Source: Dolphin Club | New Consumption New National Brands (ID: haitunzhiku)
Dolphin Club: Adopt a Cow has grown from 0 to 2 billion yuan in five years, making it a representative online new consumer brand in dairy. In your view, what aspects are not yet done well and need to be strengthened and improved in the future? What are the reasons behind this?
Chen Yaguang: I think there are two areas where we need to catch up and continue to invest in the future: the first is brand building, and the second is offline channel penetration.
First, brand building. Previously, I shared the view of many people that brand building is very costly, and after much research, there is no output, so it's better to directly take a few ads and content, invest first, and see what the ROI is. But later, as the scale grew, I realized that we really need to slowly do some subtraction and do some unchanging things.
If we don't build a brand, you'll find it hard to articulate your difference from others in terms of category or product itself. When consumers pay for your product, it's hard for you to negotiate prices.
But from a brand perspective, it could be the founder's original intention, the brand's value proposition, or your future mission, or a concept you've always adhered to but haven't realized yet. These things can infect users. What you win is not only business performance but also user mindshare and the satisfaction of users' emotional needs. This gives your product a premium.
Today's consumers, when choosing products, not only satisfy their physical attribute needs but also more spiritual needs, including name, appearance, copywriting, packaging experience, etc. Many new brands also meet such needs, gain certain pricing power, and thus have profits to better invest in the brand.
I think this is a positive cycle. Otherwise, what will it become? I rely on promotions to drive sales, I have to discount, I have to invest in traffic, and in the end, I find that competitors are also doing these things, and then we are stuck in this consumption, ignoring the development of the entire team and business, and in the end, most companies will "die."
The second area to improve is offline channel penetration. Many changes in online traffic are not subject to individual will, because competition between platforms is not so benign.
For example, this year we will find that Tmall is in a very bad situation among platforms, because some categories in the overall market are not growing. At this time, even if you work harder than last year, the final results are hard to show high growth.
Including many decentralized traffic platforms, increasingly personalized, you can't figure out their algorithms; your costs are not determined by you, but by platform supply-demand matching and platform profitability requirements. The more competitors you have, the more supply you have, and the higher the customer acquisition cost.
For example, today in our category, offline milk production is surplus, so they have to move it online to process, with big date discounts and promotions. The online user demand is limited; if they buy those big date products, they won't buy yours.
Another example: today the platform activity requires 300 minus 40, but the platform feels this is not enough to push sales scale, so they have to do 200 minus 30. Can the brand bear such costs?
So online is hard to determine the brand's basic market, especially since online user churn rate is very high, with most brands having a churn rate exceeding 70%. Unless your category has strong extension relevance, you can achieve a retention rate above 40%, otherwise, achieving 30% is already difficult.
Offline channel penetration is what determines the basic market. Because offline is limited shelf space, users face "limited choices." This means more consumers may be less price-sensitive or have rigid demand for products. So after some channel penetration, seizing the time difference or information gap is the basic market of brand business.
If new consumer brands are not strong offline, I think it will still be difficult. Because all your online actions, your competitors can easily find out by hiring a data company, including information flow investment, product reviews, factory information, etc. These are not secrets.
Dolphin Club: Now many media often talk about the end of the dividend period. In fact, we also see that the new consumer industry is becoming more and more involuted, and growth is slowing down. How do you view this phenomenon? Or, what dividends do you think will appear in the future?
Chen Yaguang: I think unfortunately, the traffic dividend is basically over. Our company is very sensitive to channels. This year, we spent a lot of manpower and resources to analyze all the platforms that are visible in the market and may change in the future, such as Pinduoduo, Kuaishou, Douyin, etc. We found that it is indeed difficult to have explosive growth like before. New traffic dividends have not yet emerged, or before the next emergence, there is a relatively long gap period.
But there is also a fortunate point. The new generation of consumers, what we call Generation Z or post-95s, have their own characteristics. This generation grew up in the internet age, and their needs have changed greatly. So in this process, the dividend of people's hearts is just beginning.
Previously, when starting a new brand, the idea was to find cheaper traffic for conversion. Now, when creating a new brand, the focus should be on how to capture the mindshare of this type of user?
Industry involution is not as serious as the market says, especially now that capital has returned to rationality. Previously, many brands, after getting money, would rush to scale, ignore supply chain capability building, invest in information flow to grab traffic, and finally lose more and more. But now it is gradually improving.
In fact, everyone truly returns to the product itself. Growth accumulated by product strength may take longer, but relatively speaking, this model is more reliable. This is my own understanding.
Dolphin Club: Adopt a Cow actually started from social e-commerce channels, and can be said to have returned from private domain traffic to public domain traffic, with experience in both operations. In your opinion, what are the cores of operations in public and private domains? Or, what should growth rely on respectively?
Chen Yaguang: I believe that the more advanced the operator, the further away from traffic.
In public domain traffic, cheap traffic is limited. Even if you can grab all the cheap traffic and reach a certain scale, you cannot maintain growth for the next 2, 3, or 5 years.
So, in the public domain, building a brand still needs to return to some mainstream exposure, content placement, brand placement, and user resource increase. Ultimately, growth must be supported by improved user word-of-mouth.
From the private domain perspective, it's the same. Previously, I visited a teacher who specializes in private domain research. He said, "Treat users as people, not as private domain traffic." This sentence impressed me deeply. So brands should focus more on data around consumers themselves.
For example, where is the traffic cost low? Where can conversion support your sustained growth? Is this growth method only you can do, and your competitors cannot? Finally, what verifies whether our business model is successful and whether we have gained market recognition is whether consumers are willing to recommend our products to others.
Dolphin Club: Whether in the past or present, whether traditional or new brands, they all emphasize the importance of "innovation," but innovation is just a general concept. In your opinion, what kind of innovation capability do new consumer brands need to succeed in the future?
Chen Yaguang: Previously, our innovation was more supply-side innovation, such as bringing foreign products and making some innovations. Now, you'll find these products are highly homogeneous, especially on Taobao, where searching for a product can yield hundreds of pages.
But as we just mentioned, the consumption needs, consumption behavior, and cultural identity of the new generation of consumers have changed greatly. We will find that compared to supply-side innovation, more opportunities now are concentrated on the demand side. The ability to have a strong understanding of the new generation's needs, and even accurate prediction of future consumer needs, will become entrepreneurial opportunities in the future.
For example, in the past year, I saw some friends around me also starting businesses, and found that pre-made dishes are doing quite well. This innovation is not technological innovation, but can only be said to be iterative innovation, evolving from instant noodles, dry noodles, etc., to semi-finished dishes.
This friend thinks that in the future, there will be more single people, young people who don't have children, and people who can't cook, but they still want to eat relatively clean, hygienic, and convenient things, so pre-made dishes may become mainstream in the future.
Many large chain catering brands, such as Xibei, are also doing some pre-made dishes, which also reflects an industry trend. In the end, who can win? I think it still depends on whether they accurately meet consumer needs, user word-of-mouth preferences, etc. These cognitive abilities are the new entrepreneurial opportunities in the future.
Dolphin Club: Now the competition in the new consumer brand track has entered the knockout stage. Many brands with big problems are gradually exiting. How do you understand the endgame of new consumption? Or, how do you think you can go to the end in the competition?
Chen Yaguang: Our founder, Mr. Xu Xiaobo, often says in internal meetings: In future business competition, winning is either cost leadership or differentiation.
This means that if you don't have a brand but have extremely high supply chain efficiency and compress costs to the extreme, you can also live well. Otherwise, you need to be different, build a brand, and increase brand premium.
Personally, I think to survive to the end, you need to improve two efficiencies: one is supply chain efficiency, and the other is user operation efficiency.
The improvement of supply chain efficiency brings cost leadership. The efficiency improvement and cost control between each link and each endpoint need to be implemented by the operator one by one; in the end, consumers' recognition of the brand, repurchase rate, and whether consumers are willing to pay a premium for your brand are all key issues to focus on when improving user operation efficiency.
Dolphin Club: This year, many new consumer brands talk about a concept called "digitalization" in their publicity. This concept is relatively abstract. Can you specifically talk about how Adopt a Cow does digitalization? What is the significance of doing this?
Chen Yaguang: In our entire operation process, there are some basic data tools. For example, in the production end, there are production systems and supply chain collaboration platforms; in the shipping end, there are warehouse systems and distribution systems; in the consumer end, there are many precision marketing tools and user operation tools.
So from our raw material production, to our e-commerce logistics and delivery fulfillment, to our consumer end connection and customer acquisition, a large amount of data is generated in this process. At the same time, a large amount of costs are also generated: for example, how much inventory should I prepare? My raw materials, cartons, and warehouse space all occupy funds. If we produce according to plan, what if we can't sell all of them?
In addition, there are loss costs, transfer costs between warehouses, promotional costs for discounting big date milk, and finally distribution costs, channel costs, and customer acquisition costs. From purchasing raw materials to the final product reaching consumers, behind these costs, there will be corresponding data feedback in the system.
I think the core role of digitalization is to reduce costs and improve supply chain efficiency by analyzing these data.
In addition, we also see an interesting thing through data: on the consumer end, whether it's doing placement, getting consumer reviews from online sales, or doing consumer research and other studies, a lot of data is also generated.
If you can reduce these costs, improve your service efficiency and customer acquisition efficiency, and during this period, the brand generates a premium, it can also bring added value to the enterprise. So I think the key to digitalization is to improve efficiency and thereby reduce costs.
Dolphin Club: Adopt a Cow has achieved 2 billion yuan this year, and the team size is also expanding with the business scale. From a management perspective, what do you think is the most important and core thing for new consumer brands?
Chen Yaguang: This year, on the platform side, our team has reached more than 400 people. I found that as the company grows larger and the team grows, some internal culture is actually diluted, or things you thought you did well before are now regressing.
This is because the things that were done well before were based on people, such as me doing it or directly leading a person to do it. But now because you have more things, you can't manage everything, and your personal ability has not become organizational capability, so this result appears.
So now we also attach great importance to the cultivation and leap from personal ability to organizational capability. In addition to some rigid training SOPs, we also need to foster a cultural atmosphere so that everyone in the team can learn how to seize traffic dividends, how to calculate accounts, how to pay attention to data, and how to do user operations.
The level of organizational capability is directly related to brand culture. The founder's original intention is the gene of the enterprise and the mission of the brand. His values become the brand culture: Who are you? Why do you do this? What kind of result do you want? These are all brand culture, which will be passed to users through the brand.
The gene of the enterprise determines what kind of talent the company can attract and whether the organizational culture can be inherited. Until today, our founder remains true to his original intention, building his own pasture and brand just for a good glass of milk. So from the founder to the management, and then to the lower execution level, everyone's thoughts are consistent to form a brand culture.
I think the key factor that determines whether an enterprise can go further is not how many resources and funds it has, but the founder's original intention and the enterprise's culture itself, which form a fundamental differentiation from other enterprises. Other shortcomings can be made up through capital and time.
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