In 2016, for most marketers in the FMCG industry, perhaps before they had time to adapt to the numerous changes, the year was already drawing to a close amidst repeated panic and chaos! This year, with the decline of traditional FMCG categories such as instant noodles, ham sausages, candies and biscuits, carbonated drinks, regular beer, and instant beverages, sales performance and gross profits both fell, marketing felt ineffective, budgets were cut, structures were adjusted, and layoffs and downsizing occurred. Wave after wave of turmoil and unease swept through the entire industry. Hesitant, doubtful, and anxious, FMCG professionals began to worry whether they could hold their ground! Where should we go from here, and where should we hold our ground? Changes in Consumers This year, we have deeply felt that regardless of wealth or social class, we all pay more attention to physical health, family well-being, food safety, and mental pleasure! The food we buy must be healthy, fresh, natural, convenient to purchase, and backed by reliable service. It is precisely this shift in our needs that has driven changes across the entire food industry! According to the McKinsey report "The Middle Class Reshapes China's Consumer Market," by 2022, more than 75% of urban Chinese households will have an annual income between 60,000 and 229,000 RMB, which, in terms of purchasing power, is equivalent to the average income in Italy and Brazil. This group spends less than 50% of their income on necessities, and their consumption behavior and habits differ from other classes. The middle class as defined above accounted for only 4% of urban Chinese households in 2000, but by 2012, this figure had grown to 68%. Over the next decade, three major drivers will boost the income growth of China's middle-class families. According to Maslow's hierarchy of needs, once a person has fully satisfied their material and safety needs, their needs shift toward social belonging, esteem, and self-actualization. This explains why we increasingly value "face" and spiritual needs, leading to sustained rapid growth in high-end liquor, women's cosmetics, men's skincare, entertainment consumption, and overseas travel. If in the past thirty years of reform and opening-up, Chinese consumers moved from subsistence to a moderately prosperous life, then in the next thirty years, they will gradually move toward a healthy and quality life. The post-80s and post-90s middle class are rapidly becoming the main consumer force in China. Their consumption behavior is more savvy and mature; they are more willing to pay a premium for product quality, and spending on non-essential goods will account for an increasing share. Brands' Strategic Changes In 2016, with the acceleration of consumption upgrades and structural adjustments in the FMCG market, forward-looking brands began to develop new products and expand new businesses. On December 8, 2016, Nongfu Spring held a press conference for its 17.5° oranges at its factory in Xinfeng County, Ganzhou. The head of Nongfu Spring, Zhong Shanshan, vigorously promoted the company's 17.5° navel oranges and 17.5° NFC juice. On December 5, 2016, as Fujian Dali Foods Group successfully listed on the Hong Kong stock exchange, Dali launched its first short-shelf-life product—"Guozhen" short-shelf-life bread, perfectly combining taste and nutrition to meet people's rising quality of life. In 2016, Xiangpiaopiao, the creator of cup milk tea, upgraded its brand image to serve the new generation of consumers born in the 80s and 90s, with the slogan "A little hungry, a little tired? Have a cup of Xiangpiaopiao." On September 13, Xiangpiaopiao released its new generation of products in Shanghai, launching the industry's first "pure milk and pure tea" drink, transitioning the brand toward "healthier" and "fresher," and continuing to drive the upgrade of the cup milk tea industry. In 2016, with the market for traditional beer becoming saturated and sales declining, more and more breweries such as Tsingtao, Yanjing,金星, and Taishan joined the production and promotion of raw draft beer and craft beer. In 2016, besides the continued competition among the three dairy giants—Yili, Mengniu, and Bright—in the ambient and low-temperature yogurt market, the growing yogurt market also attracted companies like Wei Chuan, New Hope, Danone, General Mills, and Meiji to join the competition. There are many more related cases. Consumers' psychology determines their demand, which in turn influences category upgrades and changes retail formats and channel structures. The pursuit of healthier, more natural, convenient, and shorter-shelf-life consumer goods is a distinct feature of the next era's middle-class consumption dividend. Evolution of Retailers In 2016, the e-commerce Double 11 continued to be a huge success! With the continuous development and improvement of mobile e-commerce, express logistics, and internet payment infrastructure, e-commerce has brought faster, more convenient, and cheaper consumption. Taobao, JD.com, and other e-commerce platforms have been continuously penetrating offline FMCG sales. According to Kantar Retail's "2016 China FMCG E-commerce Power Study," JD.com, relying on its complete and powerful self-operated logistics system, contributed 62% of the online beer sales growth, making it the largest distribution platform in this category. International beer brands that are rarely seen offline (such as Valentin, Eichbaum, and Oettinger) contributed the majority of sales to JD.com's beer category. Driven by the strong performance of these brands, JD.com's international beer brand sales accounted for 70% of its total beer sales. In first- and second-tier cities and areas with relatively complete e-commerce infrastructure, mom-and-pop stores, grocery stores, and small shops that sell standard products are increasingly feeling the squeeze, making upgrades and consolidation inevitable! As a result, we can clearly see two phenomena in offline retail formats: First, capital integration and joint operations among offline convenience stores and specialty stores are accelerating. For example, branded chain convenience stores like 7-Eleven, Lawson, and FamilyMart, as well as maternity and baby stores like Aibaby Island and Mishi, are accelerating store openings to meet the needs of middle-class consumers in offline scenarios, expanding into third- and fourth-tier cities across China. Second, to cater to consumers' demand for fresher and healthier products, and to avoid direct price wars with online channels, non-standard products that are channel-customized and experience-oriented are receiving increasing attention from offline retail formats. For example, recently, offline fresh food stores such as Hema Fresh, Fresh Legend, and Chef Fresh have attracted investors who hope that "physical fresh food stores + internet" can upgrade the service capabilities of physical retail. At the same time, a retail chain brand called "Miniso" has risen against the trend, opening over 1,100 stores in less than two years, with sales exceeding 10 billion RMB, and its fire is still spreading. When retailers develop channel-customized or non-standard products, they often lack the traffic generated by branded products, so they must build themselves into a major IP and turn their convenience stores into a brand to capture consumers' minds. Distributors' Strategic Changes In 2016, the distributor community in the FMCG industry continued to suffer and transform, with the strong surviving and the weak eliminated. On one hand, with the KA-ization of offline retail stores and e-commerce's low-price hoarding of standard products, the survival soil for traditional FMCG distributors has been diluted. On the other hand, in the FMCG B2B field, Alibaba's Retail Link relies on Cainiao Logistics, JD.com's New Channel relies on JD's self-operated logistics, and B-end e-commerce platforms such as Yantai Yishang Logistics and Shanghai Weicheng Jiepei, which offer unified warehousing and distribution, continue to penetrate the FMCG circulation and distribution field. It seems that traditional FMCG distributors who do not strive for progress will be gradually pushed into a corner by the market. Small and medium-sized distributors without resources are complaining that business is difficult, while those with resources are accelerating their transformation. However, there are mainly two strategies available: One is the cost-saving strategy. With upstream brand manufacturers tightening market expenses, downstream stores becoming KA chains and raising fees, and rising costs for personnel and warehousing, distributors are beginning to use mobile SaaS to manage orders and sales staff, better integrate warehousing and vehicles, and thereby reduce some daily expenses. The other is the investment strategy. In addition to continuing to operate some best-selling old categories, some traditional distributors are targeting the future trend of short-shelf-life products in the food industry and starting to invest in cold storage, cold-chain logistics vehicles, and cold display cabinets, so as to have more bargaining chips to represent good brands and products, and to cater to market consumer and retail development trends. At the same time, forward-looking distributors are no longer operating in traditional ways. They are starting to engage in multi-channel sales by establishing Taobao stores, O2O WeChat malls, opening specialty stores in cooperation with manufacturers, and building consumer group-buying channels, in order to cope with the increasingly diversified and omni-channel consumption scenarios of future customers. FMCG Professionals' Evolution In 2016, FMCG professionals felt more deeply that they were in an era of structural adjustment and rapid change! Consumer needs are iterating, brand categories are iterating, retailer operations are iterating, and distributor services are iterating! As practitioners, how can we avoid iterating ourselves? I think that for any job, everyone must work hard, but hard work does not necessarily yield the same rewards. In this era of industry change, perhaps we should learn to think and work smart. Better foresight leads to better encounters; staying informed is the prerequisite for becoming advanced! As fellow practitioners in the FMCG industry, let us encourage each other! We must protect our current livelihood, and fight for tomorrow's livelihood as well! -END- ★ Click the blue text below to view this month's popular articles ★ Click the blue text below to view this month's original articles FMCG industry's most professional and practical knowledge base [ Reply with the yellow number to view the corresponding keywords ] | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation |