---
title: "Chinese Brands Under the Pandemic: Who Has Been Held Back?"
description: "The recurring COVID-19 pandemic has added variables to the reshaping of the brand landscape in the consumer industry. The outbreak in 2020 and its continuation have changed the consumption concepts and shopping behaviors of the new generation, directly impacted supply chains and sales across online and offline channels, and impacted primary market financing for new consumption. New consumer brands have been hit hard by this 'force majeure.' Meanwhile, established brands have readjusted their positioning and products, launching strategic counterattacks against new brands. Under the pandemic, what will be the outcome of the battle between new and old brands?"
author: "大君"
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published: "2022-05-29"
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# Chinese Brands Under the Pandemic: Who Has Been Held Back?

> The recurring COVID-19 pandemic has added variables to the reshaping of the brand landscape in the consumer industry. The outbreak in 2020 and its continuation have changed the consumption concepts and shopping behaviors of the new generation, directly impacted supply chains and sales across online and offline channels, and impacted primary market financing for new consumption. New consumer brands have been hit hard by this 'force majeure.' Meanwhile, established brands have readjusted their positioning and products, launching strategic counterattacks against new brands. Under the pandemic, what will be the outcome of the battle between new and old brands?

**Introduction**
The recurring COVID-19 pandemic has added variables to the reshaping of the brand landscape in the consumer industry.
The outbreak of COVID-19 in 2020 and its continuation have changed the consumption concepts and shopping behaviors of the new generation of consumers; directly impacted supply chains and sales across various online and offline channels; and impacted primary market financing for new consumption... New consumer brands, which were in full swing, have been dealt a heavy blow by this 'force majeure.'
At the same time, established brands have readjusted their positioning and products, launching strategic counterattacks against new brands. Under the pandemic, what will be the outcome of the battle between new and old brands?

**The Consumer Market Under the Pandemic**
During the pandemic, consumers have shown deeper trust in well-known established brands.
In April, among the free daily necessities distributed by the Shanghai government, 'Longjinhua' corn germ oil stood out. Because this edible oil had limited brand awareness in the Shanghai market and its name resembles 'Arawana' and 'Luhua,' it inevitably reminded people of the love-hate entanglements between Master Kong and Kangshuaibo or Kangshuafu on green trains years ago.
Years later, brands like Kangshuaibo have faded from public view, but Master Kong itself has been suspected of copying Uni-President. Although the 3·15 investigation later found that both had 'stinky foot-flavored pickled cabbage noodles,' neither was nobler than the other. However, because of the brilliant endorsement by Wang Han for Uni-President—'Some imitate my face, and some imitate my noodles'—consumers are constantly reminded to believe in the power of authentic lineage. Similar incidents include Sprite vs. 'Leibi,' and 'Six Walnuts' vs. 'Five Walnuts' vs. 'Six Nuclear Bombs.'
Such reminders are clearly effective, as many netizens questioned whether Longjinhua was a knockoff, jokingly calling it 'the child of Arawana and Luhua.' Alongside Longjinhua, a group of 'Longkou vermicelli' brands such as Longren vermicelli and LongD vermicelli also appeared. Although it was later confirmed that Longjinhua was established in the 1950s and is a legitimate old Shandong enterprise, the little-known brand still excited netizens who felt like they were collecting a complete encyclopedia of knockoff brands, with topics like 'Magic City Four-Piece Set' (which wouldn't even be listed on Pinduoduo) continuing to ferment.
After several mishaps in procuring supplies in some areas, the selection of Shanghai's guaranteed supplies seemed to uniformly turn to well-established brands. In Xuhui District, which has the best supplies, mature brands like Uni-President, Jindian, Haitian, Arawana, and Wanchai Ferry appeared frequently; in Pudong New Area, Panpan, Mengniu, P&G, and Qingmei dominated; in Putuo District, Yurun, Colgate, L'Oréal, Xinxiangyin, and Fuling Zhacai were common...
The supplies in the above images are from some streets in Xuhui, Pudong, Putuo, Jing'an, Huangpu, and Hongkou districts. Traditional well-known brands dominate, with few emerging brands.
Image source: Internet
Fresh food platforms with surging orders are also battlefields dominated by mature brands.
On Dingdong Maicai, familiar brands like Yili, Bright, Uni-President, Jinluo, Haidilao, Zhou Hei Ya, Master Kong, and Coca-Cola dominate; on Hema, Baixiang, CP Group, Tyson, Deluxe, Wufangzhai, Hormel, and Coca-Cola are regulars; on Meituan Maicai, veteran brands like Mengniu, Bright, Deluxe, Feihe, Taoli, Sunner, Haitian, and Fulinmen are top-tier; on Pinduoduo's community group-buying star products still come from well-known brands like Bright, Panpan, Youchen, Lay's, Coca-Cola, and Nongfu Spring.
In addition, according to screenshots shared by netizens, even in group-buys initiated by community leaders, mature brands are roughly the regular guests on the list.
Group-buy items from a Shanghai community leader
Image source: Internet

**How Are Old and New Brands Really Doing?**
Under the pandemic, consumers' preference for mature or market-leading brands is not unique to Shanghai.
Yili's 2021 annual report and 2022 first-quarter report show that its white milk, which has health attributes and is a guaranteed supply product, saw increased penetration and reputation during the pandemic, with the fastest market share growth in the market. It not only became the first Asian dairy company to exceed 100 billion yuan in revenue but also achieved a 35.3% revenue increase in the first quarter, its highest profit growth in five years.
Haitian, which has the strongest scale advantage in the soy sauce industry, maintains the top market share. Haitian Weiye's 2021 annual report shows revenue of 25.004 billion yuan, a year-on-year increase of 9.71%; net profit attributable to the parent company was 6.671 billion yuan, up 4.18% year-on-year.
Looking at the condiment industry in 2021, overall performance showed a downward trend. Except for Haitian Weiye, which achieved growth in both revenue and net profit, other companies either increased revenue without profit growth, saw declines in both, or suffered losses, with continued operational pressure.
Emerging brands are not entirely without competitive strength.
In the still-growing cheese industry, Miaokelanduo, leveraging its big single product—children's cheese sticks—and Mengniu's channel advantages, achieved revenue of 4.478 billion yuan in 2021, a year-on-year increase of 57.31%; net profit attributable to listed company shareholders was 154 million yuan, up 160.60%, successfully becoming the number one domestic cheese brand, and surpassing Baijifu to become the top in C-end market share.
In the emerging category of sugar-free sparkling water, Genki Forest remains the most prominent. According to information disclosed by Li Guoxun, vice president of Genki Forest, 2021 revenue was 2.6 times that of the same period last year (Genki Forest's 2020 revenue was 2.7 billion yuan), reaching 7.002 billion yuan; in the first quarter of 2022, revenue grew 50% year-on-year. Despite intense competition in the sparkling water market, growth remains impressive.
The pre-made dishes industry, which has seen rapid market expansion in recent years, is also friendly to both old and new brands, not only driving rapid growth for emerging brands but also opening up growth ceilings for old brands.
In 2021, Qianwei Central Kitchen achieved revenue of 1.274 billion yuan, a year-on-year increase of 35%; net profit was 88.46 million yuan, up 16%. Among them, pre-made dishes, a key focus for Qianwei in 2021, achieved sales of over 14 million yuan, a year-on-year increase of 34.35%.
Weizhixiang, the 'first stock of pre-made dishes,' achieved revenue of 765 million yuan in 2021, up 23% year-on-year; net profit was 133 million yuan, up 6%. In the first quarter of 2022, Weizhixiang achieved operating revenue of 186 million yuan, up 14.17% year-on-year; net profit was 35.69 million yuan, up 21.9%.
In the catering industry, whether for emerging or old brands, the phenomenon of increasing revenue without increasing profit is common, with declines in table turnover rates, same-store sales, and per capita consumption occurring from time to time.
McDonald's China opened 1,494 new stores in 2021 and closed 661.
Haidilao opened 421 new stores in 2021 and closed 276, achieving revenue of 41.11 billion yuan, a year-on-year increase of 43.7%; but net profit was a loss of 4.16 billion yuan, close to the cumulative net profit of the three years from 2018 to 2020 (4.3 billion yuan). The table turnover rate continued to decline from 5 times/day in 2018, 4.8 times/day in 2019, 3.5 times/day in 2020, to 3.0 times/day in 2021, the lowest since listing.
Starbucks China's same-store sales grew 17% in 2021, with same-store transactions up 19%, but average ticket price fell 2%.
Luckin Coffee's total net revenue for fiscal 2021 was 7.9653 billion yuan, up 97.5% from 4.0334 billion yuan in fiscal 2020. Under US GAAP, operating loss was 539.1 million yuan, significantly reduced from the 2.5873 billion yuan loss in fiscal 2020, but losses still exist.
Nayuki's 2021 revenue was 4.296 billion yuan, up 40.5% from 3.057 billion yuan in 2020. Adjusted net profit turned from a profit of 16.6 million yuan in 2020 to a loss of approximately 145.3 million yuan in 2021.
By the end of 2021, Helen's Bar network expanded to 782 stores, with revenue increasing from approximately 818 million yuan in 2020 to 1.836 billion yuan in 2021, a year-on-year increase of 124.4%; but net profit attributable to the parent company turned from a profit of 70.07 million yuan in 2020 to a loss of 230 million yuan in 2021.
The catering industry is not entirely defeated; some brands still achieved growth in both revenue and profit. For example, Jiumaojiu's revenue was approximately 4.18 billion yuan, up 54.0% year-on-year, with net profit reaching 340 million yuan, up 169.7%.

**What Has the Pandemic Really Changed?**
**1. Declining consumption capacity leads consumers to prefer affordable products**
Against the backdrop of macro-environmental changes and recurring pandemic, companies have started layoffs due to poor operations. In March, the surveyed urban unemployment rate was 5.8%, with the rate in 31 large cities at 6.0%, a high level for the same period in recent years.
Due to unemployment or reduced income, consumers' spending capacity has become clearly insufficient, suppressing consumption willingness and propensity. According to data from the National Bureau of Statistics, after recovering in the second half of 2020, the consumer confidence index showed a marginal weakening trend in 2021. Consumers tend to buy low-priced, affordable products.
At the same time, for cost considerations and to cope with profit compression from inflation and pandemic-related logistics, raw material, and labor market issues, some brands have had to raise prices to offset negative impacts. For example, in the fourth quarter of 2021, condiment companies began raising prices to cope with rising raw material costs.
Head brands, benefiting from economies of scale, generally have lower product prices or smaller price increases, which to some extent mitigated the weak performance during the pandemic. Some head brands, such as Nayuki and Heytea, have even been able to reverse course by lowering prices to boost customer traffic while maintaining profit margins.

**2. Optional consumption gives way to essential consumption, increasing stockpiling demand**
With restrictions on travel, logistics, and consumption, consumers' curiosity and desire to try new things are suppressed, shifting from optional consumption to essential consumption, increasing the demand for stockpiling.
For example, driven by rigid demand and health attributes, both room-temperature and low-temperature white milk achieved double-digit growth in 2021. In contrast, yogurt, positioned as an indulgent consumption with optional attributes, only saw single-digit growth during the pandemic.
In various tracks of essential consumption, after multiple rounds of survival of the fittest, head brands have stable market shares. Head brands have advantages in brand endorsement, supply chain, operations, and food safety management, making it easier for them to obtain qualifications as guaranteed supply enterprises and gain consumer trust, entering the consumption whitelist. Thus, under pandemic disruptions, their overall performance has been relatively stable.
In addition, during the pandemic, in stockpiling scenarios, considering safety, cost-effectiveness, and storage time, the substitution effect of instant food and pre-made dishes for takeout and regular meals is evident. It can be said that stockpiling demand has indirectly promoted market education and accelerated the development of the pre-made dishes industry.

**3. Sharp decline in offline consumption, catering industry hit hard**
The pandemic has caused a hard loss of some consumption scenarios. Since 2020, with recurring outbreaks and rebounds in various regions, some industries have been required to suspend operations by the state, and offline gathering consumption scenarios have been severely hit. At the same time, under the propaganda and call to 'not gather, go out less,' consumers have a low willingness to go out, and out-of-home consumption has plummeted.
According to HuiKeyun data, from 2020 to 2021, foot traffic in national shopping centers recovered to 64% and 75% of 2019 levels, respectively. In the second half of 2021, due to factors such as sporadic outbreaks, the recovery of foot traffic in national shopping centers was actually worse than in 2020.
Entering 2022, the pandemic struck, with severe situations in places like Shanghai and Hangzhou causing significant disruption to the improvement trend, making offline recovery difficult to imagine.
The continued downturn in offline consumption has put enormous pressure on catering companies. Under the impact of the pandemic on offline activities, the revenue growth rate of the catering industry has declined sharply, and profitability has deteriorated or even turned to losses.
According to data from the National Bureau of Statistics, in November 2019, before the pandemic, the revenue of catering enterprises above a certain size accounted for 13.03% of total retail sales of consumer goods. This proportion dropped sharply to 6.93% in March 2020, and throughout 2020, the year-on-year growth rate of catering revenue above a certain size was significantly lower than that of total retail sales. By December 2021, the two-year average growth rate of catering revenue was only -0.5%.
In this operating context, head enterprises, with strong capital support, have relatively stronger anti-risk capabilities, while some small and medium-sized catering enterprises and emerging brands have had to exit.

**4. New consumer investment returns to rationality, emerging brands seek new paths**
Since 2019, there have been dramatic changes on the supply and consumption sides: the main consumer group has changed generations, channel dividends from short videos and live streaming have arrived, industry chain expansion has accelerated, and primary market capital has begun to concentrate on the new consumption track. During this period, new consumer brands represented by Genki Forest, Manner, and Botanee emerged, with some quickly becoming important head brands in the industry and even completing IPOs.
However, since the second half of 2021, the primary market has gradually cooled, and the contraction of the financing environment has led to reduced investment in marketing. Because emerging brands rely on category innovation to break through in a relatively stable brand landscape, they need to repeatedly communicate their differentiation to consumers through marketing. Thus, when marketing investment decreases, brand voice drops sharply, sales decline, and companies have to shrink their frontlines. However, some brands, by laying out plans in advance to diversify risks, have still achieved performance growth during the pandemic.
For example, Heytea, in addition to its new-style tea business, expanded into bottled beverages to reach customer groups that were previously inaccessible due to time and space constraints; and through CVC investments, it entered coffee, plant-based, and pre-mixed cocktail directions, accelerating business expansion and strengthening its moat.
Genki Forest, on the other hand, has built a nationwide offline channel system to establish direct access to consumers; self-built factories and supply chain management systems to address shortcomings in production, supply chain, and channels, solving its 'bottleneck' in capacity; and beyond sugar-free tea and sparkling water, it has entered sub-categories such as juice and electrolyte water, opening up new growth space.
Source: Consumption Circle (ID: xiaofeijie316) Author: Da Jun

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