---
title: "Beverage Mega-Brands Are Aging, While Baijiu Mega-Brands Remain Young"
description: "In the beverage industry, the era of relying on a single mega-brand has passed, with once-dominant products like Nutrition Express and Red Bull shrinking from billions to hundreds of millions in scale. In contrast, baijiu companies like Moutai and Wuliangye still thrive on their mega-brands, which remain their core competitiveness and are even strengthening."
author: "读懂君"
publisher: "New Distribution"
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published: "2021-04-24"
language: "en"
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# Beverage Mega-Brands Are Aging, While Baijiu Mega-Brands Remain Young

> In the beverage industry, the era of relying on a single mega-brand has passed, with once-dominant products like Nutrition Express and Red Bull shrinking from billions to hundreds of millions in scale. In contrast, baijiu companies like Moutai and Wuliangye still thrive on their mega-brands, which remain their core competitiveness and are even strengthening.

As the saying goes, "The waves behind drive on those before, and the former waves wash up on the sand." This phrase aptly describes the beverage industry.

For a long time in the past, almost all beverage companies were striving to create mega-brands, and the beverage industry was one that produced many such hits. Products like Nutrition Express, Red Bull, and JDB at the 20-billion-yuan level, and Want Want Milk and Wanglaoji at the 10-billion-yuan level, were once all the rage.

However, nowadays, the era of relying on a single product to conquer the market has long passed. The scale of mega-brands has severely shrunk, from billions to hundreds of millions, and even mega-brands with sales of one billion yuan are becoming rare.

In this situation, beverage companies that rely solely on mega-brands have generally fallen into trouble. For example, Chengde Lulu and Yangyuan Beverages have seen their revenues decline year after year, and their stock prices are fading. On the contrary, Nongfu Spring, which is often seen as "not sticking to its main business," has propelled its founder Zhong Shanshan to the top of Asia's richest list.

"Single product conquers the world, multiple products rule the kingdom" has become the golden rule for beverage companies.

**However, among all beverage categories, there is a special one: baijiu. Looking at baijiu companies, from Moutai to Jiannanchun to Niulanshan, the leaders in high, medium, and low-end segments are all still dominated by mega-brands.**

Moreover, this divergence is intensifying. In due course, Feitian Moutai and Pu Wu will inevitably become super mega-brands at the 100-billion-yuan and 50-billion-yuan levels, respectively. But forming a matrix of multiple small products each at the one-billion-yuan level is increasingly becoming the mainstream approach in the beverage industry.

Why have beverages and baijiu become two sides of the same coin?

**-01- Beverage Mega-Brands Are Aging**

At home, there is Kweichow Moutai (SH: 600519) with a market cap of 2 trillion yuan; abroad, there is Coca-Cola with a market cap of 1 trillion yuan.

**It is an indisputable fact that beverages produce great stocks, but it is also a trend that cannot be ignored that beverage stocks are diverging at an accelerating pace.**

Take Nongfu Spring (HK: 09633) and Yangyuan Beverages (SH: 603156) as typical examples. The former has been rising steadily since its listing, with a current dynamic PE of nearly 100 times, while the latter peaked at its IPO and now has a dynamic PE of only 17 times. One is the leader in bottled water, the other in plant-based protein beverages. Why is the gap so large?

Behind this lies a shift in the core competitiveness of beverage companies.

In the past, almost all beverage companies were striving to create mega-brands, and successful beverage companies were supported by their mega-brands. For instance, China Want Want (HK: 00151) had the 10-billion-yuan mega-brand Want Want Milk, and Wahaha had the 20-billion-yuan mega-brand Nutrition Express, both of which once carried their companies to the peak.

It can be said that for a long time, mega-brands were the absolute core competitiveness of beverage companies. But now, the situation is completely different. Beverage companies that only have mega-brands are generally facing development difficulties.

Yangyuan Beverages peaked at 9 billion yuan in 2015, and its revenue has been declining since then. By 2019, it had returned to the level of 2013. Chengde Lulu (SZ: 000848) followed the same pattern, peaking in 2015 and then seeing its revenue decline.

Besides both being from Hebei and being called the "twin bears" of plant-based protein beverages, another common point between Yangyuan Beverages and Chengde Lulu is that they each have only one mega-brand. The former has walnut milk, and the latter has almond milk.

For them, what was once a killer weapon is now just a basic business, and it is difficult for it to contribute to growth anymore.

More importantly, even if they can still contribute some incremental growth, the capital market is no longer paying for it.

For example, Xiangpiaopiao (SH: 603711), despite launching the ready-to-drink product meco fruit tea in addition to its instant milk tea, has maintained revenue growth through micro-innovation, but its valuation has continued to decline.

In contrast, the fundamental reason Nongfu Spring is favored by capital is that, in addition to its bottled water mega-brand, it has successfully created multiple small products such as Nongfu Orchard, Vitamin Water, Tea π, Scream, and NFC juice.

These small products together contribute 40% of its revenue. This not only makes Nongfu Spring's growth more sustainable but also shows the capital market its ability to expand into new categories.

**From this perspective, although mega-brands remain the basic business for beverage companies, their core competitiveness has shifted to whether they have the ability to diversify their product lines.**

**-02- The Success of Beverages Is Now the Success of Diversification**

If we go back 10 years, "diversification" was not such a sought-after strategy.

Compared to dabbling in many fields without being the best in any, having an absolutely leading product and brand is easier to build a moat—this is also the main reason Buffett chose Coca-Cola. In the carbonated sugar water world, no one can beat Coca-Cola.

But for beverage companies, the situation has long changed. It's not that mega-brands are unimportant, but that it is increasingly difficult to create a product with a sufficiently large scale.

The 10-billion-yuan mega-brands in the beverage industry were a product of a specific era. After the reform and opening up, China's economy developed rapidly, and consumer demand exploded, but for a long time, supply did not keep up with demand. The shortage meant it was a seller's market with "big water but few fish."

In this case, companies only needed to seize a category dividend to grow from a small fish to a big one, which is why mega-brands frequently emerged.

But over time, the supply-demand situation reversed. Now, the water is still getting bigger—for example, by 2019, the total market size of non-alcoholic beverages in China had reached 1.2 trillion yuan—but the fish have become much more numerous.

Looking at categories alone, carbonated drinks, milk-containing drinks, plant-based protein drinks, fruit juices, coffee drinks, tea drinks, sparkling water... each category is constantly innovating and spawning more products.

This means consumers have more choices, and competition among products and companies is becoming increasingly fierce. This not only shortens the life cycle of individual products but also lowers the ceiling for their scale.

Nielsen once tracked 15,000 new FMCG products, and by the second year, only 50 were found on the market. This phenomenon of new products failing to become hits is common in the industry. Even if they survive and become mega-brands, their life cycles are significantly shorter. According to Uni-President, the popularity cycle of mega-brands is only 1.5-2 years, making them more like fashion items.

**In this situation, for beverage companies to grow, they can no longer rely on one small fish becoming a big fish. Instead, they need to use more small products to replace mega-brands, use horizontal expansion to compensate for vertical shrinkage, and use the second curve to carry the first, and the third to carry the second...**

To this day, no one can shake the position of Nongfu Spring or Coca-Cola, not only because of natural water and cola, but also because of their diversified product matrices and multiple hit products.

However, within the broad beverage category, there is an exception—baijiu.

**-03- Baijiu Mega-Brands Are Still Young**

Compared to aging beverage mega-brands, baijiu mega-brands are still young and remain the core competitiveness.

The most typical example is the twin giants Moutai and Wuliangye. A single 53-degree Feitian Moutai accounts for 85% of Kweichow Moutai's revenue, and a single Pu Wu accounts for nearly 80% of Wuliangye's (SZ: 000858) revenue. Jiannanchun also has a single product, Shuijingjian, accounting for 86% of its revenue. Niulanshan also relies on a single product, Bainiuer. Even Luzhou Laojiao (SZ: 000568) has a single product, Guojiao 1573, accounting for over 50% of its revenue.

It can be said that the leaders in the high, medium, and low-end baijiu segments all rely on a single mega-brand to conquer the market.

In contrast, those liquor companies that do not have super mega-brands but instead follow a product matrix route, even if they achieve some success, have encountered problems of varying degrees.

For example, Yanghe (SZ: 002304), with its Hai, Tian, and Meng series covering the low, medium, and high-end price ranges, once grew wildly. However, the channel chaos and unclear brand positioning caused by too many product lines have led to continuous adjustments in recent years, and it has not fully recovered yet.

Another example is Gujing Gongjiu (SZ: 000596). Like Yanghe, its later-launched Nianfen Yuanjiang series, from the 100-yuan Gu 5 to the 1,000-yuan Gu 26, also covers the low, medium, and high-end. This has made its already exhausted brand power even less noticeable. Currently, Gujing Gongjiu has barely crossed the 10-billion-yuan revenue threshold, but its market cap of just over 100 billion yuan is only half that of Shanxi Fenjiu (SH: 600809), which has a similar scale.

Fenjiu's cleverness lies in further focus.

Like Yanghe and Gujing Gongjiu, Fenjiu has also created a new Qinghua series in recent years to elevate its brand power. But unlike the full coverage of the former two, Fenjiu's Qinghua series only has two mega-brands: Qinghua 20, positioned in the mid-to-high end, and Qinghua 30, in the sub-high end.

**This clearer positioning is one of the key factors in its brand image turnaround and rapid performance growth.**

In fact, not only Fenjiu, but almost all liquor companies, except for the absolutely leading Moutai which can afford to develop a large series of products, have been doing one thing in recent years: shrinking production lines, clenching fists, and attacking a specific price segment.

For example, in 2015, Luzhou Laojiao clarified its five mega-brand strategy: Guojiao 1573, Jiaoling Wine, Tequ, Touqu, and Erqu. In 2017, Langjiu, which had always pursued a "wolf pack tactic," clarified its four mega-brand strategy: Qinghualang, Honghualang, Tequ, and Xiaolangjiu. In 2020, Yanghe also began to focus on M6+, trying to build stronger brand power in the sub-high-end segment.

**Compared to the diversification of beverages, baijiu is increasingly moving towards an era of super mega-brands.**

**-04- The Victory of Baijiu Is Still the Victory of Mega-Brands**

Why has the magic of beverage mega-brands faded, while baijiu can go against this trend? The core lies in the fact that time is the enemy of beverages but the friend of baijiu.

On the one hand, baijiu is an extremely closed world. Sixty years ago, the main players in this world were the Eight Famous Liquors; 30 years ago, they were still the Eight Famous Liquors; and today, they are still the Eight Famous Liquors. Even though there are new forces like Jiangxiaobai, consumers are always fond of new things when it comes to beverages, but when it comes to baijiu, they are always nostalgic. No matter how hard the young players try, they cannot shake the foundations of the old players.

On the other hand, baijiu is also a world with a sufficiently large scale. In terms of total volume, in 2019, the baijiu industry's market size of over 500 billion yuan was much larger than any single beverage category. In terms of tiers, from the 10-yuan Laocunzhang and Erguotou to the 2,000-yuan Moutai that is still hard to get, the price range of baijiu is so wide that beverages pale in comparison.

Another important point is that over time, baijiu can continuously raise prices. This is a top-down transmission: Moutai raises prices first, then Wuliangye and Guojiao, then Jiannanchun and Yanghe... But the fiercely competitive beverage industry does not have this ability. Years ago, cola was 3 yuan a bottle and Red Bull was 6 yuan a can; years later, the prices are still the same.

There is almost no diversion pressure from other categories, and the competitive pressure within the category is not that great either, while the barriers and space are getting higher and larger. In this case, just as beverage companies in the past could grow by seizing the explosion of a single category, baijiu companies only need to firmly occupy a price segment.

**How to firmly occupy a price segment? Clearly, there is no better way than having a mega-brand. It's simple: a super mega-brand can create a super brand, possess irreplaceability, and bring high sales and profits.**

Ten years ago, the irreplaceability of mega-brands like Moutai was not so obvious, but now it is increasingly evident. The core lies in the fact that under the consumption upgrade trend, it well satisfies consumers' material and spiritual needs.

Material needs are easy to understand: when people have more money in their pockets, they naturally want to drink better liquor. Spiritual needs refer to the so-called tone value.

For consumers, brands have three major functions: providing trust, recognition, and tone. The first two solve the purchase problem, while tone is the value generated from use.

After all, the first-principle thinking in the consumer industry is that consumers always demand high cost-performance products. High cost-performance does not necessarily mean low-priced products; it emphasizes that every penny should be spent on use value.

Even Moutai consumers are no exception. In their eyes, Moutai is the most cost-effective product because its social symbol role is irreplaceable.

**When a brand provides tone value to consumers, it naturally gains a corresponding "premium" and becomes irreplaceable.**

Even if it's not Moutai, if consumers are free to choose between Jiannanchun and products at the same price, the proportion choosing Jiannanchun will be significantly higher than similar products. This is the irreplaceability of the brand, because Jiannanchun has occupied this price point for a longer time.

Of course, in a certain region, some products may easily win in the same price range, but once they leave that region, the advantage disappears.

Famous liquors emerge in every era, each leading for decades. Through cycles of change, the position of baijiu mega-brands has become increasingly consolidated, making them the unique moat of each liquor company.

Source: Understanding Finance (id: dudongcj), Author: Sun Yong

Tips will be paid 400-2000 yuan once adopted.


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