Strategic Initial Battle Period Yanghe grew from less than 200 million yuan in 2003 to 24.1 billion yuan in 2018, with the Dream of Blue series also joining the 10-billion club. Although Yanghe currently ranks third, with a significant gap behind second-place Wuliangye, could its strategic path and growth momentum allow it to rise from third to second? A review of Yanghe's development over the past 15 years. From the trajectory of China's baijiu industry, every step of Yanghe's growth has been able to align with brand status, consumer trends, and industry trends, allowing it to surge forward. From the recovery of China's baijiu industry in 2002 to 2018, the industry experienced three phases in just 16 years: the golden decade from 2002 to 2012, the turbulent adjustment period from 2012 to 2014, and the expansion of sub-premium and premium segments from 2015 to 2018. 1. Golden Decade: 2003-2007: In 2003, the company launched the "Blue Classic" series, with the 100-yuan Sea Blue as the flagship product. The launch of Sea Blue coincided with the golden decade of simultaneous volume and price increases in the baijiu industry, and industry prosperity drove the company's accelerated growth. On the other hand, Sea Blue capitalized on the national consumption upgrade trend, positioning at 100 yuan to successfully capture the mainstream national price band. From 2003 to 2006, Sea Blue's revenue compound annual growth rate reached 198.6%, becoming the leading single product in the 100-yuan price segment. 2008-2012: Sky Blue took over from Sea Blue to drive high growth. As an upgraded product of Sea Blue, Sky Blue was positioned in the 300-yuan price band. From 2008 to 2012, business activities in Jiangsu Province were active, business consumption upgraded, and the baijiu industry entered a second bull market (promoting Dream Blue within the province and Sky Blue outside). Sky Blue fully benefited from the dividends of business consumption upgrades. Through the operation of out-of-province channels and sustained brand investment, Sky Blue replicated Sea Blue's success and achieved high growth. 2. Industry Adjustment Period: 2012-2014: The industry entered an adjustment period. Sea Blue occupied the mainstream mid-range 100-300 yuan price band. As the top product in this price band, demand was stable, and it maintained steady growth even during the adjustment period. According to the company's annual report, Sky Blue's revenue declined slightly, recovered in 2015, and returned to double-digit growth in 2017, reaching 4 billion yuan, essentially recovering to the 4.2 billion yuan level of 2012. 3. Sub-premium and Premium Expansion: After 2015, as the industry recovered, driven by consumption upgrades, the expansion of the sub-premium segment, and the gradual volume increase in the company's new Jiangsu market, Dream Blue was shaped with the image of "New National Liquor" and achieved high-speed growth. In 2017, the Dream series' share surpassed the Sky series for the first time, and in 2018, it achieved 10 billion yuan in revenue. Why has Yanghe been able to accurately grasp the rhythm at every node of industry and consumer trends, whether in favorable or adverse conditions, without being swayed by the external environment? What kind of strategic foresight and strategic control capability lies behind this? Strategy is absolutely the responsibility of the top leader; it is the top leader's project. Strategy determines life and death, determines the future, and determines what should be done now for the future. The leader's vision, strategic judgment, and strategic determination are all key to whether an enterprise has a future. Today, we will reverse-engineer decisions from outcomes, adopting a hindsight perspective to reconstruct the strategic thinking in Yanghe's development. I. Yanghe's Strategic Guiding Principle: Decisive Battle Defines Initial Battle Suppose at a strategic meeting in 2002 or 2003, the leadership team led by Yang Tingdong and Zhang Yubai proposed Yanghe's ultimate strategic positioning: to become a leading brand in the top two of China's baijiu industry. (In fact, they only formulated a five-year plan at that time, hoping to enter the industry's top five within five years.) In 2003, after the trough at the turn of the century, China's baijiu industry entered a new round of rapid development. At that time, Sichuan liquor dominated the Chinese baijiu market, and the Jiangsu market was occupied by Sichuan and Anhui liquors. Although Yanghe was one of the eight famous liquors, the company was barely surviving. If they dared to propose such a strategic goal at that time, it was absolutely a decisive-battle-defines-initial-battle mindset, and every campaign in the strategic implementation had to point toward the final decisive battle. The initial battle must serve the decisive battle to ensure the inevitability of victory in the final decisive battle. The initial battle, the first battle of a war, is called the "preliminary battle" or "initial battle" in military strategy. The initial battle has a significant impact on the overall situation; military strategists throughout history have advocated caution in the preliminary battle. The ancient Chinese military classic "The Art of War" (Sun Tzu, Chapter on Military Strength) states: "The victorious army first creates conditions for victory and then seeks battle." That is, first create the conditions for victory, then engage the enemy. Mao Zedong, based on the experience and lessons of the Red Army's counter-campaigns, proposed three principles for the initial battle (see "Selected Works of Mao Zedong," Vol. 1, p. 222): First, it must be won; second, it must take into account the overall campaign plan; third, it must take into account the next strategic phase. How exactly did Yanghe fight its initial battle? The initial battle determines not only the present but also the future. "The victorious army first creates conditions for victory and then seeks battle." What kind of simulation and decision-making process did Yanghe undergo before launching the initial battle? II. Strategic Positioning Analysis of Yanghe's Initial Battle Period Any war, regardless of size, cannot be separated from strategic research and analysis. Leading strategic positioning analysis cannot be separated from the following four dimensions: From the four dimensions of strategic analysis, let's deduce what issues the senior management might have considered at the strategic level. 1. What is our current situation? In 2003, after the trough at the turn of the century, China's baijiu industry entered a new round of rapid development. At that time, Sichuan liquor dominated the Chinese baijiu market, and the Jiangsu market was occupied by Sichuan and Anhui liquors. Although Yanghe was one of the eight famous liquors, it was perceived by customers as a low-end liquor, and the company's survival was not optimistic. 2. Where are our opportunities? Research found that consumers were not fully adapted to the heavy taste and strong aroma of Sichuan-style liquor in the current political and business social drinking scenarios, where large sips were common. Customers hoped for a liquor that could solve the problem of a softer and lighter taste. Given the future explosion of the political and business group, soft or elegant styles might differentiate into a powerful category. Due to geographical and climatic factors, the brewing environment in the Jianghuai River basin naturally produces baijiu with soft and elegant styles. Opportunities are often discerned; they are hidden in customer needs. Whether it is an opportunity also depends on whether the enterprise has the capability to do it, and whether competitors allow you to do it. 3. Where are our consumer groups? The pace of social life is accelerating, business activities are frequent, and a managerial social structure inevitably leads to frequent exchanges and interactions between government and business. Government agencies, enterprises and institutions, and successful business people became Yanghe's future target consumer groups. This differs from Moutai's target of old revolutionaries and Wuliangye's nouveau riche class; it belongs to China's new generation of intellectual class. 4. Who are our competitors? The Jiangsu baijiu market is dominated by Sichuan and Anhui liquors, especially the Wuliang series represented by Wuliangchun. They are not only strong competitors in the market but also firmly occupy customer minds. Yanghe's mental competitor is Wuliangye. At that time, Wuliangye was still the industry leader; after 2005, Moutai gradually became the industry leader. The mental competitor must be the strongest in the industry, because the larger the competitor's sales, the larger your future sales will be. 5. What is our attack point? The weakness in the leader's strength. The most notable style of strong-aroma baijiu represented by Wuliangye and Luzhou Laojiao is heavy taste and strong aroma. This is the leader's strong cognitive point and a fact they find hard to change. The strong cognitive point that competitors find hard to change is their most fatal weakness. 6. What is our strategic positioning? Strategy has a two-layer structure: First, strategic positioning characteristics, which determine the strategic decisive point in mental competition. This must be based on customer needs, competitiveness, and one's own advantages. Yanghe must find a differentiation point that is a future trend, meets customer needs, competitors cannot do, and we have expertise in, to ensure invincibility in future competition. Second, strategic operational characteristics, which involve what operational alignment to adopt in actual market competition: what products to use, what prices to set, what to name the new brand, which regional markets to attack first, what channels to focus on, what advertising appeals to use, and what marketing model to adopt. This must both consolidate the customer cognitive value of the mental decisive point and avoid being blocked by competitors, ensuring the initial battle is won, continuously gaining survival space, and achieving rapid development. II. Strategic Positioning and Alignment in Yanghe's Initial Battle Period After analyzing competitors, customers, opportunities, and the current situation, Yanghe must determine its core business: what category to choose, what category characteristics to define, and what brand, product, and price to compete with. 1. Category Attribute: Yanghe still chose strong-aroma as the category attribute, as it is the mainstream aroma type with the largest consumption volume and also the company's own advantage. For a new brand, changing the category attribute to create a new category is very dangerous. The safest approach is to use category differentiation for category innovation. Choosing a different category means a different battlefield, different competitors, different strategies, and different development space and methods. 2. Category Characteristics: With "soft and elegant" as the main characteristic, Yanghe adopted oppositional positioning, going against competitors, to differentiate the category and create a new one. The soft characteristic later grew into one of the dominant characteristics of strong-aroma baijiu, and Yanghe Blue Classic became the representative brand of the soft category. Although this is an oppositional positioning method, in terms of strategic implementation, it is a typical flanking attack, not directly attacking the taste weaknesses of the Sichuan style (heavy taste, strong aroma, not soft), because Yanghe was not qualified at that stage. 3. Brand Determination: A new brand, Yanghe Blue Classic. For a new category or to create a new category by segmenting category characteristics, a new brand name is needed. A new brand can drive category characteristics to become a new category, rather than just a product's category characteristics, because the brand is the representative of the category. 4. Cognitive Product: Customer perception of a brand comes from product perception. The product is the representative of the brand, i.e., brand productization. The cognitive product must be the product that best represents the category characteristics, but not necessarily the product that leads sales. However, in the brand's origin period, it often needs to be both: the product that best represents the category characteristics and the sales-leading product. Therefore, although Yanghe Blue Classic's product lineup includes the Sea, Sky, and Dream series, only Sea Blue was used as the cognitive product. Startup brands have limited resources; to achieve a breakthrough, they must focus on the cognitive product:

First, from the external perspective, focusing on core items can reduce customer choice, thereby greatly improving customer decision-making efficiency;

Second, from the internal perspective, focusing on the cognitive product allows the supply chain and internal operations to avoid "poor multitasking" and continuously improve operational efficiency;

Third, in communication, it is also necessary to firmly revolve around the cognitive product. The brand's advertising slogans and images should maintain consistency as much as possible to solidify the brand's existing memory. All expenses should be invested in the same memory points. 5. Price Band Positioning: The cognitive product of Blue Classic, "Sea Blue," adopted the principle of brand misalignment competition, positioning at a terminal price of 128 yuan, tightly seizing the price gap between the Anhui liquor's leading product Kouzijiao at 100 yuan and Wuliangchun at 158 yuan, satisfying the interests of terminals. The 5A-level "Dream Blue" directly entered the high-end gift market. Sky Blue was priced at 258 yuan, becoming a pillar product connecting high-end gifts and the mid-range mainstream, playing a bridging role. This ensured continuous brand development space and effectively prevented competitors from exploiting price gaps to attack the Blue Classic system. Yanghe's positioning in the mainstream political and business price band during the initial battle indicates that Yanghe would use this as its main strategic direction for a certain period to manage customers. Customers choose liquor products by price as a category and by characteristics as a reason for choice. 6. Visual Hammer: Yanghe Blue Classic's visual hammer directly aligns with the brand name. Whether in product design or advertising images and videos, the main color is blue, with fashion containing classic, forming a sharp contrast with the popular yellow, red, and gold in the market, highlighting its differentiation and allowing the brand and product to instantly enter customers' eyes at the terminal. In fact, Yanghe's blue tone was market-verified and proven to be a viable choice. Before Yanghe Blue Classic appeared, products like Yanghe Blue VIP were already on the market, and customer acceptance was not low. 7. Advertising Appeal: Yanghe Blue Classic's advertising appeal, "The widest thing in the world is the sea, higher than the sea is the sky, and broader than the sky is a man's heart," indeed became a new emotional sustenance for many elite men. They pursue exactly such a lifestyle, which not only won deep consumer recognition but also triggered emotional resonance. From the perspective of leading positioning theory, in the initial stage of a brand, it should be driven by category characteristic appeals to drive customer cognition and choice, while emotional appeals are more reasonable in the brand maturity stage. This is because in that golden era, emotional appeals were the mainstream, and Yanghe's brand appeal was more touching. Additionally, Yanghe's various experiences, PR, and promotional activities all cultivated consumers with the soft category characteristic. Later, the main brand image also added: China's leading soft baijiu brand. 8. PR Promotion: PR first, advertising second. In the initial battle stage before 2004, the focus was on PR experience activities for the origin group and sponsorship of related events. Large-scale PR activities were not truly launched until the strategic expansion period after attacking Nanjing. 9. Trust Evidence: For Yanghe Blue Classic at that time, it could not use authoritative certification as trust evidence, nor could it use market position or brand status as trust evidence because it had not reached that stage. Instead, it used: differentiated products themselves as trust evidence; unique craftsmanship as trust evidence; PR experience activities as trust evidence; advertising as trust evidence; word-of-mouth from the origin group as trust evidence; and a good brand image as trust evidence. 10. Origin Group: In the early stage of Yanghe Blue Classic's launch, it targeted government agencies, enterprises and institutions, and successful business people as core opinion leader consumer groups for PR cultivation. 11. Origin Channels: Cigarette and liquor stores and group purchases. At that time, the terminal plate-in-plate model of Anhui liquor was most popular. How could they compete? Yanghe chose a different path for origin channels, selecting the newly emerging cigarette and liquor store channel and the group purchase channel that could cultivate the origin group through PR. It did not use the catering channel as the main attack channel but as a supplementary channel, avoiding the Anhui liquor brands that focused on hotels. 12. Model Market: Although the Nanjing market was the commanding height for Yanghe, in 2003 Yanghe did not enter Nanjing because at that time, Anhui liquors like Gaojujia, Yingjiagong, and Kouzijiao, along with Sichuan liquor Wuliangchun, were fiercely competing in the Nanjing market. For a weak Yanghe with an unformed model, entering Nanjing was uncertain. To ensure the initial battle's victory and lay a foundation for future campaigns, Yanghe adopted a flanking strategy, focusing on the eight cities along the Yangtze River in Jiangsu Province as the main line for pilot development and promotion. In 2004, Yanghe Blue Classic achieved great success in the eight cities along the river, with sales of 76 million yuan, before considering entering the Nanjing market. 13. Slow Start, Grasp the Rhythm, from Point to Surface Many new brands start with a lot of advertising, recruit franchisees, and lay out the market extensively, hoping to quickly occupy the market. This often fails. Enterprises believe that if their product quality is fine and prices are reasonable, customers will naturally recognize them. This is entirely one-sided and a common mistake of not understanding customer psychology. Customers often judge based on common sense, and the acceptance of new things by customers requires a slow process because customers naturally feel insecure about new things. They are more willing to trust recommendations from friends with experience or observe the performance of higher-level markets. The correct approach is to first find the market region most interested in this value decisive point and the group of people (origin customers) most interested in this region, and use this as a model market for deep cultivation. There are three benefits to doing this: First, it can cultivate a group of loyal origin customers. Through interaction with origin customers, products can be efficiently improved and internal operations simplified;

Second, it can explore an effective market playbook, accumulating valuable experience for going out;

Third, a slow start can reduce concentrated negative feedback and minimize brand risk. After achieving leadership in a demonstrative market, it can naturally move to larger markets, and previously hesitant customers can be converted into true customers. The goal of the initial battle is to determine the business, validate the strategy, establish a foothold, create a model, and train the team. Yanghe's revival achieved initial victory. The Nanjing Campaign in the Strategic Expansion Period Yanghe Blue Classic was launched in September 2003, and by the end of 2004, it achieved sales of 76 million yuan, fully validating the correctness and feasibility of Yanghe Blue Classic's strategy. It proved that a good strategy must avoid the enemy's strength and attack weakness, and must not compete on the same channel as competitors: either oppose them or misalign with them. I. Good Strategy: Use the Future to Decide the Present, Avoid Strength and Attack Weakness. Sun Tzu's Art of War says: "The victory of the army lies in avoiding strength and attacking weakness." Strength refers to the current mainstream and the competitor's strong points; weakness refers to the non-mainstream and what competitors cannot do. Why avoid strength? Facing the competitor's strong points, whether directly attacking or following development, the final outcome is to serve the competitor, like turning into spring mud to protect flowers. Three effects explain the importance of avoiding strength:

  1. Exclusivity Effect: Customer minds are hard to change, exclusive, first-impression-based, and leader-oriented. If you follow competitors, customers will not choose you. So, I repeatedly say, do not fight on the competitor's strong price band, do not imitate the category cognitive characteristics of strong competitors, and do not follow or imitate the competitor's cognitive products. Consumers will not give you a chance. This is the logic.
  2. Matthew Effect: Following the competitor's strength only makes the competitor stronger. You are just a follower, further highlighting the competitor's strength. If you follow what others do, even if you do it well, you are at best a second-rate brand, and customers will not think of you or choose you.
  3. Tenant Effect: Following competitors, no matter how much effort you put in, the final results only supplement others' strength, help the strong farm, help competitors cultivate new customers, help the strong work and educate the market. Once conditions allow, customers will abandon you without hesitation. Why attack weakness? When making strategy, we must not only look at the present but also the future. Use the future to decide the present, and use the final decisive battle to decide the current initial battle. A good strategy must do what the enemy cannot do, must do things that are currently non-mainstream, create potential demand, and create the future mainstream. The current mainstream must have been yesterday's non-mainstream. Yanghe verified this theory with facts and led the soft style and blue storm phenomenon in China's baijiu industry. Countless followers only helped Yanghe do work, boosting its rapid growth as the representative brand of the soft category and the blue category. In fact, Yanghe's rapid growth should really thank these followers; they helped Yanghe Blue Classic expand the category. So, for category leaders, do not prematurely kill the followers; instead, cultivate them to jointly expand the category. The ultimate beneficiary must be the category representative brand. Yanghe Blue Classic's soft style did not exist in the market before 2003. The mainstream style was the Sichuan style of "heavy taste and strong aroma." Yanghe went against the grain, avoiding strength and attacking weakness, thus creating its own survival space. When Yanghe Blue Classic decided on the blue packaging style, there was much criticism both internally and externally. No one was optimistic because it was not the mainstream style. People only see what exists now and lack the strategic vision to see what will dominate in the future. It is said that Yang Tingdong and Zhang Yubai overruled objections and insisted on the blue tone. This is the strategic vision and strategic decisiveness of enterprise leaders. The life and death of an enterprise truly lie in the hands of the entrepreneur or the highest leader; their strategic capabilities determine the development prospects of the enterprise. The success of the initial battle represents the past or present. For the future commanding height market of Nanjing, how to launch a earth-shattering war by avoiding strength and attacking weakness? This is another strategic issue facing Yanghe's senior leaders. II. War Opportunity Point: Seek the Opportunity to Defeat the Enemy The skilled warrior first ensures invincibility, then awaits the enemy's vulnerability. Invincibility lies in oneself, victory lies in the enemy. This means that a master of war must first ensure that he is not destroyed by the enemy, then seek the opportunity the enemy gives him to defeat him. In 2004, although "Yanghe Blue Classic" achieved impressive sales of 76 million yuan in the eight cities along the river, the vast Nanjing market contributed only 8 million yuan (the initial battle period is also the strategic origin period, which is a time to verify the feasibility of the strategy. The battle line must not be stretched too long, and the commanding height market must not be the main attack market; only small tests are allowed, so Nanjing's contribution was not high). Nevertheless, it fully verified the correctness of the soft category strategy, the feasibility of the 118-138 yuan price band strategy, and the acceptability of the blue packaging product category characteristics. When to attack Nanjing? This must wait for the opportunity. Who gives the opportunity? It is given by competitors and customers, not decided by Yanghe itself. This wait lasted more than a year. Until 2005, when the Anhui liquors were exhausted from fighting each other at around 100 yuan in the Nanjing market, and when the leader Wuliangchun, which had ruled the Nanjing market for 10 years, raised its price from 108 yuan to 158 yuan in 2003, consumers were already dissatisfied and longed for a new well-known brand to replace this king. But with no choice, they had to continue consuming Wuliangchun at 158 yuan. At this time, Yanghe, whether from the confidence in its own strategic feasibility or the strategic implementation opportunity given by the enemy, believed the opportunity had arrived and must strongly attack Nanjing. III. War Decisive Battle: Absolutely Do Not Fight on the Same Hilltop as the Enemy When launching a strong attack, it is necessary to re-examine the strategy based on the market competition situation. Anhui liquor's Kouzijiao had occupied the 108 yuan price band for 5 years, and Yanghe Blue Classic's Sea Blue was priced only 10 yuan apart from Kouzijiao, nearly the same price band. Attacking on the strong competitor's position is definitely not a wise strategy. It is necessary to open a new front and create a new position to have a chance. The most serious mistake in strategy is to compete with competitors on the same latitude or track. It is impossible to defeat leading competitors with the same products or in the same price band. Only on completely different positions can there be a chance to rise abruptly or defeat competitors. Therefore, when deciding to strongly attack Nanjing, Yanghe resolutely raised the price of Sea Blue from 118 yuan to 138 yuan. For Yanghe, there were too few old customers, and the price increase from 118 to 138 yuan was hardly noticed or cared about. It would not cause customer dissatisfaction like Wuliangchun's price increase. Customers might even think 138 yuan was Sea Blue's entry price. In early 2005, Blue Classic's Sea Blue was priced at 138 yuan to strongly attack the Nanjing market. At first, many distributors still did not favor this non-mainstream product with soft category and blue packaging, and were unwilling to distribute it, believing it had no market. Helpless, Yanghe had to avoid traditional distributors and choose new-type distributors to cooperate. But in just half a year, Blue Classic showed a momentum of breaking through and reaching its zenith, achieving sales as high as 200 million yuan in 2005. At that time, the total annual sales of mid-to-high-end baijiu in Nanjing were about 500 million yuan, and Yanghe Blue Classic series accounted for more than half. Yanghe took advantage of the fatigue of Anhui liquors and the loss of virtue of Wuliangchun to fight a beautiful flanking surprise attack. IV. The Great Power of War: Winning the Support of Opinion Leaders Mao Zedong once said that politics is "to make our people more and the enemy's people fewer." This means to win the hearts of the people, gather social forces toward oneself, and let public opinion and word-of-mouth blow in one's direction. Yanghe's leaders were well versed in this, worthy of being government-appointed operators. Yanghe used all available forces, especially opinion leaders, for PR marketing, and used all available social events to create public opinion momentum.
  4. Government PR Before launching a major attack on Jiangsu markets, Yanghe began to penetrate from government departments, conducting point-to-point breakthroughs with provincial, municipal, and departmental governments and important systems like the Nanjing Military Region. Company leaders regularly visited these important cooperative government units, and with the help, guidance, and leadership of government departments, Yanghe Blue Classic soon had a fixed consumer group, planting seeds for market consumption trends.
  5. Terminal Plate-in-Plate Model In 03-04, Yanghe, in difficulty, learned from Kouzijiao's "hotel plate-in-plate" model, starting from core hotels as the marketing starting point, mobilizing their forces to recommend products to core consumers, gradually forming strong consumption preferences among target consumer groups, using small plates to drive the market's big plate. When strongly attacking Nanjing in 2005, although Yanghe did not abandon the terminal plate-in-plate model, it was no longer the dominant model but upgraded to a "consumer plate-in-plate" model led by PR group purchases.
  6. Yanghe's "4×3" Model Given the intensifying vicious competition in catering terminals and the increasingly obvious phenomenon of consumers bringing their own liquor, the effectiveness of the terminal plate-in-plate model gradually decreased. Any wise military strategist cannot stick to one tactic to the death but must innovate and match tactical models according to trends, environment, competition level, and the direction of the masses (customers) to adapt to war. Yanghe should have innovated and created the "consumer plate-in-plate" model led by PR group purchases during the Nanjing campaign in 2005. To revolve around the "consumer plate-in-plate" model, the "4×3" alignment standard was formulated. First, three-party linkage sales method: core consumer PR, core hotel, and media PR; Second, three-in-one organizational structure: an organizational system led by factory guidance and management, including a key customer department (responsible for business development with core enterprises and institutions), a hotel direct sales department (operating hotels to obtain quality hotel resources), and a brand promotion department (PR + advertising); Third, three distributor selection criteria: brand concept + social background + financial strength; Fourth, the relationship among the three: clarify the relationship of rights, responsibilities, and interests between the manufacturer and distributors (the manufacturer mainly bears risks such as advertising and PR, while distributors are responsible for maintaining relationship networks and risk-free investment; the principle is that whoever executes, invests, manages, and is responsible). The "4×3" model extended the marketing focus from channels and terminals further down to the consumer link, directly serving each individual consumer to achieve true terminal interception, allowing Yanghe products to quickly complete consumer cultivation and brand image building, and smoothly develop core regional institutions to enter the group purchase channel. Rapid success cannot be separated from a model that everyone can execute and that can be replicated in any market. Yanghe's 4×3 model created a replicable success model for future expansion.
  7. Social Events: In 2005, the event that attracted the most global attention was the visit of Kuomintang Chairman Lien Chan to the mainland, achieving the first handshake between the KMT and CPC in 60 years. On April 26, Lien Chan led the KMT mainland delegation to Nanjing. Yanghe, facing this world-famous political event, quickly seized this favorable opportunity through government PR, enabling Jiangsu provincial leaders to use Yanghe Blue Classic to entertain former KMT Chairman Lien Chan and PFP Chairman James Soong and their mainland delegation. The PR marketing of the Lien Chan event pushed Yanghe Blue Classic to the forefront, becoming the pride of Nanjing and even the entire Jiangsu. The halo effect and siphon effect immediately erupted, and consumption trends formed. Many distributors and terminals in Nanjing could not imagine or predict that Yanghe's strong attack on the Nanjing market would erupt with unmatched momentum in just half a year. This is the power of PR. We must remember that PR creates brands. The rapid rise of brands is often created by PR, and news events are the best PR method. Of course, advertising also plays a role in adding fuel to the fire. The PR marketing of the Lien Chan event was just a small test for Yanghe. When laying out the national market, Yanghe continued to have PR events, generating continuous attention and topics. For example, in 2008, Blue Classic successfully leveraged the Beijing Olympics, launching the large-scale themed promotion "Strive for Gold and Silver, Cheer for China"; On the evening of November 11, 2009, the "APEC China-Singapore Business Leaders Night," hosted for the first time in China, was grandly held at the Mandarin Hotel in Singapore. The company's product "Dream Blue" was selected as the exclusive banquet liquor for "China Night"; in the same year, Blue Classic successfully leveraged the CCTV Spring Festival Gala, which attracted the attention of Chinese people worldwide, embedding product advertising in Zhao Benshan's sketch, becoming a big winner in baijiu promotion; In 2010, Yanghe co-sponsored the "Blue Classic? Tian Zhi Lan Cup Young Singer Competition" with CCTV, triggering national attention. Yanghe Group's series of high-frequency, high-spec event marketing successfully achieved rapid improvement and dissemination of product brand image, laying the foundation for the continued strong sales of Blue Classic. The rapid rise of Blue Classic in Nanjing shook the entire baijiu market pattern in Nanjing. The "momentum" of Yanghe Blue Classic also drove the overall recovery of the entire Su liquor brand. For Anhui and Sichuan liquors, it was a big impact. Sales of leading mid-to-high-end products in the Nanjing market, such as Wuliangchun, Kouzijiao, and Yingjiagong, all declined to varying degrees. The victory in the commanding height market of Nanjing not only verified the correctness of Yanghe's strategy at a higher level but also strengthened Yanghe people's strategic confidence in expanding outward. National Expansion Tactics in the Strategic Expansion Period After Yanghe captured the Nanjing commanding height market in 2005, the war zone map was definitely not limited to developing the entire Jiangsu market but how to strategically lay out the national market. This is another strategic decision issue facing Yanghe's leaders: Is it "stabilize the interior before expanding externally" focusing on the province? Or "attack both inside and outside" with a full-scale assault? Or "stabilize the buttocks, punch with fists" with a block-based layout? Different brand genes, competitive opportunities, and resource advantages lead to different market layout strategies, presenting different war zones and battle lines. I. Five "Invincible" Market Layout Principles. When expanding the market, there are only five market layout models that can ensure "invincibility." In specific application, enterprises need to choose one or several principles as the standard for market expansion based on their own situation and strategic layout height. Market block development is a strategic market layout, aiming to form a competitive pattern that is both offensive and defensive. The formation of the pattern must rely on the concentrated breakthrough of central markets and the organic linkage between regional markets. That is, around the central market, exert central radiation energy, lay out points in large regions, connect points into lines, connect lines into surfaces, and build a tactical market protection system for strategic markets. From central market to block market, seeking a development pattern of regional market linkage is the only way for regional brands to enhance comprehensive competitiveness, brand anti-risk capability, and external expansion development. Whether in "stabilizing the buttocks" or "punching with fists," Yanghe Blue Classic adopted this regional linkage strategy, seeking block layout and development. For brands that are not yet strong, this is a very safe strategic choice. Therefore, for different war zone layouts and different strategic stages, the carrier or scope of the model central market is different. In the Jiangsu market, the Nanjing market is the central market; in the East China block market, the Jiangsu market will be upgraded to the central market; in the national market layout, the East China block market is upgraded to the central market. II. Stabilize the Buttocks: Building the Jiangsu Block Market Centered on Nanjing Revolution needs a base area, just as a person needs buttocks. In terms of strategic position, the Jiangsu market absolutely plays the role of a base area for Yanghe, which will later conquer the whole country. A base area is an indispensable strategic location for any enterprise. Without a base area, expansion is impossible. The base area not only contributes blood, exports models, sends talents, and sets examples for the brand's external expansion, but also plays a role in war: it can attack and retreat, is not controlled by the enemy, and ensures safe survival. After capturing the Nanjing market, Yanghe must establish a base area market that can attack and defend in the national market. Therefore, from 2005 to 2006, within Jiangsu Province, Yanghe took the Nanjing market as the center, established the Blue Classic brand marketing company, adopted the model (central) radiation principle, and established Blue Classic star markets. At the same time, it cooperated with key distributors to operate the northern Jiangsu market represented by Suqian and the southern Jiangsu market represented by Suzhou, concentrating resources to expand or intensively cultivate regional markets, laying out points in large regions, connecting points into lines, and connecting lines into surfaces, achieving the strategic pattern from the Nanjing model market to regional market linkage, and then to the overall development of the entire Jiangsu block market. The block base area market took shape. From 2006 to 2008, the company's operating revenue in the Jiangsu market accounted for more than 75% of total operating revenue. III. Punch with Fists: Centered on the Jiangsu Market, Layout the East China Block Market When expanding externally, it is necessary to grasp the three economic principles of market operation: First, easy before difficult: pick the soft persimmon first, maximize input-output; Second, highlight pursuit: invest more in rapidly growing highlight markets to drive the whole; Third, peripheral flanking: first peripheral flanking, then frontal attack. It is not necessary to choose the commanding height market for a breakthrough at the beginning. In 2006, after "Yanghe Blue Classic" stabilized the Jiangsu market, it immediately began to formally expand into the Henan market. When selecting and operating the first external market, Henan, Yanghe not only comprehensively used the three economic principles of market operation but also adopted three of the five principles of market expansion. First, proximity (central) radiation principle: Yanghe chose Yudong, the closest to itself, as the breakthrough point to open the Henan market; Second, opportunity selection principle: Henan, as the most inclusive provincial market for Chinese baijiu, has a huge market capacity of 28 billion yuan, and foreign famous liquor brands can achieve considerable achievements in Henan; Third, blue ocean attack principle: local baijiu brands are not strong and have weak defensive capabilities. Whether Sichuan, Guizhou, Anhui, Jiangsu, Shanxi, or low-end brands from the northeast, all choose this as their preferred market. When Yanghe reached tens of millions in scale in Henan, it immediately turned to lay out nearby markets such as Shandong, Anhui, and Shanghai. By first stabilizing the "buttocks" base area of the Jiangsu market, relying on the radiation and influence of the Jiangsu model market, Yanghe then extended its "fists" to markets it could reach, grasp, and form linkage with, such as Henan, Anhui, Shandong, Shanghai, and Zhejiang, advancing step by step, gradually forming the East China block market. The large block base area market took shape. Therefore, any regional brand attempting to plan a national market must establish such strategic vision, radiate the flames of war further, choose strategic markets for concentrated breakthroughs, and simultaneously or gradually penetrate tactical and opportunity markets, patiently cultivate and wait for opportunities, form a large block market to jointly sell products, focus brand power, elevate and effectively utilize communication resources, and be ready to launch campaign-level attacks at any time. Once the campaign is launched, the markets within the large block will link with each other, form resonance, influence and spread, and overturn the market in one fell swoop. IV. Rapid Expansion: Centered on the East China Block Market, Rapid National Layout In 2007, after successfully laying out the East China block market with "stabilize the buttocks, punch with fists," Yanghe began to build a national marketing network backed by the East China 6 provinces and 1 city, radiating to the northwest, north, northeast, south, and southwest provinces, truly launching a rapid national layout. Today, if we assume that Yanghe treated the East China block market as a large base area market, we can understand why, after the East China block market layout took shape, it simultaneously launched rapid expansion into five major war zones. In reality, we see that Yanghe's two largest contributing provinces are exactly within the East China block market: Jiangsu and Henan. Moreover, Henan was the first external market Yanghe laid out. (Henan market contributed over 3 billion yuan in sales at its peak), showing the status and value of the East China market in the national market; it is definitely a model market. We must understand the law of base area market construction: it absolutely cannot be rushed; you must endure loneliness. So, we see that Yanghe spent nearly 4 years on the entire East China block market layout. However, the market layout of the other five blocks (northwest, north, northeast, south, southwest) took less than two years. What operational mechanism and law lies behind this? We must also understand that under the favorable time window of trends and environment, and on the basis of the large block base area market taking shape, to seek overall victory, the key to winning the entire national campaign lies not in stability but in speed. Rapid replication is the key to overall victory. Speed must pursue speed with flaws. Do not fear problems; solve them in development. Whether you can win big depends on how fast you are. So, we saw Yanghe's new five-year business goal plan formulated in early 2008. The company's business goals were divided into three steps:
  8. 2008-2009: Complete the layout of most provinces nationwide, and achieve an average annual revenue growth rate of over 100% for Blue Classic;
  9. 2010-2011: Annual sales in most provinces exceed 100 million yuan;
  10. After 2012: Annual sales in all provinces exceed 100 million yuan, and key provinces exceed 500 million yuan. In fact, Yanghe dared to make such strategic decisions, besides doing things right (operational capability, refined management, and strong execution became the key to winning the market), it also grasped doing the right things. Doing the right things means correctly grasping external industry trends, competitive environment, and consumer demand. First, the high-growth industry environment. From 05-07, driven by both economy and investment, real estate investment drove political and business activities, leading the first bull market in baijiu, with high-end liquors like Moutai, Wuliangye, and Laojiao growing rapidly. Even the 4 trillion yuan investment under the 2008 international financial crisis led local governments to launch investment plans, real estate investment and prices quickly recovered, and regional liquors entered a high-growth period, accelerating the rapid development of Chinese baijiu. This phenomenon continued until 2012. Yanghe thrived in this environment, with mid-to-high-end products rapidly increasing in volume, coupled with price increases. The proportion of mid-to-high-end baijiu revenue increased from 85% in 2009 to 92% in 2012, with Dream Blue and Sky Blue growing at over 100% in 09, 10, and 11. Second, price band positioning without strong competitors (Sea Blue). The mid-end baijiu market lacked national brands. Yanghe, with its famous liquor genes and Blue Classic series, was in a good time for rapid expansion and development. Without strong brand competition, Sea Blue quickly became the single-product king in the 100-yuan price band. Focus wins speed. In 2004, Sea Blue's annual sales reached 76 million yuan, in 2005 exceeded 280 million yuan, in 2006 reached 678 million yuan, in 2007 broke through 1 billion yuan to reach 1.113 billion yuan, in 2008 sales were about 1.968 billion yuan, and in 2011 sales were 5 billion yuan, with a 7-year CAGR of 182%. Third, the soft category characteristic became the dominant characteristic of Chinese strong-aroma baijiu. Under Yanghe's leadership and the follow-up learning of many enterprises, a soft trend swept the country. Soft became the mainstream trend and the primary reason for consumer choice. As the category representative, Yanghe Blue Classic naturally became the biggest beneficiary. With all three advantages of timing (trend), location (competition), and people (strong strategic leadership, strong execution team, and mature operating model), rapid development was natural. By 2011, all prefecture-level markets in Yanghe's provincial market had sales exceeding 100 million yuan. Among the 34 provincial-level markets outside the province, 22 had annual sales exceeding 100 million yuan, 7 prefecture-level markets exceeded 100 million yuan, and 33 county-level markets exceeded 100 million yuan. The company's out-of-province revenue grew from 677 million yuan in 2008 to 6.147 billion yuan in 2012, with a 4-year compound growth rate of 55%. V. National Offensive: Communication Must Be High-End and Match Leading Cognition. Under the time window, to achieve national leading cognition and leading position, not only must the offensive pace be fast, but the aligned promotion and communication must also be saturated investment, with high-end media representation, shaping the leader's dominance and trend. Only then can there be internal confidence, external compliance, internal and external consistency, and all voices and halos quickly converge to the brand. In actual marketing, Yanghe indeed achieved internal and external resonance, ground-air combination, and integrated marketing communication. The company used events and off-site communication (such as concerts) to coordinate ground promotion and multi-angle brand building, strengthened cooperation with CCTV, and selected high-quality outdoor media with good locations, large coverage, and high grade for publicity, further shaping and enhancing the value cognition of the Yanghe Blue Classic brand. The company's advertising and promotion expenses were about 100 million yuan in 08, reaching 850 million yuan by 12, with an average annual compound growth rate of 68%. Behind every successful brand, there are the essential laws of their success. The law is the basic principle of why they did it and dared to do it. So, when we see a phenomenon, do not imitate or fear it, but analyze the basic laws behind why it was done: why did they do it this way at this stage and another way at another stage? Brand Fission in the Strategic Adjustment Period During the golden decade, why did Yanghe focus only on the Blue Classic series, and even only on the Sea Blue product? Why, during 2013-2015, when the industry experienced fluctuations, did Yanghe continuously launch new products? Was the cognitive product still Sea Blue? Why, after the baijiu industry recovered again in 2015, did Yanghe, based on the fission of the Dream Blue brand, make Dream Blue an independent brand and focus on promoting Dream Blue? I. During the golden decade, with opportunities everywhere, why was Yanghe so focused? In any industry, during the high-speed development and expansion period, a single product breakthrough is more likely to achieve scale and establish a strong position in the national market and many regional markets. 1. During the high-speed development period, any brand can survive well. Focusing on a single series and a single cognitive product makes it easier to establish clear brand cognition and strong brand position in customer minds. Focusing at this time makes it easiest to become both a strong national brand and a "local snake" in many regional markets. In reality, Yanghe achieved such results. During the golden decade, in contrast, Wuliangye and Luzhou Laojiao made fatal strategic errors: they opened up barcodes frantically to harvest sales. This was a lack of strategic vision among enterprise leaders. In fact, at that time, they should have focused on several major series, occupied different price bands, sunk into the market, and built strong series leadership nationwide. At that time, building a brand was easier. 2. Any brand, if you create a completely new category and new brand, do not launch too many products, making consumers dazzled and confused. Consumer attention is a very scarce resource. We must use a fixed cognitive product to let them accept the category and brand through a single fixed product. After we truly establish the brand and positioning in consumer minds, then you can launch many product lines, but you cannot do this at the beginning. Yanghe, precisely during the golden decade, because the brand was in the stage of creating a new category, could only focus on Blue Classic and the cognitive product Sea Blue. This also aligns with the industry expansion period, where focusing on the brand and product makes it easier to achieve a truly national brand. So, we see that Yanghe Blue Classic achieved top-two market positions in many regional markets, achieving a true national strong position. In contrast, the brands under Wuliangye (non-Puwu) and Luzhou Laojiao, although large in scale and volume, have few markets that can truly be called strong. Of course, although Yanghe used Sea Blue as the cognitive product, Sky Blue and Dream Blue also achieved good sales, which is the halo effect of the brand. II. During the industry adjustment period, why did Yanghe instead expand and widen the product line and differentiate brands? After 2013, the industry entered a cliff-like decline until 2015 when it gradually rebounded, but the overall capacity of baijiu lost the high-speed growth and expansion opportunities of the golden decade, and competition entered an era of squeeze competition. When an industry's growth is limited and scale peaks, for a brand that has achieved a certain category leadership position, what is the correct strategy at this time? The cake is this big, and for strong-aroma baijiu, the overall capacity is shrinking. To achieve growth, it must come not only from the intensive cultivation of the leading series but also from creating new brands to find new growth space. If creating new brands for growth, is it better to open up barcodes for distributors to OEM, or for the enterprise to strategically build brands? If opening up barcodes to distributors, it is likely to damage the established positioning cognition of the leading brand and weaken brand momentum. If the enterprise has a strategic purpose to create new brands, there are two paths: First, create new brands in different price band categories and harvest in top-two regional markets. Because only in top-two regional markets can you qualify for multi-brand and rich product line monopolization. From the supply side, this means reshuffling brands with ineffective supply and brands that are not price band category representatives. Second, enter newly emerging consumption channels, such as internet channels, to capture the new consumption style groups. We see that in reality, Yanghe took both growth paths simultaneously. But for the offline market, Yanghe launched several new brands, but due to missteps in price band positioning, regional market placement of new brands, mixed execution by marketing teams, and differences in distributor market-building capabilities, they did not achieve good results. Instead, some brands launched online achieved certain performance. Observing the failure of Yanghe's offline new brands, there are two main reasons: First, before 2015, Yanghe Blue Classic formed strong brand momentum in the 138-158 yuan price band. If the new brand's product positioning or main product price positioning exceeded Sea Blue's price, it was difficult for customers to accept. This is because high momentum can influence low momentum, but low momentum cannot easily influence high momentum. We saw that during the adjustment period, the old product Yanghe Blue Porcelain performed well in many markets. Second, it did not truly operate in top-two regional markets with planning but adopted a distributor recruitment model to achieve aggregate growth. However, because the brand momentum did not truly reach the height of Wuliangye or Luzhou Laojiao, the recruitment, market sell-through, and consumption were not ideal. During an industry-wide downturn or stagnation, strong category brands relying on developing new brands for growth is a correct strategy, but market growth comes from intensive cultivation, not aggregate growth during expansion. Yanghe did not grasp this, and even if it knew, it was difficult to do. III. During the industry recovery period, why did Yanghe position its strategy at high-end and sub-premium? After 2015, China's baijiu recovered. This recovery or growth came from consumption upgrades and the rise of middle-class consumption. At this time, Yanghe's leadership team had to rethink where the enterprise's growth strategy truly lay. First, learn from Wuliangye and Luzhou Laojiao's external growth model during the golden decade; Second, learn from Moutai, elevate the brand structure, and achieve structural growth of the Yanghe Blue Classic series. Through the practice of the industry adjustment period, it was proven that the aggregate and external growth models of Wuliangye and Luzhou Laojiao were not suitable for Yanghe's brand tension. External expansion could not bring substantial, variable growth to Yanghe. Elevate the brand structure, through high-end brand cultivation, achieve structural growth of the Yanghe Blue Classic series, that is, upgrade the leading product from Sea Blue to Dream Blue, using Dream Blue's high-value influence and brand height to drive the growth of Sky Blue and Sea Blue. What exactly should be done to achieve the high-end positioning of Dream Blue? If Dream Blue still belongs to the Yanghe Blue Classic brand, in customer minds, Dream Blue will always be just a higher-priced product, making it difficult to achieve high-end brand cognition. For Dream Blue to achieve true high-end cognition, it must fission from Blue Classic and become an independent brand, and it must have new positioning to support Dream Blue as a high-end category. Only when a product is given a positioning concept can it achieve brand transformation. What positioning concept can support the high-end positioning of Yanghe Dream Blue? For any baijiu brand to take the high-end route, the mental competitor is undoubtedly Moutai. Moutai is the national liquor and the representative brand of the high-end category. What method can quickly establish high-end brand cognition in customer minds? There are two methods: one is to associate with the mental competitor; the other is to oppose the mental competitor. Yanghe Dream Blue adopted opposition to the mental competitor, repositioning Moutai. The rise of the new middle class requires new brands to represent their consumption values. So, Yanghe Dream Blue positioned itself as the New National Liquor, pushing Moutai to the other side: the Old National Liquor. After finding the positioning, the next step is how to do the operational alignment well. So, Yanghe Dream Blue, whether in high-end PR sponsorship activities or advertising communication, focused entirely on Dream Blue. Even after 2017, the terminal display of Dream Blue series products was separate, clearly distinguished from Sea Blue and Sky Blue, truly operating it as an independent brand. I believe that in the future, Dream Blue will definitely be operated by an independent business unit and independent distributors. Dream Blue's transformation into a high-end brand not only achieved its own high growth but also further drove the growth of Sky Blue and Sea Blue products in the Yanghe Blue Classic series. This completely achieved structural growth of the Yanghe Blue Classic series by elevating the product structure. In fact, the high-end positioning of Yanghe Dream Blue has flaws: the M3 and M6 products belong to the sub-premium camp, directly affecting customers' high-end cognition of Dream Blue, causing cognitive confusion, and not conducive to consolidating the future high-end positioning. Given sales demand, these products cannot be cut. What to do? The best way is to only communicate the M9 product in all communications, treat M9 as the cognitive product, and only sell M3/M6 without communication, to solve the problem of customer mental cognition confusion. Even change the advertising slogan to: New National Liquor, drink M9; high-end gifts, give M9. By analyzing Yanghe's strategic behavior in the golden decade, the industry adjustment period, and the industry recovery period, we see that in each stage, Yanghe Blue Classic relied on the basic strategic laws of brand development to scientifically guide its strategic behavior. Even during the industry adjustment period, its strategic thinking was still correct, but the operational alignment did not keep up, causing the new brands developed to perform poorly in the market and become chicken ribs. Strategy is a science, supported by powerful laws and methodologies. It requires enterprise leaders to make scientific and well-founded analyses based on industry trends, consumption trends, competitive opportunities, brand status, and development stages to ensure the correctness and suitability of the strategy. Source: Leading Strategy Author: Zhu Zhiming: The first person in leading strategic positioning, focusing on building brands to top-two positions and boosting rapid brand leadership. 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