The Mediocrity of First-Tier Brands Currently, there are two highly abnormal phenomena: first, there is a craze for private brands (PB) but not for national brands (NB); second, the quality of Pangdonglai's private brand actually surpasses that of first-tier brands. Under these circumstances, is there hope for China's national brands? This phenomenon reflects the mediocrity of first-tier brands. Although most first-tier brands still rank high in sales within their industries, many consumers are dissatisfied, and their affinity for these brands has declined significantly compared to before. The root of the problem is that when they should have proactively upgraded quality and led industry development, they chose to passively maintain volume, resulting in a situation where they please neither side. Not only is volume hard to maintain, but they are also becoming increasingly mediocre. First-tier brands are generally mediocre, and consumers have no better choices. Moreover, first-tier brands have long relied on their brand advantages to buy out shelf space in supermarkets and win with SKU quantity. If it weren't for the emergence of private brands, the mediocrity of first-tier brands might have continued. However, with the private brands that emerged from the "Pangdonglai reform" and the dual advantages of Pangdonglai's private brands in quality and cost-effectiveness, especially as Pangdonglai's private brands have led the quality upgrade, the mediocrity of first-tier brands has become a major issue. First-tier mega SKUs should be the greatest common denominator of mass consumption, which is the essential characteristic of mega SKUs. According to the normal pace in Europe and America, first-tier mega SKUs gradually become national brands (NB) and stand side by side with private brands (PB) on the shelf. This is the norm. NB and PB are a pair. It is because of the existence of NB that PB's cost-effectiveness has a comparison target. Supermarkets rely on NB to attract traffic and on PB to make money. This is a normal business ecosystem. The conditions for this ecosystem to hold are: first, NB must be widely recognized, truly high-quality, and possess faith-like premium pricing power; second, PB must have a baseline of mass quality and high cost-effectiveness. So, what is the reality? The supply chain revolution in retail triggered by the "Pangdonglai reform" poses a great challenge to first-tier brands. Pangdonglai's PB has become a benchmark, carrying the dual labels of high quality and cost-effectiveness. In contrast, where are China's NBs? They are now somewhat marginalized. From First-Tier Brands to National Brands NB and PB stand side by side, with PB being the shadow of NB. This is the current situation in Europe and America and should be the future pattern of Chinese business. First-tier brands that grew up in the era of "selling shelf space" in supermarkets must complete the transformation from first-tier brands to national brands or national mega SKUs in the face of the new supply chain revolution of "selling products." This transformation includes two aspects. First, product upgrade and finalization. Is there a limit to product upgrades? In the FMCG field, there is a limit. When upgrades reach a certain point, they become finalized, with basically no major improvements. Coca-Cola, as a world-class mega SKU, has long been finalized. China's first-tier brands are still one or two upgrades away from the finalization process. According to my research, the quality of China's future national brands will be higher than that of current multinational NBs. This process must be completed sooner or later; otherwise, they cannot become national brands. First-tier brands with quality lower than PB cannot fulfill the NB function in the business ecosystem. In other words, only by becoming true NBs can they occupy a place in the new supply chain system. Otherwise, they are not qualified to stand side by side with PB. Second, first-tier brands must transition from a brand umbrella to national mega SKUs. Under the "buy out shelf space" system, first-tier brands have many sub-brands and products, which is a "brand umbrella" product structure with a large number of SKUs. Under the PB shelf system, "wide category, narrow product" is the norm, and supermarkets significantly reduce SKUs, leaving only national mega SKUs on the shelves. Therefore, first-tier brands must concentrate their sales on national mega SKUs. In my articles, I use national brand and national mega SKU interchangeably, as they are almost synonymous. But in China's past, this was clearly not the case. Because under the brand umbrella, a brand has too many SKUs, and only one or a limited number of SKUs have the opportunity to be on the shelf alongside PB as NB. We now find that some private brands have quality that exceeds first-tier brands, which is what I call the mediocrity of first-tier brands. The mediocrity of first-tier brands neither pleases price-sensitive consumers—because their prices are not low—nor pleases quality-sensitive consumers—because their products have not been upgraded for a long time. Why Did Product Upgrades Interrupt? A brand can become a first-tier brand only by occupying the mainstream price band. The mainstream price band is the greatest common denominator of society. The mainstream price band changes: a rise in the mainstream price band is called industry upgrade. For example, mineral water has upgraded from the early mainstream price band of 1 yuan per bottle to the current 2 yuan per bottle, while 3 yuan per bottle has not yet become mainstream. This is the case in various industries. China's super mega SKUs in various industries were roughly finalized around 2016. This was a response to the upgrade after the total volume of the FMCG industry peaked in 2013. Since then, only a few products like Oriental Leaf have completed upgrades and become industry super mega SKUs, but overall, very few. The interruption of upgrades has become a special phenomenon in the FMCG industry. Why did this upgrade process suddenly interrupt? I believe there are the following reasons. First, maintaining volume became the first choice after 2020. Over 30 years of continuous growth in FMCG gave many companies the illusion that the market could grow indefinitely. Therefore, the volume correction in 2013 was seen by most companies as abnormal. Of course, some still think so now, as reflected in topics like "the bad environment." They dare not face the decline in sales, and between upgrading and maintaining volume, they unhesitatingly choose to maintain volume. Between profit and sales, they unhesitatingly choose to maintain volume. This is the inertia of over 30 years of operation. I have found that the more favorable the circumstances, the bolder the launch of new products and the higher the success rate. Favorable circumstances allow for a higher tolerance for error, can withstand longer promotion cycles, have no short-term sales pressure, and channel policies do not distort. After 2020, channel chaos became severe, and both manufacturers and distributors fell into a volume maintenance war. Product upgrade is long-termism, while maintaining volume is short-term behavior. In adversity, short-term operations are the main means. Second, the impact of consumption stratification. Consumption stratification is the current consensus, with both upgrades and downgrades. However, first-tier brands seem to focus mainly on responding to downgrades. This is a relatively unique marketing environment in China: first, the explosion of e-commerce coincided almost simultaneously with the peak of total volume. E-commerce allowed the long tail and waist of industries that were once "eliminated" by first-tier brands to reappear on e-commerce platforms, and e-commerce targets price-sensitive consumers; second, self-media replaced mass media as the mainstream of communication. In the past, mass media was the main communication force for first-tier brand upgrades, but now they cannot rely on it. Moreover, self-media creates anxiety and spreads negative emotions. Although consumption upgrades and downgrades coexist, the voice of consumption downgrade is clearly louder. Self-media has contributed to creating IP-based products, but for creating national mega SKUs, there is currently no effective communication method. Even the explosion of Oriental Leaf has no traceable methodology. Self-media has contributed to the popularity of Pangdonglai's personal IP and private brand mega SKUs, but there is still no methodological summary. The Super Elimination Match for National Brands Most FMCG industries have completed industry concentration. For example, the beer industry's CR5 once reached as high as 93%. Compared to the early days of reform and opening up, when almost every county had a brewery, this is a great improvement. Without industry concentration, first-tier brands cannot emerge. In the current supply chain environment, with PB and NB standing side by side, former first-tier brands will further concentrate. The process of generating NB, I call it the super elimination match. The number of NB slots is not large; each industry has only a limited number. I predict that the "terrible balance" that first-tier brands have maintained over the past decade or more will soon be broken, and competing for the limited NB slots will become a life-and-death battle among first-tier brands. This is a new round of elimination, a super elimination match for the right to compete in the finals. We must recognize the reality. The total consumption of FMCG is limited, determined by the human body's capacity. The past consumption levels are unsustainable, regardless of the overall environment. So, there are two paths for the future of first-tier brands: first, to become NB and, through the NB battle, accumulate capital to become a world-class brand; second, to venture into overseas markets and become a multinational company from China. China's first-tier FMCG brands currently have extremely low brand product exports and overseas market share. They have only relied on China's huge domestic market to accumulate world-class scale, but they do not have world-class products. Becoming China's NB is the ticket for first-tier brands to venture overseas.