This is an English adaptation of a FoodBud historical article originally published on July 16, 2022.
Black Ant Capital reported on a 2021-2022 field research project into China's county-level consumer market, including visits to dozens of county towns and a quantitative survey of about 1,600 consumers across nearly 500 county-level cities and counties. The discussion drew on operators and investors with county-market experience: Wang Yongping, chair of the Commercial Real Estate Committee of the All-China Real Estate Chamber of Commerce; Tian Wei, operations lead at Yuanji Yun Jiao, a dumpling and wonton chain with 2,000+ stores across China's tier-1 to tier-5 markets; Zhang Zhuoyu, CFO of sauerkraut-fish chain Yu Ni Zai Yi Qi, with 1,500+ stores in 360+ cities; Liu Yang, co-founder of claypot-rice chain Xiang Ta Ta, with 700+ stores; and Yang Cheng, partner at Black Ant Capital.
County-level markets are not simply a vague “lower-tier market.” Black Ant frames them as China's mid-mass consumer base: county-level cities, counties, and autonomous counties. Citing State Council Development Research Center think-tank data, the article says China's county towns generated about RMB5.1 trillion in retail sales of consumer goods in 2019, or 12.5% of the national total; broader county-level areas generated about RMB18.4 trillion, or 45.1%. Per-capita consumer spending by county-town residents was about two-thirds that of prefecture-level city residents, leaving room for growth.
Yu Ni Zai Yi Qi's county-market performance changed management's assumptions. According to CFO Zhang Zhuoyu, the brand had more than 1,500 stores at the time, with 49% in tier-3-and-below markets and 40% in tier-4-and-below markets. More than 300 stores had entered China's top 100 counties and township markets. Before 2021, stores in tier-3-and-below markets accounted for less than 30%.
The brand was born in Beijing and had historically followed shopping-mall expansion, with stores in most Wanda Plazas and commonly on B1 fast-food floors. Management initially doubted whether an urban brand with a roughly RMB30-plus ticket would fit county markets. A mid-2021 data review showed otherwise: county-market stores were outperforming tier-2, tier-3, and tier-4 cities in both opening speed and revenue.
Zhang said county-market demand was also more geographically expansive. A single new store in a northwestern county could serve the whole county, its townships, and even neighboring cities, unlike first-tier markets where expansion depends more on brand density and traffic.
The occasion changed the economics. In cities, Yu Ni Zai Yi Qi is closer to fast food; in county towns, it behaves more like a full meal occasion, competing with grilled fish at around RMB100 per customer. County-town customers often drive to the store and eat with family. As a result, county-store average ticket was nearly 10% higher than in first-tier cities. Non-spicy tomato fish also sold better in county stores because older adults and children were more often part of the dining party.
Despite a RMB3-4 menu-price gap between first-tier city stores and county stores, Zhang said store design, ingredients, and marketing materials stayed consistent. In some months of 2022, nearly half of Yu Ni Zai Yi Qi's new stores opened in lower-tier markets, which the company defined as at least tier-5-and-below, including county towns.
Zhang attributed county-store performance mainly to cost structure. Ingredient gross-margin structure was similar across first-tier and county markets because the brand used national unified pricing for franchisees, with the main difference being transport cost. First-tier city menu prices were RMB3-4 higher, but county stores relied more on dine-in and had lower discounting than urban delivery-heavy stores, so franchisee net receipts were not very different.
On expenses, county stores had much lower rent-to-sales ratios and lower labor-cost ratios. The standardized supply model also reduced headcount requirements. Zhang said county-store EBITA compared favorably with city stores.
Wang Yongping argued that county commercial formats remained relatively traditional, with department stores, supermarkets, and small-commodity markets still common. Modern shopping centers were insufficiently distributed and not present in every county town, which limited the consumer experience.
He suggested county consumption upgrades could begin with chain shopping centers that attract recognized brands, especially in high-need categories such as maternity and baby products, children's toys, elderly health products, and foodservice. At the time, few national commercial real estate developers had reached county-town scale; Xincheng Wuyue was cited as the only chain shopping-center operator with meaningful scale, while most other investors were local companies. Wang saw a workable path in combining delegated management by known shopping-center operators with local developers.
He also noted that most known brands in county commerce appeared as franchise stores. In his view, consumer-sector funds supporting brands' lower-tier expansion could strengthen confidence, especially if capable brands were encouraged to develop directly operated county stores to improve product and service quality.
For Xiang Ta Ta, co-founder Liu Yang said expansion depended heavily on whether the company's infrastructure could reach the location. The brand had entered Guizhou and Guangxi but later withdrew after calculating that some remote county stores had poor input-output ratios and could even lose money. The core question was whether the supply chain could truly reach the county, or more precisely whether logistics costs could be covered.
Distance also increased management cost. Franchise chains need QSC control, meaning quality, service, and cleanliness, as well as store SOPs. Remote county locations made it harder for headquarters teams to inspect, communicate, and train in real time, creating quality-risk pressure.
Yuanji Yun Jiao's Tian Wei highlighted population density. First-tier and new first-tier cities have more complete transport and living infrastructure, while many county-market plans were still expected to improve over the following years. County populations are often concentrated in specific areas, so early store counts may be limited. In first-tier cities, a standalone fresh-food retail model can work; in county markets, one store may need to serve more scenarios, including more foodservice demand. Supply-chain lead times are also typically faster in first-tier and new first-tier cities than in county markets.
Zhang Zhuoyu added that regional imbalance may be the biggest challenge. County-to-county differences can be enormous: a county in Jiangsu or Zhejiang can differ from a western county as much as Shanghai differs from a township. Yu Ni Zai Yi Qi was trying to incorporate more data dimensions into market analysis and then set B2B and consumer expansion strategies by market condition. China has more than 2,800 county towns under this broad definition, so county expansion requires long-term execution.
Xiang Ta Ta entered county markets partly because cold-chain delivery made dense regional expansion more practical than early nationwide rollout. In its second year of operation, the company set a plan to move into Hunan's county markets. At the time of the article, about 40% of its 700+ stores were in county-level markets. Those nearly 300 stores were performing well, and in recent years county-store profitability had even exceeded city stores, helped by lower rent and labor, less intense competition, and standardized quality.
Liu said county markets also had strong entrepreneurship demand. Some franchisees opened one or two stores in their home county and then wanted to open in neighboring counties. Xiang Ta Ta provided nearly 1,000 direct jobs, plus indirect jobs in warehousing and distribution. Its next plan was to invest in a central factory industrial park in Changsha County, expected to absorb 500 jobs.
Liu linked Xiang Ta Ta's ability to do daily county-level delivery to investment from Juewei. Juewei's 10,000+ store network gave it a strong supply-chain system, helping Xiang Ta Ta solve county-market supply issues in Hunan. Over more than a year from 2016 to 2017, Xiang Ta Ta completed its Hunan county-market plan.
Yu Ni Zai Yi Qi saw a different consumer benefit. Zhang recalled feedback from a consumer in northwest China: local families could finally eat fish near home that they viewed as healthy, safe, and affordable. In some inland and deeper lower-tier markets in central and northwest China, basa fish had previously not been available. Zhang said local residents often reported that before the brand arrived, they rarely fed children fish because there was no convenient, broad-appeal, nutritious, affordable, made-to-order fish dish.
The brand used transitional supply solutions, including local mature suppliers and repeated adjustments to raw-material supply. The sequence was to get raw materials into the local market first, let consumers experience the product, and then raise delivery frequency and standards as brand awareness grew. Its farthest store had reached Kashgar, and some counties Zhang had not previously heard of already had five or six stores. Once store density in a region reached a certain level, the company could quickly build its own warehousing and logistics.
Black Ant partner Yang Cheng argued that county economies had often relied more on secondary industry than tertiary services. In the Yangtze River Delta, for example, Shanghai focused on modern services such as finance, business services, logistics, foreign trade, and information technology, while neighboring Jiangsu and Zhejiang handled more processing, production, assembly, and some R&D and design. In Gaoyou, a county-level city administered by Yangzhou and visited during the research, the 2019 industrial structure was 10.5% primary, 49.6% secondary, and 39.9% tertiary, showing a secondary-industry-led structure.
Yang said first-tier cities had historically held advantages in geography, transport, policy support, openness, capital, and talent. Less-developed county markets, especially inland, were less open and faced more limits on service-sector development, making it difficult to copy developed-region models directly.
But conditions were changing. County areas were developing both production-related services tied to secondary industry and livelihood services. Examples cited included Tonglu, known for express delivery, and Xuyi in Jiangsu and Qianjiang in Hubei, which developed crayfish industries through links across primary, secondary, and tertiary sectors. Digital infrastructure, short-video platforms, group-buying models, improved communication chains, and logistics upgrades from three- or four-day delivery to next-day delivery were making it easier for modern service companies to reach county markets.
Yang's main conclusion was that the bottleneck is less about demand and more about supply. Consumption follows people, and people follow income. The article cited the constraint that county consumption lacks industrial support and county residents' incomes are hard to raise.
Caoxian in Shandong was presented as a case of county-economic reinvention. Through livestream e-commerce, Caoxian shifted from being China's largest processing base for performance costumes into a national center for hanfu design, production, and sales. It moved from OEM, labeling, wholesale, and export toward self-owned brands through interest-based e-commerce. The hanfu sector was estimated to employ 100,000 people, and the county also became an online-famous town that boosted culture and tourism.
From a consumer-investment perspective, Yang argued that the key is supply-side innovation that builds county-consumption infrastructure. Once infrastructure improves, supply-side efficiency rises further. Value-chain restructuring can then improve efficiency, reduce costs, and increase county-consumption value.
At the time, supply-efficiency brands that worked in county markets tended to share several traits: simple operating models, modest traffic requirements, standardized product taste, limited regional taste dependence, and a high proportion of headquarters-controlled supply. Representative examples cited were Zhengxin, Juewei, and Wallace.
The county market is large and still releasing potential, but operators need a more precise view than “lower-tier China.” Black Ant's interviews and survey suggested county-level young and middle-aged consumers generally had stable homes and jobs, some money and time, and a positive outlook. Their consumption structure remained relatively necessity-driven, with future upgrades still concentrated in improved essentials such as home appliances and food. Experience-led consumption had some foundation, but willingness to pay was concentrated mainly among county-town middle-class-and-above consumers.
For foodservice chains, the practical takeaway is that county expansion can change the use case, cost structure, and social role of a brand. A fast-casual urban meal may become a family-dining occasion; standardized supply can create margin advantages where rent and labor are lower; and the brand may also support local entrepreneurship and employment. The tradeoff is operational: logistics reach, training coverage, QSC control, commercial real estate quality, and extreme regional variation become central to execution.
Note: investment references, expansion plans, employment expectations, market figures, and 2022 operating figures are historical and reflect the article's original July 16, 2022 context.