Landing in Beijing and driving 225 kilometers northeast along the Jingcheng Expressway brings you to Chengde, where the well-known Chinese plant-based beverage company Chengde Lulu was born. Chengde Lulu's predecessor was the Chengde Canned Food Factory, established in 1950. Leveraging the wild apricot resources of the Chengde mountains, Chengde Lulu developed almond milk in 1975, which later became a national patented product and was listed on the Shenzhen Stock Exchange in 1997. Listed for 26 years, as a representative brand of "plant protein beverages," despite continuous performance growth since 2020, Chengde Lulu's revenue scale has barely changed—in 2013, revenue was 2.633 billion yuan, and in 2022, it was 2.692 billion yuan. However, this company with nearly unchanged revenue has nearly doubled its net profit: from 334 million yuan in 2013 to 602 million yuan in 2022. Recently, this leading almond milk company with a market share exceeding 90% has broken its usual low-key stance with frequent moves: first launching an almond milk series this year, then recently launching a new almond milk series, planning to build a factory in Hangzhou in the south, and establishing a strategic cooperation with JD.com, showing its ambitious ambitions in the wave of plant-based beverages. Chengde Lulu has long been criticized for insufficient sales growth momentum, and now changing its "lying flat" attitude is a first step toward transformation. But facing the increasingly competitive plant protein beverage market, what cards can Chengde Lulu still play? Expanding South via Distributors "The taste of the year, Lu knows"—on both sides of a rural road in Tuocheng County, Shangqiu City, Henan Province, new and eye-catching wall advertisements for Chengde Lulu series products are pasted on the walls of red brick houses. Recently, after seeing a Henan Chengde Lulu distributor share wall advertisements for rural promotion on Douyin, Luo Ying, a post-90s native of Chengde, couldn't help but recall memories. In her memory, around 2000, such Chengde Lulu advertisements were everywhere on the streets of Chengde. In Hebei at that time, through such overwhelming advertising, Chengde Lulu made almond milk the top choice for gifts when visiting relatives during festivals. "In those years, Lulu was very famous locally. Plus, Lulu invited Xu Qing as a spokesperson. Even now, my parents won't buy Lulu almond milk without Xu Qing on the can," said Luo Ying. "Now, during the New Year, as a Chengde native, I unconsciously buy a case of Lulu almond milk for gatherings." Locally, Chengde Lulu's brand power is deeply rooted in consumer minds. Image source: Lulu's official Weibo But Chengde Lulu's brand is highly regional; while popular in the northern market, it has struggled in the southern market. In fact, when I communicated with consumers in Wuhan, Shanghai, and Guangdong about their impressions of Chengde Lulu, most said "never tried" or "not familiar." This is reflected in Lulu's financial reports. In the first half of 2023, Chengde Lulu achieved revenue of 1.357 billion yuan in the northern region, accounting for 90.81% of total revenue; the central region achieved 101 million yuan, accounting for 6.77%; other regions achieved 36.2366 million yuan, accounting for 2.43%. Chengde Lulu has clearly realized its problems and has been making frequent moves to expand south in the past two years. First, it has been recruiting a large number of distributors, with a significant increase in distributor numbers. Chengde Lulu stated that in the first half of 2023, while continuing to expand the Hangzhou and Chongqing markets, it also developed new markets such as Zhejiang, Jiangsu, Anhui, Sichuan, and Shanghai. In the first half of 2023, the number of distributors in the northern, central, and other regions was 551, 90, and 147, respectively, with increases of 45, 0, and 55. A Luoyang distributor, Wang Zi (pseudonym), revealed to me that the company proposed terminal bundling buy-one-get-one activities with promotional items, which not only boosts sales but also helps consumers get to know Chengde Lulu. "We need to win the market with taste and quality," Wang Zi said. The company's early outdoor and terminal buy-one-get-one activities were very effective, "selling well." At the same time, Chengde Lulu has been continuously recruiting salespeople, requiring them to visit terminals and complete market sales tasks assigned by the company, hoping to continuously improve product distribution rates. Distributors indeed contribute the majority of Chengde Lulu's revenue. The 2023 semi-annual report shows that distribution revenue was 1.45 billion yuan, while direct sales revenue was 48.2162 million yuan. Moreover, with distributors' continuous expansion, in the first half of 2023, the company developed 79 high-speed rail stores, 215 school stores, created 2,619 image stores, held 3,091 banquets, and developed 6,208 catering stores. To better expand in the southern market, in April this year, Chengde Lulu announced plans to invest 365 million yuan to establish a wholly-owned subsidiary in Chun'an, Hangzhou, to build a production base for 150,000 tons of Lulu series beverages annually. Not only in offline channels, but Chengde Lulu is also experimenting with online channels—establishing strategic cooperation with JD.com to strengthen e-commerce promotion, and using platforms such as Weibo, WeChat, Xiaohongshu, Douyin, and offline trendy coffee markets, cooperating with internet celebrities for promotion, aiming to attract young consumers. From offline to online, and then to production base layout, Chengde Lulu's ambition to expand south through distributors is unstoppable. Success from Almonds, Trapped by Almonds "Almonds" made Chengde Lulu. Especially in the northern region, when you want to drink "almond milk," the first choice is definitely Chengde Lulu almond milk. "My family members are all crazy fans of Chengde Lulu," A Yang from Langfang City, Hebei Province, told me. They all love the almond flavor of heated Lulu almond milk. During family gatherings at the New Year, they can drink a case of 20 cans in two meals. A Yang recalled that her university was in Lulu's hometown (Chengde), where Chengde Lulu products were more diverse. "When we were in school, there were already large cans of almond milk. If our dorm had a gathering, heating a large can of almond milk was the top choice." "Almonds" made this beverage company with nearly 50 years of plant protein beverage experience the largest almond milk producer in China. Its market share reached 90% in 2019, and currently 97.54% of the company's revenue comes from almond milk. But Lulu almond milk also has a hard flaw: in consumers' minds, Chengde Lulu's brand impression is mostly for gift-giving during festivals and for children's drinks, and regular consumption habits have not formed. When I communicated with several Hebei consumers about their impressions of Chengde Lulu, most still believed that "they don't usually buy it," and that buying Chengde Lulu is mainly for visiting relatives during the New Year—which clearly contradicts the current trend of regular beverage consumption. "Although I'm a crazy fan of 'almonds,' I rarely buy almond milk in daily life; I buy more during festivals," A Yang said. An employee responsible for the beverage section at a supermarket in Gu'an told me frankly that Chengde Lulu's peak sales season is mainly during festivals, "and usually not many people buy it." Not only is it festival-oriented, but many consumers are also not used to the strong almond flavor. Previously, almond milk was even rated online as one of the "hardest to swallow" beverages. "Our family also receives almond milk as gifts during the New Year, but I don't like the almond flavor and always let it expire," said Liu Qian from Hebei. Even when I gave almond milk to Zhang Tao from Wuhan to try, he directly said he didn't like the almond flavor, "It's not tasty; I won't try it again." Almonds made Chengde Lulu, but they also seem to have trapped Chengde Lulu. For a long time, apart from the flagship "almond milk" product, Chengde Lulu has not launched any strong new substitute products. Previously, its category expansion had no major changes, only trying segmentation in original, sugar-free, low-sugar, etc., with little room for imagination. Image source: Chengde Lulu products on shelves Later, the company launched the Guoren Walnut series and the Almond Milk series, and recently launched the Badam Milk series, but so far, the new products have not made a splash in the market. I saw on the shelves of several supermarkets in Gu'an County, Langfang City, that in the beverage section, Chengde Lulu's main product is still almond milk. One supermarket didn't even stock the "almond milk" series new products, and the salesperson in charge of the beverage section even said, "I haven't heard of Chengde Lulu's new almond milk. Besides, aren't consumers afraid of buying counterfeit goods?" Another supermarket I visited had stocked the new almond milk products, but the quantity was limited. "The almond milk produced at the end of August this year, the company has two batches. The first batch has sold out, and the second batch has little left," said the salesperson in the beverage section of that supermarket. In fact, Chengde Lulu's 2023 semi-annual report shows that the Guoren Walnut series achieved revenue of 34 million yuan in the first half of the year, accounting for 2.28% of total revenue, while the Almond Milk series revenue was only 1.9522 million yuan. Unwilling to tear off the festival attribute label and relying on a single hit product, Chengde Lulu, which struggles to form a product matrix, seems trapped by almonds. Deterred by 7.5 Yuan Almond Milk In recent years, plant protein beverages have transformed into a new generation of internet-famous drinks in the beverage market. Data from Huajing Industry Research Institute shows that in 2022, the market size of China's plant protein beverage industry was approximately 135.1 billion yuan, a year-on-year increase of 9.5%. It is expected to reach 142.8 billion yuan this year. However, a favorable market also means fierce competition, especially in recent years, with not only the rise of new plant protein beverage brands like Xiaowa Zhiyin and Guanghe Boshi Vital Box, but also traditional old brands like Yangyuan, Yeguo Coconut Juice, Vitasoy, Weiwei, and Black Sesame, all eyeing the market. A search for the keyword "plant protein beverage" on Tianyancha shows as many as 12,117 related companies. Under such intense competition, Chengde Lulu faces a significant test to conquer the national market. In fact, as Generation Z gradually becomes the main consumer force, market demand for products has become more personalized, diversified, and complex. FMCG brands are showing their skills, some competing on product strength, others on marketing. Compared to Yeguo and Yangyuan, Chengde Lulu's marketing investment seems a bit "stingy." Take Yangyuan Beverage as an example: in 2017, Yangyuan's annual sales expenses were as high as 1.073 billion yuan, and in the first three quarters of 2023, sales expenses were 524 million yuan. Chengde Lulu's sales expenses, on the other hand, have been declining. In 2022, sales expenses decreased by 5.70% year-on-year to 364 million yuan; in the first three quarters of 2023, sales expenses decreased again by 4.68% year-on-year to 265 million yuan. The 2023 semi-annual report shows sales expenses of 235 million yuan, with advertising and promotion costs accounting for only 60%. Although Chengde Lulu has been continuously developing new products and aligning with young people's preferences in packaging design and brand operations, in a consumer era full of co-branding and dazzling product innovation, lower sales expenses also mean its product marketing iteration lags behind peers, even appearing somewhat dull. Image source: New almond milk packaging design closer to young people For example, Chengde Lulu has continuously adjusted its advertising slogans, from "Drink hot Lulu in winter" to "Good nutrition for breakfast, drink hot Lulu" to the current "Small almond, big health," but while emphasizing the health attributes of plant protein beverages, it has failed to find an advertising slogan that hits consumers' pain points. Compared to Yeguo Coconut Juice, which has become a nationwide drink through black-and-red marketing with annual sales exceeding 5-6 billion yuan, and Six Walnuts, which with the slogan "Use your brain often, drink more Six Walnuts" has brought Yangyuan Beverage revenue of 7-8 billion yuan or more, Chengde Lulu's annual revenue has never exceeded 3 billion yuan since 2014. At the same time, I also found that offline, Chengde Lulu products do not have an obvious price advantage. For the same 240ml/can classic iron can packaging, Six Walnuts retails at around 4 yuan, while Chengde Lulu retails at around 4.5 yuan. Even in another supermarket, Chengde Lulu almond milk retails at 4 yuan, while the adjacent Yangyuan Six Walnuts "Walnut Almond Milk" retails at 3.6 yuan. Image source: Chengde Lulu products do not have a price advantage Not only that, but the new almond milk product is priced at 7.5 yuan. "The new almond milk has no discounts; even buying a whole case is 7.5 yuan per can," the supermarket beverage section salesperson told me. He observed that at this price, some consumers are willing to buy one can to try, but more people, seeing the 7.5 yuan price, reach for the 4 yuan almond milk or other brands. Luo Ying also said that she remembers going back to Chengde for the New Year in 2018, when the usual price of a case of Chengde Lulu almond milk, over 70 yuan, could rise to 90 yuan per case, "can't afford it." Clearly, facing high-priced plant-based beverages, some people stick with nostalgia, some are loyal to taste, but more consumers are deterred and turn to other brands. As A Yang said, "Chengde Lulu's new almond milk is actually 7.5 yuan, which directly deters me." 🔺Scan code for ticket consultation🔺