Genki Forest has entered the bottled water market for the third time. After multiple attempts and facing direct competition from bottled water giants, what does Genki Forest really want?

Once a disruptor in the domestic sparkling water market, Genki Forest made a high-profile entry into the bottled water sector in July 2021, launching "Youkuang" targeting the premium market. Two years later, "Youkuang" failed to make a significant impact in the "3-yuan water" market as expected.

This summer, Genki Forest is testing the waters again.

In June, Genki Forest launched a recruitment campaign for product experience officers for its new purified water product. An internal employee who purchased the new purified water through an internal buy told Leopard Change that the new product comes in three different colored packages, uses a 520ml bottle, and has a suggested retail price of 2.00 yuan marked on the packaging.

According to insiders, the new purified water is still in testing, with preliminary work such as promotion and marketing already underway, but whether it will officially hit the market cannot be concluded yet.

At the beginning of 2023, Genki Forest obtained a new design patent, indicating a new product named "Forest Water," which is a weakly alkaline natural water beverage. However, as of now, "Forest Water" has not yet been released.

For bottled water players, one more competitor doesn't make much difference. But for Genki Forest, the momentum of sparkling water has waned, and the "testing the waters" carries the company's expectation of finding a new blockbuster product.

Fewer Bubbles, More Water

Tang Binsen, founder of Genki Forest, once studied the top 100 companies in the United States and found that consumer goods are the most stable, leading him to conclude: "The most successful people in China's future will either sell water or sell medicine."

Genki Forest, which rose to fame with sparkling water and is known for its youthful and innovative image, has now stepped into the traditional "bottled water" market. In fact, Genki Forest established a bottled water project as early as 2020. In public statements, Genki Forest even said: "We can fail in water, but the market needs a 'newborn calf' like us that is not afraid of tigers."

The new national standard "Food Safety National Standard for Packaged Drinking Water" classifies bottled water into three main categories: natural mineral water, drinking purified water, and other drinking water (natural water, sparkling water, soda water, etc.).

Youkuang belongs to natural mineral water, sourced from deep artesian springs in the primitive forests of Yunnan, with a retail price set at 3 yuan. However, in the relatively stable competitive landscape of the bottled water market, products priced at 2 yuan still dominate the mass demand. Youkuang's differentiated competition has not been effective.

If the success of sparkling water was a combination of "timing, location, and harmony," then Genki Forest's "Youkuang" was a bit unlucky. It entered convenience stores in East and South China in the second half of 2021, and began large-scale offline distribution from April to May 2022. That was during the pandemic, which affected marketing and sales, and "Youkuang" did not receive the expected market feedback.

Leopard Change searched on platforms like JD.com and Taobao and found that "Youkuang" mineral water has been removed from official brand stores and other online channels. Li Heng (pseudonym), a channel manager at Genki Forest, told Leopard Change: "Youkuang was still targeting the young market, aiming for a higher-end positioning, but the feedback from both online and offline markets was poor, and it has basically exited the market."

However, Genki Forest has not given up its attack on the bottled water market. On one hand, its once-reliable blockbuster product, sparkling water, faces fierce competition, and the company needs a sustainable and stable category. On the other hand, compared to various beverages, water is a rigid demand for consumers. Bottled water has a low unit price, rich offline purchase scenarios, and high repurchase rates.

In fact, seemingly inconspicuous bottled water has already produced two "China's richest men": Zong Qinghou and Zhong Shanshan. According to Quantuo Data, the market size of China's bottled water industry has been increasing year by year, from 174.7 billion yuan in 2017 to 254.6 billion yuan in 2022, and is expected to reach 324 billion yuan by 2025.

Under the huge market size, all brands want to cut a piece of the cake. Currently, Nongfu Spring ranks first in China's bottled water market share, followed by China Resources C'estbon, Master Kong, Wahaha, and others. In addition, foreign brands such as Coca-Cola, Pepsi, and Nestlé, as well as retail brands like Three Squirrels and Mixue Bingcheng, and emerging tea drinks, have all launched bottled water products.

In January this year, there were rumors that Genki Forest would launch a forest white peach-flavored weakly alkaline natural water at a price of 3-4 yuan per bottle. If we add the new purified water for which experience officers were recruited in June, Genki Forest has now covered the mainstream categories of bottled water on the market. Beyond products, Genki Forest faces a bigger test from channels.

Courting Distributors

The FMCG industry has always had the saying "channels are king." Genki Forest, which emphasizes its internet genes and product-first approach, once broke this rule in its dream start. However, as development enters deep waters, Genki Forest has to face the challenge of offline channel management, pay attention to distributors, and return to tradition.

In 2022, "A Letter from a P&G Veteran to Genki Forest" pointed out that Genki Forest's aggressive sales targets were not the problem in themselves, nor were capacity and raw material coordination. The real problem was the sales organization chaos and channel loss of control caused by this.

That year, along with the slowdown in Genki Forest's sales growth, various problems emerged in offline channels. Li Heng told Leopard Change that Genki Forest's growth slowed significantly last year, with overall sales far below expectations: "Before 2022, distributors were making good money, but last year there was too much inventory pressure. Only at the end of the year did Alien's electrolyte water save the market, but by then many distributors had problems renewing contracts."

Genki Forest launches new products at a high frequency, and under the weak overall sales, new products often become a 'burden' for distributors. "For example, many seasonal limited editions release millions of boxes nationwide at once. The limited edition lasts only three months. By the time the product is transported to the warehouse, about half a month has passed, and after distribution, another half month passes. If the stock cannot be sold within three months, it has to be stored. The supply and demand are too mismatched, and the shelf life is short, so distributors have no choice but to engage in cross-regional selling."

In 2023, Genki Forest has clearly paid more attention to distributors.

"This year, every distribution customer has various rebate and incentive policies. In the first half of the year, Genki Forest has already invested an additional 10 million yuan in this. Q3 is the peak season for beverage consumption, and Genki Forest plans to invest about 30 million yuan in the second half of the year to support distributors," Li Heng told Leopard Change.

Before 2022, distributors cooperating with Genki Forest played a "supporting" role: they were only responsible for distribution. But by 2023, Genki Forest emphasized "co-construction with distributors," making them "partners."

To refine channels, it is necessary to leverage distributors who have a better understanding of each region. Since the beginning of this year, Genki Forest has been visiting distributors across the country.

As previously reported by Huxiu, starting from the second week after the Spring Festival, Tang Binsen has been on business trips, frequently visiting various distributors. This is already the second wave of "sweet offensive" by Genki Forest towards distributors after the start of 2023.

On April 28, at a Genki Forest offline distributor event, Tang Binsen sincerely said: "Previously, we didn't think the channel matter was so complex. We didn't put our heart into our partners (channel distributors). Why do I say we didn't put our heart? Previously, we thought partners (channel distributors) just needed to execute. We didn't fully understand the complexity of this matter and didn't put enough heart into it."

It is understood that this year, Genki Forest has refined the assessment of provincial and city managers, including performance achievement, rankings, display quantity, etc., all within the assessment scope.

Li Heng told Leopard Change: "This year is a critical year for Genki Forest. The main goal this year is to maintain stability, think about how to make products with conscience, and run the business healthily."

According to Genki Forest's previously announced sales growth rates, from 2018 to 2021, the growth rates were 300%, 200%, 309%, and 260%, respectively. According to a report by LatePost, Genki Forest's sales collections in 2022 are expected to be about 8 to 9 billion yuan, with a growth rate of 10% to 23% compared to the previous year. Leopard Change learned that Genki Forest's sales target this year is about 6 billion yuan.

Catching Up in 2023

In June this year, during Genki Forest's 7th anniversary celebration, Tang Binsen revealed that from January to May 2023, performance exceeded the budget target by nearly 5%. Among them, sparkling water has seen steady growth for four consecutive months this year; and distributor inventory has been completely digested, changing from a state of being suffocated by inventory pressure to a rhythmic and progressive sales pace.

According to Leopard Change, in addition to bottled water, Genki Forest is also eyeing the "potential stock" of sugar-free tea.

"Traditional Chinese tea, magical Oriental Leaf." When it comes to the sugar-free tea track, one cannot avoid mentioning Nongfu Spring's Oriental Leaf series, which has been quietly making money. In 2011, sweet beverages represented by iced black tea, jasmine tea, and green tea still dominated the domestic market, and Nongfu Spring's first launch of Oriental Leaf was known for being "unpalatable."

According to the "2023 China Sugar-Free Tea Beverage Industry White Paper" released by EO Intelligence, analyzing the sales of sugar-free tea beverages on Tmall and Taobao over the past five years, online sales of sugar-free tea drinks increased nearly 10 times from 2018 to 2022. Nongfu Spring won a bet with Oriental Leaf. According to Jingcanmou e-commerce big data, from January to April this year, Nongfu Spring's sugar-free tea sales volume exceeded 420,000 units, with a market share of over 69%; sales revenue was nearly 15 million yuan, with a market share of about 62%.

Li Heng told Leopard Change that Genki Forest also wants to replicate the success of Oriental Leaf. "Our Fibre Tea corn silk tea is currently a key product we are 'nurturing.' Genki is the first to make corn silk tea. After research, we found that corn silk is one of the top plant-based beverages in Japan's sugar-free tea market. It is similar to Nongfu Spring's Oriental Leaf. As people's dining habits gradually change, it could be the next big hit product."

From an internal management perspective, according to Leopard Change, previously, from Tang Binsen to company executives and employees, Genki Forest's internal OKRs were transparent. Later, OKRs were gradually hidden, and by 2023, KPIs gradually became assessment indicators, with some positions implementing an "OKR+KPI dual-track system."

In comparison, OKR goals are relatively vague, without direct and clear assessment standards, and place more emphasis on whether the business process is healthy. KPI directly focuses on results, which is actually more suitable for the FMCG industry's pursuit of sales results, efficiency, and stability. The result-oriented KPI assessment method is one aspect of Genki Forest learning from traditional FMCG.

At the beginning of this year, Tang Binsen mentioned in an internal letter titled "Carry Through the Difficult 2022, Embrace the Challenging 2023 with All Our Strength": "Every detour and every tuition fee is external force that helps us grow. We must learn to find stability and certainty in the常态 of uncertainty."

Genki Forest, which grew rapidly, slowing down in 2023 may not necessarily be a bad thing.