Recently, major beer companies released their 2017 results, drawing attention as the industry undergoes transformation. For Chinese beer giants as a whole, performance was decent, with a common feature being that net profit growth outpaced revenue growth, indicating a clear shift from grabbing territory to seeking profits; no one wants to sell at a loss for publicity. As China's largest beer company by sales volume, China Resources Snow Breweries' annual report naturally attracted more attention. What kind of report card did it deliver? According to China Resources Beer's performance report, in 2017, China Resources Snow Breweries' consolidated turnover was RMB 29.732 billion, up 3.6% year-on-year; profit attributable to shareholders was RMB 1.18 billion, up 86.8%; sales volume was 11.819 million kiloliters, up 0.9%, with a market share of nearly 27%. From the numbers, this performance is quite good. In fact, this is also the first complete fiscal year report card for Snow's General Manager Hou Xiaohai. According to public information, Hou Xiaohai became General Manager of China Resources Snow Breweries in March 2016. However, the major internal adjustments at China Resources Snow began in 2017. Starting in 2017, China Resources Snow initiated a series of restructuring efforts in organizational structure, brands, and products, which is no longer news in the industry. Judging from the 2017 financial report, the internal adjustments have begun to show results. In fact, Snow's tactics have indeed changed since last year. Facing the new market environment, China's largest brewer has begun to turn around. New General Manager Faces the 'Last Battle' Shortly after taking office, Hou Xiaohai proposed the concept of the 'Last Battle' in an internal speech, which was cited by multiple media outlets. However, in the beer industry, is the 'Last Battle' an exaggeration? Let's look at today's beer market: In terms of the beer industry landscape, Ten years ago, it was often described as the 'Romance of the Three Kingdoms,' referring to China Resources Snow, Tsingtao, and Yanjing; Five years ago, it was common to describe it with five giants: China Resources Snow, Tsingtao, AB InBev, Yanjing, and Carlsberg, which together held over 75% of the market share; Today, authoritative beer experts summarize it as 'three worlds': traditional industrial beer, imported beer, and craft beer. Although imported beer and craft beer still hold negligible market share, it is an indisputable fact that China's beer production has been steadily declining, from 50.615 million kiloliters in 2013 to 44.015 million kiloliters in 2017, with four consecutive years of year-on-year decreases, totaling a reduction of over 6 million kiloliters. Meanwhile, imported beer has been steadily rising. In 2017, China imported 716,000 kiloliters of beer, up 10.8% year-on-year, while in 2013, the import volume was 182,000 kiloliters, nearly tripling over four years. Although there is no authoritative statistical data for craft beer yet, craft beer has been developing like mushrooms after rain, bursting with vitality. Imported beer and craft beer are continuously eroding the market share of domestic beer, behind which lies the unstoppable trend of consumption upgrading, diversified demand, and personalized consumption. The domestic beer giants, which have always excelled at building channel barriers and using price elasticity to compete for market share, are clearly caught off guard by today's industry landscape. The beer industry has indeed changed. Some experts believe that in the past, the beer industry could thrive by relying on a few major products, using channel blockades, and traditional tactics like hard advertising during peak seasons or sponsoring hot topics. This relied more on the power of capital for market operations. Channels played a huge role; regardless of product strength, a strong channel could ensure sales, and consumers could only passively choose—seeing what was available and drinking it. This approach is clearly no longer viable today, as channels can no longer control increasingly upgraded consumption intentions. This is precisely the challenge facing new General Manager Hou Xiaohai. Young People Abandon You Without Even Saying Goodbye In the beer industry, there has always been a consensus that 'those who win the youth win the world.' The young demographic is not only the core consumer group for beer but also has a strong leading role, serving as a barometer of consumption trends. Therefore, major beer manufacturers have always invested heavily in young consumer groups. However, today's young consumers are vastly different from before. The current young beer consumer group is mainly composed of the post-90s generation, who have unique personalities and consumption preferences. Industry insiders say that ten years ago, the young consumers mainly from the post-80s generation had a strong subconscious collective mindset, so their herd mentality made them highly respect and trust big brands. Today, the post-90s, who are more self-expressive and willing to spend, pursue uniqueness. They are independent in consumption behavior, not blindly following, willing to pay for what they like, and sometimes even deliberately differentiate themselves from others. This is one reason why imported beer and craft beer have risen, and it is also one reason why domestic beer sales continue to decline—young people abandon you without even saying goodbye. It can be analyzed as follows: Personalized and diversified demands are bursting forth, so the beer industry's big single-product strategy is failing; Young groups no longer rely on brand awareness to make consumption decisions, so strategies of hard advertising or sponsoring hot topics are failing; Consumers no longer submit to seeing what's available at the terminal and drinking it; they can buy beer through e-commerce or other channels, so traditional channel barriers are failing. In fact, one of the core aspects of traditional marketing is to build awareness, and on that basis, promote experience. Today, this approach clearly cannot adapt to the new market environment because young people knowing you doesn't mean you are their cup of tea. Therefore, to win over young consumers, more experts have mentioned a shift from 'awareness' to 'relationship' marketing, which means brands communicate with young people on an equal footing to build good relationships, rather than forcefully instilling. PR marketing has become a way to break the deadlock. And Hou Xiaohai happens to be a master of PR marketing. Looking back at Hou Xiaohai's past cases, PR marketing is always present: More than ten years ago, Hou proposed the 'Non-Olympic Marketing' strategy, which not only reversed Snow's awkward position as a non-Olympic sponsor but also turned passivity into initiative, making it a focus of media coverage and discussion at the time. Under Hou's push, the Brave the World brand activity was born, followed by the launch of the Brave the World product. More than ten years ago, this was a beer completely different from the product design concepts of the time, becoming a hot topic. Additionally, Hou Xiaohai also led the launch of the Natural Beauty product. And so on. Since Hou Xiaohai became General Manager, PR marketing strategies have become clear again. In 2017, Snow Beer launched a new product 'Concept Series' during the Double 11 shopping festival in e-commerce and supermarket channels. This is a combination product consisting of upgraded versions of Snow Face, Pure Draft, and Brave the World, with a very youthful and fashionable appearance. What's more noteworthy is that Snow launched this new product using event PR tactics, inviting Mao Buyi as the product experience officer, igniting online discussions with topics, and later sustaining the event's heat through offline salon activities, beer stories, and other topics. There are two points worth pondering about this PR marketing: First, choosing to launch the new product on Double 11, a carnival for young people; Second, using new media PR to communicate with young people. According to industry insiders, if the launch of Snow's Concept Series was just a trial of Hou Xiaohai's PR marketing, then the new Brave the World product in March this year was his major PR move. On March 18, Snow held a grand new product launch at an expo center in Hangzhou that had hosted top international conferences, launching a new product designed specifically for young people—Brave the World superX. According to unanimous evaluations from attendees and online live stream viewers, it was a beer launch that didn't look like a beer launch at all. It is understood that Snow's launch adopted a cross-industry mobile phone launch model, with flash videos, TED-style speeches by the general manager and sommeliers, and various audio-visual effects. This kind of operation is rare in the beer industry, and it naturally attracted high media attention and online discussion. Thus, recently, Snow has been making efforts to communicate with young people using their preferred methods and language, thereby establishing and maintaining good relationships. This is the key to PR marketing and a tactic that goes beyond traditional marketing. In fact, since 2017, under Hou Xiaohai's leadership, Snow's PR marketing has been accumulating day by day. For example, the Snow First Brewery Factory experience activities are being carried out intensively, Snow's Weibo and WeChat accounts frequently communicate with young consumers in novel forms, and various markets are conducting PR activities to get close to young consumers. Dealers' 'First Time' Let's return to the March 18 Snow new product launch. It is understood that Snow also invited dealer representatives from across the country to the main venue in Hangzhou, including veteran dealers who have cooperated with Snow for over ten, twenty, or even more years. Moreover, according to media reports, Snow's launch also set up over a hundred branch venues across the country, simultaneously live-streaming the event, with over 72 million views. This was a first for Snow dealers. Since Hou Xiaohai became General Manager, the relationship between Snow and its dealers has been developing in a new direction. As is well known, Snow is China's largest beer company by sales volume, which means it has the largest channel network behind it. However, does the largest channel mean the strongest? The fact is that Snow has always excelled at using price wars to exchange for market share, especially as mainstream sub-segment products account for a significant proportion of its product structure, meaning a considerable number of Snow dealers rely on a strategy of small profits and quick turnover to earn profits. According to media reports, Hou Xiaohai has repeatedly mentioned the strategy of 'quality development' in interviews, which can be understood as Hou gradually reversing the situation of trading profits for space through price wars. After years of cultivation, Snow's Brave the World has gained an advantage in the 5-6 yuan sub-segment. Hou Xiaohai is clearly not satisfied with this. Judging from Snow's recent operations, Hou's goal has shifted to the premium and above sub-segments, which are precisely the sub-segments that domestic beer has failed to conquer and are also the most profitable, where imported beer, craft beer, and domestic foreign brands are entrenched. In the past year, Hou Xiaohai's premiumization strategy has begun to show results. In March this year, China Resources Snow stated in its 2017 annual report that its average selling price increased by approximately 2.7% year-on-year, thanks to the continued optimization of product mix, with mid-to-high-end beer sales maintaining growth. It is clearly felt that at the enterprise level, Snow Beer is increasing its development of premium products to provide ammunition for market expansion. The newly launched Brave the World superX is priced at 8-9 yuan in on-premise stores, marking Snow's first shot in the 8-9 yuan sub-segment, which was previously unclear. Industry insiders analyze that Hou Xiaohai's premium product development strategy is undoubtedly a major boon for Snow dealers, creating more opportunities for substantial profits. And by inviting dealers to participate in the new product launch, Hou Xiaohai aims to comprehensively enhance the competitiveness of current dealers, transitioning from price wars and channel hand-to-hand combat to relying on brand premium and PR marketing. 'It can also be understood that Hou Xiaohai is trying to influence the dealer team through PR marketing, while establishing good relationships with young people, also promoting dealers to master new marketing strategies,' analyzed an industry expert. Source: Beer Observation (ID: GuanBeer) -END-