Author|Liu Chunxiong Source|Teacher Liu's Forum (ID:liuchunxiong1964) Although the industry is not booming, at least in the beverage sector, the situation is quite different from two years ago. It can be said that a new turning point has emerged. Two years ago, the beverage industry was generally sluggish. Now, I can summarize the situation in one sentence: "Sunrise in the east, rain in the west." Different climates on the same day, with varying weather. On one hand, giants are declining, with local rain; on the other hand, the industry situation is good. Second- and third-tier brands and new brands are performing well, with overall sunshine. Previously, giants represented the industry; to analyze the industry, one only needed to look at the listed companies' reports. Now that's no longer possible. It can even be said that giants have become the "opposite" of the industry's overall performance. Overall, I believe the beverage industry has entered a new period of strategic opportunities, with rapid differentiation and a new landscape forming. If, three or four years ago, someone said the beverage industry was about to embrace strategic opportunities, most people would not have believed it. What was it like three or four years ago? In 2013, most FMCG industries reached their historical peak, then began a three-to-four-year decline, with widespread pessimism in the FMCG sector. It was also at that time that beverage industry giants were declining, some for three or four consecutive years. But now, it seems that might have been the start of strategic opportunities for the beverage industry.
- Giants Are Declining From the reports of listed beverage companies, the data we see is pessimistic. It seems the beverage industry has entered a downward channel.
- In 2016, Nestlé Greater China sales fell 7.4%;
- Coca-Cola fell 5.49% in 2016, with global performance declining for several consecutive years;
- Master Kong began declining in 2014, with three consecutive years of decline;
- Uni-President, Want Want, and Wahaha also hit turning points in 2014. 2014 seemed to be a tough year. Not only the beverage industry, but almost all FMCG industries reached their sales peak in 2013, with 2014 marking the beginning of widespread decline. Is it really true, as these listed companies often say, that China's market growth is slowing? At least for the beverage industry, I disagree. The claim that traditional beverage categories are experiencing slowing growth is something I agree with. Especially categories introduced from abroad, like cola drinks, should have reached their peak. If it weren't for its American origin and representation of American culture, I think it would be difficult for it to become a mainstream category. In the past, the beverage field had relatively high category concentration. When categories decline, the result is inevitably a decline for major brands. However, the decline of traditional categories does not represent an overall decline in beverages.
- The "Long Tail" Is Growing Unlike the decline of major beverage brands, second- and third-tier brands are doing quite well. However, their voices are often absent from mainstream media. Some are growing rapidly, some are out of stock. Brands that were once severely marginalized, or even lower-tier brands, are now living comfortably. Moreover, new brands are continuously entering the beverage field. We used to think beverages were a highly concentrated industry, but now it is in a state of "re-differentiation." Industry leaders are declining, but the long tail is growing, and driving the entire industry's growth. This might be the long-tail phenomenon in the beverage industry.
- Category Innovation If you pay attention to supermarket beverage shelves, or cold cabinets in stores and hotels, you'll notice that beverage categories are now extremely rich. A large number of new categories enter the market every year. This year, hawthorn drinks are particularly hot, but in fact, every year there are new categories that are relatively popular. What kind of new categories are popular? Categories introduced from abroad that can adapt to China should have been introduced almost completely; those that haven't become popular yet might face difficulties. Of course, some foreign beverage categories might still need time; for example, I think soda water still has opportunities. Current innovative beverage categories have a basic orientation: many new categories originate from Chinese traditional consumption culture, and conceptually, "medicine and food homology" is more acceptable to consumers. In the past, imported beverage categories overwhelmed Chinese ones, an era when Chinese consumers lacked confidence. That era is passing; consumers are regaining confidence in traditional culture, reflected in the beverage field by seeking innovation inspiration from Chinese traditional consumption culture.
- Price Bands Are Rapidly Lengthening In the past, beverage competition was at the "bottom of the pyramid," with everyone concentrated at the bottom, highly homogeneous, competing on scale, so concentration increased. Take water drinks as an example: the original mainstream price was 1 yuan, now it has become 2 yuan, and is moving toward 3 yuan. There are companies operating at 4 yuan, 5 yuan, and even higher price bands. Higher price bands, though not mainstream now, are important for early positioning and layout. Three years ago, making a 5-yuan beverage was difficult; now it's the right time. In convenience stores in Beijing and Shanghai, beverages above 10 yuan fill the cold cabinets. Take beverage gifts as an example: the past price band was 30-40 yuan, now it has entered 50-60 yuan, and some regions are entering 70-80 yuan. A gift market above 100 yuan is also quietly forming. As price bands lengthen, each price band has stable consumers, enough to form scale. With the continuous lengthening of price bands, the future mainstream price band will become increasingly diluted, forming a normal distribution of price bands.
- Bottom-Line Safety Why are second- and third-tier brands growing? Why can new brands survive? This is a question I care about. Marketing expert Niu Enkun mentioned an opposite phenomenon: "Baijiu is concentrating, beverages are differentiating." My interpretation is: In the beverage field, there is a phenomenon of 'bottom-line safety,' meaning consumers' safety concerns about ordinary and new brands have decreased. Meanwhile, baijiu is constantly exposed to various problems. The food sector is an area where Chinese people are not reassured, but beverages overall have performed well. Without this premise, it would be difficult for second- and third-tier brands and new brands to do business. This is the result of the collective performance of the beverage industry, and we should applaud the practitioners in this industry.
- Universal Leisure Lifestyle The growth in beverage sales is actually a result of lifestyle changes, just like the growth of leisure snacks. Although southern beverages are mainly "ready-to-drink" and northern ones are mainly "gifts," the universal leisure lifestyle has provided support for beverage sales growth. Going out is leisure, staying at home is also leisure; this is what I define as the universal leisure lifestyle. Opportunities for going out for leisure are certainly increasing, bringing growth in ready-to-drink consumption. Staying at home is also leisure, bringing the out-of-home leisure consumption style home. The growth in beverage consumption should be related to this.
- Quality Changes Perceptions In the past, marketing believed "perception is greater than fact." Major brands had strong communication capabilities, leading to brand concentration. The combination of the internet and marketing has brought new marketing and communication methods, such as KOLs (key opinion leaders), experiences, scenarios, community communication, etc. These methods can achieve saturated and targeted communication in local areas, and communication is based on experience, making it 'autonomous communication.' Because consumption experience comes first, current communication is "facts change perceptions," completely different from the past "perception is greater than fact." Traditional marketing had two separate stages: one was air communication to build the brand; the other was ground sales. The combination of the internet and marketing has formed '4Ps are all communication,' 'products carry their own IP,' 'channels are inherently traffic sources,' and consumers are also communicators, with UGC (user-generated content) communication being more effective. All this makes it possible for new brands to quickly form consumer perceptions in local markets. This year's leading hawthorn brand, Xiaoshile, rose rapidly as a new product and quickly formed category and brand awareness, using new communication principles.
- New Round of Strategic Opportunities Regardless of the reasons, under the pattern of "sunrise in the east, rain in the west," the beverage industry is experiencing expansion in price bands, categories, and other aspects. The industry landscape is changing, and what the new landscape will look like is hard to say. Although giants are declining, it cannot overshadow the strategic opportunities in the industry. I believe this is the beginning of a new round of strategic opportunities. The new round of opportunities will definitely be "differentiation first, then concentration." The direction of innovation and development is relatively clear, and some are already exploring new internet marketing models. A better beginning is worth embracing! -END-