Source: Lujiu Finance (ID: liujiucaijing69) For Coca-Cola, is Genki Forest a challenger that will pose a fatal threat, or a pioneer that can be harvested from behind? (Image source: Lujiu Finance) According to investment insiders, Genki Forest is about to complete a new round of financing, with a valuation of $15 billion. This time, the story Genki Forest is telling is to become China's Coca-Cola in the new era. This news has not been confirmed by Genki Forest. In the previous round, Genki Forest raised $500 million in March this year, led by Warburg Pincus, at a valuation of $6 billion. According to earlier public statements by Genki Forest founder Tang Binsen, 2021 is a big year for products, as 95% of its products had not yet been launched. In other words, Genki Forest's diversification and full-category product strategy are just beginning in 2021. Coca-Cola has been around for over 100 years. Genki Forest, founded 6 years ago, is a domestic internet-famous FMCG brand. An old giant and a challenger, yet they are engaged in hand-to-hand combat among their distributors in China's offline channels. This is the explosive scene in China's food and beverage market in 2021. Today, Genki Forest's financing valuation directly benchmarks against Coca-Cola. In terms of historical accumulation and market size, Coca-Cola (KO.US) and Genki Forest are two completely different species. However, due to Genki Forest's potential challenge, the industry has placed them on a scale, with weights added to Genki Forest's side called "national brand" and "internet playbook." "Full category" is a similarity between the two, but it is only superficial. The enduring popularity of Coca-Cola's classic product remains a mystery, but it does not prevent the company from providing users with more new products, including sparkling water, faster and in greater variety beyond carbonated drinks. For Genki Forest, which has chosen multi-front operations and ecosystem layout, it is more like a "Xiaomi" in the new consumption field than a beverage company. Of course, this time "Xiaomi" is challenging not "Nokia," but more like "Samsung." As an investor said: Companies that win through fierce competition in the C-end (consumer) deserve long-term ownership. For national brands like Genki Forest that aim to replicate hit products through methodology, there is still a long way to go to become a global giant like Coca-Cola that has stood for a century.
One Battlefield, Two Species
In China's beverage market, Coca-Cola and Genki Forest appear to be two completely different species. One is a global giant with a century-long history, studied and interpreted by management scholars, competitors, and followers, plus its own century-long marketing and mind-share occupation, making it thoroughly understood by the public. Moreover, Coca-Cola's localization is thorough: even in fifth- and sixth-tier small towns, vending machines and freezers with "COCA-COLA" lettering are ubiquitous, its Chinese website is rich in information, and online interactions are diverse, allowing consumers to easily see the company's global updates. In terms of performance, Coca-Cola has always been regarded as "particularly profitable sugar water." Its financial reports show 2020 full-year revenue of $33 billion, operating profit of $9 billion, and earnings per share of $1.95. In Q2 2021, revenue was $10.13 billion, up 42% year-over-year; operating profit was $3.02 billion, up 52%. Global unit case volume grew 18% year-over-year, and Asia Pacific unit case volume grew 16%. Based on this, Coca-Cola also raised its full-year 2021 guidance, expecting organic revenue growth of 12% to 14% and EPS growth of 13% to 15%. Genki Forest, on the other hand, first established a research and development center, then later founded the company, and only launched its first product in 2017. After several years of quietly building channel communication, enduring contract manufacturer capacity shortages, upstream supplier supply cuts, and competitive tactics like channel promotions from rivals, it still became a "internet-famous" brand in the beverage industry, especially representative in the "sparkling water" segment, thanks to its impressive performance of doubling sales year after year in first-tier cities and e-commerce channels like Tmall. In terms of historical accumulation and market size, these are two completely different species, yet because of Genki Forest's proactive benchmarking and potential challenge, the industry has placed them on a scale. A notable challenge was on Christmas Eve 2020, when Genki Forest released a video short film titled "Do You Dare?" implying it would break out from the "encirclement" of a certain brand, with a background resembling Coca-Cola's typical packaging. On the official website of Challenger Capital, founded by Tang Binsen, the core philosophy is prominently displayed: "China's rise, challenge giants, invest in good products, believe in young people." This juxtaposition easily leads the industry to make associations. In the eyes of Xiaobai (pseudonym), a mother of a 10-year-old boy in Beijing, Coca-Cola and Genki Forest represent a competition between children's preferences and parents' preferences. She said: Children usually like to drink cola, Genki Forest, etc., because they are fizzy and satisfying, and the packaging is fresh. In terms of children's active choices, cola is more popular, but mothers often decide to buy Genki Forest for their children rather than cola. After all, the "0 sugar, 0 fat, 0 calories" claim makes parents "feel it's healthier." As for Diet Coke, which also promotes health, Xiaobai laughed: "Children basically don't like it." Genki Forest's dream is certainly not limited to being an internet-famous brand. So, previously, whenever the consumer goods industry thought Genki Forest was the new-era Jianlibao, Wahaha, or Nongfu Spring, insiders at Genki Forest expressed disdain. Because their true dream is Coca-Cola. Industry observer Ms. Mai believes that choosing to benchmark against a giant is a common marketing tactic for new brands. Genki Forest's "national brand" color and a series of internet "new playbooks" integrated with the founder's personal experiences have indeed "added weight" to it. Ultimately, whether this benchmarking gains market recognition still needs to be proven by the new brand's own strength and sustained performance. Is "Full Category" a Consensus or a Divergence? Although Coca-Cola and Genki Forest are organisms of different sizes, at the 2021 time point, one can see both are walking on the "full category" path. However, this "full category" is not the same as that. Coca-Cola, which focused on carbonated drinks for many years, began proposing to build a "total beverage company" in 2016, and has since expanded its portfolio, launching organic tea, coconut water, milk, sparkling water, and other non-carbonated categories. In Q2 2021, Coca-Cola announced it would enter China's alcoholic beverage market with Topo Chico hard seltzer as its pioneer. This move is seen as an important achievement in advancing its "total beverage" strategy. Corresponding to Coca-Cola's total beverage strategy is its judgment on global beverage market trends. In its view, a single "cola series" can no longer support global consumers' diverse demands for health, taste, freshness, and cultural expression. Years of financial data have reinforced this judgment: soda sales have been flat or slightly declining for years, while categories like functional drinks have seen significant growth. Remember, small, beautiful, and personalized are the trends for today's consumer brands. As a new brand, Genki Forest, which should have achieved a single-point breakthrough through focus, seems to have also embarked on a full-category path in the past year. This is even more challenging for this 6-year-old "child" company. From the layout of Genki Forest's official website, the image pages of its main products all link directly to Tmall stores. Upon closer inspection, these links do not all point to the "Genki Forest Flagship Store": Ran Tea links to "Ran Tea Flagship Store," and Alien Electrolyte Water links to "Alien Flagship Store." On product packaging, products like Ran Tea and Alien Electrolyte Water have formed independent visual systems, except for the inconspicuous "Genki Forest" characters in a corner, indicating their relationship with the parent company. Its WeChat platform product layout is even richer. The "Genki Forest" official account mainly sells Genki series beverages, while the "Genki Mall" on the "Genki Forest Service Account" opens to the "Genki Family Member Store" mini-program, which includes not only Genki series soft drinks, including tea drinks, sparkling water, dairy products, sports drinks, and other categories, but also small alcoholic drinks, staple foods, snacks, and even non-Genki brand products. Along with the product line, its market layout is also expanding. On December 17, 2020, Genki Forest announced a new appointment: Liu Zhen, former Senior Vice President of Enterprise Development at Toutiao, joined to be specifically responsible for overseas business. According to its claims, its products have been sold to more than 40 countries worldwide. Not only expanding into overseas markets, Genki Forest seems no longer satisfied with being a soft drink company. Aiqicha data shows that on January 27, Genki Forest strategically invested 100 million yuan in Beijing Guanyun Technology Co., Ltd. (the entity behind "Guanyun Baijiu"); as of October 9, Genki Forest holds a 25.8% stake in Beijing Guanyun Technology Co., Ltd., making it the second-largest shareholder. Multi-front operations, ecosystem layout: Genki Forest is not just a company fighting alone; it has formed intricate connections with companies invested by Challenger Capital behind founder Tang Binsen, through joint marketing or co-investment. This familiar situation reminds one of the godfather-level enterprise in the internet ecosystem—"Xiaomi." We noticed that almost all of Genki Forest's executives are simultaneously named partners. It is evident that Tang Binsen has been using an investment + incubation approach to build his FMCG beverage empire. However, as a century-old giant, Coca-Cola's "full category" appears steady and solid, leveraging its comprehensive advantages in channels and brand; while Genki Forest, which has just carved out a place in first-tier cities and the sparkling water segment, its "full category" makes people break out in a cold sweat, wondering if it can stand firm in today's environment of giant encirclement and increasing involution among emerging brands. What Cards Does Genki Have to Play? The beverage industry is gradually entering a prosperous phase. According to historical data on total retail sales of consumer goods released by the National Bureau of Statistics, since 2016, the annual retail sales of beverages have hovered around 0.5% to 0.6% of total retail sales of consumer goods. However, in 2021, monthly retail sales from January to August have seen significant increases compared to the same periods in the previous two years. Among them, from January to August 2021, monthly retail sales of beverages grew 25.6% year-over-year (nominal growth, excluding price factors). (Compiled by Lujiu Finance based on data from the National Bureau of Statistics) Behind the beverage industry's prosperity are changes in social consumption psychology and divergence in consumer preferences, as well as the crisis awareness of old players in the red sea and the offensive desire of new species, together creating the heat from vigorous marketing. Although Coca-Cola is a century old, it has been repeatedly reported by the media as showing various signs of "aging." However, in recent years, with changes in its leadership, it has once again burst out with new growth momentum, whether in consumer insight, meeting the needs of "thousands of people with thousands of faces," or in localization and getting close to young people, it still shows its mettle. In November 2020, Coca-Cola launched "Coca-Cola Ginger+," claiming it was developed specifically for the Chinese market and is its first soda that can be consumed hot. In January 2021, Coca-Cola launched a Chinese New Year gift box tailored for township markets, including multiple categories such as soda drinks, juice drinks, and plant-based protein drinks, and offered different specifications like gift boxes, multi-packs, and full cases. The product logic is simple and clear, showing its down-to-earth approach. Online channels have not become Coca-Cola's weakness. According to its official website, during the 2020 Double 11 period, Coca-Cola's total transaction value on China's e-commerce channels grew 61% year-over-year, with JD.com up 130%, Hema up 178%, and Tmall flagship store up 121%. For the 2021 JD.com 618 promotion, Coca-Cola claimed to have "won the top sales ranking in the beverage category." Relying on the founder's internet genes and venture capital resources, Genki Forest's aggressiveness was once strong: When entering the market, it adopted a "follow-the-giant strategy" to judge and select various sub-sectors in the new consumption field. When laying out, it flexibly used testing and iteration methods from the gaming industry to increase the speed of new product development and reduce the cost of trial and error. When rising, it used visual packaging, entertainment marketing, and online distribution to precisely target the intended audience and quickly ignite sales. Each step fully reflects the business logic that Tang Binsen, a science and engineering man, adheres to: continuously increase the probability of final success by consistently doing things with a high probability of success. However, after successfully alerting giants and triggering counterattacks, Genki Forest suddenly chose to expand into multiple categories and markets in 2021, which seems a bit rash. Tang Binsen once proposed a judgment: the next five to ten years are the golden time for new consumer brands. Combined with the historical background that Tang Binsen founded Challenger Capital in 2014, focusing on investments in the consumer and TMT sectors, and only later founded Genki Forest, Genki Forest is more like a challenger in the beverage industry, but rather a tool for Tang Binsen to realize his dream of building a new consumer giant, refining the hit product methodology and creating a model. It is worth noting that in 2021, Genki Forest's R&D investment in new products was three times that of the previous year. According to an industry insider, apart from the sparkling water and 0 sugar 0 calorie label, its methodology for creating hit products seems to be failing. What problems its diversified expansion faces, and whether it can achieve great commercial success, remains to be tested by time. At least for now, Lujiu Finance has not obtained sales data for new products like Alien Electrolyte Water. On the other hand, Genki Forest's founding product is 0 sugar 0 calorie sparkling water. Previously, although Genki Forest achieved differentiation in sparkling water and the 0 sugar 0 calorie label, it does not have an absolute "moat" in any dimension, attracting imitators such as Qinqin Yuanqi, YECO, Qingting, and many others. They are highly similar to Genki Forest in design style and positioning, and the taste is not much different. In the data of the top ten Tmall sales in the sugar-free soda category in 2021 from Jiuqian Zhongtai, brands like Kellyone, Mingren, and Coca-Cola grew rapidly, and Genki Forest's leading market share is facing erosion from latecomers. A beverage industry analyst believes that from a market game perspective, challengers like Genki Forest are not so much a threat to giants like Coca-Cola at present, but rather help Coca-Cola and others explore product directions, educate the market, and enlarge the cake. Who will be the final harvester is still unknown. Currently, Genki Forest's sales are only a few billion RMB, far from threatening Coca-Cola. As an investor said: Companies that win through fierce competition in the C-end (consumer) deserve long-term ownership by investors, and this is clearly a long-distance race. In any case, Genki Forest, at least as a national brand, deserves respect from many old consumer brands for its sharpness and strategic layout. Genki Forest's story may have just begun. Are you "watching" me?