“The greatest risk in turbulent times is not the turbulence itself, but continuing to think and act as in the past.” This quote from Peter Drucker's “Managing in Turbulent Times” was cited by Zhao Bo, founder of New Distribution, during his keynote at the opening of the 6th China FMCG Conference. While the current economic environment may not be turbulent, in an era of shrinking volumes, “difficulty” is a common sentiment: companies find it hard to grow, distributors find it hard to do business, and retailers find it hard to make money. Under structural pressure, both product innovation and channel operation logic are being reconstructed, making it untenable for companies to continue with past mindsets and behaviors. Taking channels as an example, with changing consumption habits, channels are trending toward divergence and fragmentation. As the channel landscape is being reshaped, how should FMCG companies respond? At the opening of the 6th China FMCG Conference, Wang Kaibao, head of new retail operations at Adopting a Cow, delivered a keynote titled “Reconstructing Brand Operations Under Channel Transformation.” As a pioneering dairy company, how is Adopting a Cow exploring new ideas and finding new growth paths amid channel changes?
Opportunities in Niche Segments Amid the “Darkest Hour”
Compared to categories like beverages and snacks, the dairy sector, where Adopting a Cow operates, has faced particularly heavy pressure in recent years. The dual pressures of excess raw milk upstream and insufficient consumer demand downstream have not eased since last year. Financial reports from some listed companies show that sales expenses have been climbing, but revenue has not grown at the same pace. This indicates that the market environment has changed, and traditional tactics are no longer effective. For companies, having their comfort zone disrupted is painful, but change is not necessarily bad; under change often lie new opportunities. Taking channels as an example, according to Wang Kaibao's presentation, the fragmentation of domestic retail channels is intensifying. Kantar Consumer Index's China retail report shows that in the first half of this year, the market share of the top ten traditional retailers all declined to varying degrees, with a clear trend of divergence.
Meanwhile, emerging channels such as membership stores, bulk snack stores, and Douyin e-commerce have seen rapid growth in sales and market share. The report also shows that Chinese consumers maintained a near-field shopping habit in the first half of the year, with small supermarkets and convenience stores remaining the main growth channels in modern trade. Additionally, O2O, as an effective bridge connecting online and offline, has seen over 30% of urban households in China purchase FMCG products through O2O channels.
At the same time, this format is also showing divergence: community group buying platforms and some comprehensive platforms are declining, but front-warehouse models like Xiaoxiang Supermarket, which have transformed into full-category platforms, are accelerating growth, achieving considerable increases in both sales and purchase frequency. Breaking down dairy consumption, according to Nielsen's research, O2O channels play a role in increment, premium pricing, and efficiency for dairy products. Taking liquid milk and yogurt as examples, consumers purchase through O2O not only for emergency needs but also for the convenience of stocking up at home; multi-pack purchases are comparable to hypermarkets, and there is greater room for premium pricing. How to differentiate product placement in O2O channels to maximize single-item output will be an important topic for dairy manufacturers. For instance, Adopting a Cow, as Wang Kaibao introduced, actively expanded its O2O presence after recognizing its potential, strengthening distribution and investment, and launching special collaborations with leading O2O platforms. For example, in cooperation with Pupu Supermarket, it organized a live-streaming event tracing the origin of Adopting a Cow's ranch, inviting Pupu users to visit its Bobo Ranch. Additionally, Adopting a Cow co-created a new product with Hema, launching A2 β-casein organic pure milk, which achieved good sales on the Hema channel this year.
Beyond near-field consumption, consumers' online consumption of dairy products continues to penetrate. Although Adopting a Cow has been aggressively expanding offline in recent years, it originally started online, and its online strength should not be underestimated. Recently, the China Chain Store & Franchise Association released the “2024 China Online Retail Top 100,” with Adopting a Cow ranking 37th. Notably, only three dairy companies made the list: the other two are Yili and Sanyuan. In fact, as a rising star in the dairy industry with a relatively innovative approach, Adopting a Cow was initially positioned as a new consumer brand. Now, with the economic downturn and the fading consumption boom, many once-famous new consumer brands have disappeared, but Adopting a Cow has not only withstood market tests but has grown stronger. This is attributed to the company's solid progress in omni-channel layout and full industry chain construction, giving it the confidence to traverse cycles when the industry downturn arrives. Over the past decade since its founding, Adopting a Cow has basically completed its full industry chain layout.
Upstream, it has completed the construction of 9 world-class large-scale ranches, with nearly 90,000 dairy cows, ranking first in Asia in milking efficiency, second nationally in average milk yield per adult cow, and achieving a self-owned milk source rate of about 90%. Midstream, it has completed two world-class modern factories with an annual capacity of 480,000 tons, forming a “ranch + factory + warehouse” model. On the product side, Adopting a Cow's products cover multiple lines including pure milk, yogurt, milk powder, and ice cream, meeting the needs of different consumer groups. Most commendably, while traversing its own cycle, Adopting a Cow has also led its distributors through the cycle. It is reported that a distributor in Linyi took two years from not knowing Adopting a Cow to deciding to join and then achieving win-win results. “At the beginning of product distribution, there was little distinction between online and offline products. Later, the company launched online direct-sales products and offline distributor-exclusive series.” With Adopting a Cow's step-by-step improvements, more distributors' sales potential has been unleashed.
Through mechanisms such as dedicated personnel and deepened channel expansion, multiple distributors from Linyi and Anhui have achieved annual sales exceeding 10 million yuan.
Getting Closer to Consumers
If supply chain and products are the foundation, channels are the lifeline of FMCG, the direct pathway connecting brands with consumers. The more channels diverge and reconstruct, the more important it is to adhere to the principle of “where consumers are, channels are.” Only by getting closer to consumers can brands understand their true needs, which in turn informs innovation in product and channel strategies. We noticed that in addition to the cases Wang Kaibao mentioned in his speech, Adopting a Cow has done a lot of innovative work this year on both product and channel fronts, finding increments in niche categories and markets. For example, at the end of May this year, Adopting a Cow launched an A2-type ton-ton milk, which sparked a consumption craze among young refined consumer groups such as mothers and white-collar workers. Within a month of launch, monthly sales exceeded 1.1 million bottles, and it even topped category charts on multiple platforms like Douyin e-commerce and Hema. The A2-type ton-ton milk's ability to impress consumers and go viral quickly is inseparable from its precise product positioning and channel strategy. First, to cater to the quality pursuits of target groups like new-generation mothers and refined white-collar workers, the A2-type ton-ton milk differentiates itself by focusing on A2 β-casein pure milk, a niche category favored by new-generation families, ensuring high nutrition and easy absorption while also precisely aligning with young people's trendy consumption trends in product design. The ton-ton bucket not only has a large volume and cute bottle design but also comes with a shoulder strap for portability. Additionally, in terms of channels, the A2-type ton-ton milk focuses on interest e-commerce like Douyin and Xiaohongshu online, while offline it focuses on new retail channels like Hema and 7-Eleven, and also lays out O2O channels like Pupu and Xiaoxiang.
Unlike traditional supermarkets and comprehensive e-commerce platforms, these channels are precisely the new channels with high penetration among young consumer groups. In marketing, it also emphasizes communication methods that young people are more interested in, such as influencer seeding and city pop-ups. Through a series of precise operations, Adopting a Cow's A2-type ton-ton milk has appeared in the target consumer group with a high-quality, high-appearance image, satisfying both nutritional needs and providing emotional value, while exhibiting strong social attributes, leading to a large number of consumers spontaneously sharing and recommending it on social media. Reviewing the viral process of Adopting a Cow's A2-type ton-ton milk, it can be seen that for a single product to succeed today, it cannot rely solely on low prices; as long as it meets consumer needs, consumers will not reject high-quality products. As Suzuki Toshifumi, founder of 7-Eleven, said in “Retail Philosophy”: In an economic downturn, innovation for rice balls is not about making them cheaper, but making them tastier and more value-for-money. As a rising star in the dairy industry, Adopting a Cow has managed to carve out a space in a highly competitive industry dominated by giants, largely due to its high emphasis and investment in user value research. From product to operation to experience, all work revolves around user value. We understand that to get closer to users and understand their true needs, Adopting a Cow has continuously strengthened communication with users over the years, such as inviting consumers to visit ranches, participate in product tastings, conduct user interviews and in-depth research, and even having company executives personally participate in user follow-up and feedback research, all to listen to users' authentic voices. Take its most distinctive “City Ranch Plan” as an example: to shorten the distance between the brand and consumers and further link consumer groups with the upstream industry, Adopting a Cow launched the “City Ranch Plan” last year, bringing the ranch directly “into the city.” Children and parents from all over the country come to visit, immersing themselves in knowledge about dairy cows and the birth process of a good glass of milk. Today, the “City Ranch Plan” has been carried out in zoos in multiple cities, including Hangzhou Wildlife World, Suzhou Shangfangshan Forest Animal World, Chengdu Haichang Polar Ocean Park, and Nanjing Hongshan Forest Zoo, and is loved by many families and children. Everything is mutual; we believe that consumers and the market will not let down a brand that truly cares about consumers.