Lee Kum Kee's Tiancheng Yimei dipping soy sauce retails at about 8 yuan per 150ml, a premium compared to traditional cooking soy sauce at about 10 yuan per 1500ml. The driver behind condiments moving from kitchen to restaurant is the upgrade in consumer demand for quality of life. This upgrade is also happening with brands like Haitian, Totole, and Xinhe, and is intensifying.
Among various condiments, the segmentation of cooking wine will become a major highlight in the next 5 to 10 years. According to Euromonitor International, the retail market for cooking wine is expected to grow at a compound annual growth rate of 20.3% from 2012 to 2017, reaching approximately 10.6 billion yuan by 2017.
Product Strategy: Brewed Cooking Wine - How to Crack the Slow-Moving FMCG
Currently, there are two main types of cooking wine on the market. One is blended cooking wine with relatively high production volume, mainly occupying catering and distribution channels in Jiangsu, Zhejiang, and South China, represented by companies like Laocaichen, Wangzhihe, Haitian, and Hengshun. The other is rice wine brewed from rice and water. Due to limited production and generally slow turnover in condiment terminals, this type of cooking wine has to move towards higher quality and finer flavor segmentation to achieve higher profits. The current consumption upgrade has finally brought spring to this Chinese time-honored brand.
In terms of product craftsmanship, Laohenghe has developed three product lines based on brewed cooking wine: premium cooking wine, streamlined cooking wine product combinations, and natural health products.
Laohenghe began focusing on the cooking wine market in 2013, simultaneously introducing the sales model of baijiu (white liquor), launching two new products: Vintage Collection Yellow Wine and Drunken Cooking Wine, completely breaking consumers' traditional perception of cooking wine.
Chairman Mr. Chen Weizhong designed the strategy for Laohenghe cooking wine as follows: in product development, ensure clear differentiation from similar products on the market; in pricing, follow a premium route, establishing the concept that the most expensive cooking wine is made by Laohenghe, thereby reflecting the uniqueness of Laohenghe products.
As of the first half of this year, Laohenghe's base wine inventory has increased to approximately 169 million liters. Despite having a high storage volume of yellow wine, cooking wine still faces challenges of relatively long consumption cycles and low consumption frequency. Additionally, influenced by the traditional practice of producing and selling locally, consumers typically only accept local brands. How to change consumption habits remains a difficult problem for Laohenghe.
Chen Weizhong has a deep market understanding of cooking wine product development. Regarding other strategic products, he stated, "The most important thing for other strategic products is to add luster to the Laohenghe brand, absolutely not to overdraw the brand. They must be developed and operated in coordination with the overall product strategy."
Channel Model: Channel Transformation, Focusing on Catering, Expanding Channel Penetration - Where to Place the Pieces
Before the Spring Festival of the Year of the Horse in 2014, Laohenghe successfully listed on the Hong Kong Stock Exchange. On the right is Mr. Chen Weizhong, Chairman of Laohenghe Brewing Co., Ltd.
Looking back, in 2005, Chen Weizhong acquired Huzhou Laohenghe Brewery for 4.174 million yuan, starting with premium soy sauce products and planning the yellow wine market from the production of stored yellow wine. Nine years later, before the Spring Festival of the Year of the Horse in 2014, Laohenghe successfully listed on the Hong Kong Stock Exchange.
According to a report on China's condiment and cooking wine market compiled by research firm Euromonitor International on March 29, 2013, Laohenghe has become China's largest cooking wine producer. In 2012, it held retail market shares of 13.8% by value and 5.8% by volume.
Although cooking wine is a kitchen essential, its long usage cycle results in a relatively small market capacity. Laohenghe understood this clearly and therefore deeply tapped into both product and channel.
Starting in 2015, Laohenghe began aggressively expanding its distribution network, with over 700 distributors nationwide entering Laohenghe's sales system. The channel structure focused on supermarket channels across regions, with over 90% relying on large supermarkets. This strategy quickly boosted Laohenghe's sales, but the huge channel costs did not bring substantial returns. From 2016, Laohenghe began adjusting its strategy, planning to reduce the proportion of large supermarkets in all channels to 20% within two years, while expanding catering and distribution channels to about 80%. The reason for the channel shift stems from the low-involvement, high-impulse nature of cooking wine as an FMCG.
Let's look at the characteristics of the cooking wine segment.
First, cooking wine is not used as frequently as soy sauce or vinegar. Although it is a kitchen essential, its long usage cycle and relatively low price are inherent disadvantages, leading to a relatively small market capacity.
Second, as a typical low-involvement FMCG, how to "go out" and gain wider recognition for the reputation of regional time-honored brands is an urgent issue to solve.
Third, brewed cooking wine is a product that aligns with consumption trends. However, regarding the contradiction between raw wine inventory and consumption frequency, if the brand cannot form a premium, then from an input-output perspective, it becomes a loss-making venture that only brings fame.
Therefore, for enterprises, relying solely on household consumption of cooking wine is not enough. Catering channels, development of new regional markets, and category expansion may be the directions to enlarge the market.
Marketing Model: Cooking Wine Market Lacks Leading Brands - How Laohenghe Cultivates Internally and Promotes Externally
Condiments will usher in an era of returning to natural, green traditional condiments.
According to industry insiders, condiments will usher in an era of returning to natural, green traditional condiments. "At this stage, consumption concepts will shift from compound seasonings back to traditional condiments. Brewed cooking wine made from brewed yellow wine will be more favored by consumers than blended cooking wine."
However, the cooking wine products on the market are varied and inconsistent in quality, providing an opportunity for enterprises focused on producing conscientious products to rise abruptly. A distributor who has cooperated with Laohenghe for many years stated that in terms of brand building, Laohenghe still needs to increase investment and conduct consumer education.
One of Hong Kong's Four Talents, advisor to "A Bite of China," and gourmet Chua Lam's expert endorsement is extremely valuable.
Chen Weizhong also deeply feels this. He said, "Over the past five years, Laohenghe has continuously tried to communicate with consumers, from online advertising to offline interactions. For Laohenghe, every step in brand building is a beneficial exploration, even if it costs some tuition. Whether brewed cooking wine can gain more market share, consumer education remains key." To this end, in September this year, as a traditional condiment producer, Laohenghe invited one of Hong Kong's Four Talents, gourmet Chua Lam, as well as Shen Hongfei, chief advisor of "A Bite of China," Professor Chen Li, and Yang Weilong, founder of the Yangcheng Lake Hairy Crab Association, to serve as honorary advisors. Additionally, it sponsored "Chef Nic" (12 Ways to Taste), forming an all-star lineup with expert endorsements and celebrity support, bringing cooking wine from the back kitchen to the forefront, engaging the new generation of consumers through taste buds, and creating new consumption demands.
Cooking wine consumption is notably random, resulting in relatively low brand concentration and relatively backward sales management systems. With consumption upgrades and mainstream shifts, the focus is on products with higher prices and grades and larger profit margins, while greatly strengthening terminal work through distribution, display, and promotions to stimulate consumer purchases. In Chen Weizhong's view, what matters more is making good products, and he is confident that consumers will recognize them. He said, "Because the Chinese market is gradually returning to rationality, the era of thin profits and high volume where consumers only buy cheap products is over." In fact, Laohenghe's push into catering channels is also a necessity. There are three reasons. First, making brewed cooking wine is also a necessity; otherwise, the low average transaction value would affect the overall market scale. As a listed company, it would be hard to justify. Second, the market barriers for cooking wine are very low. In the current trend of a stock market, if we don't proactively break out, it means others will break in. Third, the upgrade in consumer demand requires cooking wine to move towards the high-end market, launching more segmented products to meet or even lead sales.
Regardless, Laohenghe's marketing strategy this year is very clear. But based on such a strategy, how will Laohenghe implement it?
The distinct channel formats and consumption habits between high-tier and low-tier cities require localized management.
First, improving the product line with different levels (high, medium, low) requires adaptive classification management of channel terminals.
Second, the FMCG plus low-involvement nature means the market needs extensive distribution to ensure the possibility of being purchased by consumers, while also bearing the risk of high inventory.
Third, the distinct channel formats and consumption habits between high-tier and low-tier cities require localized management.
Fourth, outlets determine sales. The higher the sales target, the more new outlets are needed to achieve it. How to master outlets? How to develop outlets? How to ensure product distribution rate, vivid display, and outlet visits are maintained above corporate standards? How to grasp channel sell-out inventory data? These will all become Chen Weizhong's mandatory questions.
Most importantly, the improvement of brand image, expansion and upgrade of product lines, make the development of new regions an urgent task, and the adjustment and supplementation of the current distributor structure is related to the success or failure of Mr. Chen's new strategy. The original condiment distributors have basically lost their terminal service capabilities. After years of being sedentary merchants, their abilities have been exhausted, and they have almost become delivery providers. Redefining the service capabilities of regional distributors and utilizing regional resource advantages to make the sales management links in the distribution channel more efficient is what qualifies as a competent distributor.
In summary, with a clear strategy, the next step is to test Laohenghe's implementation management capabilities. The expansion of market territory, expansion of product lines, increased production capacity, and increased advertising budgets all mean that once the arrow is shot, there is no turning back. The key measure to ensure the arrow hits the target is to rely on the regional operation and service capabilities of distributors to realize Laohenghe's new blueprint.
Source: Sales A (销售甲)