Since 2013, the domestic ambient lactic acid bacteria beverage market has shown explosive growth, with small and medium-sized manufacturers in various regions quickly following suit. According to Nielsen monitoring data, in 2014, there were as many as 79 brands of ambient lactic acid bacteria beverages (those sold in supermarkets with annual sales above a certain scale). Market competition is extremely fierce, with frequent price wars in some provinces, and an industry shakeout is imminent.

Facing the current development situation of the domestic ambient lactic acid bacteria beverage industry, whether it will become the next 'old yogurt' and how to respond in the future are concerns for many manufacturers and sales personnel.

I. Review of the Development of Ambient Lactic Acid Bacteria Beverages

  1. Sales of ambient lactic acid bacteria beverages grew ninefold in eight years: From the earliest domestic product, Taizinai, to the current ambient lactic acid bacteria beverage products from various manufacturers, sales in this category achieved a rapid ninefold increase from 2006 to 2013.

  2. In 2014, the number of manufacturers surged, and competition intensified More and more manufacturers developed more and more products to participate in the lactic acid bacteria beverage market competition. In 2014, the number of ambient lactic acid bacteria brands increased 3.9 times compared to eight years ago, reaching 79 brands (with sales in supermarkets and annual sales above a certain scale).

  3. Frequent price wars signal an imminent industry shakeout Due to the low entry barriers in the lactic acid bacteria beverage industry, a large number of small and medium-sized dairy and beverage enterprises entered, and some manufacturers from non-dairy or non-beverage industries also quickly followed. Many companies, with a 'grab a quick profit and leave' mentality, used low-price strategies to quickly ship products, and their rough management methods caused product price chaos. The ambient lactic acid bacteria beverage market is entering a more intense competitive era.

  4. The industry is a mix of good and bad, with negative news emerging endlessly Due to the mixed nature of the industry, some companies, with a 'grab a quick profit and leave' mentality, exaggerated or even falsely advertised product features and functions. Most were complained about by consumers and attracted media attention. A Baidu search for 'ambient lactic acid bacteria' reveals overwhelming negative news such as 'no live bacteria' and 'equivalent to sugar water,' posing a huge threat to the future development of the ambient lactic acid bacteria beverage industry.

Based on the current industry development, the author believes that within two to three years, the ambient lactic acid bacteria industry still has room for growth; however, an industry shakeout will occur, and the lactic acid bacteria beverage market will gradually become standardized, with only quality brands surviving.

II. Main Operating Models of Domestic Lactic Acid Bacteria Beverage Manufacturers For companies that have entered or are about to enter the ambient lactic acid bacteria beverage industry, the question 'Where to go after the hype?' is a concern for many industry insiders. Before considering future strategies, let's first understand the current main operating models in the domestic ambient lactic acid bacteria beverage industry.

Operating Model 1: Traditional Franchise Recruitment and Extensive Distribution (Representative Company: Dongjun Youleduo) Operating Characteristics: 'Traditional franchise recruitment + extensive distribution channels' Advantages (low cost, fast franchise recruitment)

  1. Simultaneous promotion of franchise exhibitions and regional recruitment
  2. Attractive purchase incentives Disadvantages (relatively rough management)
  3. Extreme price strategies, leaving little budget for later investment
  4. Rough management model, lacking dealer management, and less terminal image construction and maintenance

Dongjun Dairy is a large dairy beverage enterprise in Shandong, and its early representative product, the 'Mingtai Lang' series of dairy beverages, was sold in third- and fourth-tier markets nationwide. Dongjun Dairy was one of the early entrants into the ambient lactic acid bacteria industry. In the second half of 2012, it launched 'Youleduo' ambient lactic acid bacteria beverage, leveraging its years of accumulated franchise recruitment experience and dealer resources for nationwide recruitment and distribution. Its operating characteristics: 1. Formulating attractive franchise policies; 2. Participating in various exhibitions for recruitment, while dispatching 4-5 personnel to each major province to guide customer marketing and local recruitment.

The advantage of this approach is rapid nationwide recruitment and distribution. However, it also has problems such as rough management, harsh policies, and lack of terminal support, with some regions experiencing poor product sell-through.

Operating Model 2: Media-Assisted Comprehensive Recruitment (Representative Company: Haocaitou Xiaoyang) Operating Characteristics: 'Endorsement + advertising + recruitment' Advantages (media hype, rapid recruitment)

  1. Endorsement + advertising (sponsorship of popular variety shows) to quickly increase brand awareness
  2. Simultaneous promotion of franchise exhibitions and regional recruitment for rapid recruitment Disadvantages (high risk)
  3. High risk: large investment may not yield high returns
  4. Relatively rough marketing management

On February 28, 2014, Fujian Haocaitou's lactic acid bacteria product 'Xiaoyang' was grandly launched. Its marketing strategy was a perfect application of the 'endorsement + advertising + recruitment' model commonly used by Fujian enterprises: youth idol 'Xiaoyang - Wang Luodan' endorsement + sponsorship of five popular programs in 2014, including 'Run Together' and 'I Am a Speaker,' combined with nationwide recruitment.

However, large investment does not necessarily yield high returns. In 2014, 'Xiaoyang' did not achieve its expected sales target of 1 billion yuan. Moreover, such a large market investment is not something every small and medium-sized enterprise can afford to learn from or attempt.

Operating Model 3: Manufacturer-Dealer Collaboration for Terminal Construction (Representative Company: Junyao Weidongli) Operating Characteristics: 'Consumer command' product appeal + manufacturer-dealer linked terminal construction + media investment (later stage) Advantages (long-term planning, steady growth)

  1. Good product concept and strong sell-through capability
  2. Emphasis on terminal construction during recruitment (store signs, displays, exchange of goods)
  3. Online media investment after steady growth Requirements (long-term planning and investment)

Junyao entered the ambient lactic acid bacteria industry early. At the initial product planning stage, the company proposed a product strategy of 'good product concept and strong sell-through capability.' After careful research and planning, it determined the medium- and long-term launch strategy: 'consumer command' product appeal + manufacturer-dealer linked terminal construction + media investment (later stage).

First, the product name 'Weidongli' broke away from the monotonous imitation of 'Yang,' 'Le,' and 'Duo.' 'Weidongli' - 'Weidongli' (stomach power) is a clever hint at the product's intestinal conditioning function. The product selling points, whether 'Drink a bottle of Weidongli to exercise your stomach' or 'Prebiotics, the power source for intestinal health,' are more intuitive prompts for consumers to understand and remember. Second, in terms of channel policy and terminal management, Junyao did not just use a simple price system for recruitment; it implemented a 'regional and city manager management system' in regional management, emphasizing guidance and assistance to dealers in basic retail terminal construction, including store sign placement, display image construction, and exchange of goods execution. Finally, after the market operation became relatively mature, it invested in popular satellite TV programs and online pre-roll ads.

III. Recommendations for Future Operations of Ambient Lactic Acid Bacteria Beverages Each of the three typical operating models has its pros and cons. The author believes that the domestic ambient lactic acid bacteria beverage market has entered a mature stage. The industry will gradually become standardized, and simple imitation and copying will no longer work in the fierce competition. To survive and thrive, companies must stay close to the market, study consumer needs, create differentiated product selling points, and innovate operational thinking.

In response to the current chaos in the domestic ambient lactic acid bacteria beverage market, the author proposes five recommendations:

  1. Differentiated product concepts Change the current monotonous naming conventions like 'Yang,' 'Le,' and 'Duo' and create innovative product names. For example, 'Xiaoyang' changed the simple imitation and the aesthetic fatigue of 'blue and green' in both product name and packaging design.

  2. Consumer command-style product appeals Use consumer command-style product appeals to open up consumer purchase needs. For example: the best-selling herbal tea: 'Fear of getting heaty? Drink Wanglaoji'; the best-selling throat medicine: 'Sore throat? Use Jinsangzi Houtbao'; the best-selling health product: 'This holiday, don't give gifts; if you give gifts, give Naobaijin.'

Four principles for refining product appeals: A. Include the product name B. Accurately express the product positioning C. Use plain language that is easy to spread D. Directly command consumers to buy

  1. Functional segmentation of product selling points and population segmentation of product functions Currently, the functions of ambient lactic acid bacteria products on the market are relatively single, with only flavor distinctions like original and fruity. Only a few manufacturers have launched product series with functional and population segmentation.

  2. Enrich product sales channels Currently, the sales channels for ambient lactic acid bacteria beverages are mainly traditional circulation channels such as mom-and-pop stores and convenience stores, with some manufacturers also distributing in supermarkets. Ambient lactic acid bacteria beverages have casual and snack-like product characteristics, so in the future, channel expansion can be increased in internet cafes, schools, bakeries, tourist attractions, restaurants, and other outlets.

  3. Strengthen support for retail terminals Currently, most ambient lactic acid bacteria beverage manufacturers adopt a simple agency distribution system. Often, products are just placed at retail terminals or even remain in dealer warehouses. To win the future market, it is necessary to increase manufacturer-dealer collaboration and strengthen the management and support of retail terminals.

The ambient lactic acid bacteria industry still has significant growth space. Facing fierce market competition, companies must learn to change.

Text by Lin Jing (Deputy General Manager, Shanghai Mingtai Mingguan Dairy Marketing Consulting Co., Ltd.)

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