Introduction: Successful FMCG brands always break through themselves. Author 丨青山依旧 Review 丨勾勾 Layout 丨张雨薇

The Chinese beverage industry, which has surpassed the trillion-yuan market scale, is experiencing new changes. Driven by health consumption demands, Chinese beverages are moving towards product segmentation, category innovation, and channel diversification. The beverage market, which reached a scale of 1,247.8 billion yuan in 2022, continues to expand. For beverage brands, this presents both opportunities and challenges. Opportunities arise from the rise of young consumers with increasing demand for beverages, diversified consumption scenarios providing innovative inspiration for brands to explore new battlegrounds, and more下沉 (lower-tier) diversified channels that can reach consumers anytime, anywhere to meet their daily needs. However, increased opportunities mean intensified competition. In recent years, beverage giants like Nongfu Spring, Master Kong, and Uni-President have been racking their brains to innovate. For example, Nongfu Spring leveraged its nearly decade-old Oriental Leaf to unlock growth in 2023, Master Kong upgraded its best-selling iced tea series, and even Genki Forest, which holds the top position in the sparkling water category, launched a new electrolyte water brand, Alien. Meanwhile, Dongsheng Beverage, in its rapid growth phase, has also entered the coffee, electrolyte water, and sugar-free tea tracks. It seems all beverage brands are undergoing changes. Behind these brand changes is the transformation of China's beverage industry.

New Changes in China's Beverage Market If you frequently drink beverages, you've likely noticed shifts in the market. First, product changes. The author observed that Chengde Lulu has made new innovations. In the first half of 2023, Chengde Lulu introduced sugar-free and classic low-sugar variants based on its original almond milk, aiming to cater to consumers' demand for healthy drinks under the sugar-free trend. Simultaneously, multiple brands entering the oat milk segment highlighted the potential of plant-based protein beverages. Coupled with Coconut Palm's viral marketing and the recent surge in coconut water sales, young consumers are seeing this long-existing yet novel subcategory. Plant-based protein beverages hold a significant place in the trillion-yuan beverage track. With Genki Forest's establishment in sparkling water, the door to China's sugar-free beverage market was opened, and almost every notable brand has launched sugar-free product lines, reflecting a shift towards healthier beverages. Even Lulu, which appears healthy, still needs to adapt.

Second, channel changes. Previously, beverages were mainly distributed through hypermarkets and supermarkets. Now, with diversified channels, beverage brands have more distribution paths: e-commerce platforms, live-streaming sales, chain convenience stores, rural mom-and-pop shops, lower-tier markets, and community group buying. A single sales channel can no longer satisfy brand competition; to go further, brands must open new channels. In fact, successful FMCG brands always break through themselves. For example, Chengde Lulu, deeply rooted in the northern gift market, aims to open larger markets through channel breakthroughs. By strengthening direct sales channels, online channels, content e-commerce, special channels, and restaurant channels, it seeks to reach more consumers. Additionally, Taoli Bread, based in the north, is opening the southern market by building its own factories and recruiting new distributors; Dongsheng Beverage has also expanded from Guangdong to the whole country through innovative products and new channels, with growth outside Guangdong exceeding that within the province.

Finally, brand changes. Brands are intangible, and their changes are often reflected in marketing actions. For instance, Chengde Lulu, on one hand, built a factory in Hangzhou and recruited distributors in the southern market, signaling its determination to go south; on the other hand, by increasing R&D investment, new products like the "Nongqing" (affectionate) version and "Xiao Lulu" (Little Lulu) let consumers feel the rejuvenation of the old brand. Just as Coca-Cola created the "Boundless Innovation" platform to deeply bind consumers with the brand and launched several highly attractive products; Nongfu Spring leveraged the rapid growth of Oriental Leaf to become a brand in the sugar-free tea track that can compete with Suntory; and the co-branding of Luckin Coffee and Moutai allowed more young consumers to experience the excitement of "Moutai freedom." Changing to meet consumer demands is the biggest change in the beverage industry.

Why Some Brands Can Navigate Cycles In fierce market competition and an uncertain environment, why are some brands overwhelmed by the tide of the times while others can navigate cycles? Certainly, those that navigate cycles have exceptional qualities, whether by seizing the right trend or finding the right channels. Chengde Lulu, which achieved double growth in channel revenue and profit in the first half of 2023, also gained satisfactory results by relying on the large plant-based protein beverage track. It can be said that Lulu has caught the big trend of health consumption. Successful brands have also seized the dividends of their times. Century-old Coca-Cola survived the flames of World War II and withstood tests of different cultures, ultimately becoming a global carbonated beverage giant. Back in the domestic market, some brands have also successfully navigated cycles. Wahaha, with its two major products AD Calcium Milk and Nutrition Express, has become a memory for generations; Nongfu Spring has been selling well for years with its slogan "We don't produce water; we are nature's porters"; and even newcomer Genki Forest quickly grew by riding the sugar-free sparkling water trend. But catching the trend is only one step in Lulu's success.

As is well known, in the plant-based protein beverage track, brand concentration is relatively low, but category concentration is high, and these popular categories always have a familiar brand. For example, when mentioning almond milk, we think of Lulu; when mentioning coconut juice, we think of Coconut Palm, even though Joy House and Special Forces also do well, consumers still think of Coconut Palm; and when mentioning walnut milk, we think of Six Walnuts. This is brand power. In the blue ocean market, these brands quickly accumulated word-of-mouth, conquering consumers with good products, so that in the red ocean era, they can forge ahead.

Some say Lulu doesn't taste good, and some say relying solely on almond milk makes it hard for Lulu to break through itself. But in fact, Lulu has existed for 40 years and achieved double growth in the first half of 2023 despite sluggish consumption. This is the result of brand momentum. Category advantage is also one of the brand's moats. No matter how many sugar-free sparkling waters there are, it's hard to surpass Genki Forest; no matter how many sugar-free tea players, it's hard to beat Suntory and Oriental Leaf.

Another secret to navigating cycles is daring to recognize one's own shortcomings. Coca-Cola once changed its formula, but after consumer complaints, it reverted, becoming a carbonated beverage giant. Similarly, Lulu, despite holding a strong northern market and deeply cultivating the gift channel, has recognized that to achieve nationalization, it must change. And Lulu seems to be changing. According to the 2023 semi-annual report, in the first half of the year, Lulu increased its distributor count by 45 in the northern region and 55 in other regions, indicating that Lulu has begun its national layout. Additionally, the report revealed that besides consolidating the northern gift channel, Lulu will develop immediate-consumption channels in the southern market, and will vigorously develop third- and fourth-tier cities and township channels to penetrate more segmented consumer markets and meet more consumer demands. Therefore, brands that can navigate cycles share the following characteristics:

1. Backed by a highly growth-oriented track; 2. Possess category-as-brand recognition; 3. Can see their own shortcomings and change.

The Ultimate in Navigating Cycles Is Brand Vision If the methodology of navigating cycles belongs to the tactical level, then behind it must be a strategic foundation. The strategy of a brand is its vision. This is also the secret to Lulu's ability to remain active in the market after 40 years and potentially enter the national market. Giants like Wahaha, Nongfu Spring, Lulu, Coca-Cola, Mengniu, and Yili can occupy leading positions in the industry not only because of excellent products, strong channels, and deeply rooted brands, but also because they care for the public. As a veteran agricultural enterprise, Chengde Lulu has been deeply involved in the "three rural" (agriculture, rural areas, and farmers) industry since its inception, achieving industrialized development. The company+almond processing plant+farmers+base+logistics service model, formed through close interest linkage with agricultural production entities, has laid the foundation for rapid industry development and full resource utilization. This has not only improved the economic level of growers but also boosted the income of local farmers. (Image source: Lulu's official account)

At the same time, it signed a cooperation agreement with Northwest A&F University on high-yield cultivation technology for kernel apricots, promoting research on almond cultivation for high yields, and organized specialized agencies to provide farmers with planting and breeding technical guidance, enhancing their capabilities and the quality of agricultural raw materials, thereby safeguarding the income from agricultural planting and breeding. Against the backdrop of rural revitalization, Lulu, as one of the top 500 agricultural enterprises, has fulfilled its social responsibilities through concrete actions. During its development, Lulu has not forgotten environmental protection, adhering to the concept of harmonious coexistence between humans, nature, and society, which has become key to enhancing Lulu's brand value. Indeed, the future Lulu is not only a plant-based protein beverage brand loved by consumers but also a whole-industry-chain enterprise capable of driving regional development, solving farmer employment, and helping farmers grow. Becoming a socially responsible enterprise is perhaps the goal every brand pursues. Lulu, along with other giants, is striving to achieve this goal.

Final Thoughts With the release of semi-annual reports from various beverage listed companies, some are happy and some are worried. As one of the representative brands in plant-based protein beverages, Chengde Lulu achieved double growth in revenue and profit, but through the report, we can still see areas for improvement. For example, can its overly single product line appeal to southern consumers? Can it open more channels by focusing on the gift market? How much growth space remains for almond milk, which accounts for a relatively small share in plant-based protein beverages? These issues require Lulu to change. But we also see Lulu's excellent side: continuous R&D investment, bold new product launches, determination to open the southern market, and concrete actions to help farmers. Under health consumption demand, Lulu, as a representative healthy beverage, has even greater development space in the future.