Introduction: It's Genki Forest's turn to accept the challenge. Under the siege of giants, Genki Forest has invested in 11 projects within 2 years. According to public data, Genki Forest's revenue in 2021 was approximately 7.3 billion yuan, of which about 4 billion yuan came from sparkling water, meaning sparkling water contributed the vast majority of Genki Forest's revenue. However, in fact, Genki Forest's current products include sparkling water, milk tea, Alien, Burn Tea, Fiber Tea, Youkuang, and other products, covering categories such as milk tea, sugar-free plant tea, mineral water, and yogurt. Moreover, in addition to its own products, Genki Forest has been expanding its boundaries through industrial investment. Currently, Genki Forest's fields of involvement cover beverages, alcohol, light food, catering, small appliances, technology, and many other categories. In Yilan Business's view, behind the frequent moves is Genki Forest's anxiety that is hard to conceal.

01 What is Genki Forest anxious about? Many companies rose on the new consumption trend, but few new consumption brands truly survived. Genki Forest can be considered a representative survivor. From its inception, Genki Forest's sales performance was outstanding, with sales growth rates of 300%, 200%, 309%, and 170.3% from 2018 to 2021. Clearly, starting last year, Genki Forest's revenue growth began to decline. Facing reality, Genki Forest founder Tang Binsen proactively slowed down, setting the 2022 revenue target at 10 billion yuan (some reports now say it has been adjusted to 7 billion), a year-on-year growth rate of only 36.9%. Regarding Genki Forest's revenue situation, Daily People in "Genki Forest, the Catfish Loses Speed" stated that in the hottest summer of the past year, Genki Forest's sales decline had become a common reality. Domestic FMCG merchants, to increase sales, require distributors to stock up. During Genki Forest's high-growth period, distributors wanted to stock up without salespeople urging them. This year, the three most common phrases distributors say are: no money, high inventory, and too lazy to bother. One distributor also said that in December last year, they bought 1,000 cases of milk tea, and the remaining few hundred units were sold at a loss. Tang Binsen proactively slowed down, distributors openly said they couldn't sell, and were unwilling to stock up again. This is precisely Genki Forest's current anxiety. In Yilan Business's view, the root cause of this anxiety is that Genki Forest faces severe challenges in three aspects: industry, products, and channels.

From an industry perspective, Genki Forest rose on the wave of young people's advocacy for sugar-free products. In 2016, the National Health and Family Planning Commission issued the "Dietary Guidelines for Chinese Residents (2016)", which emphasized that everyone should control added sugar intake: "Daily sugar intake should not exceed 50g, preferably controlled below 25g." That year, Genki Forest rose with the wind, seizing the starting point of new culture, and quickly launched "0 sugar, 0 fat, 0 calorie" sparkling water, achieving great success. Although Genki Forest was not the pioneer of "sugar-free" (Coca-Cola's early Zero Coke, Nongfu Spring's Oriental Leaf), the timing made Genki Forest the biggest beneficiary. According to public data, before 2019, Genki Forest's market share was as high as 85%. The rise of consumer brands is often closely related to the development of cultural trends. In the process of social development, brands become associated with culture through labeling, building consumer market awareness of the brand. Coca-Cola, as the most successful beverage brand in the world and a major representative of American industrial prosperity, embodies American economy, lifestyle, and other elements. It is jokingly called "happy fat guy water" and equated with "happiness", which also made Coke a hard currency during the pandemic. It is worth noting that today Coke still equals "happy fat guy water", but the connection between Genki Forest, which rose on "sugar-free", and "sugar-free" is becoming blurred. On one hand, Genki Forest's emphasis on erythritol (the sugar substitute in sparkling water) has shifted people's perception from "sugar-free equals Genki Forest" to "sugar-free equals erythritol behind Genki Forest". Health depends not on the beverage itself but on the ingredients behind it. On the other hand, most brands have started launching their own "sugar-free" series. According to public data, by the second half of 2021, Genki Forest's market share was at most 50%, Coca-Cola's "AH!HA!" product reached 25%, and Nongfu Spring's sparkling water reached about 18%. More and more brands are using erythritol and touting "sugar-free". For those concerned about "sugar-free", Genki Forest is no longer the only option, and its uniqueness is diminishing.

From a product perspective, the vitality of hit products is limited. Since the beginning of this year, Genki Forest has vigorously developed the three products "Alien, Fiber Tea, and Youkuang". Alien electrolyte water sales exceeded 1 billion in September, Fiber Tea exceeded 100 million in August this year. Compared with sparkling water, these revenues are not high, and Youkuang's sales have also been high at the start but declined, failing to gain recognition. In August this year, Genki Forest also launched a cola-flavored sparkling water, but Tang Binsen once said bluntly that 95% would fail, and he did not have high expectations for the cola-flavored sparkling water, even not planning large-scale distribution. In Yilan Business's July article "Genki Forest Making Cola: Both a Small Test and a Big Strategy", Genki Forest co-founder Lujiao once said that the original intention of launching cola-flavored sparkling water was not to compete with anyone but to meet user needs. Tang Binsen believes that while boldly verifying demand, one should avoid overly high psychological expectations, and be cautious at the tactical level. Currently, according to Genki Forest's official website, there are 7 products in total: "sparkling water, milk tea, Alien, Burn Tea, Fiber Tea, Youkuang, and Beihai Ranch". The overall product structure is not single, but in comparison, the only true hit product is still sparkling water. Looking at its actions along the way, whether it's its own products or investments, it has not yet found a business to support a second growth line. According to a report from the Consumer and Market Research Center, the replacement cycle for tea beverage categories is generally 5-6 years. It has been 4 years since sparkling water was launched. Based on recent market performance, there are more and more substitutes, and sparkling water has reached a growth bottleneck. This year, Genki Forest has launched many new flavors for sparkling water, such as sweet orange, sea salt grapefruit, sea salt pineapple, and also launched a 0 sugar 0 fat lactic acid bacteria sparkling water "Duice", "Lang - Ice Lemon Soda", and "Bishancun" soda new products. Most still revolve around sparkling water. Retail practitioner Pan Min told Yilan Business, "Based on my understanding of friends around me, apart from the product concept (sugar-free), Genki Forest itself is not a particularly tasty beverage. If you just rely on brand, taste, packaging, and concept, the space won't be too big." Additionally, the single product price has caused Genki Forest to miss a group of users. Yilan Business observed in dozens of comments under Daily People's article "Genki Forest, the Catfish Loses Speed" that nearly 30% said Genki Forest's prices are a bit expensive. Lin Xiyu, who talks about retail fresh food, also said that Genki Forest's prices seem a bit high, and the brand positioning and promotional channels are relatively young. During the three years of the pandemic, besides economic impact, such consumers were mostly in school lockdowns or online classes. Clearly, for Genki Forest, if it wants to maintain "sustained growth", finding a "second growth curve" is urgent.

From a channel perspective, Genki Forest is under siege by giants. For the beverage market, offline traditional channels are the basic market for Chinese beverage sales. According to Euromonitor statistics, in 2020, China's soft drink industry distribution channels were dominated by modern channels (supermarkets, chain convenience stores), accounting for 52.7%; traditional channels accounted for 34.1%; catering channels accounted for 7.6%; e-commerce channels accounted for 4.4%; other channels only accounted for 1.2%. And predecessors like Coca-Cola and Nongfu Spring have already established a strong presence in traditional channels. According to public data, there are about 8 million terminals nationwide that can cover beverage sales, of which Coca-Cola has secured more than 3 million, Nongfu Spring less than 3 million, and Genki Forest currently only about 1 million. In terms of freezer placement, Coca-Cola ranks first in the industry with over one million units, Kangshifu (including Pepsi China) ranks second, Nongfu Spring ranks third with 400,000+ units, and Genki Forest has only 100,000 freezers. Compared with traditional giants, Genki Forest still seems a bit immature, which also means Genki Forest still has a lot of room to expand in channels, but giants seem unwilling to give Genki Forest this opportunity. Daily People described in "Genki Forest, the Catfish Loses Speed" that regarding Genki Forest's entry into the beverage market, Zhong Shanshan said many years ago that any industry needs new faces and new young people to come and try. By 2021, Zhong Shanshan's attitude had changed to, "If you want to do Genki's business, don't cooperate with me." As early as 2021, many regional distributors of Nongfu Spring received notices from headquarters not to act as agents for Genki Forest products. Facing the 2.43 million terminals that Nongfu Spring took more than 20 years to cover, Genki Forest can only try to avoid seeking traditional distributors and turn its attention to freezers and smart vending machines. Nongfu Spring and Coca-Cola have respectively planned "Windfall" and "Mengzhan Yuanqi" counterattack plans, both centered on spending money to place Nongfu Spring and Coca-Cola products in Genki Forest's freezers, squeezing Genki Forest at offline terminals. After all, Genki Forest cannot be richer than Nongfu Spring and Coca-Cola. Genki Forest's smart vending machine project team was established in September last year, setting a goal of deploying 100,000 smart vending machines by the end of 2022. However, as of June this year, only 2,000 units had been deployed, completing only 5% of the annual KPI. There is still a long way to go to achieve the 100,000-unit target. It is worth noting that Pan Min also said that from years of industry experience, in the actual sales process, Genki Forest offers too few consumer activities. A "one more bottle" activity brings significant sales and exposure to Coca-Cola and Kangshifu. But from a market perspective, Genki's investment in terminals is minimal except for display fees and refrigerated freezers. Although Genki Forest has high brand awareness, TV advertising placements have indeed brought some growth, but this is not enough to cause phenomenal explosive sales.

02 Breaking the deadlock When the flagship sparkling water is imitated by competitors, the first-mover advantage gradually diminishes, and channel breakthroughs are difficult. Genki Forest, living under the siege of beverage giants, has been trying to break the deadlock.

First, adjustment of organizational structure. Currently, on Qichacha, Genki Forest's introduction is still an internet innovative beverage company, but Genki Forest's official website introduction has been changed to a Chinese food and beverage enterprise. This beverage company initially aspired to use internet methods to reshape the traditional FMCG industry. It brought internet thinking into the new product development process, with multiple project teams led by product managers. Each product had its own R&D, e-commerce, and growth teams, running in parallel under a "horse race mechanism". But as the macro environment changed, revenue growth slowed, and no second "sparkling water" was discovered. This year, Genki Forest began to lower its profile and learn from traditional industries. Former Genki Forest executive Li Guoxun also candidly responded that to achieve internal organizational upgrades and optimization, Genki Forest would proactively slow down (organizational expansion) in 2022. It is understood that the company has changed from a small team organization based on products to a "middle platform" organizational structure. Positions such as e-commerce have begun to be separated from small groups and incorporated into the company's larger organizational structure, attempting to improve overall efficiency.

Second, broadening boundaries. Although Genki Forest has always emphasized its R&D investment and product technical content, the technical barriers in beverages are not high. Genki Forest's key point is actually occupying the first-mover advantage. Under fierce competition, product differences among companies are narrowing. Feeling the pressure, Genki Forest, before creating a true second growth curve, began to continuously expand product boundaries. In this regard, Pan Min said that the Genki Forest effect brings the starting point of the entire company's industry chain, and the overall layout will definitely try different products. The cost of trial and error is actually not high; if it doesn't work, stop losses in time. For Genki Forest's current overall size, it is negligible. However, once trial and error succeeds, it will definitely bring qualitative improvement to the entire company. So we can see that in the past 2 years, Genki Forest has invested in 11 companies, covering food and beverages, catering, software development, and other fields. The acquisition of the bottled coffee brand "NeverCoffee" in 2021 filled Genki Forest's gap in the coffee field. In 2022, it acquired the food and beverage distributor "Zuixi". Besides the products themselves, the most important thing should be Zuixi's penetration in catering channels. Before the acquisition, Zuixi had already cooperated with chain restaurants such as Jinshan Fuhuo Hotpot and Xijiade. The 2021 investment in the manufacturing enterprise "Jide Electric" that produces freezers and refrigerators may be related to Genki Forest's layout of smart vending machines.

Finally, going abroad to expand consumer groups. In early 2021, Genki Forest established an overseas business department, and in May of the same year, it officially launched on Amazon. Genki Forest has entered first-tier supermarkets in 40 countries and regions, including the United States, the United Kingdom, France, Australia, Singapore, and Vietnam. After going abroad, Genki Forest also topped the US Amazon sparkling water bestseller list Top 10 and swept the top 3 of the new product list in the category. Regarding issues encountered during the overseas process, such as first-leg transportation, international customs clearance, overseas warehousing, and last-mile delivery, Genki Forest has now reached further cooperation with Cainiao based on international logistics and supply chain to customize solutions for these issues, helping the brand directly reach overseas consumers.

03 Finally Although the situation is difficult, Genki Forest is making efforts to break the deadlock from various aspects. After all, the Chinese beverage market never lacks young entrants; what it lacks is a breaker. In the process of new brand growth, problems such as channels, products, and giant sieges will inevitably be encountered. Looking back, even giants have not been smooth sailing in their development. Coca-Cola was once banned by the Belgian government from selling beverages of various brands produced by the company in the country. Nongfu Spring's products have experienced "rapid rise and rapid fall" multiple times. It can be said that challenges in the beverage market are everywhere. Now it's just Genki Forest's turn to accept the challenge.

References: "Praising Genki Forest to Death" Jinduan; "Genki Forest, the Catfish Loses Speed" Daily People; "Genki Forest Making Cola: Both a Small Test and a Big Strategy" Yilan Business

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