“Are you still investing in new consumption?” This is a question Li Yang, who does consumer direct investment at a fund of funds, has been frequently asked recently. Faced with this question, Li Yang always helplessly throws back a sentence, “Don't mention new consumption to me anymore; there's nothing left to talk about.” Li Yang said that he was also “appointed at a critical moment.” In 2019, at the watershed of new consumption, his institution temporarily established a consumer group. “In 2019, the pandemic led to a surge in online consumption, and several high-valuation consumer unicorns emerged. The industry saw the high growth and dividend period of the consumer track, so many investors from other tracks switched to the consumer track. We also temporarily set up a consumer direct investment department,” Li Yang said. But under the great changes of the times, no one can stay out of it. “It's like experiencing a roller coaster; eventually, you have to return to the reality of being on solid ground,” Li Yang said. The personnel in their temporary consumer direct investment department were dispersed to other groups, and some were passively let go. In the second half of 2021, after new consumption brands were continuously exposed to layoffs, salary cuts, and store closures, everyone collectively received the signal of a major industry downturn. Business became increasingly difficult, losses widened, and survival became tough. Until now, few investors are willing to pay much attention to new consumption. New Consumption Pushed onto a Roller Coaster In the past two years, all visible, edible, and tangible consumption became “opportunities” that a large number of internet investors could seize. But after a fleeting peak, it immediately turned cold. In Li Yang's view, the consumer track was not paid attention to by investors for a long time because building a consumer brand is a long and lonely road. Moreover, looking around, the oligarchs in the industry are all veterans and hard-working players. But from another perspective, consumption is a long-lasting track that can counter the cyclicality of the era. “Before 2019, the valuation system for the global consumer track was stable, and both primary and secondary markets were not exciting gold-digging tracks for investors. But 2019 became the watershed for new consumption. After 2019, investment institutions and investors who never looked at the consumer track suddenly flooded into the consumer investment market,” Li Yang said. Looking back at the capital market situation in 2019, everyone had money in hand, but lacked targets. Investors focusing on the TMT track were also clear that in the popular tracks favored by investors in the past few years, the head landscape had been determined, and new players had no market space. At this time, the pandemic led to a surge in online consumption, giving birth to several high-valuation consumer unicorn brands. This made many investors see the high growth and era dividends of the consumer track, so a large number of investors poured in, and many star investment institutions also temporarily established consumer funds. Catching up with the explosion of national consumer demand, the entire new consumption industry was severely forced to mature, leading to distortion. It was once widely rumored in the circle that if you casually create a new brand, first lay out 5,000 posts on Xiaohongshu, then 2,000 Q&As on Zhihu, and finally sell out on influencer live streams, with all mid-tier and lower-tier anchors across the internet jointly promoting, a new consumption unicorn would be manufactured. Coupled with the exit prospects of the consumer track at that time, everyone was unprecedentedly optimistic, thinking they didn't need to worry about slow growth of consumer goods or the capital market not paying. As a result, with unprecedented positive signals in the secondary market, the valuation system for consumer goods in the primary market began to skyrocket. Many new consumption brands, only a few months old with tens of millions in sales, had valuations already called at hundreds of millions. Looking back, the consumer track in 2020 was filled with bubbles and irrational sentiment, and the valuation system was constantly being broken. The head new consumption brands in the track were not short of money, opening three rounds of financing a year, continuously sweeping in hot money. This also led new consumption brands to experience a high-gloss moment in the capital market from 2019 to 2021, enjoying capital dividends. After 2021, new consumption brands instantly cooled, coinciding with the capital winter. Chinese concept stocks collectively plummeted, and the once unicorn Perfect Diary fell from $16 billion to over 2 billion RMB. Everything crazy fell back to historical lows. When the capital market returned to rationality, the new consumption brand companies invested in by investors successively exploded, suffered losses, and ran out of funds. At this point, new consumption has completely become an investment graveyard, and the historic capital dividend has completely ended. Next, the prolonged winter is not only a problem thrown to investors but also a reality that entrepreneurs must face. Entrepreneurs Enter a Low-Key Period In the first half of 2021, at the hottest moment of the new consumption track, the market was filled with phrases like “long slope with thick snow,” “crossing cycles,” and “all consumer goods are worth redoing.” Times have changed, and the new consumption track has been retreating. Coffee, Chinese tea drinks, baking, etc., are seeking breakthroughs in internal competition, and many categories that were once “redefined” are now ignored. For entrepreneur Wang Yang, he has become much more low-key compared to before. Wang Yang is an entrepreneur in the braised food industry and a traditional entrepreneur. In 2019, Wang Yang's braised food track was fortunate to become one of the hot tracks for consumer investors. “At that time, many investors came to talk to us, and without spending much time or effort, we successfully completed three rounds of financing, obtaining tens of millions of yuan. At that time, investors invested in us mainly because they recognized the team and our idea of building our own supply chain,” Wang Yang said. “During the financing process, the pace of investors was very fast, so I had to speed up. Looking back from 2019 to the first half of 2021, the entire track was thriving, everyone was busy, and the industry entered a period of upheaval. At that time, I felt that regardless of whether companies in the track could be profitable, getting investment and going for an IPO should not be a problem,” Wang Yang said. After receiving the financing, he used the money to build factories, which was very capital-intensive. In the following days, Wang Yang was always in a state of shortage of funds, and what made him even more anxious was that subsequent financing was not going smoothly. “The wind turned really fast. Previously, they took the initiative to talk to us, but by the second half of 2021, the tone changed, saying that the track had difficult growth and weak moats, so they wouldn't invest,” Wang Yang said helplessly. After comprehensive consideration, facing the difficulty of financing in the new consumption track, Wang Yang began a strategic transformation, linking up with some hot tracks. He said, “If we link up with hot tracks, maybe we can attract investors' interest again.” Looking back, a “first year of new consumption” pushed him onto the fast track, disrupting his slow development pace. In fact, Wang Yang's previous business was doing well, with familiar and reliable OEM factories and his own brand, with an annual scale of nearly 200 million yuan. Everything could slowly develop in a good direction until he got the money and chose to build his own production line with a heavy asset model. Wang Yang admitted that with the heavy asset model, every subsequent step became very difficult. Of course, the story is not over yet. Wang Yang said that regarding financing, he is still in contact with investment institutions. The Dilemma of New Consumption From “all consumer goods are worth redoing” to the retreat of new consumption, starting from milk tea shops, coffee, trendy toys, restaurants, and bars, none have escaped. Everyone expected that after the pandemic, things would get better, but surprisingly, business not only continued to lose money but also became increasingly difficult, bringing endless disasters to entrepreneurs. The core reason is likely that the purchasing power of young people is generally declining, which is related to the current economic situation. From recruitment information, there are too many job seekers and too few jobs. Undoubtedly, in the crisis of unemployment and difficulty in re-employment, young people are not in the mood to maintain high enthusiasm for food, drink, and entertainment. Moreover, there is the dual pressure of car loans and mortgages, especially for young people born in the 1980s and 1990s, with extremely high debt ratios. According to relevant statistics, the average debt per person for Chinese born in the 1980s exceeds 220,000 yuan, while for those born in the 1990s, it exceeds 120,000 yuan. In addition, many young people rely on credit cards and overdraft to maintain their lives. In this situation, the foundation for the bursting of the consumerism bubble is laid, after all, it was the strong purchasing desire of young people that supported new consumption. Looking back, how rapid was the development of new consumption? According to statistics, in the entire 2021, there were 1,064 investment and financing events in the consumer track, with a transaction amount of 160.8 billion yuan, mainly concentrated in food and beverages, beauty and personal care, maternal and infant, clothing, and pets. Such a hot track did not last long. In the second half of 2021, the “cold wave” of new consumption arrived, with frequent layoffs, store closures, and data declines. When founders of new brands began to start businesses rationally, investors also began to calmly examine and rationally screen targets. Consumption itself is a track worthy of continuous attention and respect. Without decades of accumulation, it is difficult to create a true brand. For example, consumer stocks have always been a major investment direction for Buffett. The consumer companies he favors all have extremely high brand and market positions, clear profit models, stable cash flow, and reliable long-term profitability. For example, Coca-Cola: Buffett bought Coca-Cola in 1988, and from 1989 to 2003, for 15 years, Coca-Cola was Buffett's largest holding. From 2005 to 2011, Coca-Cola again consecutively held the position of the largest holding. Of course, Buffett has also made mistakes. As early as 1972, Buffett acquired See's Candies, which has been over 50 years. But at this year's shareholder meeting, Buffett had to admit, “See's Candies has an excellent brand. We tried various methods in the world to expand the charm of See's Candies beyond California, but the brand's charm is limited, only remaining near the western United States.” Good consumer companies are “money printers,” but not all consumer companies can grow into “evergreen trees,” just as some always want to invest in the next Coca-Cola, Heinz, Uniqlo, Procter & Gamble, or Unilever. The consumer track was once overcrowded, with massive funds flowing to all visible and invisible “brands.” But for the Chinese market, after the first year of new consumption, in less than three years, it has already been ignored. Those investment institutions that once held high the banner of new consumption have retreated one after another, even disbanding their consumer groups. Investors who originally looked at consumption are now looking at new trends. At the same time, some consumer brands once considered hopeless, such as Luckin Coffee, are still making steady progress and turning losses into profits. Admittedly, this article is not to belittle consumption. As a demand that has existed and will always exist, no one can stop consumers and consumer entrepreneurs from yearning for a better life. As the saying goes, the waves wash away the sand. Being expelled and changed under the great changes of the industry is to let truly good things be seen. No matter how the theme of the times shifts or how investment directions change, the “original intention” of investors to help entrepreneurs realize their dreams remains unchanged, but this path is more difficult for many people.