Moutai's youth-oriented strategy has sparked controversy on social media. From the co-branded coffee 'Sauce Aroma Latte' with Luckin Coffee on September 4th, to the liquor-filled chocolate with Dove on September 14th, and even earlier the Moutai ice cream, these moves have triggered multiple waves of discussion. It wasn't until September 16th, when Moutai's chairman Ding Xiongjun announced that co-branded products would be paused, that the热度 truly subsided. In these efforts to connect with young people, who truly benefits, and what does Moutai gain from partnering with emerging brands? If viewed from the perspective of young people, Luckin and similar brands are more scarce; arguably, Moutai needs Luckin more than the reverse.
Youth-Oriented Strategy A Necessary Move for Moutai Now Moutai's strength is undeniable. According to the semi-annual report released not long ago, in the first half of 2023, Moutai achieved revenue of 69.576 billion yuan and net profit attributable to shareholders of 35.98 billion yuan, both up 20.76% year-on-year. In the entire first half of 2023, with high inventory and first- and second-tier baijiu brands cutting prices to clear stock, achieving this performance demonstrates Moutai's strength. But if you ask young people around you about their feelings toward Moutai, it's a different issue. I once conducted a survey, asking young people if they wanted Moutai. No one refused. After obtaining it, many chose to sell it to scalpers to make money. Is it the allure of money? If you replaced Moutai with luxury goods like Hermès, LV, Gucci, or limited-edition streetwear brands like Supreme, Balenciaga, or even Yamazaki whisky, many would choose to keep it for themselves. Clearly, Moutai faces an awkward problem: how to make young people genuinely recognize Moutai as a liquor, not a financial investment product. There are usually two ways to solve this: one is heavy marketing, i.e., repeated exposure on channels where young people gather, like Coca-Cola, Sprite, Mengniu, and Yili, which allocate part of their advertising budget to Douyin, Xiaohongshu, Bilibili, iQiyi, and Tencent Video, investing in ads and live streams, gradually being accepted by young people as contact deepens. The other is to change their old impression of the brand by launching products that young people like. For example, Li Ning and Bosideng. Bosideng, founded nearly 50 years ago, underwent a strategic upgrade in 2018, collaborating with international top designers such as former LV and Balenciaga designers and former Ralph Lauren design director to launch co-branded down jackets, shining at New York Fashion Week, then influencing a host of Hollywood stars. After that, through the construction of online and offline sales channels and the launch of new down jacket products, they changed young people's old impression of Bosideng. Li Ning is similar; a key step in its youth-oriented strategy was launching the 'China Li Ning' sub-brand, which became an instant hit at New York Fashion Week in 2018. Using new products to drive brand rejuvenation is also Moutai's approach. Starting in 2022, Moutai partnered with Mengniu to launch ice cream. By May 29, 2023, Moutai ice cream had completed the layout of 34 flagship stores across 31 provinces, municipalities, and autonomous regions in mainland China, with cumulative sales of nearly 10 million cups. In 2023, Moutai also partnered with Zhongjie 1946 to launch five new Moutai ice cream products. Additionally, since 2023, Moutai Group has continuously launched multiple cultural and creative products, including blind boxes, figurines, fridge magnets, and keychains. Have these attempts worked? When the ice cream was first launched, since Moutai had not opened many ice cream stores nationwide, its product prices were inflated on various e-commerce platforms, reaching as high as 240 yuan per cup, nearly three times the original price of 66 yuan per cup. But by the end of July this year, in Beijing, Liaoning, Hunan and other places, the original 66 yuan per box ice cream was discounted, effectively reducing the price to as low as 9.9 yuan. In Shaanxi, there was even a promotion of 'buy three boxes of the same flavor Eight Treasures ice cream and get one box of Moutai ice cream for free.' Blind box products, on second-hand trading platforms, had dropped from a retail price of 79 yuan each to 25 yuan each, with free shipping. In social media discussions, most were about reselling, with few using them personally. Ice cream, blind boxes, and cultural and creative merchandise don't seem to have helped Moutai win over young people. Why is that? We often say that the most important thing for a brand is to occupy the user's mind. Usually, a brand can occupy consumer cognition in two ways: One is through the product. By stating product features and demonstrating product value to gain consumer recognition, like Yuanqi Forest with its zero sugar, zero fat, zero calorie drinks, Wanglaoji with 'fear of getting heaty, drink Wanglaoji,' the globally leading men's pants expert, and Mirinda with 'non-cola' are all product logic. The other is to emphasize the consumer group. Attract more people through the crowd, like Moutai. Why is Moutai so valuable? Is it because of the unique flavor of sauce-flavored baijiu, or because of Moutai's group attributes? The answer is obvious. As mentioned earlier, an important part of Bosideng and Li Ning's strategy was first being sought after by fashionistas at New York Fashion Week, then welcomed by young people who follow fashion. From this perspective, looking at ice cream, blind boxes, and cultural and creative merchandise, it's actually product thinking. From a product perspective, because young people like these products, making these products will gain young people's attention. But ice cream is not new, blind box gameplay is not new, and cultural and creative merchandise is everywhere. Their popularity now is because a group of young people first endorsed a certain brand's ice cream, a certain brand's blind box, or a certain IP's cultural products, thereby driving other young people to like them. Therefore, if Moutai wants to rejuvenate, instead of making efforts on the product side, it's better to directly find places where young people gather and influence them. In fact, luxury brands similar to Moutai have also successfully achieved rejuvenation in this way.
Luckin and Similar Brands One of the Few Options for Moutai's Youth-Oriented Strategy If I had to find the most successful brand in youth-oriented strategy in recent years, I would definitely recommend Louis Vuitton (hereinafter referred to as 'LV'), the flagship brand of LVMH, one of the top three luxury groups globally by market value. How did LV rejuvenate? They first collaborated with the famous streetwear brand Supreme, which had once been in court with them, to launch co-branded limited products, using Supreme's influence among young people to enhance their favorability toward LV. On the day the LV x Supreme co-branded products went on sale, tens of thousands of young people set up tents overnight at Supreme stores, and there were even fierce clashes between fans and scalpers. In the second-hand market, the most popular Box Logo T-shirts and Monogram hoodies once soared to $10,000. The topic of the LV x Supreme collaboration continued to ferment in fashion circles, streetwear circles, and on major social networks. It can be said that with the help of Supreme, young people changed their views on LV. After that, LV hired Virgil Abloh, the founder of Off-White, as its first African-American artistic director, designing many items loved by the streetwear circle, including the hit LV Trainer. Driven by these products, LV gradually shed the label of an old luxury brand and regained the favor of young people. Starting with LV, Burberry and Supreme, Prada and Adidas, Givenchy and Nike, Balenciaga and Adidas, Dior and Air Jordan... Luxury brands seem to have opened their second meridians, successively embarking on co-branding with trendy and sports brands loved by young people, and young people began to accept these luxury brands that their parents once adored. Why do luxury brands choose co-branding? A brand collaborates with opinion leaders in a certain circle to launch co-branded products, using their influence in that circle to bring the brand into that circle. Nike used this method in the 1990s to bring the Nike SB product line into the skateboarding circle. Therefore, luxury brands choose to collaborate with trendy brands that are highly sought after by young people, using trendy brands to impress young people. How can well-known brands quickly impress Chinese young people? The answer is obvious: places where Chinese young people gather, which naturally include new consumer brands that are deeply loved by young people. So we see LV choosing to collaborate with Manner, Fendi, another global first-tier luxury brand, choosing to collaborate with Heytea, and Moutai, China's highest-end consumer brand, choosing Luckin. Given Moutai's position in China's consumer brand field, probably no brand would refuse to collaborate with it. But since it's a collaboration, it must be mutually beneficial. In the collaboration, can Moutai gain the favor of young people without losing brand value? From this perspective, Moutai has few choices, and Luckin at least has the following advantages: First, Luckin is a Chinese brand and the leader in the specialty coffee track. Moutai is the number one; at least the partner's status shouldn't be too different. If they haven't even made it to the top three in the industry, they probably wouldn't catch Moutai's eye. Luckin has just risen to become the leader in the specialty coffee track, with single-quarter revenue scale for the first time exceeding Starbucks China, and total store count reaching 10,836 stores, more than 4,300 more than Starbucks China. Second, It is deeply loved by young people. After all, Moutai needs to solve the youth-oriented problem, which is the basis for cooperation. Previously, Moutai collaborated with Mengniu to launch ice cream, but Mengniu hasn't solved its own youth-oriented problem, so its boost to Moutai is limited. Young people are Luckin's advantage. According to statistics, consumers aged 18-34 account for nearly 70% of Luckin's customer base, and Luckin's popular products like Houru Latte, Shengai Latte, and Shenglao Latte are deeply loved by young people. Third, It is good at using co-branding for marketing. It should be said that Chinese chain beverage brands are all masters of co-branding, and Luckin is one of them. In the past two years, it has successively collaborated with well-known IPs such as LINE FRIENDS, Pepe the Frog, 'JoJo's Bizarre Adventure: Stone Ocean,' and Doraemon, gaining young people's attention through various gameplay. Fourth, Coffee comes with a lifestyle label. From the history of coffee's popularity, first European celebrities gathered in cafes to chat, then Americans chatted in Starbucks. After being introduced to China, coffee once became a symbol of the lifestyle of developed countries, which gave coffee a lifestyle label. Moutai is also a symbol of a lifestyle, and 'fine liquor + coffee' has become a communication phrase. Fifth, It has a certain brand texture, at least it shouldn't always be shown at low prices, affecting Moutai's high-end image. There are countless brands in China, and thousands of new consumer brands have been launched in recent years, but just Luckin's first three advantages can filter out almost all brands, and the only one that meets all five advantages is probably Luckin. On the contrary, from the perspective of supply and demand, there are many baijiu brands that can collaborate with Luckin on baijiu lattes, such as Wuliangye, Fenjiu, Luzhou Laojiao, Jiannanchun, and Gujing Gongjiu. These also need youth-oriented strategies, and collaborating with Luckin seems to lose nothing for Luckin, but of course, the best is still Moutai. It can be seen that if co-branding is used as a strategy for youth-oriented development, Luckin is probably one of the few choices. But we should also note that behind Moutai's youth-oriented strategy is a topic of sustained growth. From the current situation, Moutai is trying to find the next growth point through reform of existing business and diversification strategy. Using co-branding to open new markets is just one part of this strategy, but diversification itself carries risks. If not careful, it could fall into a crisis like LEGO's, and interestingly, co-branding was also part of LEGO's reform back then.
What Needs Vigilance and Attention The Double-Edged Sword of Diversification In the 1980s, LEGO's patents expired in various countries, and many manufacturers began to imitate LEGO bricks and sell them at low prices. At the same time, Nintendo's game consoles and other electronic games were competing for children's playtime, and LEGO faced a growth crisis. Plogmann was appointed as LEGO's new CEO in a critical time. His solution was to 'de-brick' the company, leveraging LEGO's strong brand influence at the time to expand into electronic games, clothing, watches, baby products, shoes, camping supplies, and other fields, making licensing and merchandise sales new growth pillars. LEGO also built LEGO theme parks worldwide and vigorously developed LEGO education. In brick products, Plogmann changed LEGO's long-held value of 'not creating a world that reminds people of violent things,' promoting LEGO's collaboration with the blockbuster movie 'Star Wars' themed on space warfare, launching LEGO version of 'Star Wars.' Beyond 'Star Wars,' LEGO also broke tradition by launching the 'Galido' series, which was incompatible with other LEGO bricks, and the completely fictional toy hero 'Jack Stone' series. Although the LEGO version of 'Star Wars' became the best-selling work in LEGO history and started the wave of LEGO's collaborations with major movies, and LEGO progressed smoothly in TV, movies, theme parks, and clothing, the simultaneous expansion into too many fields not only caused internal focus loss but also consumer confusion—what exactly is LEGO? Is it toys, or games, clothing, watches? What are the features of LEGO products? The result of confusion is the disappearance of consumer interest, directly leading LEGO into huge losses. In 2003, the company's sales plummeted from 10.1 billion Danish kroner the previous year to 7.2 billion Danish kroner, with a loss of 900 million Danish kroner; in 2004, LEGO's loss expanded to 1.9 billion Danish kroner. In February 2003, large retailers squeezed a large amount of inventory, and LEGO inventory in discount stores increased by 40%, more than twice the safety stock. In 2004, LEGO experienced unprecedented huge losses, with debt of nearly $1 billion, and sales fell by 40% in just two years. That year, new CEO Knudstorp took over in a critical time, determining a new direction to bring LEGO back to bricks, focusing on core assets (bricks and the LEGO system), core products (City series, Duplo series), and core customers (children aged 5-9). In addition, LEGO optimized the product development process, built a product innovation matrix, set boundaries for innovation, and innovation was no longer blind, not innovating for the sake of innovation. With these measures, LEGO returned to the growth track and became the world's largest toy brand today. Looking back at today's article protagonist, Moutai's collaboration with Luckin is like LEGO's collaboration with 'Star Wars,' breaking the original system to find new growth points. Moutai's attempts in ice cream, cultural and creative products, etc., also have similarities with LEGO. From LEGO's comeback story, we can see that using a diversification strategy to solve growth problems has a double-edged sword. Blind diversification may dilute its own advantages in the original industry and affect consumer perception, ultimately ending up with nothing. In fact, every diversification attempt carries the risk of diluting existing brand value. Wuliangye, once the leading baijiu brand, adopted an OEM licensing model for rapid expansion, where manufacturers produced and distributors sold under the brand, causing dilution of Wuliangye's brand value, and ultimately giving up the top position in baijiu. It should be noted that Wuliangye's expansion was only in the baijiu field, while Moutai involves more categories, so the challenge is definitely greater. Moutai, firmly holding the top position in baijiu, certainly needs new growth points, but the premise of finding new ones is to maintain its original advantageous position. It should be noted that the Chinese baijiu track is full of strong competitors. Before Moutai, Luzhou Laojiao, Fenjiu, and Wuliangye have all held the top position, and they are still eyeing it now.