Soochow: Mass-market snacks shifting from "land-grab expansion" to efficiency competition; top picks BUSYMING (01768), Fujian Wanchen Food Group (300972.SZ)

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 mass-market snacks, as both Don Quijote and Kobe Bussan have gone through a process of upgrading from single-point low-price advantages to systematized capabilities. China's mass-market snack industry is also moving from early "land-grab expansion" into an efficiency competition stage, with future competition focus shifting from store count to procurement scale, warehousing and distribution efficiency, product development, and franchise management capabilities. Attention should be paid to opportunities in national expansion and efficiency improvement of China's mass-market snack leaders, with top picks BUSYMING (01768) and Fujian Wanchen Food Group (300972.SZ). Soochow's main views are as follows: Japan's 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 shifted downward, household consumption gradually shifted from brand premiums and consumption upgrading to matching price with value, and Japan's household consumption level index continued to decline after reaching a high of 108.8 in 1992. 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 part of Japan's retail system. Japan's discount retail formed two typical models: Don Quijote relies on opportunistic procurement to monetize non-standardized goods, 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 ample supply for discount channels. 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 products launched increased from 1,992 to 3,758, and rapid product iteration drove an increase in tail goods, off-season products, and periodic inventory. Don Quijote converted non-standardized supply into a competitive advantage through flexible procurement, store empowerment, and a "treasure-hunt" experience; Kobe Bussan reduced costs through own factories, global procurement, and integrated manufacturing and retailing, with the number of business supermarket stores growing from 813 to 1,122 in FY2018-FY2025, the PB product share rising from 30.0% to 34.2%, and sales growing from JPY 267.2 billion to JPY 551.7 billion. Both models ultimately moved from supply-source dividends to competition in supply chain and organizational efficiency. China's mass-market snacks have a demand foundation similar to Japan's discount retail development but rely on a mature manufacturing system to form a differentiated path. On the demand side, consumers are more focused on value for money; on the supply side, China has the world's 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, and industry inventory pressure pushed manufacturers to actively expand mass-market channels. Mass-market snacks compress traditional distribution 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, and estimates show that China's mass-market snacks are still in the national penetration stage. Japan's experience shows that the development of discount retail comes not only from changes in the consumption environment but also relies on channel structure evolution and large-scale replication. Since 2017, China's mass-market snacks have gone through three stages: regional validation, national expansion, and industry consolidation, and industry concentration has risen rapidly since 2024. As of the end of 2025, major mass-market snack brands had about 44,600 stores, of which BUSYMING and Fujian Wanchen Food Group reached 21,900 and 18,300 stores respectively in 2025, with the industry CR2 at about 75.5% based on GMV. Based on the resident population of each province and store density in mature markets, 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 leaders continue to expand, the national 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 below expectations, intensified industry competition, cross-regional expansion and franchise management below expectations, food safety and supply chain management risks.