This article is from WeChat public account: Internet Arena (internet-war), focusing on company trends in primary and secondary markets at home and abroad, sharing insights on venture capital, business, and products. Author: Tie Lin, Editor: Liu Pangpang. Reproduction without authorization is prohibited.

In 1998, after two years of preparation, Wahaha finally launched a distinctive carbonated beverage, "Future Cola," positioning it as "Chinese people's own cola." In the following years, Future Cola mainly targeted rural areas in China, becoming a childhood memory for many born in the 1980s and 1990s.

However, the advantages of this carbonated drink did not last. Due to strategic positioning errors and fierce attacks from Coca-Cola and Pepsi, Future Cola suffered successive defeats. The market no longer has Future Cola, although production has not ceased.

Besides Future Cola, many domestic cola brands have attempted to challenge these two giants, but with little success. The carbonated beverage market remains firmly in the hands of Coca-Cola and Pepsi.

Until recently, internet-transformed consumer brands have found a new entry point. As Diao Ye put it, "Every consumer product seems worth redoing."

The disruptor in the beverage industry is Genki Forest.

This new brand is marketing with great intensity: inviting controversial figure Zhang Yuqi as brand ambassador, placing numerous brand ads on Douyin and Moments, sponsoring popular variety shows, and mass-producing Xiaohongshu posts. The momentum is strong.

This is a common typical approach for new consumer brands: segment positioning, reliable product quality, and using large-scale, high-frequency advertising bombardment to form brand memory in a short time and gain consumer trust.

Genki Forest's valuation in the primary market has reached $2 billion, comparable to Perfect Diary, another new consumer brand that rose around the same time.

Unlike Perfect Diary, Genki Forest needs to seize offline channels.

It is squeezing into the shelves of chain convenience stores and supermarkets. Taking Beijing's 7-Eleven and Bianlifeng as examples, Genki Forest's series of zero-sugar carbonated drinks are carving out freezer space beyond Coca-Cola and Pepsi. If you enter a 7-Eleven in the evening, you might find Genki Forest drinks sold out.

Since 2018, media attention on Genki Forest, a startup consumer goods company, has gradually increased. However, unlike new brands that rely entirely on e-commerce channels, this company's fate is half tied to offline.

-01- Adapting to the Rules of New and Old Channels

Lao Liu is a distributor for a well-known domestic beverage brand, responsible for beverage distribution in several cities in Shandong for years. Over the years, he has seen many new brands; most appear quickly and disappear quickly, rarely staying on shelves for long.

Genki Forest is one of the few brands that left an impression on him.

"After the product arrives, they can't rely on my existing network to promote it. They should build their own (network), have their own salespeople go out to run the market, communicate with customers in stores, explain how to do it, and how to do the market."

Lao Liu calls this process "after-sales service" for distributors.

Many new brands promise profits or commissions upfront but don't manage the specific work. Such brands may not be quality partners; a slight misstep can be a pitfall.

These meticulous "after-sales" tasks are only for old brands; new brands often lack the time and financial resources to support such work. Lao Liu's favorability towards Genki Forest stems from this: the company has its own salespeople, making product distribution smoother than other new brands.

In first-tier cities, Genki Forest's primary target is chain convenience stores favored by young users.

Taking Beijing as an example, Genki Forest's products first appeared in 7-Eleven and Bianlifeng, and the latest milk tea series also appears first in 7-Eleven's freezers.

The new generation of convenience stores highly aligns with young consumers' habits and needs. 7-Eleven statistics show that consumers aged 20 to 40 account for 88% of convenience store shoppers, highly overlapping with Genki Forest's user base.

Besides the user base, convenience stores are also an important promotional ground for new consumer brands.

7-Eleven has an advantage in Beijing with nearly 300 stores, and over 100 in Shanghai; FamilyMart has a dominant presence in Shanghai with over 2,000 stores, and Lawson has over 1,000.

As an immediate beverage, drinks must create convenient purchase conditions for consumers, and convenience stores best meet this need.

Shelf in a Beijing 7-Eleven store

Once on the shelves of chain convenience stores, new brands gain an excellent offline promotion platform, which is also their survival method in big cities.

However, the more advantageous convenience stores charge higher commissions to brands.

Some new brands won't consider entering first-tier cities as a starting point because it's destined to be a "money-losing" business.

Relatively mature brands with financial strength also value the additional capabilities of convenience stores, such as digitally managed product selection processes.

First, convenience stores themselves value data, which guides daily management.

A Bianlifeng employee revealed that Bianlifeng typically decides product placement based on sales performance. This is somewhat like Douyin deciding how many users to recommend a short video based on likes and comments.

Brands with better sales can quickly gain a dominant position under this decision-making process.

Second, this data also helps brands monitor products in real-time.

Although "convenience stores do not proactively share data with brands," brands can use third-party data agencies for data monitoring. For example, Genki Forest not only cooperates with data service provider Mashangying but also has signed cooperation with Guanyuan Data and Hengshi Data for BI construction.

Mashangying provides offline data, while Guanyuan and Hengshi make data usage more convenient, helping salespeople complete data analysis. This is Genki Forest's internet-oriented side: using data to improve decision-making accuracy.

-02- Moving to Lower-Tier Markets

However, to expand the company's scale, relying solely on first- and second-tier cities is far from enough.

The beverage industry, with thin margins and high volume, must seek profits from larger markets. Future Cola originally wanted to counterattack with a "rural surrounding city" strategy, but lost to Pepsi and Coca-Cola's "city surrounding rural" approach.

"City surrounding rural" seems more in line with the logic of expanding ordinary user products. An example is that Douyin, going from top to bottom, from cities to rural areas, is easier than Kuaishou's counterattack from rural to cities, and popular elements are more easily accepted.

Consumer brands can often satisfy this logic. Whether it's the brand image or the product itself, brands from cities can often be relatively quickly accepted by rural users.

Wang Lidong is a senior salesperson who has worked at a top foreign beverage company for nearly 20 years. He is familiar with the market in northern Heilongjiang. Over the past year, the product he increasingly cannot ignore is Genki Forest.

Monitoring competitor data is one of his work methods. He told Internet Arena that Genki Forest can reach 70% of the market in most areas of Heilongjiang.

He knows that a company without certain financial strength cannot achieve this level.

The Northeast seems to be Genki Forest's base. Recently, Genki Forest launched a lychee-flavored carbonated drink exclusively for the Northeast, which can be understood as a test before a product goes mainstream.

Fitness and weight-loss dietary needs are indeed a big track, and many entrepreneurs see opportunities. But to make a truly universal product, functional elements alone are not enough.

Lao Liu's main evaluation of Genki Forest is "good taste." "Taste" surpasses "formula" and "price" as the main factor determining whether a product can sell in volume.

He analyzed, "This (Genki Forest) becoming popular is not accidental. Because we have schools here, college students, or some young people, they also quite recognize its taste. And honestly, five or six yuan, today's young people can accept it."

"Taste" or the success of the product itself is a foundation for opening up a larger market.

In Lao Liu's view, "taste" is something even traditional brands may not control well.

Well-known big brands also launch products with immature taste. They hit shelves quickly, and consumer feedback comes faster. Even with a mature sales network, new products can still end up as a flash in the pan.

Although Lao Liu cannot directly feed consumer opinions back to the brand, he can decide to stop distributing an immature product.

Wang Lidong, as a brand's sales backbone, thinks more deeply. He always believes that whether a product can enter a larger market and sustain sales long-term is a test of the company's comprehensive strength, not just the distributor network or the product alone.

For example, product awareness. Wang Lidong said, "(New products) may first sell well in big cities like Beijing, Shanghai, Guangzhou, and Shenzhen, then in provincial capitals, and gradually radiate to third- and fourth-tier cities."

He believes his company's products can sustain sales largely due to the company's backend support. Brand awareness is already formed, so there's no need to spend too much time convincing distributors and key channels like new brands do.

Genki Forest's exploration in "lower-tier markets" seems to have passed the passing line: products are solid, and the team pays attention to detailed work, but some tasks await the test of time.

Wang Lidong cited an example: big companies like his may have dozens of salespeople in one region, but new brands may have only a few in a province.

On a recruitment website, opening Genki Forest's recruitment page, sales supervisors and sales talents in various regional cities are the recruitment focus, especially in some third- and fourth-tier cities, where only sales personnel are needed.

-03- Marketing and Capital-Backed Sales Barriers

If the layout of the sales network is the key to opening the market, then marketing is the support for long-term sales.

Wang Lidong's experience tells him that whether a product can sustain a place in the market requires comprehensive work such as R&D, design, and consumer pull.

People in beverage brands and cosmetics brands share a consensus: marketing is as important as the product itself.

Perfect Diary has even been evaluated as doing online promotion "regardless of profitability."

A beverage brand entrepreneur once analyzed that marketing and products should promote each other. On the basis of ensuring product quality, capital can also be used to expand marketing.

With capital support, new consumer brands can develop by leaps and bounds. Of course, this process tests the team's comprehensive strength; otherwise, it's easy to exhaust resources.

From this perspective, Genki Forest, as the most-watched new beverage brand, does not lack capital support. In July this year, 36Kr reported that Genki Forest was about to complete a new round of financing with a post-investment valuation of about $2 billion. Sequoia Capital China and YUANSHENG Capital would be new investors, with some old shareholders following.

Just last October, Genki Forest completed a 150 million yuan financing with a valuation of 3.75 billion yuan.

Compared with other startup brands, Genki Forest has sufficient financial strength to continue brand marketing.

The zero-degree beverage track has never lacked competitors. According to the aforementioned entrepreneur, carbonated drinks have low technical barriers and are highly replicable.

And what Genki Forest originally developed was not the now-popular zero-degree carbonated drink.

According to Qianzhan Industry Research Institute data, excluding drinking water, tea beverages have the largest market size in China, followed by fruit and vegetable drinks and carbonated drinks. Carbonated drinks are particularly special, almost monopolized by Coca-Cola and Pepsi, with domestic brands basically defeated.

Image source: Qianzhan Economist

Entering the tea beverage track seems wiser, although this track also has veterans like Suntory, Nongfu Spring, and Master Kong.

In 2017, Genki Forest launched Ran Tea and Genki Fruit Tea. It wasn't until March 2018 that Genki Forest's cucumber-flavored carbonated drink first appeared publicly.

Deciding what to make is only the first step. Genki Forest's standout success is due to some bold moves, such as special and eye-catching packaging design, choosing a Japanese style that appeals to young aesthetics.

But these are not unbreakable barriers. The market has seen imitators following Genki Forest, such as Qinqin Yuanqi, YECO sugar-free soda sparkling water, and Qingting from Qingquan Chushan. They are highly similar in design style and positioning, and in taste, there may not be much difference.

Lao Liu, a veteran distributor, said he is not opposed to cooperating with new brands. Once a promising product is selected, there can be long-term profitable returns. But new brands need to first give distributors a sense of trust and security (mainly sales volume). For example, Genki Forest's national marketing-created brand image makes it easier to gain Lao Liu's favor than other brands.

Besides offline sales, high-intensity marketing is also creating sales for Genki Forest's online channels.

Compared with traditional brands, Genki Forest's Tmall official flagship store has 3.35 million followers, surpassing Nongfu Spring's 1.05 million, Master Kong Beverage's 471,000, and Coca-Cola's 722,000.

According to Alibaba data, during the 2019 Tmall 618, "Genki Forest" sold 2.26 million bottles, ranking first in the water beverage category; during the 2019 Double 11, "Genki Forest" ranked second in online sales, beating foreign brands like Coca-Cola and Pepsi; in 2019, "Genki Forest" sales exceeded 700 million yuan.

However, the beverage industry's e-commerce penetration is relatively low. Ministry of Commerce public data shows that online sales penetration for this category is below 5%, while apparel is above 20%.

Genki Forest indeed bears many traces of "new consumer brands": skilled at marketing on new traffic channels and expanding new sales channels. Although immediate beverages are less dependent on online channels, online sales performance is enough to warn old and new brands: new traffic channels are disrupting consumer brand playbooks.

Wang Lidong's foreign beverage company is also adjusting its strategy, making online sales a necessary part of brand layout.

-04- Critical Moment for Survival

Sometimes, rapid development can mask problems, but the problems themselves do not disappear.

Wang Lidong's view is that new brands may give consumers novelty, but novelty will eventually pass. What follows is a test of the company's comprehensive strength, such as production and manufacturing.

Lao Liu has similar concerns. Although he is optimistic about Genki Forest's current development, he cannot judge how long the advantage will last.

Old brands like Nongfu Spring have drinking mineral water as support, giving them enough time to develop new products. Even if a new product fails, it won't affect the company's long-term development.

Nongfu Spring is a classic case because its barriers are almost unbreakable. Users may switch between different drinks, forming unstable purchasing habits, but the demand for water persists. Moreover, drinking water has a wide range of uses, not only for daily drinking but also for various large meetings and events.

Nongfu Spring firmly controls the drinking water market. According to Frost & Sullivan, from 2012 to 2019, Nongfu Spring maintained the top market share in China's packaged drinking water market for eight consecutive years.

Genki Forest's carbonated drinks are not as essential as ordinary drinking water. After being on the market for over two years, having satisfied consumers' "novelty" needs, Genki Forest must come up with more hit products for larger sales.

Wang Lidong observed in his region that Genki Forest's carbonated drinks are still popular, but sales have not continued to grow.

From both capital and company development perspectives, Genki Forest is expected to maintain high growth. The reason "cola" products are hard to become outdated is largely due to skillful communication, especially in Western countries, where cola is deeply tied to daily life scenes and emotions.

Multi-brand layout is almost the only way for Genki Forest to address its anxiety. The company is launching more new brands to diversify operational risks, not only tea and carbonated drinks but also milk tea beverages.

Tianyancha monitoring information shows that recently, Genki Forest added 3 patent information items: sucrose-free high-protein probiotic yogurt and its preparation method, sucrose-free fat-reducing yogurt and its preparation method, and sucrose-free compound probiotic yogurt and its preparation method. All three were filed in September 2019, all as "invention patents."

This may mean that Genki Forest's next sugar-free beverage could be dairy drinks, a larger market.

However, in the "health" track, besides new brands, traditional brands have never relaxed their offensive.

Nongfu Spring is good at tea, and its Oriental Leaf is a perennial favorite. Coca-Cola and Pepsi already have mature products and are increasing marketing for zero-degree drinks. When the three meet, there will be a battle.

Besides industry competition, some "off-field" factors are affecting the industry's development.

Zhang Li, a college student on a diet, chooses to avoid these "zero-degree" drinks. She doesn't quite believe in these weight-loss products with questionable ingredients. There are also voices questioning whether zero-degree drinks using "sugar substitutes" actually have weight-loss effects.

So far, no sugar-free beverage can maintain relatively good taste without adding sugar substitutes.

Genki Forest has been established for less than 4 years, and its oldest beverage is only 3 years old. Investors are already expecting huge returns from this company because Nongfu Spring's IPO is imminent, with an optimistic market value of 200 billion yuan.

On the basis of drinking mineral water, Nongfu Spring has mature brands in tea drinks and fruit juices, and is skilled in marketing, creating many viral advertising slogans.

Back to Genki Forest, it seems there is no noteworthy "emotional" marketing. This is a successful new consumer brand, but not yet a mature beverage brand.

Like education and cosmetics, which are being transformed by the internet, the internet cannot solve all problems. Ultimately, these new brands must face the problems that traditional companies once faced.

Whether in offline sales or online marketing, Genki Forest has embarked on a path that cannot stop.

(Lao Liu, Wang Lidong, and Zhang Li are pseudonyms)

Tips will be paid 400-2000 yuan upon adoption.