---
title: "Genki Forest's 'Cooler Defense War' That It Cannot Afford to Lose"
description: "In 2020, Genki Forest's management held an internal discussion on how giants could destroy the company, foreshadowing intense competition. Over the following two years, Nongfu Spring and Coca-Cola led a crackdown, and in 2022, Genki Forest shifted from an internet-plus beverage company to a traditional food and beverage enterprise, aggressively deploying coolers and offline marketing while facing slowed revenue growth."
author: "袁喜乐"
publisher: "New Distribution"
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published: "2022-08-12"
language: "en"
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# Genki Forest's 'Cooler Defense War' That It Cannot Afford to Lose

> In 2020, Genki Forest's management held an internal discussion on how giants could destroy the company, foreshadowing intense competition. Over the following two years, Nongfu Spring and Coca-Cola led a crackdown, and in 2022, Genki Forest shifted from an internet-plus beverage company to a traditional food and beverage enterprise, aggressively deploying coolers and offline marketing while facing slowed revenue growth.

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In 2020, Genki Forest's management held an internal annual meeting discussion on "how giants could destroy Genki Forest." Such internal discussions with a strong sense of crisis often indicate that the company is facing or will face asymmetric and brutal competition.
In the following two years, Genki Forest was besieged by Nongfu Spring and Coca-Cola. In the first quarter of this year, Tang Binsen publicly stated that due to the pandemic, the 2021 sales target was not achieved.
Entering 2022, Genki Forest attempted to rebrand itself, removing "Internet+ beverage company" from its official website and replacing it with "Chinese food and beverage enterprise." While shedding its internet label, Genki Forest has been aggressively deploying coolers, offline marketing, and managing distributors. These shifts from virtual to real are set against a backdrop of revenue growth being capped at 50-60%.
By defining itself as a traditional beverage company, Genki Forest inevitably faces direct competition from traditional giants like Nongfu Spring.
There are many spicy narratives about the confrontation between the two, such as a joke: This year, Nongfu Spring's functional drink Scream collaborated with Ultraman, interpreted as "Ultraman fighting the little monster (Alien)"; or a Liu Huaqiang-style story: In a family-run store in Hebei, salespeople from both companies clashed physically over shelf placement.
The intense rivalry ultimately stems from the high concentration of distribution channels in the beverage market.
Compared to beer, beverages have 92.4% of their channel structure from circulation channels. That is, beverages, which are based on immediacy and convenience, are more dependent on channels. This leads to the main competition between Genki Forest and Nongfu Spring not only around products but also channels, including the coolers placed in grocery stores.
**01 Open-loop competition**
A little-known fact is that Nongfu Spring's bottled water, sold for only 2 yuan in grocery stores, is actually the most profitable beverage. Of the 2 yuan retail price, 59% goes to channel and terminal profits, far higher than beer's 29%, baijiu's 23%, and dairy's 26%.
The internal reason for this result is inseparable from a term that cannot be avoided in the FMCG market—sell-through.
Baijiu often has strong brand power, dairy demand is relatively rigid with prominent head-brand advantages, and beer has regional market segmentation characteristics, so their natural sell-through is relatively strong. In contrast, consumers' taste preferences for beverages are relatively changeable, and due to the basic positioning of thirst-quenching convenience and the consumption habit of "deciding in-store," beverages exhibit obvious open-loop competition characteristics.
Especially for flavor-based beverages, differences between categories are small, and natural sell-through is relatively weak. Therefore, beverage companies often give higher channel profits to strengthen channel push, including extensive outlet coverage and obtaining more shelf share within individual outlets.
Thus, beverage companies compete fiercely for shelf share. Giving higher channel profits is one aspect; shelf display and bottle marketing are specific manifestations of intense competition, including the most direct—increasing investment in terminal facilities like coolers and warmers.
The practice of selling beverages with coolers originated with Coca-Cola, whose earliest sales locations were soda fountains in local pharmacies, so much so that Coca-Cola's hometown Atlanta is also known as "a city of soda fountain counters."
Today, Coca-Cola has over 10 million coolers and vending machines worldwide. Over the years, Coca-Cola's market expansion path has never changed—build a factory in a region, then transport refrigerators emblazoned with the Coca-Cola logo there.
In China, Coca-Cola has the largest number of coolers, reaching 1.29 million units. Behind it are Master Kong (including Pepsi) with 768,000 units, Nongfu Spring with about 650,000 units, and Uni-President with the fewest, nearly 400,000 units.
As for Genki Forest's cooler count, there are three claims. One is an estimate based on Shenzhen Business Daily news content, suggesting about 180,000 units were deployed in 2021. Another data set indicates 25,000 units in 2020 and 95,000 in 2021, totaling 120,000. A third claim is that in January 2022, Genki Forest's 100,000th cooler came off the production line.
Regardless of which data is true, even if all three are combined, it would only be on par with the fourth-place Uni-President, showing that its threat to Coca-Cola and Nongfu Spring is currently insufficient. However, what is frightening about Genki Forest is the speed of its attack, which makes giants uneasy.
In 2020, when it decided to deploy coolers, Genki Forest's revenue was only 2.7 billion yuan. In April this year, Genki Forest disclosed that 2021 revenue was 2.6 times that of the previous year. By this calculation, its 2021 revenue was 7 billion yuan. According to Caijing data, Genki Forest's 2021 sales collection amount was 7.3 billion yuan.
With nearly threefold revenue growth, it is hard to say that the large-scale cooler deployment did not contribute.
A survey by Northeast Securities shows that among the main sales channels in China's beverage market, traditional channels represented by family-run grocery stores account for the highest sales share, reaching 37.7% in 2020, and cooler deployments by various companies are concentrated in this channel.
This battle for shelf share based on "deciding in-store" has gradually evolved into a scale competition for cooler deployment, with the ultimate goal being that when consumers enter a store, everything they see is their own products.
**02 The dilemma of smart coolers**
In November last year, when Tang Binsen was interviewed by LatePost and asked, "What are things Nongfu Spring would do but you wouldn't?"
His answer was: "We develop our own smart coolers, which can remind salespeople to restock without having to go on-site to check. Nongfu hasn't done this."
The smart coolers Tang Binsen mentioned have cameras embedded in the door to observe and count product purchases, while also ensuring that the company's own brand beverages are placed in the top three layers (from top to bottom).
Genki Forest's vision is that smart coolers can provide precise data for each terminal, including consumer profiles, making consumer images in convenience stores, modern supermarkets, and other channels more concrete. This theory sounds appealing, but the ideal is full, while reality is harsh.
On one hand, smart coolers do not have high technical barriers. If Genki Forest can deploy them, other brands like Nongfu Spring and Coca-Cola can too. At the end of last year, Nongfu Spring's chairman Zhong Shanshan announced an investment of 2 billion yuan to promote the application of 4-door and 3-door smart coolers at terminals, and has already placed orders for over 30,000 units with smart cooler manufacturers.
On the other hand, concrete data may not generate specific returns, but it significantly increases the procurement and deployment costs of coolers. In an article, Ebrun Power quoted an insider saying that Genki Forest's coolers are one-tenth more expensive than those on the market, with hardware alone costing an additional 300-400 yuan. Based on a volume of 100,000 units, this cost could be 30-40 million yuan.
However, hardware costs and data returns are not the biggest obstacles for Genki Forest.
According to relevant reports, Genki Forest has set a collection target of 10 billion yuan for this year, a significant reduction from the previous 300% growth rate.
It is hard to say whether the growth rate reduction is subjective or forced by objective conditions. In Wang Lie's letter to Genki Forest, one point was that Genki Forest might die from overly fast growth. The reason lies in aggressive sales targets; the problem is not the sales target itself, nor the coordination of production capacity and raw materials—the real big problem comes from the resulting sales organization chaos and channel loss of control.
From another perspective, after deploying 100,000 coolers and encountering fierce competition from rivals, as well as the high cost of Genki's own coolers, the growth rate reduction may not be entirely subjective.
But to stimulate market confidence, since the cost of smart coolers is too high, Genki Forest has simply bet on a track that competitors have not fully occupied—unmanned vending cabinets.
At the end of May this year, Uboss, the "number one" in domestic vending machines, went public in Hong Kong. Its prospectus disclosed that among the top five unmanned retail operators in China, Company A, with total sales of 1 billion yuan and a 3.5% market share, is its biggest competitor. That company is Nongfu Spring.
Nongfu Spring's previous prospectus disclosed that it has deployed nearly 60,000 vending machines in nearly 300 cities in China, with some combination vending machines renamed "Nongfu Spring Sesame Store." According to reports, Genki Forest has already deployed 10,000 unmanned vending machines, and this number will reach 50,000 by the end of the year.
**03 Ponzi structure**
In his letter, Wang Lie mentioned a Ponzi structure—resources front-loaded, super-large investment, spending tomorrow's money, betting on rapid future development. Tomorrow, you borrow from the day after tomorrow, which requires an ever-increasing sales base. Similar to a Ponzi scheme, if future sales do not meet expectations, the bubble will burst. The bubble must not burst, so:
1) Increase efforts, keep a close eye, there is no turning back, and sales targets must be achieved; 2) Diversify investments, claiming to have found another mine elsewhere, metaverse beverages, second or third battlefields—in short, there must be room for imagination.
Looking at Genki Forest's layout over the past year from this perspective, it somewhat aligns with Wang Lie's description. But this does not mean Genki Forest is a Ponzi structure. Products like Youkuang bottled water and unmanned retail cabinets can be seen as efforts to create imaginative space, and if successful, they would guarantee sales.
Behind these efforts is the inevitable path for Genki Forest to transform from an asset-light company to an asset-heavy company. In plain terms, after making a name with internet-plus methods, it is time to make up for the lessons in "production, supply, and sales."
On one hand, Genki Forest's breakout sparkling water belongs to the lowest tier of flavor-based products in terms of demand stability that determines product life cycle, lower than packaged water and functional beverages.
Flavor-based beverages have shorter product life cycles. In recent years, hit products have rapidly scaled up, completing their life cycle in 2-3 years. Even products like Wahaha Nutri-Express, Master Kong Iced Tea, and Coca-Cola Minute Maid, which maintain retail volumes of around 5 billion yuan due to strong channel advantages, are trending downward or struggling to grow.
At this point, looking at Youkuang packaged water and the recently rumored cola sparkling water, it is not hard to understand Genki Forest's purpose: **to expand products with more stable demand and extend product life cycles.**
On the other hand, it is about ensuring these products can reach consumers through channels, whether coolers or unmanned retail cabinets, and both must make a difference.
For now, coolers remain a protracted battle that Genki Forest must fight. At the very least, according to data provided by Genki Forest, in March last year, its sales force with coolers increased sales by an average of 118% compared to without coolers. Additionally, compared to the six-month statistics of traditional coolers, smart coolers saw an average sales increase of 74% per unit, with efficiency improvement of 472%.
But the cooler war also has unavoidable constraints, especially for Genki Forest, which needs to spend more money to enter and ensure higher channel margins to grab territory in traditional grocery stores controlled by Coca-Cola and Nongfu Spring.
Therefore, high-end business warfare often finds the crudest methods most effective.
References:
[1] China Beverage Industry In-depth Report: Seeking Progress in Change, Many Boats Racing, Huachuang Securities
[2] Nongfu Spring In-depth Report: A Diversified Soft Drink Industry Giant, Futu Securities
[3] Nongfu Spring: Ingenuity, Water Flows Naturally, Northeast Securities
[4] Coolers Have Become Their Battlefield, Feng Lun Feng Ma Niu
[5] Review: The Counter-encirclement and Container "Legions" of a Hundred-Billion-Yuan Genki Forest, Ebrun Power
[6] Genki Forest's Secret War with Nongfu Spring, Power Plant
[7] The Old Tricks of FMCG Companies, Genki Forest Didn't Avoid Either, Fast Moving Consumer Goods
[8] A Letter from P&G's Wang Lie to Genki Forest, Wang Lie
[9] In Convenience Store Coolers, Northeast Big Board, Genki Forest, and Coca-Cola Will Eventually Fight, IC Laboratory
[10] Nongfu Spring Invests 2 Billion Yuan, Just to Block Genki Forest?, Fast Moving Consumer Goods
[11] Hairong Cold Chain's Large-Sample Analysis of 381 Convenience Stores and Mom-and-Pop Shops: Refrigerated Cabinets, the Next Match Point, Anxin Securities
Disclaimer: This article (report) is based on publicly available information or information provided by interviewees, but Decode Decode and the author do not guarantee the completeness or accuracy of such information. In any case, the information or opinions expressed in this article (report) do not constitute investment advice to anyone.
Source: Decode Decode (ID: kankeji001) Author: Yuan Xile
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