The 20 billion market “scratched out” by young people has no future?

In recent years, relatively affordable products such as near-expiry foods and cosmetic samples have gradually become popular among young people. Now, the market for leftover snacks has also begun to heat up. Not only can we see a large number of users sharing topics on online platforms, but on e-commerce platforms, "leftovers" have even become a marketing concept for some businesses.

Grandpa and grandma like to rush to the supermarket to buy goods before closing time and pick up discounted goods. In recent years, young people are also keen on buying "expiring food", "cosmetic samples" and "leftover snacks" at discounted prices.

Saving money is for everyone.

Since 2022, the topic of leftover snacks has been heating up on social media such as Xiaohongshu and Douyin. Nut crumbs, meat jerky fragments, biscuit crumbs, etc. in large-sized packaging and low unit prices are highly praised by young people. "Eat as much as you want with one pound", "Snacks are free", "Selling at 10% off the regular price", all kinds of gimmicks have not only promoted the spread of this emerging category among young people, but also converted into actual sales on e-commerce platforms - bulk pork jerky and beef jerky, a large plastic bag full of them, with a unit price as low as 10 yuan per pound, and group sales of more than 100,000 pieces are common.

Leftover snacks popular among young people

Strictly speaking, scraps refer to a reasonable amount of remaining waste, broken materials and offal that have not been completely consumed by the company in the production process and can no longer be used for product processing. For example, beef offal, mutton offal, and tendons in the catering industry can actually be defined as scraps. In the field of snacks, chopped walnut kernels, bread edges, and pork jerky fragments are also included in this category. According to estimates by the research organization "TouBao Research Institute", from 2020 to 2022, the market size of scrap snacks has increased from 18.13 billion yuan to 22.32 billion yuan.

The chart comes from: TouBao Research Institute

In terms of appearance, leftover snacks are generally not as refined as regular snacks, and are often "missing some parts". However, because they are no different from regular foods in terms of materials and craftsmanship, they taste the same. And because it is "waste recycling", companies often price it much lower than regular snacks. For example, at present, in the official flagship store of Glico, the price of 400 grams of Baichun Matcha Mousse Biscuits is 60 yuan. The official bulk package is sold at only 35.1 yuan for 400 grams in the authorized dealer channel, which is almost half the price.

The popularity of near-expiry foods has not yet subsided, and young people have "carved out" a multi-billion-dollar market for leftover snacks. However, although leftover snacks are cost-effective, the market size cannot escape the fate of shrinking. On the one hand, the reason is that the growth rate of domestic food production scale has stabilized, and on the other hand, food processing technology is constantly developing. After all, for companies, improving quality control and continuously reducing the generation of leftovers are the ways to maximize economic benefits. So objectively speaking, leftover snacks are a naturally "restricted" market, and it is difficult to find sustainable growth potential.

"Scraps snacks are only a very small market segment. Everyone is trying to find growth points, but like near-expiry foods, their essential attributes dictate that it is impossible for them to become a large industry." Jeffrey, the official distributor of scraps for a Japanese snack giant, explained to reporters that a brand's scrap sales growth rate is generally difficult to keep pace with its overall market growth rate, otherwise it means that the brand's control over everything from raw material procurement to production process is very poor.

Although the market ceiling is limited, it is also a fact that the sales scale of leftover snacks is currently on the rise. Analyzing the reasons, first of all, consumers' pursuit of leftover snacks has stimulated food companies to improve the efficiency of using leftovers and strengthened their circulation in the retail market. For example, CCTV's "Zhengdian Finance" column previously reported on a pork jerky processing company in Jingjiang, Jiangxi. The person in charge mentioned that the company's annual output of pork jerky is about 4,000 tons. The attached slices, that is, the leftovers, generally account for between 10% and 15%. In recent years, part of the company's profit growth has come from the sale of leftovers. Another peer claimed that the company's annual sales of 20 million yuan accounted for nearly 30% of the sales of leftovers, and they were in short supply.

Secondly, the hot and in-demand scrap snack market has also led to some non-real scrap snack merchants using the scrap marketing concept to infiltrate the market, injecting a certain amount of false prosperity into the industry. It also puts consumers on the test of distinguishing between "real and fake scraps".

After being popular for more than a year, the market seems to need to examine this category more calmly and rationally.

1. Who is creating the 20 billion “secret gold mine”?

In the food production and processing industry, no matter how good the process is, scraps will inevitably be produced. The only difference is the quantity.

Jeffrey gave an example, saying that Japanese companies' food processing technology is already among the best in the world, so the output of scraps is relatively limited. According to data, Jeffrey's cooperative brands have annual sales of several billion yuan in China, but his online store's annual sales are only less than one million yuan. "I sell all the scraps produced by the brand's factory in Shanghai, China, and they are sold out every year. So my sales volume is almost the total output of the brand's scraps in the Chinese market."

Through simple calculations, it can be found that the ratio of the brand's scrap production to the regular production is close to one ten-thousandth. "That is to say, on average, only one gram of scraps may appear for every several kilograms of goods produced." Jeffrey also added that many food scraps can be recycled, and if they are broken, they can be "re-melted" and do not need to be sold as scraps. This is also the reason why the production capacity of scraps is limited. Moreover, controlling the generation of scraps is also a means to protect the brand image and product grade. "A brand with a large number of scraps and bulk packages circulating in the market will definitely not be very high-end."

When e-commerce was not well developed, there were limited channels for leftovers to enter the retail market, and they could only be "consumed locally" - in the past, many local dairy companies would sell expired and surplus milk to nearby residents in limited quantities and at limited times. A bakery employee also told reporters that he would buy some bread scraps before leaving get off work every day.

Now, with the help of e-commerce channels, leftovers can enter a wider national market, creating greater economic benefits, and brands are more willing to do this part of the business themselves. For example, Taoli Bread and Yurun Food now have officially produced and packaged leftovers such as "bread edges" and "meat scraps" on sale, and from the data of e-commerce channels, the sales volume is not inferior to the formal wear. At the same time, the distributors of the above brands told reporters that the entire process from production to packaging is completed by the official factory, and they are only responsible for sales, so the products are guaranteed in terms of food safety.

Some official "leftover" products from some brands

Officially produced leftover snacks, similar to the "special items" in the brand product matrix, will also be included in the overall operation, but generally will not be sold together with the official flagship store. Take Taoli Bread as an example. Its Tmall official flagship store does not have the "bread leftovers" category. Yurun's official flagship store also only sells one "leftover meat" food.

Leftovers are mainly shipped by distributors. "This is mainly from the perspective of brand image, because leftovers will lower the brand's grade." Jeffrey explained that even the snacks he sells in bulk are not available in the brand's official store. In addition, the industry also believes that low-priced leftovers, sold through the same channel, may cause certain internal competition for formal wear and easily break the brand's price system. The two are based on different channels and are sold to differentiated groups, which can not only maintain the price system but also maximize profits.

"The official side-products themselves are made out of the brand's need to control the market. Official side-products generally use product information and packaging design provided by the official. This can distinguish them from unofficial side-products that may be illegally circulated." Jeffrey pointed out that these brand initiatives are also intended to tell the market - this is what official side-products look like, and consumers should be cautious in their choices.

It is worth mentioning that compared with the above brands, Oreo handles scraps differently. According to dealers, the scraps produced by the Oreo factory, such as "cookie crumbs" and "cookie powder", are sold directly to demand industries such as milk tea and cakes as ingredients, and the main business is for corporate customers. For example, McDonald's single product McFlurry consumes a huge amount of Oreo cookie crumbs every year. Therefore, the scraps that actually enter the retail market are only a small part.

2. When “scraps” become a marketing concept

Leftover snacks are sold cheaply, but the cost is not low. They are the same as regular products in terms of materials and craftsmanship. However, unlike the fully automatic production of regular products, leftovers still require manual intervention for secondary screening. "The only thing that is cheaper is packaging. Compared with regular boxes, leftover snacks are generally packaged. Brands will definitely make less profit from selling leftovers, but as a distributor, our gross profit margin is similar to that of regular products sold in shopping malls because the wholesale price is correspondingly lower." Jeffrey also added that the price changes of the leftover snacks he sells are in line with those of brand regular products, and will also be subject to official control.

But not all leftover snacks are cheaper than regular ones. The "bread edges" officially produced by Taoli Bread are priced at 7.8 yuan per pound in the distributor channel, which has no obvious advantage compared to the general price of 8-9 yuan per pound of regular ones. A store clerk explained that the product positioning of bread edges is not entirely leftovers, but it is a "DIY" ingredient that many consumers like, such as being used for baking, so there is no need to "lower the price".

Pricing is controlled, gross profit margin is low, production is limited and the overall situation is downward. Selling leftover snacks is not a good business no matter how you look at it, but it seems that more and more businesses are involved, because many so-called leftover snack businesses are actually not worthy of the name - they are under the guise of leftovers, but what they sell are not real leftovers.

For example, many large-sized packages of meat and fruit jerky are in regular shapes and are not leftovers. Some are more expensive than regular products. Once labeled as “leftovers”, consumers will not only gain considerable traffic, but will also often blindly trust the product because of the word “leftovers” or make impulsive decisions, thus ignoring the precise consideration of quality and price, and eventually “falling into traps”.

The price of Oreo cookie crumbs from unofficial channels is 0.049 yuan per gram, which is higher than the official price of 0.047 yuan per gram.

In addition, Zhang Yichun, CEO of iMedia Consulting Group, once emphasized that there are two issues that need special attention for the leftover food currently sold on the market. One is the qualification of the processing company, and the other is the production cycle and storage cycle. Even if the raw materials come from brand factories, if the channel dealers who do secondary processing in the later stage do not have perfect disinfection and packaging capabilities, food safety problems are likely to occur.

Complaints on some irregular scraps on social media

In addition to commodities, the resurgence of leftover snacks also reflects the structural changes in the consumption psychology of young people. On the one hand, consumption has been upgraded, and they are willing to pay for the emotions and appearance premiums attached to commodities. On the other hand, consumption has been stratified, and they are addicted to Taobao, Pinduoduo and other sinking e-commerce platforms, and they can't put down expiring foods, cosmetics samples, and leftover snacks, enjoying the so-called process of getting the best deal.

However, these categories are ultimately just "vassals" of the mainstream and can hardly support an independent market. After the excitement, they will inevitably fall into silence.

Author: Shen Songnan; Editor: Si Wen

WeChat official account: E-Commerce Online (ID: dianshangmj), see sharpness and insights, and focus on innovative media on the Internet and new business.