Click to read the original text for details. Source: Wild Grass New Consumption (ID: yecaoxxf) Author: Zheng Yixian In the new consumption field, compared to the ebb and flow of channel dividends, consumer goods entrepreneurship offers more diverse and in-depth opportunities. From niche brands to mass brands, from first-tier cities to fourth-, fifth-, and sixth-tier cities, every细分 positioning based on demographics, circles, and scenarios seems to be able to grow something different. But facing these factors that affect new brands, according to dozens of consumer investors that Wild Grass New Consumption has previously contacted, their inner thoughts are quite different. Some believe the key is to capture new demographics, while others think the core is to create new categories. These two types actually target a larger niche market. Today, we will discuss new consumption propositions. This point has rarely been mentioned before, but upon deeper examination, it represents the value and possibility behind every consumer goods entrepreneur. The match between this proposition and the times, consumer groups, as well as the support of underlying technology and products, will determine how big a new brand can become and how far it can go. But in specific complex situations, how do consumption propositions arise and how are they practiced? For a new brand, behind its unique proposition, what more needs to be done? Gao Feng (Charlie), founding partner of Fengshang Capital, is both an advocate of this concept and has invested in many projects with "new consumption propositions." This time, he will conduct an in-depth discussion around the new consumption propositions behind new brands and the underlying necessary conditions. Being a Consumer Investor and Entrepreneur in the New Era

1. Being an Investor Who Understands the Business

I previously worked in investment and M&A at Morgan Stanley and KKR for many years, and in the early days invested in consumer companies like Belle, Mengniu, and Kappa. At that time, not to mention VC, equity investment was relatively rare in China. For me personally, the core is how to become a good partner who grows together with excellent entrepreneurs, and what entrepreneurs hope to cooperate with are investors who understand the business and can help. Based on investment stage, single amount, company maturity, etc., the outside world classifies Fengshang Capital in the VC circle. But we do not limit ourselves to this label. To put it bluntly, VC is more of a probability game, seeing who can run out. We have always positioned ourselves as Industrialist Investors, placing more emphasis on helping companies solidify their core business. Whether at Morgan or KKR, this is what I have consistently done. Specifically, we discuss business with entrepreneurs from two aspects. First, from an operational perspective, which indicators are worth their attention. Many Chinese startups lack the dimension of data to analyze business development in reverse. This is precisely the value-added part we can do very solidly. From Morgan to KKR, we have formed an institutionalized approach, such as pulling out an operational improvement plan proposal before investment, refining it into an executable plan during investment, and forming a 100-day plan after investment to help companies do better in some aspects. For example, when we invested in Belle in 2004, I think an important reason was that it might be the first brand retail company in the country to propose paying attention to inventory-to-sales ratio and capital turnover rate. Everyone thinks selling shoes is simple, but it is not. The same shoe style has different colors, sizes, left and right feet, requiring a lot of inventory, which occupies a large amount of operating capital. When we further discussed with them, in addition to the inventory-to-sales ratio, we also paid attention to indicators such as discount rate and inventory age, and then made the investment decision. Second, from a scale perspective, how does the company itself treat growth? Is it for the sake of getting bigger, or does it remain vigilant about the economic model during expansion to ensure increasing profits and marginal benefits? We believe that very successful companies do not blindly pursue scale but are relatively restrained. For example, Haidilao has become popular across the country, but when it went public, it had only over 400 stores nationwide, with fewer than 50 in Beijing. China's market is large enough; it is not necessarily the fastest runner who laughs last. If products and services are solid, customers like them, and during development, the organizational structure is not overstretched or diluted, many problems can be avoided. Looking back, why is Haidilao successful? Personally, I think first, to this day, the fullness of each store remains at a relatively high level. Whether expanding to lower-tier cities or going overseas, it has not sacrificed table turnover rate for expansion. Second, compared to other companies, it started internal personnel training early, such as establishing Haidilao University. Excellent brand companies all attach importance to talent cultivation, as do Belle and Mengniu. Everyone hopes to become a century-old store, but it is not about spending three years conquering territory to occupy all of China's market share. It is about taking root to grow big and lasting. Including when we invested in Mengniu, we signed a bet-on agreement, not to let the company bottom out. On the contrary, the company estimated at the time that it would grow four to five times annually in the future, but we said you do not need to grow that fast; you should pursue quality growth. This is also related to our value assessment of the company. If the company can do better than agreed, we are happy to give shares to the entrepreneurial team. This is a very positive incentive process. In the early days when we formulated these performance-linked adjustment mechanisms, we always "lost" shares, but we lost happily, indicating that the company did better than expected, and the value would be greater. Today, bet-on agreements have become common practice in VC, but they have somewhat changed. Some people pursue the so-called concept of "only speed matters" in the market, encouraging companies to be aggressive, increasing operational risks, and compressing room for error. Although there is no distinction between good and bad in tactics, I believe that investing in projects must first be responsible to investors. Therefore, Fengshang Capital has adopted a mandatory co-investment mechanism to align the interests of entrepreneurs, GP, and LP as much as possible. For companies that expand particularly fast, some people may like excitement. For us, there are too many places where a company can go wrong during development. If we do not solve them now, it will be difficult to fill the gap later. We believe in Murphy's Law; when investing, it is always good to think of risks more seriously.

2. Choosing Founders with Vision

Now some internet practices are being copied to the consumer field. As long as you can expand and increase GMV, capital will continue to enter. This makes some entrepreneurs no longer calm and rational, not thinking about whether they should do this, and once the摊子 is spread out, how to clean it up? For founders, whether a project can create value is a question that must be discussed. Many things need time to verify, but due to capital催熟, everyone is eager to extend and replicate without verification, which is not a good thing. The philosophy of the founder of KKR left a deep impression on me. He would cooperate with people he likes and trusts (Like & Trust). First, we share the same philosophy and direction; second, we do not talk about empty things but return to reality, how to do it step by step. In my view, investing is also a process of finding like-minded partners. All the companies that Fengshang Capital cooperates with, although covering a wide range of fields, such as catering, flower sales, and clothing, have a high degree of consistency in temperament, that is, they are responsible to users and shareholders, and care more about whether this matter can create value. Including when investing, we also ask the company: if this money were your own, would you spend it this way? If the answer is yes, we will have more confidence. In general, we believe that in the consumer goods industry, first, the founder must have vision and insight, be able to keenly perceive major trends and new demands. If you only do well in your own small plot, it is far from enough to achieve a great company. Second, you must be good at calculating big accounts and controlling the development rhythm. Do not blindly burn money, but be willing to invest where it should be invested, and can you make every penny spent settle into tangible and intangible scarce value assets of the company? This way, two extremes can be avoided in business: one is that entrepreneurs are good at making money but cannot grow big; the other is that the scale is large but capital is idling, and once the supply is cut off, it will shrink immediately. In addition, in this era of entrepreneurship, we also find two points different from the past: On the one hand, internet technology has lowered the threshold for new brand entrepreneurship. For example, now through a relatively successful marketing campaign, you can make the product widely known to consumers, which was hard to imagine a decade ago. On the other hand, the requirements for continuous innovation capability of enterprises are higher. Whether it is the leading enterprise in the position or an innovative enterprise trying to break through, the sensitivity to the market and the speed of new product launches must keep up. New Brands Should Represent New Consumption Propositions

1. Consumer Generation Gap Exists, Brand Iteration Always Exists

Since its establishment, Fengshang Capital has focused on consumer investment because consumption is the field I am most familiar with and first entered. It is around our daily lives, everyone can perceive it, and the macro environment provides a very good development stage. Moreover, domestic demand consumption, as the foundation of a country's long-term stability, is less affected by external policy environments and will be a relatively eternal theme in the foreseeable future. In this wave of consumption change and opportunity, the post-90s and post-95s have become a consumer group that everyone is extremely concerned about. I do not think that this generation of post-90s or even post-95s consumers is completely different. The new generation of consumers will stand from their own perspective and say they are different from the previous generation, such as pursuing personalization, health, self-pleasing, etc. But if we stretch the time scale, every generation has similar transitions, not unique to the post-90s and post-95s. The post-70s and post-80s also have different consumption habits and tastes from their parents. For example, many girls define some brands as "mom's brands." No matter how hard they try to launch new styles, they always feel it is not my brand. Therefore, there is a generation gap between each generation of consumers. As long as this phenomenon exists, brand iteration will always exist. In addition, everyone is discussing whether China can produce a batch of world-class brands worth tens of billions of dollars? In the 40 years of reform and opening up, the first half was constantly catching up. Now some fields have caught up or even surpassed others. At this time, it is possible to talk about whether world brands can be created. But for investment, this is not a measure of standard, because many factors of globalization cannot be changed by entrepreneurs. For example, China's standard communication technology is now resisted by some countries, and traditional Chinese culture may not have the same market recognition overseas. But fortunately, China has a population of over a billion, nearly 60% urbanization rate, and the consumer market is relatively consistent. Except for slight regional differences, it is rare that a truly quality and connotative brand does well in East China but completely fails in North China. For example, ZARA and H&M adjust styles according to region, but they can open stores nationwide. This is very valuable because as long as you can make it work, the market can be very large.

2. New Brands Should Represent New Consumption Propositions

So, in this era, what are the space and opportunities for new brands? We will see that the previous generation of enterprises was actually good at paving channels and making supply chains solid, but some of them were very lacking in communicating with consumers and hard to build brand power. Therefore, today's new generation of entrepreneurs, standing at this historical node, should make brand communication more meticulous. Why have I always proposed that new brands should represent new consumption propositions? Because in this case, when others mention your brand, a picture can emerge in their minds. For example, when thinking of Yuanqi Forest's "Ran Tea," it is not only zero sugar and zero fat, but also has a picture of burning fat. This does not need a paragraph of explanation; users can immediately map it in their minds. Another example is the Luoji Thinking we invested in. When everyone thinks of Luo Zhenyu, Luo Pang, they know he will talk about those brain-opening ideas. Although the course content of the "Dedao" APP covers a wide range of fields, the content is both cutting-edge and practical knowledge, and the overall quality and temperament are consistent, which everyone can immediately feel. The continuously iterated "Quality Control Manual" is also Luo Pang's proudest product methodology precipitation. The most substantial significance of these brands representing specific consumption propositions is that it reduces consumers' choice costs and brings brand premium. When the brand side does the quality and temperament check for consumers, everyone no longer needs to hesitate and struggle. Just like Luo Pang's fatherly logic, unlike motherly love's thoughtful care, the way fathers express love is usually: I tell you this is good, I have already picked it out for you. If you want to learn management, choose Ning Xiangdong; economics, choose Xue Zhaofeng; psychology, choose the best in emotional aspects, Wu Zhihong. I have invited them all to your home; just listen attentively. And why do the upper classes in Europe always go to Galeries Lafayette, Harrods, and other high-end department stores? Because the latest and best goods in the world are there, and consumers identify with and trust their quality.

3. Consumption Propositions Originate from Founders' Almost "Stubborn" Persistence

So how does this consumption proposition arise? I think the core is to rely on the company's long-term, almost "stubborn" persistence. Stubbornness is not being unconventional or fighting against the whole world, but seriously listening to market feedback, not giving up until customers are satisfied, and "fighting" with yourself to the end. China's market is large enough and has enough levels. Even in the most niche segments, if the product is done well, it can live very comfortably. For example, around the supply chain of flower sales, the co-founder of Huadian Time moved his home to Yunnan, staying upstream to supervise flower planting and picking. At the same time, in the supply chain, they jointly developed water-carrying transportation for fresh flowers with SF Express, extending the shelf life from the original three to five days to half a month. This kind of magnitude improvement can only be achieved when entrepreneurs treat it as a long-term career. Today, you have to give up quick money to earn market reputation. This is particularly difficult because consumers are easily induced but also hardest to retain long-term. Compared to Europe and the United States, Chinese consumers are also more willing to try new things. Many new brands are indeed popular at the beginning, but if the quality is not good enough or does not meet or even exceed expectations, customers may not buy a second time. So, the cost of trying new products is not high now, but the speed of being abandoned is also fast. To make a brand have a distinct and unique proposition and be trusted, the team needs to always be tense, persist without slack, and put more effort into places consumers cannot see. Technology is the Underlying Force Supporting Product Transformation In addition to unique to C new brands, using technology to empower consumption scenarios is also a key direction we focus on. We believe that true transformative innovation at the product level is usually driven by breakthrough technological progress. For example, Tetra Pak used packaging technology to replace plastic bag packaging, allowing dairy products to be preserved for a long time and sold nationwide through modern supermarket distribution channels. This also gave rise to the rise of brands like Mengniu and Yili. Similarly, Chinese people like to eat pasta, but gradually tired of fried instant noodles that have been eaten for decades. The market has developed freeze-drying technology that can lock in soup and freshness. The application and innovation of this technology will inevitably bring product transformation and new advantageous brands. Many people think Luoji Thinking is just a self-media, but it is not. They regard it as their mission to redo the publishing industry and even the knowledge service industry with new technology. At first, it was audio listening to books. Now, all content of the "Dedao" e-book products, from titles to footnotes, is connected to full-text search. For example, if I want to understand the "herd effect," I just enter the keyword, and the system can display all paragraphs containing the "herd effect" in all stocked e-books, and can start free trial reading of 1/10 of the relevant books from any position. The reason for this upgrade is that the founder, from the customer's perspective, keenly noticed that everyone generally has such needs, and technological transformation is always the underlying force supporting good products. At the same time, you will also find that the founders of technology-enabled platforms are not necessarily from a technical background, but they share two common traits: first, high sensitivity to smell; second, strong productization ability. Business acumen includes two aspects: first, the connection between customer needs to be met and the technology that can be realized now. If these two points match, new demand can immediately burst out; second, the ability to quickly land the matched technology and demand and transform it into products. Some companies do not seem to be known for technology at first glance, but they actually invest energy behind the product. For example, Luoji Thinking spent 3 years insisting on "listening to a book every day," gathering the wisdom of ancient and modern times, and now e-books can also search all ancient classics and cutting-edge knowledge. In this way, they have high asset value, but it has not been fully released yet. In addition, like another invested company, Le Element, their developed "Happy Xiaoxiaole" as a casual game has occupied the top three positions in the game chart for many years since its launch. The company has also made a lot of continuous investment in technology and R&D. Especially in the early days, they adapted to almost all models on the market, and used a lot of AI technology in the setting of each level, all to make consumers have a better experience during the game. In the end, what such technology-enabled platforms ultimately want to reduce is the decision cost of consumers, not relying on being big and comprehensive. Moreover, from the moment of birth, they are unique, others cannot imitate, and they cannot be done overnight. Taking Bottled Beverages as an Example, Why Can New Brands Break Through? In the specific investment field of consumer goods, while paying attention to some hot trend projects, we pay more attention to innovation in traditional product categories on the shelves. Traditional brands generally have problems of aging and generation gap, and bottled beverages are a typical representative. Bottled beverages have entered China for decades, and consumer cognition is constantly shifting. When Coca-Cola, Pepsi, and other brands first appeared, everyone felt they were safe, had good taste, and were not expensive, so they quickly spread nationwide. In recent years, people have increasingly pursued health, questioned various additives, and also had more picky requirements for taste. This has made many traditional beverages decline. People hope to have a better and healthier product. From the logic of the shelf, bottled beverages are limited by price range. Freshly squeezed juice is healthy, but a cup costs 20-30 yuan, while a bottle of beverage is only 5-6 yuan. Therefore, under the premise of ensuring cost performance, it is also necessary to have innovation, which is a point that is difficult for new enterprises to find. Theoretically, traditional things are indeed worth redoing. The so-called development of demand is actually to poke through that window paper and hit the unmet needs in many people's hearts. But it is not easy to find the point where demand, product, and profit margin match. For example, Yuanqi Forest attaches great importance to product R&D and has had an international perspective from the beginning, including a product center established in Japan, and market layout in the United States, Australia, Hong Kong, and other Southeast Asian regions. In addition, large enterprises will always leave space for entrepreneurs. In the food and beverage field, compared to the activity of entrepreneurial teams, many large companies rarely expand such new products. I think there are two points: First, due to opportunity cost considerations, a beverage company that develops to a certain scale will be limited by scale. For incumbent large enterprises, if a new product does not reach sales of 700-800 million in the first year, it is likely to be rated as failing internally. Spending the same energy, rather than taking risks to develop new products, it is better to let an existing product with tens of billions in sales grow another 20%. Relatively speaking, entrepreneurial teams have a smaller burden. If the first year achieves revenue of over 100 million, and the second year achieves 300-500 million, it is completely fine. Moreover, channel parties also hope to have some new products to maintain market freshness. In addition, there are many market demands waiting to be met. Of course, some leading beverage companies are investing in new product R&D, but their new products often do not sell as well as new brands. Second, large enterprises have their baggage. Their channels can cover from first-tier to fifth-tier and even more下沉 markets. If a new product can only be sold in first-tier cities, why not directly make a product that can be sold nationwide? So large enterprises will always leave space for small enterprises, and there are indeed many places worth learning from innovative enterprises. We often use the efficiency standards of large enterprises to require startups, such as the proportion of logistics costs, packaging costs, and payment terms with suppliers. Although this is somewhat harsh, it is achievable. Even if it cannot be done this year, it can be done next year. Facing the Next Decade of New Consumption The consumption track is wide and long. In the future, facing more complex and diverse brands and offline channels, we will always pay attention to new trends, but two points will not change: First, attention to the essence of business and the founding team's extreme pursuit of products, more simply, "a good business done by true craftsmen." We do not want to burn capital or play subsidies. As I said, if you are unwilling to do it with your own money, do not use investors' money to do it. Second, invest in the most advanced productivity and pay attention to capital efficiency. The most advanced productivity does not necessarily mean whether it is internet-based, but rather paying attention to core elements such as operational efficiency indicators and capital turnover rate of an industry. In terms of investment mainline, we will still adhere to the two categories of "unique brands" and "enabling technology" in the future. Of course, each investment target must meet our own evaluation standards. For brands, they must be born from the eternal consumer needs of clothing, food, housing, transportation, and entertainment, with strong brand power and brand value. For technology-driven empowerment projects, they must be able to truly solve the practical problems of customer groups in the industry, provide better and more efficient services, and create greater value for customers. Facing the next decade, I believe that if we want to go further, we must first firmly believe in the bright future of the Chinese market. No matter when, people need better products. China's demographic dividend has reached a peak, so theoretically all growth comes from two parts: one is the replacement of existing things, and the other is the improvement of single product value. At the same time, we also firmly believe that good products will generate premiums. Investment actually values the intangible assets of enterprises. Compared to traffic, customer trust in the brand is the most tangible intangible asset. Investing in brands with value propositions will be our foundation for survival.