everyone thinks that the industry competition is very fierce, but these are only temporary." Zhao Ding said, "We are just at the beginning of the next stage. In the future, when everyone starts to compete for new technologies and new capabilities, that will be when the competition is most intense."
Wuhu is known as the "City of Roasted Nuts". In 2008, Zhao Ding, whose family was engaged in the roasted nuts business, began to take his fellow villagers to open "Shazi Guazi" roasted nuts stores outside Anhui Province. They opened 40 to 50 new roasted nuts stores every year, all the way from Zhejiang and Jiangxi to Hunan. In 2014, when this group of Wuhu people planned to open more roasted nuts stores in Hunan, Zhao Ding, the leader, suddenly realized that the market had changed.
At that time in Hunan, the market share of traditional loose-mixed roasted nuts had been shrinking. Compared with roasted nuts shops, this was the world of snack chain stores headed by Laiyifen and Liangpin Puzi.
Behind the alternation of old and new formats is essentially the change in consumers' snack consumption habits. Zhao Ding observed that in the past, people ate melon seeds and other fried food mainly during the Chinese New Year and other festivals, but now the habit of eating snacks exists in daily life, and the requirements for categories and quality are also becoming more diversified.
For example, early snacks were mostly peanuts, melon seeds, and nuts, and then a group of imported products such as chocolate and candy appeared. Later, there were products such as pork jerky and chicken feet, and more categories were derived around one product. In the past, the small shops of 20 to 30 square meters opened by these snack makers could not accommodate such a variety of snacks.
He decided to seize this opportunity. In 2015, Zhao Ding opened his first snack store, which covers an area of more than 130 square meters. "After the first store was opened by accident, the business met expectations, and then I decided to officially take root in this industry," Zhao Ding recalled.
However, the success of the single store was not replicated as expected by the fellow villagers who came to join the franchise. Today, Zhao Ding recalls his early experience and admits that although he brought many fellow villagers out to open stores, unfortunately, he did not let them make money through franchising. "To some extent, the business at this stage ended in failure."
But he did not gain nothing.This experience made Zhao Ding realize that the two biggest factors affecting the offline snack chain industry are: one is the site selection; the other is whether the franchise store can make money.
Among them, site selection is a factor that determines the life or death of offline snack stores. Since entering the snack industry, Zhao Ding has done the most work in site selection - selecting sites for his own stores and also helping fellow villagers select sites.
He found that whether in the retail industry or the catering industry, when many people talk about site selection, their first reaction is to find a cheap shop. This idea is the biggest misunderstanding in site selection.
"When choosing a location, you can't just look at whether the rent is cheap. When choosing a location, don't just think it's okay. You must visit the front-line to see how much the rents of the five stores around it are, and then finally buy the store at a suitable price. Reasonable is the only indicator." Zhao Ding explained, "Secondly, we also need to consider the surrounding business formats. For example, if there is a Mixue Ice City next to the target store, then we must try our best to understand the sales of this Mixue Ice City store and its level in the entire Mixue Ice City franchise system. This can also help us judge the future sales performance of this store."
In addition to the location, Zhao Ding was also concerned about the fact that many of his fellow villagers who opened shops with him in the past did not make money. "The reason why my business did not take off during that period was that the franchisees could not make money. First of all, we must make the franchisees make money, which is the foundation for the success of all business models," Zhao Ding reflected.
These practical experiences from the early years are still influencing Zhao Yiming's snacks today.
In 2019, the development of the snack market entered the fast lane. The China Business Industry Research Institute pointed out in the "Analysis on the Current Development Status and Trends of China's Snack Industry Market in 2019" that the market competition in the snack industry showed a "3+2" model (Three Squirrels, Bestore, and Be & Cheery leading, followed by Laiyifen and Yanjinpu), and at the same time showed trends such as online and offline omni-channel integration. In 2020, the total output value of the snack industry was close to 3 trillion yuan.
In the same year, Zhao Ding decided to rebuild a snack collection store brand that focused on offline stores. At that time, there were already offline snack collection store brand stores, such as the snack brand Wife Daren, which was established in 2010, and Snacks is Very Busy, which was established in 2017.
After much deliberation, Zhao Ding decided to name the new brand after his son, Zhao Yiming, which meant treating the brand like his own son. In January 2019, the first direct-operated store of Zhao Yiming Snacks was launched.
This time, Zhao Ding was calmer and more composed. He and his team spent nearly two years polishing the single-store model, raising the monthly sales of single stores from 300,000 yuan/month, the highest in the industry, to 450,000 yuan/month.
The increase in sales comes from the polishing of a series of details. The company has condensed four key words: more products, low prices, fast updates, and good experience. On this basis, we continue to think about practical details such as store type, shelf design, product pricing, and site selection.
During the process, the team also formed a methodology that was centered around the "personnel and site selection model" that they followed in the early stages: who would open the store and where it would open.
Zhao Ding explained that the first step of this model is to select people and choose good franchisees, because not all franchisees can run a good store.
Based on this, Zhao Yiming Snacks has three requirements for franchisees: First, they must be fully committed and must be responsible for the operation themselves, and investors are not allowed to join. Even in the early stages of the business, Zhao Yiming Snacks does not welcome more than two people to invest in partnership, and tries to avoid conflicts that affect operations.
Second, you must have the ability to recognize risks, that is, you must have experience in doing business. The investment funds must consist of two parts: your own funds and loans, and form a certain balance.
Third, there must be common values. Zhao Ding explained that the four key values that Zhao Yiming snacks bring to consumers are more products, lower prices, faster updates, and better experiences. When it comes to stores, it means doing a good job in display, service, hygiene, and reporting. Therefore, franchisees are required to consider how to stock and label goods in stores, and look at surrounding competitive products. They must take the initiative to understand these details, have an understanding of retail, and have common values.
Zhao Yiming Snacks even requires them to visit the market in person. Franchisees need to research at least 20 Zhao Yiming Snacks stores in operation and write a "review".
"I will also ask them during the interview, for example, after you have seen a store, what is the name of the store manager, how much is the monthly salary, and what is the approximate monthly sales of the store," Zhao Ding said. "We have informed all franchisees who have opened stores that we cannot tell these detailed information to those who come to consult, so those who want to join must go to the store to count the number of people and the average customer spending. After experiencing this, he will also know that this is not an easy business."
Although Zhao Yiming Snack Shop has been contacting franchisees since 2019, the cumbersome screening conditions in the early stage directly discouraged many people. Zhao Ding recalled that out of 100 calls in the early days, only one franchisee actually opened a store, and for the selected franchisee, Zhao Yiming Snacks only issued a store opening qualification, and was allowed to open a store only after completing 6 months of training.
This also led to the slow pace of Zhao Yiming Snacks' early store expansion. From 2019 to the beginning of 2022, in three years, Zhao Yiming Snacks only opened about 80 stores, including 20 directly-operated stores.
The first 100 franchisees of the brand were all recruited by Zhao Ding after interviewing them personally. He believes that the slow pace in the early stage paves the way for the rapid pace in the later stage.
In 2019, Zhao Ding also did an important thing. He eliminated all relatives in the company. This made Zhao Yiming Snacks officially move from a family workshop to a modern company.
In 2022, Zhao Yiming Snacks accelerated its store expansion. The number of stores increased from 83 to 700, and in 2023, it developed to 3,000 within a year. As of now, the number of Zhao Yiming Snacks stores has exceeded 5,500. "After polishing the single-store model, speeding up is a natural process." Zhao Ding said.
When Zhao Yiming's snacks were "booming", the snack mass-marketing industry also entered an era of wild growth. Events of competitors competing with each other on low prices, grabbing stores, and seizing franchisees broke out one after another, and disorderly competition spread in the industry.
But in November 2023, an unexpected event occurred in the industry. Zhao Yiming Snacks announced a strategic merger with Snacks Henmang, and the two former old rivals finally came together.
Talking about the merger, Zhao Ding said frankly that the industry competition is fierce and franchisees are "fighting" with the brands every day, which causes great internal friction for them. This is the direct reason that prompted the two brands to finally come together.
Another reason is that this vicious competition also hurt their friendship. In fact, Zhao Ding and the founder of Snacks Are Busy, Yan Zhou, have known each other for a long time. Zhao Ding was familiar with Yan Zhou when he opened the Shazi Melon Seeds and Roasted Nuts Shop, and the two often talked about some industry topics. During that period, Zhao Ding thought that Yan Zhou was a person with entrepreneurial thinking. To some extent, it was also inspired by him that Zhao Ding decided to start a new business around the business model.
"Before 2019, although I opened stores, it was more like a reselling activity. After I founded Zhao Yiming Snacks in 2019, I really wanted to solve a social problem. At this stage, I officially started my business." Zhao Ding told "China Entrepreneur" that when it comes to retail entrepreneurship, he and Yan Zhou are on the same wavelength, and he is one of the people who have the greatest influence on him.
On June 12, 2024, the merged Mingminghenmang Group became the first brand in the snack chain industry to exceed 10,000 stores.
Talking about the number of 10,000 stores, Zhao Ding said that the reason why snack stores can reach 10,000 stores is firstly due to their industry attributes, as they grow in the lower-tier markets; secondly, snack stores can greatly reduce the circulation links by purchasing directly from manufacturers, and have higher turnover efficiency compared to supermarkets. After the number of 10,000 stores, the bargaining power of brands on the purchasing side will be further enhanced, and there will be more room for adjustment in pricing. After the turnover efficiency is improved, there will also be more room for improvement in quality.
In the past two years, there are two stories circulating in the market about Zhao Yiming Snacks' case of reducing costs and increasing efficiency: One is that Zhao Yiming Snacks' travel standards have always remained consistent with the initial entrepreneurial period, and this rule applies equally to all employees, including Zhao Ding.
Secondly, snack brands previously often used color-printed cartons to deliver goods, but Zhao Yiming Snacks suggested from the beginning of the cooperation that snack brands change their packaging cartons to black and white printing, so that they could save 1 to 2 yuan per carton.
When the reporter mentioned these two stories to Zhao Ding, he explained: This cannot be directly defined as a good habit or a bad habit. It's like ants moving when it rains.The ability to “squeeze out 1 dollar at every link” is a basic ability for a retail company to survive in this industry.
He also mentioned that many outstanding companies in the retail industry, such as Aldi and Sam's Club, have strict control over costs and extremely high requirements for product quality. The convenience store brand 7-Eleven has always changed with the changes in consumer demand. Pinduoduo's efficiency as a platform-based company has always been what Zhao Yiming Snacks has been emulating and learning from over the years.
For example, after Zhao Yiming Snacks learned about Sam's Club's cooperation with small factories in China, it gradually changed its cooperation methods with small factories.
"We were planning to cooperate with a factory that specializes in producing cat ears, but we found that the factory had unstable quality control issues. If it were in the past, we would have directly refused to cooperate with it. But now, we will provide it with time and financial assistance, help it find a third-party company to conduct employee training and equipment optimization, and give the small factory time to grow." Zhao Ding said.
Now, standing at the milestone of 10,000 stores and facing the ever-changing industry environment, Zhao Ding has more thoughts about the future. He still wants to do more to improve the efficiency of Zhao Yiming Snacks' organization.
As the store gradually expanded, he began to feel anxious. He was afraid that Zhao Yiming Snacks, which had grown up in a county town, would unknowingly suffer from big company disease. He was worried that problems that used to be solved in a day would be slow to respond as the organization grew larger. He was also worried that after senior executives left the front line, they would not know where to work hard.
Now, he has found some solutions to these anxieties: looking at practical problems more often, taking senior executives to the front line more often, organizing internal managers and above to go to the front line for training every quarter, etc. "Retail is actually very simple, it is to do practical things, raise problems and solve them." Zhao Ding said, "Regardless of the scale, Zhao Yiming Snacks is still in an entrepreneurial environment."
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