---
title: "Fragmented Thoughts on Beverage Entrepreneurship"
description: "This article summarizes the author's recent exchanges and reflections on beverage and low-alcohol drink entrepreneurship, highlighting key capabilities needed at different stages, risks in the capital-fueled boom, and the importance of patience and offline channels."
author: "胡昊"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-08-14"
language: "en"
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# Fragmented Thoughts on Beverage Entrepreneurship

> This article summarizes the author's recent exchanges and reflections on beverage and low-alcohol drink entrepreneurship, highlighting key capabilities needed at different stages, risks in the capital-fueled boom, and the importance of patience and offline channels.

**Click the image above for details**
Recently, VC friends have been sending over business plans for consumer goods startups in beverages and low-alcohol drinks. In my spare time, I've also exchanged ideas with some founders. Drawing on years of experience in the beverage industry, I'd like to summarize these recent exchanges and reflections.

**-01- What are the key capabilities for beverage entrepreneurship?**
In discussions with investment circles, the most important factor in starting a beverage (specifically low-alcohol) business is always the first topic. Everyone wants to identify the key factors to judge whether the founder and founding team possess such capabilities to increase the probability of success. Among the many factors, the most discussed are channels, products, brand, and supply chain, but there seems to be no consensus on which of these four is more critical.

**Beverages compete on the entire industry chain capability. If your goal is to become a beverage group with annual sales exceeding 10 billion yuan, advantage in a single area won't achieve that goal.** We can clearly see that on the consumer side, it's about product and brand; for scaled profitability, it's about channels and supply chain... But achieving 10 billion in annual sales is not done in a day or a year; it's the result of daily leveling up. Below, I attempt to analyze the needs at different stages of business development from the perspective of a startup, starting from project inception:

The structured table above simply reflects the key points at different stages of business development, making it clear which of channels, products, brand, and supply chain are more important at each stage. The above is only a simple summary, not a detailed analysis. I'll use the sample market building stage as an example to elaborate; if you need more discussion, feel free to message me privately.

**First, at this stage, the product has been trial-run for a while, and its value to users has been validated on a small scale; it needs to be promoted to a larger audience.**

**Second, from trial sales to scale, as a startup, you need to establish a validated business model before replicating and expanding.** For the beverage industry, this means building your own (profitable) sample market model within a relatively moderate scope (city/city cluster). Excluding headquarters costs, the break-even for a regional market is: product gross profit - (labor + channel investment + marketing investment). Achieving positive financial results in this model hinges on channel development and operational management capabilities.

**Additionally, this is a critical stage for building a sales team and establishing a distributor system.** Take Hawangshui (好望水) as an example: the foodservice channel is its core channel for incubation and validation. During the city model exploration, developing distributors around suitable foodservice outlets is the top priority.

**Subsequently, how to serve distributors and how to develop and serve foodservice end customers are the main goals and work content of the city sales team.** Once this layer is completed, expanding and serving other circulation channels (CVS, premium supermarkets, vertical small formats, special channels, etc.) around the foodservice sales channel as the core sales circle becomes the largest periphery of building the city model.

Thus, this stage is a period of how to combine, synergize, and efficiently match internal (team building) and external (territory grabbing) efforts. Channel planning, execution, and business management capabilities (e.g., KPI setting and follow-up) are particularly important.

**-02- What are the risks behind the capital-fueled beverage entrepreneurship boom?**

**1. Vicious channel competition**
It is certain that **starting next year, the cost of moving goods will increase significantly, including CVS entry fees, promotional gross profit subsidies for slotting, and freezing display fees. Many capital-backed companies without industry experience will invest in channels without limits to gain entry and possible sales.**

In this context, it is recommended that startups find their niche market and base (sample model), and steadily advance expansion while ensuring cash income. Additionally, actively leverage the upward momentum of O2O to guide users' mindset and behavior of buying beverages on home-delivery platforms.

Intense channel competition will also be reflected in distributor development. There are already few distributors in the region with downstream customer resources, distribution, and warehousing capabilities. Coupled with the changes in offline business caused by the pandemic, distributor development next year will face unprecedented challenges.

**2. Severe product homogenization**
Genki Forest's sparkling water became a phenomenal product leading the beverage industry this year, leading to a proliferation of carbonated drinks across the country.

**Although carbonated beverages hold the largest share in the beverage segment, the giants in this track, Coca-Cola and PepsiCo, have extremely strong product R&D, brand marketing, and channel management capabilities. It is foreseeable that next year they will likely make moves in the carbonated beverage category from multiple dimensions, which will create an unfavorable competitive environment for startups entering carbonated drinks.**

Tea drinks, functional beverages, and mixed juices also face excessive homogenization. If I were to give a suggestion now, due to the pandemic's impact, consider opportunities in dairy-containing and plant-based protein beverages.

**3. Prevalence of speculative mentality**
With capital backing, in any industry or period, there are always entrepreneurs who mask losses under the guise of scale.

**Beverages are an extremely traditional industry; to date, e-commerce penetration is only 2%. The survival, development, and scaling of beverages rely almost entirely on offline sales, meaning that face-to-face sales opportunities with consumers are almost all offline (although online seeding is possible).** This means that from inception to survival to doing a bit better, beverage brands cannot use the leverage of e-commerce; they can only improve daily through a linear "number of sales outlets × sales per outlet."

Therefore, **do not enter the beverage industry with a speculative mindset. You must have boundless enthusiasm and sufficient patience to gain any accumulation and achievements in the beverage industry. This applies not only to entrepreneurs but also to investment institutions.**

Please be friends with time!

Source: Walking Maker (ID: Geekinshenzhen) Author: Hu Hao


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