Click to read the original text for details Dear Genki Forest, Hello, seeing this letter is like seeing me. Recently, during a casual dinner conversation, I mentioned that you have problems, which prompted several friends to ask for my specific views. What exactly are they? Where are the problems? Rather than whispering behind your back, it's better to put it on the table. So, I'm writing this letter to discuss it directly.
- I don't intend to criticize you; I genuinely hope you succeed. My original intention is to see you do well. To become the second Nongfu Spring, to defeat Coke and Pepsi, and to give us another local brand to be proud of—I'm not a nationalist, but I do dislike the arrogance and cunning of American companies. (I don't dislike French companies; they're just like that, quite interesting.) Initially, I heard that the cola giants were waging war against you at the retail level. I wish you well. When you become strong, you inevitably provoke the old forces—they shout at you, bite you, and even pee on your trouser legs. This is a normal marketing battle, a head-on confrontation. From Uni-President, Master Kong, Coca-Cola, to Pepsi—the entertainment troupes of the Taiwan Province Military Region and the U.S. Far East Military Region—they've been fighting and performing all along, and business grows bigger with each battle. This is the pain of growth; it's fine. Later, I heard that the cola giants used other tactics, demanding that supply chain partners stop cooperating with you, cutting off erythritol supply, and even blocking bottle caps. That's not a head-on confrontation anymore. You think they're being thuggish and shameless. The cola giants surely consider this forward-thinking Strategic Thinking, textbook Category Leadership. They'll write it up as a case study and share it globally, like "How we beat Genki Forest in China," and they'll be proud. Several friends have worked at American beverage companies for years, and I've also worked at P&G for many years. What is the spiritual core of American companies? They care about professional honor, about "systematic" and "professional" approaches, and they inherently believe that "aggressiveness" is part of professionalism—"killing the competitor is paramount." Their stance and approach to attacking competitors differ from ours; they move swiftly, strike like thunder, and don't shy away from using below-the-belt tactics, seamlessly switching between being extremely professional and utterly shameless, all with composure. Look at America's treatment of Russia and mainland China—it's clear this is typical WASP behavior, something ingrained. To win their dominant position, they're willing to sacrifice themselves and even more willing to sacrifice others.
There's a fable. A man finds a magic lamp, rubs it, and summons a genie. The genie says, "I want to repay you, my friend, for you have freed me. I can grant you any wish, and I'll double it—whatever you ask, I'll give your friends twice as much! Twice!" The man is initially stunned, but calms down, thinks it over, and tells the genie, "Then gouge out one of my eyes, so my friends will be completely blind—what an advantage I'll have!" I was shocked when I heard this fable. Is it really a fable? It's real! Isn't this exactly America? Americans oversimplified the Russia-Ukraine war. This war they instigated will likely accelerate America's economic recession. Look at the Fed's rate hikes and balance sheet reduction—they can't offset the impact of the war continuing. They also oversimplified the Chinese beverage war. They want to kill you, but it's not that easy. No one can kill you; external pressure only makes you stronger. You must have confidence—you'll ultimately be the one to ruin yourself; others don't have that ability.
- You might die from a lack of respect for the industry. Earlier, I heard voices in the air saying, "FMCG companies, we can use internet thinking to 'redo you all.'" If that's a suggestion, it's fine; it's always good when others offer opinions. In reality, Brother Yuanqi, you have indeed done things worth reflecting on in the consumer goods industry, like allocating a large portion of product development budget and achieving efficient product iteration. This has disrupted the rules of the beverage game, giving practitioners a chance to break free from path dependence and re-examine themselves—the organizational management methods and resource allocation designs of major enterprises have prevented anyone from playing this way or daring to play this way. You're a catfish. Very helpful. But if you look down on the industry because of this, thinking it's a "dimensional reduction strike," then you're being impetuous, and you'll suffer consequences on that "dimension." Live long and see. Watch Carrefour fall, e-commerce become a traditional channel, unmanned convenience stores go bankrupt, and new consumer brands fade like fleeting flowers, yet those consumer goods giants have dominated the market for decades. Success has its reasons. You, with internet thinking—perhaps with some information advantages and tool advantages—are not smarter than them. Take Alibaba as an example. I've studied a topic: how internet people's overconfidence arises (and why company size doesn't equal respect). The premise is that people's IQ and thinking abilities don't differ much; any industry follows a normal distribution. Fluid intelligence and crystallized intelligence have low ceilings and quickly hit their limits.
The average intelligence of men and women is the same, but men's standard deviation is larger, so relatively, women perform more stably in the workplace, while men have a slightly higher probability of being paranoid or foolish. But privately, I think female leaders are more prone to emotional instability. But confidence has no ceiling. The more information you get, the more you're praised, the higher your GMV, the more confident you become. Confidence has no ceiling; it goes high high to the sky. You see, decision-making ability peaks, but confidence keeps soaring, and this scissors gap widens, so people become inflated—after all, recognizing your own problems also requires ability, as per the Dunning-Kruger effect. The Dunning-Kruger effect is a paradox: you need a certain level of ability to realize you're not that good; those with low ability tend to think they're great. So, people with low ability overestimate themselves; those with high ability—always thinking everything is common sense—tend to overestimate others. You only understand why predecessors avoided certain paths after stepping into the pit yourself. Having worked in consulting and seen many companies, I've come to understand a truth: things you think are low-class or unreasonable must have information you don't know behind them. Don't be too confident, don't speak too early, or you'll end up slapping yourself.
- You might die from your products. [Those who rely on appearance will see love fade when beauty fades. What you rely on to rise often leads to your decline.] Genki Forest debuted with stunning sparkling water, then a bunch of new products, then continuously entered new categories, conquering territories. Having a good product, continuously having good products, and defending the market—which is most important? Defense is most important. To defend, you need a moat. However, borrowing from Japan won't help you dig a moat; innovative product development and a reserve of hundreds of new products also can't become a moat—in other words, in the FMCG field, except for the business team, nothing is a moat. Product innovation and iteration are like a window paper that can be pierced with a finger. It's like picking a winning stock and making a fortune; once everyone knows how you did it—if it's an efficient market—your method will no longer work. Enterprises from Zhejiang, Guangdong, Taiwan, the U.S., and Japan follow quickly. Are you the only one who goes abroad for research? Are you the only one boldly introducing and grafting? Sparkling water, they can make it; electrolyte water, they can make it; milk tea, they can make it; mineral water, they can make it. What else? Yogurt? High-end low-temperature yogurt? Actually, I don't understand why you entered this category. High-end, low-temperature, short-shelf-life products might be the hardest to make—ask Simple Love (Jian Ai). Its founder is a dairy industry leader, with abundant production, supply, and sales resources, and a steady, focused initial strategy. How many years of losses before turning profitable? I'd really like to see your yogurt business's P&L statement. Faced with past success, decision-makers think it's due to their wisdom and effort, but statistics and probability tell us that many people work hard, but success mainly comes from luck—a few consecutive good lucks early on. And eventually, everything reverts to the mean; there's no such thing as endless good luck. Successful people just seize the initial good luck, quickly build a reinforcing loop with positive feedback, then carefully avoid big mistakes and defend. This is an economic law and a statistical law. Respecting laws is respecting yourself. You might say you have the ability to crush the industry, and this has been collectively certified by your subordinate team, supplier team, distributor partners, and third-party service providers—it can't be wrong—and you compare yourself to Mr. Xu of the city; you're beautiful. You produce a hit product every now and then, with inherent good luck and aura. So what, can't you? No, you can't. First, you still don't understand regression to the mean and don't respect probability. Jack Ma can't have continuous good luck either. Pony Ma has a bit too much good luck, but that's due to the inherent steadiness of Chaoshan people—steadiness means a small "standard deviation" in decisions and actions, predictable behavior, no big risks, no wasted resources. Second, in all likelihood, you can't continuously produce hit products. Hit products depend not only on the product itself but also on market timing. From the day your competitors started watching you closely, you no longer have good timing, just like Messi gets injured as soon as he steps on the field—any innovation you have, your window won't exceed three months. Third, even if you have hit products, it might not be enough. There are several places where you could be ruined; products are just a trigger.
- You might die from too-fast growth. Should it be high-speed development or high-quality development? That year, I heard you planned to achieve 7 billion in 2021 out of thin air. That goal was a bit intoxicating. Friends joked it was "brain diarrhea," which I found funny but unkind. But I sincerely hoped you wouldn't achieve it, so you could grow a bit more, develop for a few more years, and build a solid foundation. Then, like XX (or XXX), you could withstand abuse when expanding nationwide later, thanks to a strong childhood. Later, I heard you actually did 7.3 billion. There's nothing to say. In my heart, I planted a tree for you, added soil, placed flowers and snacks, but it's not needed yet, so I'll keep it ready. Beside you, I also placed cigarettes and alcohol for some brothers and sisters: Alibaba Retail Link, Perfect Diary, Jiang Xiaobai, Xiao Xian Dun, Heytea Beverages, Lamian Shuo, One Cow Raised by One Person, Miao Fei... (omitted for personal safety). They're all still alive, with stable vital signs; they can't be buried just yet. Business is a complex, mutually causal system. The sales target is the golden thread of causality in that web—pull it, and the whole body moves. How you pull that thread determines the fate of the web. Brother Yuanqi, after observing the industry for years, my most painful insight is: complacent small and medium-sized enterprises mostly die on the road to rapid growth. Rapid growth means production capacity, raw materials, and organization must all scale up quickly. To digest these scales, products have to abandon their high-end and ultra-high-end pride and extend down one or two price bands, landing right in the comfort zone of traditional giants. Their experience with mass-market products is unparalleled, and that's where they'll kill you. Some don't die but are hurt, ending up like "a child prodigy in youth, but a talentless old man in old age." Look at those old brands hiding in market corners, wiping tears with their sleeves—which one didn't play rapid expansion back then? Who wasn't as passionate as you? Who can't do a five-minute stand-up with a year's worth of jokes? Have you heard of Bright's Mosilian? A business of several billion, and even exclusive Tetra Pak packaging didn't save it. If you go to Shanghai, bring tissues and talk to them. I haven't seen how you set your goals or understand the background behind such a big target; there must be hidden circumstances and difficulties we don't know about, so I won't speculate. But typically, suicidal sales targets are characterized by: a momentary impulse, then constant self-justification. At first, from the founder to the marketing head, they're inadvertently inspired by past good performance to become wolf-like. They: — Deeply believe past achievements are due to their own abilities, that their strategies are reliable, and the market is their family's domain; — Deeply believe all future development is linear, that the future, present, and past, consumer and capital markets, won't change; — Deeply believe that with bright eyes, a black crewneck and jeans, they can create a reality distortion field. The four beauties are present, and the two difficulties are met. That day, the company boss suddenly put down his chopsticks at the dinner table and said, "I don't want 30% growth; I want 300% growth continuously. Only breakthrough goals can escape the present mediocrity and solve my current predicament." At this point, Sales Head Zhang San must respond, or he'll seem to lack internet thinking and wolf spirit. His peripheral vision sweeps over his deputy Li Si, who is nodding frequently, and his eyes are already off. If he doesn't continue to play along with the boss's joke, he'll be reporting to Li Si soon. Sales Head Zhang San says, "Boss, you're absolutely right. You truly embody the internet and wolf spirit." Then everyone says, "Yes, yes, yes, it's all internet thinking and wolf spirit, first principles and second curves, underlying logic and closed loops, thermodynamics and entropy increase, wave-particle duality and so-and-so's cat." They don't quite understand, but they agree, and the target is set. Rapid expansion often becomes a Ponzi structure—not necessarily a Ponzi scheme—resources are front-loaded, super-heavy investment, borrowing tomorrow's money, betting on high-speed future development. Tomorrow, you borrow the day after tomorrow's money, requiring an ever-increasing sales base. Similar to a Ponzi scheme, if future sales don't meet expectations, the bubble bursts. The bubble must not burst, so:
- Increase efforts, keep a close eye, there's no turning back; the sales target must be met; 2) Diversify investments, claim to have found another mine elsewhere, metaverse beverages, second and third battlefields—in short, there must be room for imagination. The problem with aggressive sales targets isn't the target itself, nor the coordination of production capacity and raw materials—the real problem comes from the resulting sales organization chaos and channel loss of control. Let me share my reasoning.
- You might die from your own business team. Based on my communication experience with internet giants, what I've seen and heard, my feeling is: compared to FMCG giants, internet giants' team management level is worse by half a Changchun city—the difference between a Toyota and a hand tractor. But their internal fighting skills are extraordinary. From an FMCG perspective, internet people are terrifyingly good at office politics—just attending one of their meetings is an anecdote for us. However, the rapid business growth, huge GMV, and high salaries mask problems and exaggerate strengths—but those with experience in both worlds see clearly, and few can stay long. Even experienced FMCG companies face a life-or-death test when suddenly expanding the sales team. If it's not a matter of life and death, it's best not to do it—people matters are the hardest; the difficulty of management increases with the square of the increase in personnel size. Expansion can't be rushed; it must be classified, graded, zoned, and phased. Sales targets equate to work assignments. This inevitably triggers a series of organizational management issues: how to allocate people, how they work, how performance is evaluated, how much they're paid, and what the team culture is. More complexly, these elements are mutually causal and interconnected. High targets are wolf-like, but they can also quickly ruin your team: ◎ The boss sets a high sales target. ◎ Management starts breaking down the target, thanks to data brought by defectors from old employers, breaking it down to provinces, cities, counties, maybe even stores. ◎ They start planning team expansion—this is a critical point. ◎ First, expand the HR team, then HR gets busy, recruiting and headhunting. ◎ People from consumer goods giants don't want to come, so HR promises high salaries, benefits, stock options, company vision, mission, values, and paints a rosy picture. ◎ People from all over resign and come together, each with their own culture, ideas, and accents. ◎ They also bring some of their own brothers from previous employers. Those who can't bring their own brothers indicate poor teamwork; those who bring too many indicate the new employer's teamwork will suffer. ◎ People arrive, but how should they work? ◎ Management hastily pieces together various SOPs from beverage companies, spreads them on the table, covers with a cloth, powers up, and after a puff of smoke, what's twitching on the table is our own marketing operation system. ◎ Patchwork always has bugs. Cutting an elephant in half doesn't make two small elephants. You can learn from it, but you need to polish it. An operation system is something that needs time to develop a patina, like a bracelet; it can't be rushed. As the old Beijing saying goes: "If the wall is new, the tree small, and the painting not old, this person must be from the Imperial Household Department." Cultural integration, unification of language and tools, and formation of tacit understanding all need time to mature. But you're really in a hurry; there's a huge sales target pushing from behind, no time for磨合. ◎ But when working, these bugs are tormenting, making everyone itchy, busy scratching and picking lice, with no mind for work. ◎ Itching is unavoidable; the higher the boss, the less they understand sales—after all, they're internet people who descended from a higher dimension. ◎ Not understanding marketing is fine; you can still form factions, at least dividing into internet-thinking and traditional-backward-thinking. ◎ Gradually, people feel the work is exhausting. ◎ The proportion of sales bonuses in salaries increases—this proportion is inversely proportional to the company's market capability. You can verify this phenomenon. ◎ Later, people feel that at this rate, they'll die before getting bonuses and options—you might have vitality, but I've lost mine. ◎ So, the soft-hearted and non-wolf-like resign and return to big companies. ◎ The tough ones decide to rob you—taking advantage of expansion spending, with enough leaks, the "Imperial Household Department" can get rich first. ◎ So everyone competes to get rich, seeing who gets rich first, silently getting rich together—arriving in an Alto, leaving in an Audi; arriving in a Benben, leaving in a Benz. ◎ They can also get rich together with distributors and parallel importers. They're in harmony but not united, yet they support each other, enjoying it. ◎ The circle is small. As more people leave, word spreads, and fewer come. So they recruit year-round, with great effort. ◎ An efficient method is to recruit low-level people from big companies and promise them high-level positions. ◎ These brothers may be capable, but they lack experience. After taking office, they care most about looking like the boss of that position. So first the Peter Principle, then Parkinson's Law—I've mentioned this in "Observation," feel free to check it out. ◎ So they weaken round after round. ◎ Weak leaders like to use drastic measures when business is bad. According to Kahneman's "prospect theory," this is "when facing potential losses, people prefer risks," which is human nature—since losing either way, why not gamble and fire a shot? If it works, great; if not, change jobs. ◎ In the industry, I've never seen a company with a weak team have a future—no matter how strong the product, it can't compensate for a weak team. To summarize: 1) Large-scale recruitment of new people in a short time; 2) Unrelenting performance pressure; 3) Loose expense monitoring. If any two of these three elements have problems, any team can be destroyed. Far examples like "Vitality Meijieshi," near examples like XX (or XXX, or XXXX)—this doesn't require special insight; veterans who've experienced one or two industry cycles know it well.
- You might die from channel strategy. A thief never returns empty-handed. Excessively fast sales targets, while ruining the sales team, will also kill the channel. ◎ The boss sets a high sales target, management breaks it down to provinces, cities, and counties. ◎ At the oath-taking rally, they sign military orders and push goods to distributors. ◎ Existing terminals can't sell, so they talk about "deep distribution," developing new outlets like a tide, the more the better. ◎ Developing new outlets must be resolute; talking about "diminishing marginal contribution" is lacking wolf spirit—eventually, outlet development becomes performance art. ◎ But you have money, good freezers, and are willing to invest in expenses, which is good. The terminals look beautiful, but sales still don't move. (In the picture, the boss faces the convenience store entrance, standing in the main aisle. Customers turn right upon entering, and Genki Forest is in a blind spot; the freezer opposite Genki Forest is in the C-position.)
That day on a business trip to Qingdao, I went to a Suning convenience store near the hotel to buy something. The boss said, "Genki Forest used to sell a bit, but since they put in the freezer, it doesn't sell much anymore. Before, in the cold cabinet and freezer, Genki Forest dominated the C-position, conspicuous, with an advantage; now it's hidden in a corner, selling in a blind spot for shoppers, no one compares, selling alone—where it's placed is far more important than how it's placed or what tool is used, because it determines whether customers see you." That day, I chatted with the boss for a long time, offering various advice: being cheated by Suning franchise is unfortunate, but don't be sad; no one intends to be a liar from the start; they drift away step by step, pulled down by circumstances. Give up buying from Retail Link; don't stay with hopeless people or businesses. Don't place freezers randomly; free things aren't necessarily good. Don't be afraid of electricity costs; turn on all the lights in the store... Later, the boss quietly refunded my cigarette money via Alipay. ◎ These long-tail small stores have shiny freezers, awkward locations, and mediocre per-store output. ◎ Relying on them, distributors still can't catch up with the company's sales target. If they don't meet the target, no rebates, and they'll definitely lose money. ◎ The weather is hot, but their hearts are cold. Distributors grit their teeth, throw down their tea bowls, and hit the streets to dump goods. ◎ On the road, they see they're not alone; everyone is dumping goods. The boss regrets not leaving earlier. ◎ It's a feast of collective dumping; today you dump on me, tomorrow I dump on you, and in the end, the meat rots in everyone's pot—total volume doesn't improve, but the price system collapses. ◎ Prices are chaotic, leaving retailers confused about how to stock—if they trust you, prices are high; if not, supply is unstable. Every purchase might become a regret. ◎ The neighboring store with parallel goods has lower purchase prices and even lower selling prices. ◎ Stores compare prices daily, run promotions daily, and retail prices keep falling. ◎ The more customers buy, the lower their psychological price—it's not about the money; it's that they think you're not worth it. They must buy on discount, or they'll look stupid. So no promotion, no sales. ◎ Retailers' profits are promoted away, so they ask distributors for promotional fees. ◎ Distributors say they don't have any; retailers say, "What do you want? Lock codes or remove my shelf? Pick one?" ◎ Here's the RAP part, find your own rhythm: Distributors' gross margins are getting lower, distributors can only rely on rebates, but rebates require meeting sales targets, so they'd rather subsidize sales to hit targets, dumping goods lowers market prices, retailers don't make money and don't want to stock, goods don't sell, distributors subsidize to dump, after dumping they restock, then dump again—repeat this ten times. ◎ Finally, everyone pins hopes on the next hit product. They all hope for a new hit to forget the past and start over. But where's the promised hit? You see, others take over a decade to create such chaos, replacing founding members and several leadership teams, but you've achieved it at 5x speed. Speed is a characteristic of internet thinking.
- I hope this letter has a sobering effect. I've written a bit much, mainly because it's easy to talk when you're not in the hot seat. I suggest you read it with an open mind and a critical attitude. My original intention in writing is to clarify my thoughts, not to abruptly offer free specific advice. P&G always says, "Back to the Fundamentals." That American saying makes sense: children growing too fast are prone to osteoporosis; horses running too fast are prone to fractures; bamboo grows fast but isn't useful, while pine trees grow slowly but each one counts. Business isn't about expanding as fast as possible. To avoid losing everything in one failure, you need to leave safe room for error. According to "Scarcity," you need to build "slack" into the system. Brother Yuanqi, you might need to consider slowing down, steadying your steps, and putting more effort into building a strong team. As I said, only a good team is a moat. I sincerely hope Genki Forest isn't just a Happy Farm; new consumer brands need an excellent spokesperson, and I hope you are that. Borrowing a passage from "Classics and History": "The fate of the world and of individuals, though long, has few critical nodes. Three-quarters of life's script is written before age thirty; the rest isn't worth reading. The rise and fall of civilizations and states have irreversible nodes, and the youth with infinite possibilities is always very brief." We're all still young, and Genki Forest is still young, with infinite possibilities. Let's cherish this rare youth together. Mutual encouragement, Wishing you business success, Wang Lie