The problem lies in shrinking volume, while the opportunity lies in gear-shifting blockbuster products. Blockbuster products cure all ills. Use gear-shifting blockbusters to open up the industry ceiling. FMCG manufacturers are having a tough time recently, and even leading companies are no exception. Many regional managers have been replaced, even in batches. Many sales executives have also been replaced entirely. The reason is simple: growth has hit a major obstacle, and with the current situation, there is no immediate solution. To drive growth, all levels have been aggressively pushing inventory, leading to a surge in near-expiry products and some distributors' warehouses bursting at the seams, approaching the state of 2015-2016 when there was a large-scale replacement of distributors and some distributors fled. The popularity of the concept of shrinking volume is a comprehensive reflection of the current difficulties faced by manufacturers and distributors. So, what is this predicament? I believe it is the lack of gear-shifting blockbuster products that can drive industry progress and open up new industry ceilings. 8 Years Ago, the First Solution to the Shrinking Volume Problem 2013 was the first year of shrinking volume in FMCG. Of course, it wasn't called shrinking volume then; it was called declining sales. People thought shrinking volume was abnormal and believed growth would soon return. In 2014, shrinking volume continued. People still thought it was abnormal and had expectations for growth. In 2015, shrinking volume continued. People began to think shrinking volume was normal. Shrinking volume became the new normal, but they were at a loss when facing it. Over 30 years of reform and opening up, FMCG had sustained growth, creating a growth inertia. When first encountering shrinking volume, it's normal to be at a loss. So, increasing promotions, even cutting prices, was a natural reaction. If that didn't work, they would replace people and increase pressure, which is also normal practice. Replacing people didn't solve the problem, and replacing distributors didn't solve it either. Because there was no fundamental solution, replacing anyone was the same. The result of increased pressure was that distributors generally had their warehouses bursting, and some even faced capital chain breaks and fled. In 2014, I proposed the concept of "mainstream gear-shifting". Why did I propose mainstream gear-shifting? Because I believed shrinking volume was normal, and the only way to solve it was through product upgrades and gear-shifting. What is mainstream? It refers to the product with the highest sales volume, called the mainstream product. What is gear-shifting? It means "changing the main course." At a feast, you don't change the side dishes; you change the main course, replacing the most impressive signature dish. Otherwise, the feast still won't be welcomed by guests. Starting in 2016, a batch of previously dormant products exploded into industry blockbusters, such as Tang Daren (a noodle brand); a batch of companies discovered the potential of blockbuster products, such as Mosilian, Ambrosial, and Chunzhen (yogurt brands); some industries began the path of high-end upgrades, such as the high-end liquor trend led by Moutai; some industries saw continuous upgrades, such as beer price bands moving from 3 yuan to 5 yuan to 8 yuan, with the fastest growth now in the 10-12 yuan range; and some industries experienced overall upgrades, such as bottled water moving from a 1 yuan price band to 2 yuan. The launch of a batch of gear-shifting blockbusters opened up new ceilings for many industries, seemingly temporarily solving the shrinking volume problem. Please note two important concepts here: one is gear-shifting, and the other is blockbuster products. By breaking through the industry ceiling, the negative impact of shrinking volume was resolved. It's not that the shrinking volume problem was solved, but that a new growth model replaced the incremental model. People seem to have forgotten the shadow of shrinking volume. This is an important milestone: replacing increment with growth, replacing quantity growth with valuable growth. The era of increment is over! Opening the Industry Ceiling I naively believed that after the successful mainstream gear-shifting in 2016, China's leading FMCG companies had successfully transformed, found a value growth model, and successfully transitioned from quantity growth to value growth. To put it more bluntly, the shrinking volume problem was solved by gear-shifting blockbusters opening up the industry ceiling, thus entering a new upward trajectory. It wasn't until recent years, when the term shrinking volume became popular, that I realized I was naive. Why did the concept of shrinking volume become popular again? Because the gear-shifting blockbusters from 2016 have entered the mature stage of their life cycle and can no longer drive growth, so the shrinking volume problem has resurfaced. It's truly like "once on shore, one prays no more"! When it hurts, it feels like a new scar. The popularity of the negative term shrinking volume only indicates the despair of not finding a way out. Especially in recent years, with the special macro environment, the macro transformation period, and self-media selling anxiety, a collective judgment has formed: shrinking volume is not a trend but a problem. It even implies that only when the overall environment improves can the shrinking volume problem be solved. This only shows that although the 2016 mainstream gear-shifting found a method, it did not fundamentally change perspectives. When encountering similar problems, traditional thinking resurfaces. In fact, in recent years, some new mainstream price band blockbusters have been launched with good results. For example, Oriental Leaf and Genki Forest (beverage brands) have made the beverage industry one of the few industries that grew in 2023; in the beer industry, Yanjing's U8, Tsingtao's White Beer, and China Resources' Heineken have been successfully launched, performing well despite a cumulative 40% decline in beer industry volume. The shrinking volume problem hasn't changed, and the solution hasn't changed either; we still need to return to the transformation logic of mainstream gear-shifting. Therefore, starting in 2023, I have repeatedly proposed a new concept: new mainstream price band blockbuster products. The reason I didn't continue using the mainstream gear-shifting concept is mainly that I think new mainstream price band blockbusters are more specific and easier to translate into operational levels. A batch of decision-makers has already felt the benefits of this concept. In this article, I repeatedly mention a term: opening the industry ceiling. Opening the industry ceiling brings growth space for all enterprises. The purpose of using concepts like new mainstream price band and blockbuster products is to realize the importance of opening the industry ceiling. New Mainstream Price Band Blockbusters New mainstream price band blockbusters are a fusion of two concepts and a concrete concept. One is the new mainstream price band, and the other is blockbuster products. In 2017, when mainstream gear-shifting showed promise, I wrote an article titled "Occupying a Price Band Means Occupying an Era," first proposing the concept of price bands. Contrary to many people's belief that "the lower the price, the greater the sales," product sales follow a normal distribution around the mainstream price band. The mainstream price band is the price band with the highest sales volume. For example, the current mainstream price band for bottled water is 2 yuan, with the highest sales volume, while the 1 yuan price band is gradually marginalized, and the 3-4 yuan price band has far lower sales than the 2 yuan band. Therefore, the current mainstream price band for bottled water is 2 yuan. The adjustment of a company's product structure is not about going high-end, as many think, but about gradually upgrading around the mainstream price band. In the dairy industry, the previous round of mainstream gear-shifting products like Ambrosial replaced old mainstream price band blockbusters like Yoghurt. In the past, discussions about product upgrades were often too general, especially when some thought product upgrades meant going high-end. High-end products have no volume and do little to change the shrinking volume dilemma. For product upgrades to have an impact on the industry, they must seize the opportunity in the new mainstream price band. In particular, they must use the new mainstream price band to open the industry ceiling. Upgrading the mainstream price band, compared to quantity growth, has strong strategic layout capabilities, and strategic layout requires a long time span. First, starting from existing products, lay out across all mainstream price bands. According to the three-level theory, a company should have products at three levels: one is products that achieve current sales (first growth curve); two is products that support future sales (second growth curve); three is seed products (future growth curve). Future blockbusters emerge in the following order: seed products → future mainstream products → current mainstream products. Laying out products across price bands is like seed products; first, sow the seeds, see which ones sprout, and try for a long enough time. Tang Daren and Oriental Leaf are blockbusters that took 8-10 years of layout before exploding. The mainstream price band is the price band with the highest sales volume in the industry. For example, the original mainstream price band for beer was 6-8 yuan, the fastest-growing new mainstream price band is 8-10 yuan, and the fastest-growing price band is 10-12 yuan. This is a very good price band layout. In the context of shrinking volume, growth in the 8-10 yuan band can solve the industry's growth problem. And the rapid growth of the 10-12 yuan band, despite a low base, lays the foundation for newer mainstream price bands. New marketing expert Mr. Fang Gang has organized a price band layout for the beer industry. Because the layout is clear, although the beer industry continues to shrink, the leading companies are performing well overall. Second, the new mainstream price band must produce blockbuster products. A structure without blockbusters is only symbolic. Tsingtao's Tsingtao Whole Wheat, August, and Tsingtao Pure Draft, Yanjing's U8, and China Resources' Snow Pure Draft constitute the blockbusters driving growth in the new mainstream price band. Looking back at industries with intense involution, they all lack new mainstream price band blockbusters. Without upward momentum, there is only downward involution. After entering the internet era, a saying circulated in the FMCG industry that there would be no more 10-billion-yuan blockbusters, only 1-billion-yuan ones. Now it seems this saying is wrong. Oriental Leaf is a counterexample. As long as the upgrade of China's mainstream price bands is not over, there will always be space for new blockbusters, and the internet has the ability to automatically create "headlines," with attention resources automatically concentrating on the top, which is conducive to creating new blockbusters. Dual-Front Warfare Yili is the leader in the dairy industry, with sales of around 140 billion yuan, but 5 blockbusters account for more than half of sales. Among them, 2 are 20-billion+ blockbusters, and 3 are 10-billion+ blockbusters. An enterprise without blockbusters is soulless. Because blockbusters are the carriers of brands, making brands no longer abstract. About 20 years ago, I proposed the "trilogy" of market advancement: single product breakthrough (blockbuster) → product enrichment → product structure. Without a blockbuster leading the way, other products have no driving force. The value of a blockbuster is equivalent to "one person attains the Way, and his chickens and dogs ascend to heaven." More importantly, blockbusters become the focus of marketing, providing a handle for marketing. However, each era has its own blockbusters. All blockbusters are the greatest common divisor of consumer needs in that era. No matter how much personalization is emphasized, personalization without blockbusters lacks a comparative background. The reason blockbusters sell well is that they occupy the mainstream price band. The mainstream price band also reflects the greatest common divisor of purchasing power in that era. In the current market environment, K-shaped divergence is a classic description. K-shaped divergence indicates that some consumers are trading down, while others are trading up. What should we do in the face of K-shaped divergence? I believe we need to engage in dual-front warfare. In the figure above, I have delineated three areas: the involution quagmire zone, the involution scale zone, and the involution victory zone. Dual-front warfare mainly refers to the dual-front warfare in the involution scale zone and the involution victory zone. The involution quagmire zone is the death zone of involution. Once you fall into the quagmire, the more you struggle, the deeper you sink. Without external force to pull you out, there is only death. In this zone, a large number of small and medium-sized enterprises fall into price involution until they are on the verge of losses in batches, or even disappear in batches. Low-end price involution easily pushes quality to the edge, and a slight mistake can lead to quality problems. Therefore, involution in this zone is absolutely suicidal, leading to widespread death and thus increasing industry concentration. The involution in the involution scale zone is involution around the old mainstream price band, which easily expands scale and squeezes competitors. There are two reasons for expanding scale: first, involution in this price band attracts consumers from lower price bands due to extremely high cost-performance, thereby expanding the scale of this price band; second, the form of involution in this price band differs from that in the low-end price band. Involution in the low-end price band is presented as "cheaper." Involution in the old mainstream price band is presented as "getting a bargain." The difference between "cheap" and "getting a bargain" is significant in consumer perception. It's not that manufacturers in the low-end price band don't want to use the "getting a bargain" approach, but their channel capabilities are weak, and they have no handle at the terminal, so they can only be "cheaper." Little do they know that "cheap" cannot lead to "getting a bargain." Only consumers with extremely low incomes reluctantly buy "cheap" products; most will choose "getting a bargain." The involution victory zone, strictly speaking, has no price involution, only new product promotion and value presentation. The involution is in promotion methods and intensity, not strictly involution. Because growth in this zone can generate significant momentum and profits, and at critical moments, it can support the involution in the involution scale zone. Dual-front warfare means involuting to scale in the involution scale zone, promoting momentum and profits in the involution victory zone, and finally becoming the victor. The "getting a bargain" style involution in the involution scale zone is not difficult. But promoting blockbusters in the involution victory zone is extremely difficult. Especially after entering the internet era, there is currently no model for promoting blockbusters. Nurturing Blockbusters The launch of new mainstream price band blockbusters requires three conditions: first, advanced R&D and early channel dormancy; second, company-wide brand communication; third, channels using new blockbusters as an incremental handle to revitalize all channels. Let's discuss these three aspects. First, let's talk about the two keywords: advanced R&D and channel dormancy. Tang Daren was launched in 2008 and became popular in 2016; Oriental Leaf was launched 10 years ago and became popular in 2022. Both fit these keywords. Advanced R&D forms new product seeds. Can the seeds sprout? Unknown. Advanced R&D also means low sales volume. With low sales, you still need to continue promoting. This is hard to balance. For advanced R&D and channel dormancy, I emphasize four aspects: First, there is still price space in the Chinese market for new mainstream price band blockbusters. The upgrade space for Chinese blockbusters is not over; in fact, it is in a golden period. Recently, I chatted with a leading FMCG executive, and our common view was that China's future mainstream price bands will exceed those of Europe and the United States, but currently they are still lower. Therefore, there is broad space for upgrading China's mainstream price bands, and we should dare to lay out in new price bands. Second, advanced R&D is not a gamble but trial and error. The new mainstream price band is relatively easy to determine, but what the blockbuster will be is hard to determine. Advanced R&D provides more room for trial and error. When competitors' blockbusters succeed, you can imitate, but competitors have established their "authentic" position. Third, channel dormancy is the core. Since we need advanced R&D, it means that when entering the market, the price is somewhat high, and the market may not accept it. In an era where sales volume is the reverse affirmation of products, low sales mean product failure and channel abandonment. How to solve the channel dormancy problem? New mainstream price band products must not be fully distributed; they should be distributed to specific terminals. Don't assess "distribution rate," but must assess "accurate distribution rate," i.e., the distribution rate in qualified terminals. As long as you are promoting new products, it must be "accurate distribution rate" assessment. When there is no sales volume, keeping advanced R&D products alive is the only way to have future new mainstream price band blockbusters. Early channel dormancy is currently a challenge. Especially under such pressure to push inventory, who is willing to work on products that "may have a future but no sales now"? The success of Oriental Leaf, I think, has a symbolic role. At least it tells us: new mainstream price band products have opportunities. Let me give two examples: Kunlun Mountain Mineral Water and Evergrande Ice Spring. Both were launched at similar prices. Kunlun Mountain Mineral Water, through "wine-water integration," positioned itself as a companion for high-end liquor, occupying a niche market at 4-5 yuan per bottle. As the mainstream price band for mineral water upgrades, it may eventually enter the mass channel. This is channel dormancy. Evergrande Ice Spring had successful marketing but failed sales. At that time, bottled water was transitioning from the 1 yuan price band to the 2 yuan band. Evergrande Ice Spring's 4-5 yuan price band was neither in the old mainstream nor the new mainstream. However, it was fully distributed to terminals. A seed product, but it wanted to enter the new mainstream price band without early dormancy. Fourth, discover the potential of blockbusters. This is very difficult. Honestly, I really don't know how to judge. Because long dormancy followed by sudden popularity is the norm. Before that, it's hard to predict. Communication and Promotion of Blockbusters Once the dormancy period for new mainstream price band blockbusters is over, it's certain that significant money will be spent on promotion. However, it's really unexpected that leading companies now face difficulties in spending money on marketing communication. Because there is no definitive communication medium, companies don't know where to invest. In the mass media era, betting on CCTV was a high-probability event. In the self-media era, with media fragmentation, the communication model for blockbusters faces a problem: where to spend money? For mass FMCG products, there is currently no corresponding communication and promotion model. The "Xiaohongshu + Bilibili" saturation model used by new consumer brands has basically failed. The current IP-based communication model has repeatedly created communication miracles but is not suitable for mainstream price band blockbusters. Few mainstream price band blockbusters become IPs; they can only become classics. In the era of media fragmentation, online omni-channel marketing + offline integrated marketing communication may be a more reliable model. The basic logic is Schultz's integrated marketing communication theory. Treat all contact points as communication points, speak with one voice, and achieve the effect of "same frequency resonance, accumulating small amounts into large." In the past, blockbuster promotion used a flood irrigation model. This is a large closed loop of mass production, mass communication, and mass distribution, which costs a lot. Now, a better model is Hua and Hua's super symbol model and the bC integration model I proposed, characterized by small closed loops. Form a high-density closed loop between B-end and C-end in specific business districts, quickly forming regional scale. Summary The FMCG industry lacks blockbuster products that can drive industry progress and open up the industry ceiling, which is the cause of the current difficulties in the shrinking volume era. The shrinking volume era is not over, but there are still multiple opportunities to launch blockbusters in the new mainstream price band. Therefore, in the face of the shrinking volume dilemma, don't complain, don't expect shrinking volume to reverse, but focus on new blockbusters, and like in 2016, use new blockbusters to solve the industry's difficulties. What kind of blockbusters have the opportunity to break through? What products are consumers more willing to accept? What changes have occurred in promotion models? What good brand cases can we learn from? The era of true national blockbusters has not yet arrived. Can you be part of this era? From August 20-22, 2024, the [6th China FMCG Conference] with the theme "Crossing the Shrinking Volume Era" and the [3rd China FMCG Hard Discount Conference] & [3rd China FMCG Distributor Conference] will be grandly held in Shanghai. At this conference, we will continue to implement "professional methodology" and "case growth theory," bringing together all roles in the FMCG industry chain, top guest lineup, leading retail platforms, and national first-line excellent distributors, interpreting the truth of industry changes from multiple dimensions, deeply linking upstream and downstream of the industry chain, and efficiently docking cooperation opportunities! At the same time, three exclusive industry reports will be released on-site with in-depth interpretation! Keynote speeches, roundtable dialogues, report interpretations, closed-door salons, and networking dinners, with rich formats. Attend this conference and refuse to be a "frog at the bottom of a well"! **🔺Scan code for ticket consultation🔺******Recommended Reading