Soochow: Competition focus in China's value snack retail industry shifts; watch leading players' nationwide expansion and efficiency improvement opportunities.

Soochow released a research report stating that Japan's discount retail development experience provides an important reference for understanding the growth path of China's value snack retail industry. Both Don Quijote and Kobe Bussan have undergone a process of upgrading from single-point low-price advantages to systematized capabilities. China's value snack retail industry is also moving from the early stage of "staking out territory" into an efficiency competition phase. Future competition focus will shift from store count to procurement scale, warehousing and distribution efficiency, product development, and franchise management capabilities. Attention should be paid to leading Chinese value snack retailers' nationwide expansion and efficiency improvement opportunities. Soochow's main views are as follows: Japanese experience shows that under a low-growth environment, consumer rationalization drives the rise of discount retail, with value-for-money demand shifting from a choice to a long-term consumption trend In the early 1990s, after Japan's bubble economy burst, average growth from 1991-2000 was only 1.4%. As the economic growth center of gravity shifted downward, household consumption gradually shifted from brand premiums and consumption upgrading to matching price with value. Japan's household consumption level index reached a high of 108.8 in 1992 and then continued to decline. Against the backdrop of slowing consumption growth, discount retail developed rapidly on the strength of low prices, high efficiency, and abundant product supply, becoming an important component of Japan's retail system. Japan's discount retail formed two typical models Don Quijote relies on opportunistic procurement to monetize non-standardized products, while Kobe Bussan achieves sustained low prices through supply chain reconstruction. During the development of Japan's discount formats, product iteration on the supply side accelerated, providing discount channels with ample supply. From FY1983 to FY2000, the number of convenience stores in Japan grew from 6,308 to 38,274; from 1993 to 1997, the number of new food product launches increased from 1,992 to 3,758. Rapid product iteration drove an increase in tail goods, off-season products, and periodic inventory. Don Quijote converted non-standardized supply sources into competitive advantages through flexible procurement, store empowerment, and a "treasure-hunt" experience; Kobe Bussan reduced costs through own factories, global procurement, and integrated manufacturing and retailing. From FY2018 to FY2025, the number of Business Supermarket stores grew from 813 to 1,122, the PB product share rose from 30.0% to 34.2%, and sales increased from JPY 267.2 billion to JPY 551.7 billion. Both models ultimately moved from supply source dividends to competition in supply chains and organizational efficiency. China's value snack retail has a demand foundation similar to Japan's discount retail development, but relies on a mature manufacturing system to form a differentiated path On the demand side, consumers are paying more attention to value for money; on the supply side, China has a globally leading food manufacturing system, with a large number of white-label, OEM, and brand manufacturers providing stable low-price supply. During the pandemic, the average inventory-to-sales ratio of representative snack companies such as Yanker Shop Food, Jinzai Food Group, and YouYou Foods rose from 18.3% in 2019 to 23.2% in 2020, and remained above 20% in 2022-2023. Industry inventory pressure pushed manufacturers to actively expand value snack channels. Value snack retail compresses traditional circulation links through direct procurement from manufacturers, large-scale procurement, customized products, and central warehouse distribution. Japan's discount retail development path validates the long-term space for low-price formats; estimates show that China's value snack retail is still in the nationwide penetration stage Japanese experience shows that the development of discount retail not only comes from changes in the consumption environment, but also relies more on the evolution of channel structure and large-scale replication. Since 2017, China's value snack retail has gone through three stages: regional validation, nationwide expansion, and industry consolidation. Since 2024, industry concentration has risen rapidly. As of the end of 2025, major value snack brands had about 44,600 stores, of which BUSYMING and Fujian Wanchen Food Group had 21,900 and 18,300 stores respectively in 2025. The industry CR2 calculated by GMV is about 75.5%. Based on the permanent resident population of each province and store density in mature markets, and combined with regional adjustments for population density, regional GDP, per capita GDP, and per capita food, tobacco, and alcohol consumption expenditure, the medium- to long-term store space is about 85,000-112,000 stores. As the two leading players continue to expand, the nationwide store count still has considerable room for improvement; further combined with industry size and single-store model estimates, the long-term theoretical store capacity is about 103,000-106,000 stores. Risk warnings: Consumer demand and store efficiency falling short of expectations, intensifying industry competition, cross-regional expansion and franchise management falling short of expectations, food safety and supply chain management risks.