2020 may mark a new era for the beverage market. Our company has already taken on three beverage projects, and even more beverage brands have come to us for consultation. Half of these beverage entrepreneurs have no prior experience in the industry, chasing whatever is hot. I think this is dangerous, so here are some reminders.

1. The beverage market is enormous, possibly one of the few trillion-yuan markets in China. Not only is the market capacity huge, but there is also no oligopoly, and it is not subject to as much policy regulation as baijiu or cigarettes.

Brands like Nongfu, Coca-Cola, Pepsi, Uni-President, Master Kong, Wahaha, Six Walnuts, Wanglaoji, and Red Bull all have sales exceeding ten billion yuan. In this huge market, even a little effort can yield a few hundred million in scale. So first, I want to say that beverages are a good industry.

2. It looks beautiful, but every industry has barriers; otherwise, this industry would have been fragmented long ago. For example, most industries can start online, avoiding the pressure of physical stores and the need to develop offline channels. But beverages are special: due to the low price-to-weight ratio (e.g., Rolex has a high price-to-weight ratio, so mountainous Switzerland makes such products), they are unsuitable for long-distance and individual shipping. Beverages are also one of the least preferred items for courier companies, making online sales difficult.

You may notice that some beverage brands charge higher prices online than in convenience stores, precisely because of high shipping costs. But building offline channels is also difficult, not only due to familiarity but also high entry costs.

For example, a convenience store chain in South China charges 50 yuan per month per store for a single barcode. Meiyijia, the largest convenience store brand in Guangdong, has 20,000 stores. If you only distribute through Meiyijia, the entry fee alone would be about 1 million yuan per month, regardless of whether you can sell through. And that's just for one barcode.

Online display space is unlimited, but convenience store shelf space is very limited. I see that the 7-Eleven near my office has only three upright refrigerators; if one beverage goes in, another must come out. So even if you pay to get on the shelf, if you can't sell, it won't last. Sometimes you can't even get on the shelf even with money—this is the distributor barrier mentioned in Michael Porter's "Competitive Strategy" as an entry barrier.

3. Many entrepreneurs come to us saying they have a beverage formula and decide to start a business with it. I must say, this idea is very dangerous. Having only one flavor formula to start a beverage business has a very low success rate. Even a company as hot as Genki Forest had many flavors and formulas that failed in the early stages. The popularity of beverage flavors requires both R&D capability and luck.

Uni-President's Assam Milk Tea, launched in 2009, is considered its super single product of the past decade. But after 2009, the only notable beverage products from Uni-President were Rock Sugar Pear and Xiao Ming Tong Xue. Uni-President's flavor R&D is not to be underestimated, yet it cannot guarantee continuous super products. So for a new startup to create a super beverage product, it must prepare a large number of flavors to test in the market continuously. Expecting one flavor to become an instant hit is unrealistic.

4. The battlefield for beverages is offline, and offline shelf selling is very different from online traffic conversion. If you are familiar with e-commerce, you need to catch up on offline lessons; they are different sales logics.

Take packaging, for example. Online, you can display packaging from various angles with backgrounds and models. But on an offline shelf, you can only passively show one side to customers, with limited space.

5. For early small-batch production, you are unlikely to find a large factory to help you. Small contract manufacturers often have poor production lines and quality control. You need to pay special attention to quality issues; there are many pitfalls.

6. In early sales, offline channel distribution is more important than advertising promotion. Because even if you advertise or do content marketing like Xiaohongshu, customers can't buy if the product isn't available. So first, distribute through channels and observe natural sell-through and repurchase rates. If sell-through is fast, focus on penetrating one type of channel thoroughly; don't be greedy for more.

For example, if you start with first-tier cities, penetrate them thoroughly—convenience stores, supermarkets, universities, restaurants. Don't just because Beijing seems good, immediately expand to Hebei and Henan; that may waste many resources.

7. The transportation radius for beverages is not large, generally around 200 kilometers. For room-temperature beverages, consider shelf life issues. Especially with carbohydrates and no preservatives, it's actually difficult, depending on filling technology and production environment. So most room-temperature beverages use flavorings rather than real fruit juice, not because brands don't want to, but because preservation is a big problem.

If you go for cold-chain beverages, cold-chain transportation and shelf life need more consideration; if they don't sell, there will be a lot of waste.

8. Packaging design must consider not only marketing aspects like easy recognition and unique bottle shapes, but also practical transportation and storage issues. For example, shelf height is usually limited, and convenience stores have width limits for packaging. For carbonated beverages, pressure must be considered; many packaging shapes are unsuitable for carbonated drinks.

Some brands design a unique tall, narrow package, only to find it doesn't fit in convenience stores. This is a real problem.

9. Seeing a hot beverage and directly copying its packaging and flavor has no future. This immediately shows your ignorance of the industry and your lack of capability.

In summary, an industry that looks simple actually has many big pitfalls you don't know about. If you are a new entrant, it's better to maintain some awe.

Source: Xiao Ma Song (ID: xiaomasong999)

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