△Scan the QR code to follow the New Distribution video account and reserve the live stream The food consumption sector is undergoing a new transformation, with many internet-famous brands emerging. The rise of internet-famous foods such as Genki Forest, Saturnbird Coffee, and Chicecream signals the arrival of a new era of consumption; however, it also raises concerns about their moat-building. Internet-famous foods aiming to become truly 'long-lasting' brands still have much to learn.

"In today's era with 1.4 billion consumers and 1 billion online users, it is not that difficult for a brand to achieve some success," said Song Xiangqian, Chairman of Jiacapital, to Yicai. He noted that internet-famous brands excel at customer acquisition, but retention, conversion, and repurchase after acquisition are key, all of which depend on the company's overall strength, requiring comprehensive online customer acquisition capabilities and full-lifecycle user management.

-01- A Surge of Hits in the Food Track Zhang Ye, founder of Tsingshan Capital, which focuses on consumer investments, recently remarked on social media that the investment market had not paid much attention to the consumer sector, but in the past two years, more and more investment institutions have been shifting toward it.

Liu Fangwei, Co-CEO of Fosun RZ Capital, told Yicai that since the second half of 2019, some funds originally focused on TMT and internet investments have also begun to join the consumer goods investment wave, a trend that accelerated in 2020.

Brands are rising faster than ever. Previously, a brand might need ten or even twenty years of building and operation to secure a place in consumers' minds. Now, with capital support and changes in marketing channels, emerging internet-famous brands like Genki Forest, Chicecream, Saturnbird Coffee, Wangbaobao, and Lamian Talk have established themselves in the market in half the time or less.

Data shows that during the 2019 Double 11 shopping festival, Saturnbird Coffee, founded four years earlier, surpassed Nestlé Coffee to become the first domestic coffee brand to top Tmall's Double 11 coffee rankings. This year's Double 11, Genki Forest became the top seller in the beverage category on both Tmall and JD.com. Similarly, on Double 11 this year, Chicecream's sales exceeded 4.6 million yuan, ranking first in Tmall's ice cream category.

Undoubtedly, their rise is attributed to favorable timing, geographical advantages, and human harmony. Currently, China has a mature industrial chain foundation, and e-commerce, new media, logistics, and mobile payment have built a complete infrastructure.

With rising per capita income, consumption upgrading and differentiation are becoming more evident. As digital natives, the post-90s generation is more willing to accept new things, emphasizing personality and taste. Changes in consumption are reshaping the supply side.

Among various consumer goods, the food and beverage track stands out and is more likely to produce hit products. Liu Fangwei told Yicai that on one hand, the 'tongue economy' has higher frequency attributes compared to other categories and is easier to combine with other scenarios; on the other hand, in recent years, through mobile internet, the demand chain for food enthusiasts—from information acquisition, online transactions, self-production, to experience sharing—has been fully connected, greatly improving the efficiency of capital investment feedback.

Unlike traditional food companies that rely on distributors for channel distribution and 4A agencies for marketing, internet-famous brands break through original physical boundaries and communication forms, leveraging new content platforms and traffic channels like Douyin, Kuaishou, and Xiaohongshu to reach consumers more efficiently and at lower cost.

Facing the rise of new internet-famous brands, category selection is the most important thing for entrepreneurial teams. "Affected by the pandemic, people are more concerned about health, and Fosun RZ Capital has increased its bets in the health consumption sector this year," Liu Fangwei summarized the team's main investment directions as health-oriented, convenience-oriented, addictive, and new domestic brands.

Health-oriented refers to meal replacements, sparkling water, nourishing products, and high-protein foods; convenient foods include '3R' foods, short-shelf-life foods, and cold-chain semi-finished products; addictive specifically refers to foods related to tobacco, alcohol, sugar, tea, coffee, carbonated drinks, and spicy, sour, and stinky flavors; new domestic brands correspond to the branding of local specialty products, modernization of tea drinks, and modernization of time-honored Chinese brands.

"Another key factor in the rise of these internet-famous brands is that in their tracks, the original category leaders have gradually aged, giving them the opportunity to redefine the category," Liu Fangwei emphasized to Yicai.

-02- It's Not Easy to Turn Internet-Famous into Long-Lasting However, along with high attention, there is also discussion about whether internet-famous products can achieve long-term success. The lessons of Huang Taiji, Diaoye Niurou, and Xishaoye Roujiamo are still fresh. The market hopes to see evergreen companies like Nestlé and Kraft Foods, not short-lived brands that are popular for a moment and then disappear.

It is understood that the supply chain and production of internet-famous foods do not have obvious barriers. In a sense, internet-famous products rely more on modern digital deep distribution systems and communication matrices, characterized by heavy sales, light production, light management, and light channels. On the basis of choosing the right category, relying on marketing and improvements in R&D ingredients to quickly capture user mindshare is the growth path for most internet-famous brands.

Challenges follow. Li Feng, founding partner of Fengrui Capital, once said that since Toutiao, Xiaohongshu, and Taobao rely more on recommendation-based distribution, they essentially segment user groups more finely. While the niche target groups covered by brands become more precise, the difficulty of reaching the entire network will be higher than before.

There is a growing consensus in the industry that in the current environment, the fragmentation of consumer mindshare and content determines that there will not be an absolute single blockbuster product. This will force all companies to become platforms with underlying operating systems, quickly launching their own brand matrices through their existing brand IP and infrastructure.

Genki Forest was extremely popular in 2020. Using erythritol as a sugar substitute and promoting a health concept, it quickly exploded in niche markets like fitness and weight loss, targeting young people. However, from the investment perspective, Genki Forest's moat is not deep, and its model is highly replicable. Even without 'zero sugar, zero calories, zero fat' drinks, the market can easily imitate this model and launch products with other functional concepts (sleep aid, digestion, immunity, etc.).

Song Xiangqian believes that the process of turning internet-famous into 'long-lasting' is not easy. To become a full-scenario, full-basin company, the cost structure of most internet-famous brands will be rewritten, and in this process, operational efficiency will decline, and marginal benefits will diminish. There is much to learn.

The sense of urgency is not absent. Yicai reporters noticed that many internet-famous brands are not only innovating in flavors and tastes and expanding usage scenarios but also broadening their categories.

Take Genki Forest as an example: this year, it not only built its own factory in Anhui but also launched a series of products like Ran Tea and Milk Tea in addition to its original sparkling water. There are also widespread rumors about its entry into the coffee sector. Genki Forest's founder Tang Binsen even publicly stated that 95% of products have not yet been launched, and 2021 will be the real 'big product year' for Genki Forest.

But so far, apart from sparkling water, its Ran Tea and Milk Tea products have performed mediocrely. Song Xiangqian analyzed that if a product is highly competitive, the company should focus on one track and penetrate it thoroughly. Starting diversification too early indirectly indicates that the company's core competitiveness in its main track has not yet truly formed.

"Rhythm is very important. Brand development requires time to accumulate, but many brands are too hasty. The incident of Xin Ba selling fake bird's nest was a major blow to the entire functional food industry," Liu Fangwei lamented. Some capital-side pushes have disrupted the rhythm of some food companies. "In my observation, some companies' valuation levels have a certain deviation from their current business data and expected future growth rates."

Source: Yicai, Author: Chen Xiayi

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