Click to read the original article for details New consumption is visibly receding. Looking back at this wave of consumption, no one can accurately know where it started or where it is headed. Just as there is widespread debate about the first year of new consumption. If we trace the starting point of the story, I believe it should be 2014. In April of that year, Genki Forest was founded in Beijing, and in December, its first beverage brand 'Ran Tea' (燃茶),主打'0 sugar, 0 calories, 0 fat,' hit the market. Its impressive market performance showed Tang Binsen the potential of the track. In 2016, Genki Forest's sugar-free sparkling water was launched, avoiding competition in the traditional carbonated beverage market and quickly winning market favor. That same year, Royal Tea was renamed Heytea, Perfect Diary's parent company Yixian E-commerce was founded, and Nayuki completed its first round of financing. The main upward wave of new consumption gradually took shape. After completing its initial accumulation, Genki Forest began to stride forward, assembling a senior management team of international first-tier brand managers, from supply chain and self-built factories to marketing spending. It broke out in 2019, invested heavily in advertising in 2020, began preparing self-built factories in 2021, and launched a 'freezer battle' offline. As a representative brand of new consumption, Genki Forest went from 0 to 1, then to a sustained head-on battle with traditional giants, encountering slow iteration of core hit products, homogeneous competition, high marketing costs, and the impact of the pandemic. As during the current pandemic, I hardly see people stocking up on new-consumption products; instead, they are paying high prices for Coca-Cola, stocking up on Lao Gan Ma, and also tobacco, alcohol, and tea. In the face of absolute rigid demand, from survival necessities to addictive categories, the once-hot new-consumption track seems less important. And Genki Forest's predicament is not an isolated case. New-consumption brands that previously followed the asset-light path, high marketing spending, and premium pricing for new categories, compounded by the pandemic's impact, have all encountered growth bottlenecks. Just as to look at a sector, you look at leading companies, to understand the plight of new-consumption brands, you must focus on the current situation of the head enterprises. In this issue, we select new-consumption companies that went public between late 2020 and 2021, and use quantitative data from their financial reports to dissect the difficulties and breakthroughs of new consumption. The sample includes Perfect Diary's parent 'Yixian E-commerce,' the first small-bar stock 'Helen's Bar,' the first blind-box stock 'Pop Mart,' and 'Nayuki,' which went public to stop the bleeding. These listed new-consumption head enterprises encompass the grass-roots economy and offline scenarios, and also cover three hot categories: domestic beauty, new tea drinks, and trendy blind boxes. Except for Pop Mart, the stock prices of the other three companies have fallen below half of their issue price. Yixian E-commerce's single stock price has been below $1, facing the risk of delisting from the NYSE. Although stock prices may not truly reflect corporate value, especially given the recent turmoil in Chinese stocks, they do show changes in the market environment and investment logic. We previously did a statistic: since the second half of last year, new-consumption financing events have decreased, and in the first quarter of 2022, they hit rock bottom. Capital is not only rational but also contracting; the past frenzy of VCs fighting to get on the investment lists of internet-famous companies has not continued. Especially in the current external environment full of uncertainty and repeated pandemic outbreaks, consumer demand presents a smile curve: brands with 'rigid demand + cost-effectiveness' and brands with high emotional added value and high premiums generate greater revenue, while brands in between see their revenue compressed. Although new-consumption head enterprises are still expanding, capital is contracting and placing more emphasis on profitability. Beyond stock price data, to see the clear quantitative operating conditions, one must delve into financial report data, dissecting from three dimensions: revenue, profit, and cost. 01 The Dilemma of Expansion In terms of overall revenue growth, the four head brands still maintain expansion momentum. In the 2021 financial report data, Yixian E-commerce's revenue was 5.84 billion yuan, a year-on-year increase of 11.6%, and it was the only one of the four companies to exceed 5 billion yuan in revenue. However, the corresponding marketing expenses grew by 17.41%, with marketing expenses reaching 4 billion yuan, accounting for nearly 70% of revenue. Since 2019, Yixian E-commerce's marketing expenses have had a compound annual growth rate of 178.89%, while revenue growth has fallen from a high of 377.11% to 11.6%. To date, Yixian E-commerce has cooperated with 15,000 KOLs, including Li Jiaqi and Viya, and signed Zhou Xun and Liu Haoran as brand ambassadors in October and November last year, respectively. But the marginal benefits of 'celebrity + grass-roots marketing + live streaming' are diminishing, eroding profits. In contrast, Pop Mart's 2021 revenue was 4.491 billion yuan, a year-on-year increase of 78.7%, exceeding the 49.31% growth in 2020. Compared to the triple-digit growth rates of 225.49% and 227.19% in 2018 and 2019, the performance was not recognized; on the day the financial report was released, the stock price fell 3.64%. Declining consumer willingness and a sluggish market have become external constraints on revenue. Especially for the trendy blind box category, amid repeated pandemic outbreaks, emotional needs are giving way to basic living needs. In addition, the main audience, women born after 1993, is also the group whose spending power has been hit hardest. Nayuki, which turned a profit in 2020 with a net profit of 16.64 million yuan, also faced losses after going public. In fiscal 2021, Nayuki's revenue was 4.296 billion yuan, a year-on-year increase of 40.53%. As of December 31, 2021, it opened 326 new stores, accounting for nearly 40% of total stores, a slowdown compared to 2020's expansion pace. Officially, it plans to reach 1,000 stores by 2022. The direct manifestation of expansion is the loss data. In the two fiscal years after listing, Nayuki lost 203 million yuan and 145 million yuan, respectively, with the total loss narrowing. Similarly in the catering track, Helen's Bar, with stores mainly in second- and third-tier cities and an average per-person consumption of about 50-60 yuan, is called the 'Mixue Bingcheng of the bar industry,' with college students as the main audience. In fiscal 2021, Helen's revenue was 1.835 billion yuan, a year-on-year increase of 124.4%, making it the fastest-growing company among the four. The main reason for revenue growth is rapid store expansion. After cutting franchise stores in 2018 and adopting a direct-operated store route, Helen's new store openings in 2021 exceeded the total number of stores in 2020, supporting rapid revenue growth. In terms of profitability, Helen's annual loss reached 210 million yuan; excluding expenses such as changes in fair value of shares and listing costs, the profit level was around 100 million yuan. As of March this year, Helen's had 854 direct-operated bars, and in 2022 it will also reach a scale of 1,000 stores. In corporate planning, Helen's expects to increase stores to 2,200 by the end of 2023. As a high-margin alcoholic beverage category, Helen's own-brand products have a gross margin of 80.2%, while third-party brand products have 48.8%. But in terms of cost structure, Helen's faces the same dilemma as traditional catering: raw material costs, employee costs, and rental costs are increasing rapidly, with growth rates of 112.53%, 225.06%, and 47.55%, respectively. Rapid expansion is accompanied by heavy costs. In summary, based on the 2021 financial reports, the four listed companies are divided into two camps: 'profitable' and 'loss-making.' Pop Mart and Helen's Bar are 'profitable,' while Nayuki and Yixian E-commerce are 'loss-making.' In addition, slowing revenue growth, rising cost pressures, and questioned profit models have become common pain points for new-consumption brands. Besides the head brands approaching 5 billion in revenue, mid-tier new-consumption brands with around 1 billion in revenue have encountered similar problems. Taking last year's Double 11 statistics as an example, Wang Baobao's revenue fell nearly 70% year-on-year to only 1.429 million yuan; Lamian Shuo dropped by half; meal replacement brand Super Zero's best-selling single product in November last year sold only 3,000 units, and Wonderlab, in the same category, has long disappeared from the overwhelming advertising... Compared to mature FMCG categories, new consumption focuses more on growth and revenue growth rate, and the once-vigorous category reinvention activities have ceased. Bain & Company launched a study in 2018 tracking 46 new brands; by 2021, only 17 brands were still maintaining growth, while the rest either stagnated or quietly exited. Facing brutal market competition, many new-consumption brands have begun to retreat. 02 Three Mountains Facing New Consumption 'Time is a friend of the brand.' At the 2021 financial report conference, Yixian E-commerce CEO Huang Jinfeng said this. But for every brand growing at a loss, time is also an opponent. How to outrun time, find a clear profit model, and gain capital market confidence is a more realistic issue. In trendier terms, it's about changing the engine while flying at high speed. But the burden on new-consumption brands also includes three visible mountains: the fading of platform dividends, insufficient mindshare and channel penetration, and a weak hit-product matrix.
- Fading Platform Dividends Perfect Diary, which entered the beauty category with a DTC model, grew symbiotically with Xiaohongshu. During Perfect Diary's early days, Xiaohongshu was in its growth phase, with lower traffic costs and higher ROI. Additionally, with the rise of e-commerce live streaming and short-video e-commerce, Perfect Diary quickly completed its initial accumulation through traffic purchases and extensive KOL cooperation. Almost single-handedly, Yixian E-commerce raised KOL rate card prices. But market competition is 'flat,' and traffic depressions are quickly filled. According to third-party platform research data, Xiaohongshu's advertising business accounts for up to 80% of total revenue, and KOL cooperation costs have risen accordingly. Moreover, such cooperation generally lacks exclusivity agreements, so competitors can also invest. On Tmall and JD.com, with the entry of short-video platforms, a trend of traffic diversion is forming. During last year's Double 11, there was no 'choose one or the other,' no rolling GMV numbers on big screens, and no late-night shopping strategies. Both platforms and brands were unusually quiet. The growth rate of transaction volume on Tmall and JD.com slowed, as if only the Double 11 period had been extended. Besides regulatory policies, the fading of platform dividends and the reshuffling of top livestreamers are inevitable main causes. Relying solely on big promotions can no longer drive annual GMV growth. Various e-commerce platforms are also adjusting, guiding brands to focus more on daily operations—that is, advertising bidding during big promotions is too expensive and not cost-effective, so budgets should be reasonably allocated across different stages of the year, with good 'water storage' before promotions.
- Insufficient Mindshare and Scenario Penetration Different people define brands differently. From a price perspective, brand power is the ability to hold a price band. Compared to traditional first-tier brands, which have strict pricing policies and stable marketing methodologies, with low discount frequency and price reductions mainly during annual promotions, some new-consumption brands discount more frequently. High-frequency discounts boost sales but also consume brand equity. Once discounts stop, sales plummet, and the brand cannot hold its price band. Additionally, brands lack a stable marketing methodology, basically using whatever works. In last year's Double 11 sales data, international big brands' price cuts quickly drove sales. In the beauty category TOP10 ranking, the top three were all international brands; Perfect Diary, which dominated the previous year, saw sales drop 45%. In the skincare category, only Winona remained as a domestic brand in the top ten. It's easy to lower prices, but in the long run, it becomes very difficult for brands to raise prices. Although Yixian E-commerce is sprinting toward a mid-to-high-end brand route, forming a brand matrix including Perfect Diary, Little Ondine, Galénic, and Eve Lom, in public perception, Yixian E-commerce follows a cheap, 'dupe' route, so the mid-to-high-end route inevitably faces many difficulties. Corresponding to mindshare penetration is scenario penetration, i.e., expanding coverage. Head new-consumption brands at the 5-billion revenue level still have low penetration in their category. The combined annual revenue of these four head new-consumption brands is less than a quarter of Master Kong's. Therefore, continuous expansion is both a stage need for growth brands and a requirement for capital appreciation. Yixian E-commerce, besides acquiring brands to form a matrix covering various price points and moving into higher-premium skincare categories, is also moving closer to traditional channels, opening offline stores starting in 2019. But according to the prospectus, the 40 'Perfect Diary' offline stores opened in 2019 contributed only 3.3% of total revenue. Currently, Yixian E-commerce has 400 brand stores and plans to open 600 more this year. Additionally, Yixian E-commerce has begun to lay out overseas business, but this part of revenue awaits time to verify and has not yet supported growth. Helen's Bar, which is expanding offline faster, faces the same dilemma: the low-price bar expansion route has no barriers, but revenue easily hits a ceiling. In terms of revenue structure, the average daily revenue per store in first-, second-, and third-tier cities is 10,200 yuan, 11,800 yuan, and 12,200 yuan, respectively. In terms of profit margin structure, stores in first-, second-, and third-tier cities have margins of 0.01%, 16.92%, and 23.25%, respectively. This revenue composition is counterintuitive: first-tier cities, which originally had higher spending power, have lower per-store revenue contributions. Perhaps this is also related to business area, but it shows that Helen's Bar faces significant obstacles in moving up to higher-tier cities. Unlike the down-market approach, Nayuki's store expansion logic is to further enhance brand momentum, planning to implement a 'densification strategy' in 2022, increasing store density in existing first-tier, new first-tier, and key second-tier cities, and continuously upgrading stores. In 2021, it vigorously promoted PRO stores, targeting business people and community populations with spatial experiences, which also lowered overall profit levels. Its first-type PRO stores (located in higher-level chain shopping malls), second-type PRO stores (in premium office buildings, etc.), and standard stores had operating profit margins of 9.8%, 6.2%, and 17.5%, respectively. High-end transformation cannot avoid the high rents, labor costs, and store decoration expenses brought by prime locations. And the expansion of the catering industry also has the lesson of Haidilao. According to the 2021 financial report, Haidilao permanently closed 260 restaurants and temporarily closed 32. As Zhang Yong lamented at the shareholders' meeting: 'I misjudged the trend. Looking back, it was indeed blind confidence. When I realized the problem, it was already January 2021, and by the time the company reacted, it was March.' To alleviate revenue pressure, especially with repeated pandemic outbreaks and restricted offline store scenarios, Nayuki's delivery order revenue share is increasing, and the offline experience feature will be weakened. Additionally, Nayuki has joined the price reduction camp, launching several lower-priced products. For Pop Mart, the past decade has been about enriching scenarios, forming a comprehensive format of standard stores, flagship stores, pop-up stores, and robot stores, and continuously laying out e-commerce channels such as Tmall, JD.com, and Douyin. The online-offline revenue ratio changed from 32%:58.7% in 2019 to 41.8%:47.8% in 2021, with online business becoming the main growth driver. Furthermore, in August last year, Pop Mart established Beijing Pop Mart Land Management Co., Ltd., to build its first offline theme park in Beijing. Besides lacking experience and foundation in offline amusement park operations, whether IPs without a story core can support a trendy culture park scenario is a point worth deeper consideration. Therefore, to break through the 5-billion revenue threshold and push toward 10 billion, expansion is inevitable, and with it comes cost pressure.
- Weak Hit-Product Matrix New-consumption brands that broke out with hit products, on one hand, because they mainly rely on OEM models with low barriers, competitors quickly enter, easily falling into homogeneous competition; on the other hand, how to continuously launch hit products to keep raising the revenue curve is a more long-term issue. Tang Binsen once revealed that Genki Forest's revenue was 2.7 billion yuan in 2020, estimated to exceed 7 billion yuan in 2021, and expected to reach 10 billion yuan in 2022. But compared to Nongfu Spring's full-category revenue structure, Genki Forest's new products, which it had high hopes for and invested heavily in R&D, did not explode in 2021; sparkling water still accounted for more than half of revenue, while Alien and Milk Tea each contributed 1 billion, performing moderately. On the other hand, Nongfu Spring is quickly following up with sugar-free drinks, relying on its huge distributor system and strong advertising to block Genki Forest's sparkling water products offline, which will undoubtedly affect Genki Forest's main revenue. Besides physical products, whether Pop Mart, which 'commercializes art and mass-produces it,' can develop an IP matrix similar to Molly is also questioned. Perfect Diary, which previously followed the 'light R&D + OEM' route, lacks product barriers; after its eyeshadow palette hit, a host of imitators appeared, almost identical in appearance, material, and color. The low-alcohol beverage category,主打微醺 (tipsy), also faced fierce competition last year, even exceeding category demand. An investor lamented: 'There aren't enough tipsy women'... How to iterate a hit-product matrix during the revenue growth period brought by hit products, make it the main revenue point, and establish solid brand mindshare becomes the key to sustained growth. 03 Under the Pandemic, Some Things Become Unimportant A relevant research group at the Chinese Academy of Social Sciences launched a trendy toy report in December last year to understand blind box users' consumption motivations. Among them, 46.78% of users were driven by surprise, 38.95% by the cultural labels they like, and 21.64% by the joy of shopping with friends and family. This means that growth in the trendy toy category requires continuous emotional and psychological stimulation. Whether it's visual design, the thrill of opening blind boxes, or the need for collecting and 'speculating' on blind boxes, whether it will be a passing fad and how big the trendy toy story can become is full of uncertainty. Especially amid repeated pandemic outbreaks, a more pragmatic consumption concept will undoubtedly impact trendy toys and the lifestyles advocated by other new-consumption brands. Even in the post-pandemic era, the soul-searching for new consumption is not only about people flow, logistics, and cash flow, but also about rethinking category space. Whether the once-prosperous track is like a bubble blown by a gust of wind, and after the wind passes, how much real space remains in the category better reflects true demand. The biggest waste is 'supply-demand mismatch'—producing things that can't find buyers. A brand, in the final analysis, is your relationship with the world; it exists because it is needed. When certain needs become unimportant, the brand seems to have less presence. But 'people's aspiration for a better life' will not change, and the trend of consumption spiraling upward will not change either. However, for new-consumption brands, to achieve '1 to 10,' they need to break away from the '0 to 1' path, and only by moving from 'new brands' to 'mass-market brands' can they board the ship to the next stop. Source: 营销之美 (ID: yingxiaozhimei) -END-