Once-glorious toothpaste brands like Liangmianzhen and Lantian Liubizhi have now become second-tier products. However, in recent years, with the launch of high-end functional toothpastes represented by Yunnan Baiyao, local brands have been continuously improving themselves in segmented markets such as product quality and efficacy, and their counterattack in the mid-to-high-end market has begun to show results, potentially accelerating industry reshuffling.
"A good set of teeth, Liangmianzhen." This advertising slogan familiar to consumers is now just a memory for most people. Since 2007, Liangmianzhen (600249.SH) has been in a loss-making state multiple times in terms of net profit after deducting non-recurring gains and losses. In the 2016 annual report released not long ago, Liangmianzhen also turned losses around by selling securities assets.
Like Liangmianzhen, many once-popular domestic toothpaste brands such as Tianqi, Heimei, Xiaobai Rabbit, Shengfeng, Yaboshi, and Caoshanhu have also been on the decline. A reporter from 21st Century Business Herald found that they are hard to find in large supermarkets in first-tier cities.
Brand expert Yin Jie introduced that from 1949 to 1996, the three major domestic brands Zhonghua, Liangmianzhen, and Heimei held a monopoly position in the Chinese toothpaste market. However, with foreign toothpaste brands led by Colgate capturing the Chinese market, national brands gradually declined, and foreign brands now occupy nearly 70% of the domestic toothpaste market.
However, in recent years, with the launch of high-end functional toothpastes represented by Yunnan Baiyao, local brands have been continuously improving themselves in segmented markets such as product quality and efficacy, and their counterattack in the mid-to-high-end market has begun to show results, potentially accelerating industry reshuffling. Wu Chaoyu, a researcher at Forward Industry Research Institute's oral cleaning industry, believes that by seizing segmented markets, applying new marketing techniques, and focusing on consumer communication to continuously refresh consumers' awareness of brands and products, local brands may break through against the trend.
Liangmianzhen's "setback"
Liangmianzhen has long faced three major problems: severe brand aging, lack of product innovation, and insufficient advertising investment. Since 2013, when it loudly announced its return to its main business with toothpaste priced at 59.9 yuan per tube, Liangmianzhen actively advertised on CCTV and increased sales channels; in 2015, it also launched the "Million Pain Relief Plan," distributing one million free trial packs of Liangmianzhen traditional Chinese medicine toothpaste to the public in Guangzhou.
At the same time, after Tong Dawei, Liangmianzhen invited first-tier male star Zhang Jiayi to become its image spokesperson. Liangmianzhen stated that through this cooperation, the audience could gain a deeper understanding of Liangmianzhen's craftsmanship spirit. Liangmianzhen obviously hopes to return to the first tier of toothpaste brands.
Zhang Jiayi (right) endorsing Liangmianzhen
In fact, the market share of Liangmianzhen toothpaste, once the "first domestic toothpaste brand," has fallen from a peak of 10% in 2006 to less than 1%. In addition to the three major problems mentioned above, Yin Jie pointed out that this is also closely related to Liangmianzhen's long-term strategic positioning.
Liangmianzhen also admitted in its financial report the potential risks of its diversification strategy, pointing out that there is overcapacity in the industries it operates in to varying degrees, especially in competitive industries; it also pointed out that the daily chemical industry, paper industry, sweetener industry, and pharmaceutical industry all have varying degrees of excessive competition and overcapacity, which puts pressure on the company's development planning goals.
In 2004, as the first listed company in the domestic daily chemical industry, Liangmianzhen raised a large amount of funds. Facing many competitors, Liangmianzhen attempted to change the competition of single toothpaste products and chose capital operation as a breakthrough for its diversification strategy, successively investing in real estate, sugar manufacturing, daily chemicals, buses, pharmaceutical cultivation, sanitary products, papermaking, and import/export trade.
In 2007, 5 of Liangmianzhen's 7 major holding and participating companies were loss-making; in 2008, 6 of 8 were loss-making; in 2009, 5 of 9 were loss-making; from 2010 to 2012, only 3 companies performed well. Financial data for 2016 shows that half of Liangmianzhen's 8 subsidiaries were still in a loss-making state.
According to the latest 2016 annual report data, Liangmianzhen's operating revenue was 1.6 billion yuan, a year-on-year increase of 15%; net profit was 26.9 million yuan, a year-on-year increase of 116%. Among them, Liangmianzhen's losses in the first to third quarters of 2016 were still relatively large, with losses of 45.7849 million yuan, 32.3338 million yuan, and 14.0783 million yuan respectively. The relatively impressive data in the annual report was actually not from main business profits but from selling financial assets.
This is not the first time Liangmianzhen has sold financial assets to save itself. According to incomplete statistics, in 2010, Liangmianzhen held 95.5275 million shares of CITIC Securities. To obtain funds, it disposed of no more than 8 million shares that year; in 2011, it sold no more than 14 million shares; from 2012 to 2014, it sold CITIC Securities shares three times, obtaining over 500 million yuan in cash support. On July 2, 2015, Liangmianzhen again sold CITIC Securities shares, exchanging for 300 million yuan.
Not long ago, Liangmianzhen also planned to change the use of 36.64 million yuan of raised funds originally intended for "new product development and R&D center upgrade" to "repay bank loans." This may also be a helpless move by Liangmianzhen, which is indeed "very short of money."
According to the 2016 annual report data, as of December 31, 2016, Liangmianzhen's current liabilities totaled 350 million yuan, and non-current liabilities totaled 400 million yuan; among them, short-term borrowings were 110 million yuan, accounts payable were 37.87 million yuan, and non-current liabilities due within one year were 10.06 million yuan; in addition, interest payable was 980,000 yuan, including 650,000 yuan in bank loan interest and 330,000 yuan in other loan interest.
Decline of local brands
The decline of Liangmianzhen, a former "rising star," has its own reasons for development, but it also shares a common background with the "decline" of other domestic brands: they were crushed by foreign brands.
Yin Jie told a reporter from 21st Century Business Herald that from 1949 to 1996, the three major domestic brands Zhonghua, Liangmianzhen, and Heimei respectively occupied the eastern, southern, and western markets, forming a tripartite balance. However, with Colgate entering China in 1992 and Crest, from the world's largest cleaning products company Procter & Gamble, entering China in 1995, foreign brands began to rapidly capture the Chinese market from 1996 with strong marketing offensives, and the Chinese toothpaste market pattern was reshuffled.
"After foreign brands entered China, they used heavy investment in advertising to quickly leave an impression on consumers. Brands need a process of repeated memory in consumers' eyes, so the advertising cycle is particularly important. But after implementing its diversification strategy, Liangmianzhen basically did not advertise," Yin Jie pointed out.
According to data provided by Nielsen to the media, toothpaste brands spent over 13 billion yuan on TV advertising in 2015, and the cosmetics/personal hygiene products category, to which toothpaste products belong, was one of the top three industries in total advertising spending in 2015.
During this occupation process, foreign brands on the one hand made the public accept them through excellent marketing methods and price adjustments, and on the other hand gained market share and channels by acquiring domestic brands. For example, Unilever obtained the operating rights of the "Zhonghua" brand from Shanghai Toothpaste Factory, which was then "shelved" for many years; the Sanxiao brand was acquired by Colgate, and Sanxiao Group was not allowed to use the "Sanxiao" brand in toothbrushes, toothpaste, soap, shampoo, shower gel, cosmetics, household cleaners, and other product areas. Later, Sanxiao oral care products almost disappeared.
In 1996, among the top ten domestic toothpaste brands, foreign brands only occupied two seats; by 2000, that number had increased to six. Lantian Liubizhi, Fangcao, Liangmianzhen, Lengsuanling, Heimei, and other former domestic famous brands became second-tier brands, retreating to third- and fourth-tier markets and falling into a general decline.
In addition to Liangmianzhen, the market share of the old brand Lantian Liubizhi also declined continuously after 2001, falling to 2% by 2004. Lantian Liubizhi also had its glory days like Liangmianzhen: in 1911, Liu Kaiping, founder of Lantian Group's predecessor "Tongchanghang," created the Old Train brand tooth powder; in 1992, it developed China's first all-effect toothpaste, Lantian Liubizhi; in 1996, Lantian Group's market share in the toothpaste market reached 15.9%.
A reporter from 21st Century Business Herald visited several supermarkets in Beijing and found that Yunnan Baiyao, Colgate, Crest, and Darlie had more displays in supermarkets. Among them, Yunnan Baiyao was placed in 12 columns in one supermarket, in a very prominent position, while Zhonghua and Pien Tze Huang only had two columns, and Tongrentang only one. The person in charge of supermarket toothpaste sales explained that generally, the more displays and the more prominent the placement, the better the product sells.
During supermarket visits, the 21st Century Business Herald reporter rarely saw the Liangmianzhen brand. The above-mentioned person in charge of Liangmianzhen explained that Liangmianzhen sells less in Beijing and is mainly in southern regions such as Guangxi and Wuhan, and focuses on e-commerce layout.
The breakthrough of "Liangmianzhen" and others
In the view of Feng Jianjun, a senior daily chemical industry expert, local toothpaste brands originally retreated and missed development opportunities, so it is indeed difficult to break through again. However, in recent years, local brands have been continuously improving themselves in segmented markets such as product quality and efficacy, striving to become bigger and stronger.
In fact, brand competition is no longer point-to-point or face-to-face competition between enterprises, but has evolved into comprehensive, three-dimensional competition in products, marketing, brands, channels, and other aspects. At present, multinational brands basically monopolize the high-end market and continue to expand into the mid-to-low-end market, while local toothpaste brands including Yunnan Baiyao and Saky are also in the stage of strategic counterattack.
In recent years, with the launch of high-end functional toothpastes represented by Yunnan Baiyao, the counterattack of domestic oral cleaning brands in the mid-to-high-end market has gradually shown results, and industry reshuffling may accelerate. Wu Chaoyu, a researcher at Forward Industry Research Institute's oral cleaning industry, believes that by seizing segmented markets, applying new marketing techniques, and focusing on consumer communication to continuously refresh consumers' awareness of brands and products, local brands may break through against the trend.
Local brands have begun to attach importance to marketing interaction with consumers. A reporter from 21st Century Business Herald reviewed advertisements of various local brands and found that many toothpaste brands use celebrity endorsements. For example, Wang Han endorses Liubizhi; Wu Xiubo endorses Lengsuanling; after signing David Beckham and Li Bingbing, Saky successfully signed super popular idol Kris Wu as the latest brand image spokesperson for Saky toothpaste; Liangmianzhen is endorsed by Zhang Jiayi. To get closer to young consumers, Liangmianzhen also sponsored a celebrity racing reality show on Shenzhen TV in 2016.
A person in charge of a toothpaste brand told a reporter from 21st Century Business Herald, "Entertainment marketing helps quickly increase a company's visibility, strengthen the brand's deep impression on people, and promote consumer purchases. However, although entertainment can attract attention, if the intensity and direction of communication are not well controlled, it is easy to have both positive and negative effects."
In addition to adjusting marketing direction and doing brand communication, many domestic toothpaste brands are also currently developing segmented functional products and laying out the high-end market. For example, Nice's "Jianshuangbai" series toothpaste, with cartoon character packaging, comes in three types: brightening for men, fresh for women, and brightening for women, priced at 27.6 yuan, 25.8 yuan, and 49 yuan per 110g on Tmall.
The most successful breakthrough is Yunnan Baiyao. In 2004, Yunnan Baiyao entered the toothpaste field with annual sales of only 30 million yuan. Seizing the momentum of China's economic and consumer spending rise, Yunnan Baiyao led the way, and by 2014, sales reached 3 billion yuan, surpassing Colgate in market share and being on par with Crest. In contrast, Liangmianzhen's annual sales revenue has remained around 100 million yuan in recent years.
"Yunnan Baiyao's clear core selling point is preventing gum bleeding or stopping bleeding, making the core benefit of herbal toothpaste land on the product, allowing consumers to truly feel the efficacy of Yunnan Baiyao toothpaste; moreover, Yunnan Baiyao toothpaste not only strengthens brand communication on traditional TV media but also pays more attention to the use of online media. Locking onto the younger generation of Chinese consumers through online communication is a core strategy for Yunnan Baiyao toothpaste's future brand communication." In Yin Jie's view, Yunnan Baiyao's success has its inevitable factors.
-END-