Xin Ba's remark that 'Lao Gan Ma is also a prepared dish' has once again brought traditional condiment companies into the public eye. As people re-examine the side-dish industry, it's easy to see that Fuling Zhacai, which has a long history like Lao Gan Ma, is inevitably caught in a survival crisis and the pains of transformation. At the end of 2023, Zhou Binquan, who had led Fuling Zhacai for 23 years, handed over the top position to Gao Xiang, a chairman born in the 1980s. With the change in management, Fuling Zhacai is now thinking about how to 'squeeze' out new brand value. Zhou Binquan (left), Gao Xiang (right) Image source: Wujiang Zhacai official WeChat On January 10, at Fuling Zhacai's 2024 distributor conference, the new chairman Gao Xiang stated: 'Fuling Zhacai will adhere to industrial innovation, continue the century-old zhacai heritage, and strive to achieve the 'Billion-Yuan Wujiang' dream by 2030.' In fact, 'Billion-Yuan Wujiang' is a large-scale production expansion and revenue growth plan proposed by former chairman Zhou Binquan as early as 2020. However, in the three years since, Fuling Zhacai's sales have continued to shrink, falling into a predicament of sluggish revenue growth. The new production capacity from the large-scale expansion cannot be digested as expected, the product diversification strategy away from a single category has yet to show results in the short term, and even the traditional 'price increase' strategy has reached its limit. The once-popular 'first zhacai stock' seems to have stopped selling well. Against the backdrop of performance pressure, how to reverse the decline and achieve the 'Billion-Yuan Wujiang' brand dream within the next seven years? This is a huge challenge for the new chairman. Unable to Take Innovation Steps, Unsure of Positioning Discussions about 'Fuling Zhacai not selling well' have been around for a while, and industry insiders often attribute it to the failure of the 'price increase' strategy. In 2008, Fuling Zhacai sold for 0.5 yuan per pack; now the average price in offline supermarkets is 3.5 yuan per pack, a seven-fold increase in just 15 years. The most recent significant price hike sparked heated online discussions, with many people exclaiming, 'I can't even afford zhacai anymore.' To verify the actual impact of price increases on consumption, the author randomly visited several Yonghui and New Century chain supermarkets in Chongqing city. A common pattern is that few customers linger near the shelves of side-dish foods in supermarkets, and most products' production dates are still before December 2023. The author asked the person in charge of the condiment section at New Century supermarket, who said bluntly: 'The price increase hasn't had a very obvious impact on consumers' purchase of zhacai; in the past six months, Fuling Zhacai's sales still account for the majority. However, sales of all major brands' side dishes are dismal, and the overall situation is indeed much worse than before.' Photo: Retail Business Finance Overall, the direct impact of 'price increases' is mainly slower sell-through at the terminal channels. Distributors will reduce their order quantities after fully considering consumers' purchasing power and inventory capacity, especially when the demand for side dishes was relatively stable in previous years. Fuling Zhacai still adopted a policy of 'high rebates and high discounts' to push channel expansion, ultimately leading to oversupply. This negative impact should be a normal phenomenon in the cycle of price increases and sales fluctuations, but Fuling Zhacai's decline seems to be getting out of control. The root cause is the inability to quickly adjust its own strategies based on changes in the external market environment. First, the channel power is relatively single. Fuling Zhacai still focuses mainly on offline channels, with traditional sales channels such as the household segment accounting for over 80%. How to transform Fuling Zhacai from a 'channel brand' to an 'omnichannel brand' is still worth considering. Second, product innovation is not strong. Consumers emphasize the freshness of side-dish foods, but Fuling Zhacai's 'evolution' in product iteration, packaging design, and specification adjustments is not satisfactory. Fuling Zhacai neither sticks to tradition like Lao Gan Ma, nor chases trends like the Sichuan-style rice condiment brand 'Fansaoguang'. It tends to make minor, inconsequential adjustments within its comfort zone. 'Minor adjustments' may seem to have low trial-and-error costs, but behind them lies a lack of clear positioning and strategic confidence. Take Fuling Zhacai's 'health card' as an example. In 2022, to escape the price competition caused by product homogenization in the industry, Fuling Zhacai adjusted its core products in multiple health directions such as 'light salt,' 'low fat,' 'low calorie,' 'dietary fiber+,' and '0 additives,' aiming to achieve product quality differentiation. As an 'upgraded zhacai' that meets modern people's low-salt dietary needs, the 'light salt' series claims a 30% reduction in salt, contains 15 amino acids and dietary fiber, and the new packaging continues the traditional Chinese trend element of 'Sichuan opera face-changing' design, but the copy emphasizes 'fresh, crispy, light salt, safe to eat.' In marketing, they chose famous athlete and short-track speed skating world champion Wu Dajing as the brand ambassador, creating a tendency toward healthy eating. Wujiang Light Salt Zhacai Image source: Retail Business Finance, Fuling Zhacai official WeChat The 'light salt' series targets young groups with health awareness. This change is not about adding to the audience but inadvertently filtering the user base. Blindly pursuing brand rejuvenation, Fuling Zhacai is clearly 'outsmarting itself.' According to the author's observation, for elderly loyal fans of Fuling Zhacai, as long as the product doesn't change taste, consumption will continue. But the consumption preferences of young customers are quietly changing. Some young respondents said that zhacai seems to have quietly faded from their dining tables, becoming a childhood memory of 'remembered, but not necessarily bought.' Xiao Zhou, born in the 2000s, told the author: 'I still really like eating zhacai, but usually my parents or grandparents buy it. If there's some at home, I'll eat it and still enjoy it, but I won't buy it myself.' For side dishes like pickled vegetables, the core value lies in: cheap and convenient. For some consumers, whether it's the physical need for oil and salt or the preference for heavy flavors ingrained in Chinese DNA, the positioning of the 'light salt' series seems awkward. In other words, 'heavy flavor' is not the main reason young consumers 'abandon' Fuling Zhacai, after all, they don't eat zhacai for 'health.' During offline visits, the author also learned that long-term consumers don't rate the 'light salt' series highly, saying, 'This approach of pursuing health at the expense of some taste is really not worth it.' Zhu Danpeng, a Chinese food industry analyst, said that the zhacai track itself does not have a health label, and future growth has hit the ceiling. So even though Fuling Zhacai has launched reduced-salt zhacai and snack foods, this category is not new in China, and its help to revenue may not be significant. Fuling Zhacai needs to break through its own ceiling and invest a lot of manpower and financial resources to layout other projects. 'Making Pickled Vegetables the Way You Make Zhacai' The model is right, but what's still missing? As one of the few state-controlled enterprises, Fuling Zhacai's business model is relatively stable, but in terms of new product expansion, it tries to 'replicate' the successful experience of the past two decades, showing a lack of innovation. In fact, Fuling Zhacai has also experienced a comeback, and its leader Zhou Binquan has the unique vision and industrial spirit of the older generation of state-owned enterprise cadres. Image source: Huashang Celebrity Hall Today's Fuling Zhacai is no longer the backward, debt-ridden company it was in 2000. After Zhou Binquan took over, it gradually built strong raw material control, channel control, and brand communication effectiveness, becoming dominant in the side-dish appetizer field with a market share of up to 36%. Why is it said that the positioning of an enterprise at each stage is important? The first thing Zhou Binquan did after taking office was to find direction and set the tone for the company's development. Considering the actual situation of this zhacai company, he knew well that blindly following market trends and cross-border transformation into internet technology would not work, so he made the decision: 'We only know how to make zhacai, so let's just make zhacai well.' To be strong, one must be strong oneself. He then launched a combination of backend production reform and increased brand promotion. First, reduce costs and increase efficiency from the production end, transforming traditional workshop-style manual production into modern industrial production lines. Zhou Binquan successively inspected the modern production methods of similar enterprises in developed countries such as the United States, Japan, and South Korea, then introduced advanced production equipment from Germany for industrial technology transformation, and gradually built the first automated production line in the domestic zhacai industry. Just one year later, Fuling Zhacai's sales exceeded 100 million yuan, successfully turning losses into profits. Image source: Internet Second, expand the brand influence of Fuling Zhacai. In 2004, China's pickled vegetable market size exceeded 20 billion yuan, but there was no strong brand occupying consumers' minds. Among them, zhacai was a category with greater development space in the pickled vegetable market, which was a huge opportunity for Fuling Zhacai. So, Zhou Binquan invited brand marketing master Ye Maozhong to refine the process standard of 'three clears, three washes, three pickles, three squeezes,' and made 'three squeezes' a star product, cultivating consumers' brand awareness that Wujiang brand Fuling Zhacai is healthier, thus standing out from the homogenized, low-level market, and profits jumped 4 times. He also spent 14 million yuan to secure a prime advertising slot during CCTV's News Simulcast and invited Zhang Tielin to endorse it. The slogan 'Wujiang Zhacai, my grandfather's grandfather said it's good' made Fuling Zhacai unprecedentedly popular nationwide. Image source: Internet In addition, Fuling Zhacai has focused on the stable construction of the entire industry chain for many years. In the upstream of the industry chain, Fuling Zhacai's raw material, mustard tubers, can be sourced locally with high yield and good quality. 2023 data shows that the planting area of mustard tubers in Fuling District, Chongqing, accounts for about 46% of the national total, with an annual output of about 1.6 million tons, and the company's annual procurement accounts for 1/4, so it also has high bargaining power. In terms of procurement model, Fuling Zhacai has established an industrialization mechanism of 'company + base/cooperative + farmer' with farmers, implementing 'contract planting, order production,' which not only ensures the stable supply of raw materials but also promotes the protection of mustard tuber purchase prices and increases farmers' enthusiasm for planting. Image source: Internet The downstream channel has always adopted a distribution model similar to Lao Gan Ma's 'cash before delivery, partial credit,' which ensures stable cash flow while accumulating over 1,200 loyal distributor customers, achieving full coverage from supermarkets like Yonghui and RT-Mart to local farmers' markets and mom-and-pop stores. Zhou Binquan's retirement marked the end of Fuling Zhacai's glorious 20-plus years; Gao Xiang took over at a critical moment and is trying 'making pickled vegetables the way you make zhacai.' The current pickled vegetable market is similar to the zhacai industry years ago, with rapidly growing market demand, low mechanization in production, and a lack of leading brands in consumers' minds. Expanding into the pickled vegetable category can not only fully utilize the industrialization foundation and channel momentum of zhacai but also help the company quickly open a second growth curve. Meishan Pickled Vegetable Industry Base Image source: Internet As early as 2015, Fuling Zhacai acquired the leading pickled vegetable company Meishan Huitong Food Industry for 129 million yuan, and in 2021, it spent 600 million yuan to develop a pickled vegetable production base in Liaoning with an annual output of 50,000 tons. However, the second pillar industry built with huge investment has not yet produced a hit product, and its share of the company's total product profits has been below 10% for years. For Fuling Zhacai, it is certainly commendable to continue to accumulate solidly in the professional field as in the past, but to make breakthroughs and take the company to the next level, it needs to continue to learn and connect with the new era of the industry, maintaining a clear and open mind to reposition its products. Where is the Path to Youth-Oriented Transformation? The market size of a single pillar product is always limited, and growth has already stagnated. Other categories have a small base and cannot foresee sustained high-speed growth in the short term... Traditional food companies represented by Fuling Zhacai face multiple transformation challenges. Of course, in exploring brand rejuvenation, each company has its own differentiated path. In Moutai's view, brand rejuvenation means seizing what young people like. From trendy drinks to traffic stars, as long as there is an opportunity to be exposed to the young audience, it dares to take bold cross-border steps. In the past year, Moutai indeed attracted a lot of attention, but the heat came and went quickly. Gen Z consumers increasingly prefer new types of alcoholic beverages and are increasingly resistant to the 'drinking culture' associated with Moutai, so even with crazy co-branding, it still hasn't found the best way to occupy the minds of young people. Image source: Moutai official WeChat Compared to Moutai's addiction to cross-border co-branding, Fuling Zhacai appears more composed in dealing with youth-oriented anxiety. Knowing that it lacks social attributes, Fuling Zhacai is relatively conservative in youth-oriented marketing. The rare co-branding that went viral was the cooperation with Bilibili in November 2023, 'Together, It's Fragrant.' Scanning the QR code on the co-branded packaging allows users to watch hundreds of selected food videos from Bilibili. The unexpected combination of physical zhacai and 'electronic zhacai' briefly won the favor of young people. Image source: Brand Overall, Fuling Zhacai is still trying to find a track with higher professional barriers. According to the 'dual expansion strategy' of 'category + market' repeatedly mentioned by the official, on the one hand, Fuling Zhacai will expand from focusing solely on the zhacai category to the coordinated development of multiple categories such as seasoned vegetables, pickled vegetables, doubanjiang, and leisure snacks; on the other hand, the company will also shift its focus from household consumption to the broader B-end catering market and food processing industry market, opening up more potential consumption scenarios. In terms of new product positioning, seeing the weak consumption and fierce competition in the side-dish market, Fuling Zhacai launched 'Cui Xiaocai' to test the waters in the leisure snack track. Image source: Internet Giving zhacai a leisure attribute does further expand the product's consumption scenarios, but due to the short time on the market and small sales volume, whether this positioning is correct remains unknown. Moreover, the snack track is highly competitive. First, there are brands like Liangpin Puzi occupying the high-end track, and then there are snack discount stores like Snacks Are Busy and Haoxianglai. Even 'Fansaoguang' in the side-dish track has already started to make rice condiments more casual. Fuling Zhacai not only entered the market late but also lacks competitive advantages in product diversification and discount strength. In addition, Fuling Zhacai is also following market trends by promoting the Sichuan-Chongqing prepared dish industry project. From 'zhacai+' to '+zhacai,' this may become a new growth point for the company. But there are strong players in the prepared dish track, from established catering companies like Shaxian Snacks to new retail giants like Hema, all entering the market. Image source: Brand At the same time, in the discussion of 'whether Lao Gan Ma is a prepared dish,' it can also be seen that the public opinion environment in the C-end market is not optimistic. If Fuling Zhacai wants to do prepared dishes, it must adhere to the past 'three clears, three washes, three pickles, three squeezes' and implement production standards that reassure consumers. Overall, regarding the future development of Fuling Zhacai, the author believes there are two points to note: First, product price increases have reached their limit, and future price adjustments need to be cautious. Rising costs are not a problem unique to one company; reducing costs and increasing efficiency is the key. According to Fuling Zhacai's 2023 semi-annual report, its net profit margin is as high as 35.15%, leading the food and beverage industry. 'Price increases' due to rising costs are essentially a classic joke of 'wool from the sheep's back.' This strategy has a certain threshold. In the long run, Fuling Zhacai should return to re-refining and re-creating the core value of the product itself. Image source: Food Industry Expert Second, while expanding new consumption scenarios, do not 'disconnect' from the emotional connection with the younger generation. Undoubtedly, young customers will be the main consumers of Fuling Zhacai in the next 20-30 years. Once the opportunity to cultivate brand awareness and consumption habits among this group is missed, it will be difficult to recover. According to iiMedia Research's '2023 China Condiment Industry Product Innovation Special Research Report,' consumers have better acceptance of new forms of marketing such as social platform seeding and live-streaming e-commerce, which also reminds companies to continuously expand the coverage of 'online + offline' sales scenarios. Image source: iiMedia Research Whether Fuling Zhacai can 'squeeze' out new value is just a matter of time. The key is how to recreate a category hit, which greatly tests the company's comprehensive judgment and decision-making ability in product sales positioning and channel expansion for emerging consumption scenarios. PS: From March 14-16, 2024, the 9th China FMCG Innovation Conference, co-hosted by New Distribution and Ande Zhilian, and the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference will be grandly held in Chengdu! The 2nd China FMCG Distributor Conference will be co-hosted by New Distribution and Zhoupu Data. This conference will focus on the theme of 'Supply Chain Revolution.' Over three days, there will be one main forum, one China FMCG Hard Discount Conference, one China FMCG Distributor Conference, more than ten sub-forums and closed-door exchange sessions, and the first-ever 'Ultimate Supply Chain' brand factory direct sourcing fair. It will bring together thousands of FMCG brand owners, distributors, retail innovators, and industry service providers from across the country in Chengdu for continuous brainstorming to discuss the challenges and opportunities, changes and solutions in the era of supply chain revolution. In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a conference worth attending! For business cooperation, please contact: