Click to read the original article for details Source: Shenke New Consumption (ID: xinshangye2016) Author: Huang Xiaojun "In at most 3 years, you can become the No.1 in beauty, meal replacement, or online coffee, but who dares to pat their chest and say they can become the No.1 in baijiu?" said Lao Zheng, an investor in the new consumption sector. The growth path of the baijiu category is too rigid. Among the nearly 600 billion yuan revenue of baijiu enterprises above designated size nationwide, the top 7 companies account for 40%; and among the revenue of A-share listed baijiu companies, Moutai, Wuliangye, and Yanghe account for over 70%. In this category, new brands almost never have the opportunity to become the No.1. Among them, Jiangxiaobai, established 10 years ago, is a typical representative. According to its founder's open letter, the company's market share in the baijiu market in 2019 was only close to 0.5%, which translates to sales of about 2.9 billion yuan. This figure is slightly lower than that of Shuijingfang, which has a history of over 600 years, placing it at the second-tier level in the industry. Lao Zheng believes, "Such data is almost the ceiling for new brands in the baijiu industry. The only suspense is that no one knows how much old liquor Jiangxiaobai has and how thick its cards are." Why does he say this? Lao Zheng said that in 2018, Jiangxiaobai's sub-brand "Sanwu Zhiyou" was sent to the San Francisco World Spirits Competition for evaluation and only won a silver medal. Three years later, this liquor stood out among 3,800 spirits products globally. With its elegant, clean, and refreshing quality and taste, it won the competition's "Double Gold Medal" and was awarded the title of "Best Qingxiang Baijiu." Liquor is indeed the fragrance of age. However, new brands like Jiangxiaobai, no matter how aged their liquor, cannot stop the arrival of this overwhelming change: First, with more aged liquor, the oligopoly pattern of traditional liquor giants is becoming more obvious. According to the 14th Five-Year Plan guidance of the China Alcoholic Drinks Association, this figure is expected to reach 950 billion yuan by 2025, an increase of nearly 60%. But according to this draft, by the end of the 13th Five-Year Plan, the baijiu industry is expected to complete a production volume of 7.5 million kiloliters, a year-on-year decrease of 43%. Sales rising while production falls indicates that giants like Moutai, Wuliangye, and Yanghe, by grasping the high-end market, will intensify the squeeze on the entire industry. Second, more new liquor brands are rapidly emerging. Data from Qichacha shows that in the decade after 2011, domestic liquor track investment and financing showed an overall fluctuating upward trend, with cumulative disclosed investment and financing exceeding 55 billion yuan, of which baijiu totaled 27.593 billion yuan. Among them, Jiangxiaobai and Qingqing Kejiu, both over ten years old, tied for first place in the number of financing rounds, while brands that emerged in the past two years such as Guanyun, Kaishan, Guangliang, and Sanliangjiu also performed well. ▲Jiangxiaobai ranks first in the number of financing projects in the liquor category Image/Qichacha A few years ago, marketing expert Miao Qingxian said that Jiangxiaobai's focus on youthfulness was like squeezing milk from a stone. But unexpectedly, behind this brand, a large group of new brands are also squeezing milk together. The squeeze in the traditional baijiu market is becoming increasingly tense, and on the "young fossil slab" of the emerging market, more and more people are lying down to squeeze milk. In the next decade, how will Jiangxiaobai break through the "ceiling" that capital talks about? Ten Years of Jiangxiaobai One Product Runs Through an Industry Chain Whenever talking about the company's growth, Lao Luo, a founding member of Jiangxiaobai, recalls the Beginning of Autumn 10 years ago. At that time, the temperature in Chongqing was 40°C, an "autumn tiger." A few people held unlabeled baijiu bottles with the words "Jiangxiaobai" printed on them and went to sweep stores at noon. "What I remember most vividly is the grilled fish restaurant next to the Electronic School overpass. That was personally stocked by Lao Tao." It is said that this store was also one of the first to call back for repeat purchases. In the next 10 years, Jiangxiaobai Liquor Industry roughly told the story of slowly running through channels and connecting the upstream supply chain through such a 100ml light-taste liquor. Everyone knows that liquor is the Jiangxiaobai Expression Bottle. 1. Users: Returning to C-end Thinking How did this liquor become popular? The common external view is that the copy full of sentimentality combined with the barbecue stall scene catalyzed a chemical reaction that could make people cry while drinking. But Bai Yufeng, a marketing expert in the liquor industry, strongly denies this. Bai Yufeng was previously responsible for the Shede Tuopai brand and had close contact with the founding team of this company in the early days of Jiangxiaobai. In his view, saying that Jiangxiaobai relies on copywriting to win is like saying Haidilao relies on giving away watermelon to win. These are just so-called pursuit of technique, not seeing the most essential aspect behind business operations. At that time, the operation of the liquor industry was basically dominated by the interests between brands and distributors. A distributor of a domestic strong-flavor liquor company told Shenke New Consumption: "If the brand is powerful, basically the distributor listens to the brand. Whether it's price limits or quantity limits, or even whether to stock up, you have to listen, otherwise they won't sell to you. If the brand is not powerful enough, the distributor is the emperor, and you have to serve them. If the brand is average, it can balance with the distributor, jointly invest to set up a joint venture, with interests constraining behavior, and ultimately make money together." First evaluate your own value, then measure the distributor's value, but what about the users who actually drink? Many industries that adopt the distribution model, including baijiu, unconsciously forget the C-end that ultimately pays. What Bai Yufeng calls returning to the essence is actually returning to the user. The founder of Jiangxiaobai once proposed a similar principle at the Heiyi Capital annual meeting, that is, first think about how to do well for the C-end and create value for users. Even if the company's business center is in channels and needs to be realized through To B, it must clearly and firmly recognize that the source of driving B-end value realization comes from the C-end. ▲The shift in value ranking from ABC to CBA Chart/Shenke New Consumption The most obvious C-end return of this company is being the first to launch low-alcohol, light-taste baijiu among young people. Roland Berger once released a report stating that among alcohol consumption by people under 30 in mainland China, baijiu accounts for only 8%. Foreign liquor, wine, premixed drinks, and beer categories have seized the glasses of the post-80s and post-90s generations in China. Traditional spicy baijiu is actually losing young people. But fortunately, young people have not yet shown a "never interact" rejection of baijiu. A founder of a rice wine brand once said that more than 80% of post-90s do not have such a strong dependence on alcohol; their feeling about alcohol is either that it tastes good or it is trendy. ▲Domestic baijiu consumption growth is far lower than fruit wine and foreign liquor Image/CBNData This means that as long as it is not too spicy to drink and the brand level matches personalized style, young people will still like it. Even if it is not called baijiu, it doesn't matter. Therefore, Jiangxiaobai gave up the sauce-flavor and strong-flavor baijiu that account for 70% of the market share and chose the relatively niche small-qu clear-flavor sorghum liquor. Later, Weibo social, anime, street dance, graffiti, rap... If you came from 2012, you probably wouldn't believe that a baijiu company would do these things. Jiangxiaobai began to bring true user thinking to Chinese baijiu. 2. Channels: Diligence Like Distributing Beer The light-taste baijiu that caters to young people finally won the vote of RMB. In 2020, even with the impact of the epidemic, Jiangxiaobai's revenue reached about 2.9 billion yuan. In 10 years, how to open up the channel from factory to table is what anyone who cares about Jiangxiaobai wants to know. In an article in "All-Weather Technology," a set of data was given: in the beverage industry, offline and online contributions are 95% to 5%. Even Jiangxiaobai, which had built its digitalization from the beginning, actually had online sales accounting for only 5% of total sales. Returning to the essence of liquor, liquor is meant to be drunk at the table. All "new brands" in the market that focus on internet celebrity marketing routes will eventually have to return to offline channels. In terms of channels, ByteDance may have studied Jiangxiaobai. Last year, Xiao Cai, an employee of ByteDance who claimed to be in the "mass consumption commercialization" sector, expressed his views on Jiangxiaobai at a exchange meeting. He believed that more than 99% of people have not thoroughly studied this company, because behind its overly bright brand, channel construction is the most powerful part. In the entire Chinese media circle, there is too little information about Jiangxiaobai's channel development. The only relatively rich case is a fragment of an article written by Yang Yehu, who claimed to be "former marketing director of Jiangxiaobai." According to him, Jiangxiaobai did not adopt the traditional large distributor system in the baijiu industry offline, but borrowed the tactics of the FMCG industry: deep distribution. The article introduced that in the catering channel, through salesmen stocking stores one by one, the goods were finally spread across a regional market. This point is indeed similar to the expansion style of the founding team in Chongqing 10 years ago. The article said that from 8 am to 10 pm, they could lay out more than 240 catering outlets in Huayang, Chengdu in one day. In places like Xichang and Panzhihua, these frontline sales teams could even cover 320 effective catering outlets in one day and complete 4,300 effective catering outlets in 20 days. ▲Schematic diagram of Jiangxiaobai's deep distribution tactics in previous years Image/China Merchants Securities The article also mentioned that when entering Chengdu, they leveraged the channels of Snow Beer. At that time, each district in Chengdu had many high-quality outlets that had been bought by distributors or competitors for exclusive liquor supply rights, and Jiangxiaobai simply couldn't enter. This is an unspoken rule in the beverage industry. A senior media person in the liquor industry said that during the premixed drink channel war, Ice and RIO were in fierce competition, and one brand bought out internet cafe channels at high prices to prevent competitors from entering. Facing such "no-entry" obstacles, Jiangxiaobai saw the channel resources of Snow Beer. At that time, Snow Beer had more than 200 first- and second-level distributors in Chengdu, with a market share of over 75%. And coincidentally, Jiangxiaobai's products and Snow Beer were complementary in off-season: the beer peak season is before October, while Jiangxiaobai's is after October. Taking advantage of this, this new baijiu brand actually provided nanny-style services to Snow Beer's distributors, eventually grafting onto one-third of its high-quality catering outlets. ▲Jiangxiaobai grafted onto Snow Beer in the Chengdu market Image/China Merchants Securities We don't know if this story is true, but we believe it must have been an exhausting battle of both mind and body. Today, with so many new consumer brands, try building an offline channel network, and then you'll know the hardships Jiangxiaobai endured. Zhang Peiyuan, founding partner of Heiyi Capital, once said, "You may find that every restaurant's door sign, chopstick box, toothpick box, etc., has the Jiangxiaobai logo. But many people don't know that behind this is a team of seven or eight thousand people." Heiyi quietly invested in Jiangxiaobai in 2017, and the relevant amount has not been disclosed to this day. However, authoritative data from China Merchants Securities research report shows that Jiangxiaobai only sets up provincial-level offices in various places. The offices only develop first-level general distributors, which reduces the links from factory to consumer by at least 2-3 layers compared to traditional liquor companies, reducing costs by 15%. ▲Comparison of channel models between Jiangxiaobai and traditional liquor companies Image/China Merchants Securities Is the "provincial office-distributor" model consistent with the deep distribution mentioned by Yang Yehu? When Shenke New Consumption called Jiangxiaobai's Chongqing headquarters, the answer given was: There is no such Mr. Yang in the company's senior management. Unfortunately, we were ultimately unable to confirm Jiangxiaobai's channel story, and also lost the soul originally envisioned in this article—the thrilling business war. Fortunately, Xiao Cai from ByteDance, who participated in the discussion, said that she was once a channel person for a beer brand and could confirm the diligence of Jiangxiaobai's channel construction. It was only after Shenke New Consumption established contact with Xiao Cai that we discovered that ByteDance, before investing in low-alcohol liquor, had already opened a flagship store called "Suiwo Baijiu" on Taobao. 3. Supply Chain: Change and Constancy in the Next Decade Looking back at Jiangxiaobai's channel development, from 2012 to 2015 it focused on the Sichuan-Chongqing market, from 2015 it entered the difficult traditional baijiu markets of Wuhan, Hefei, and Zhengzhou, and by 2017 it achieved layout in more than 70% of cities nationwide. Diao Ye, a serial entrepreneur, also quoted former Baidu vice president Li Jing (Li Jiaoshou) as saying: "Those in the baijiu industry in China are too lazy. Do you really think Jiangxiaobai's success is due to its copywriting? Its copywriting is good, but can Mi Meng write better? Why doesn't Mi Meng sell baijiu?" The truth is that Jiangxiaobai, with the diligence of distributing beer, spread cheap small bottles of baijiu into countless small restaurants in the capillaries. And while frontline salesmen were working hard to stock stores, there was another group facing the loess with their backs to the sky. In 2013, Jiangxiaobai's brewing base began renovation and expansion, and two years later extended to the agricultural sector. Tang Pengfei, assistant president of Jiangxiaobai Liquor Industry, is a representative of this team. In 2015, he left downtown Chongqing to grow sorghum in Baisha Town, Jiangjin District. "Running around the mountains and fields every day, looking for government and farmers, digging ditches, building roads, leveling land..." He was previously a fair and chubby young man, but now Tang Pengfei has been tanned dark. In 2018, Jiangxiaobai announced its full industry chain strategy. At that time, data showed that its upstream sorghum demonstration planting base planned a core area of 5,000 mu and a planned demonstration planting area of 20,000 mu. In addition, Jiangji Winery also reached 760 mu, becoming the largest sorghum liquor brewing base in Chongqing. ▲Jiangxiaobai's production base Jiangji Winery underground liquor storage Photo provided by interviewee During the release of the full industry chain strategy, Jiangxiaobai also announced an investment of 3 billion yuan to build a centralized industrial park. Supporting enterprises such as glass bottles, cartons, bottle caps, brewing equipment manufacturing and R&D enterprises, logistics and intermodal transport enterprises, etc., will cooperate with Jiangxiaobai in this 1,300-mu industrial park. According to a report by Chongqing media Hualong Net, the company plans to build the largest brewing industry cluster in Chongqing in Jiangjin Baisha. In September 2020, Jiangxiaobai received Series C financing. However, its founder said, "I can say very confidently that not a penny was spent on marketing. All the money from financing was used for agriculture and distillery production." It is hard to imagine the forbearance Jiangxiaobai has shown to create a bottle of liquor. It is worth noting that many new baijiu brands like it use OEM processing upstream and e-commerce sales downstream. This fast-moving consumer goods-style hit product approach, similar to beauty and coffee, can quickly boost brand sales and awareness. But rapid popularity is destined to be short-lived. In the past decade, more than 14,000 companies that played this way in the consumer industry and were well-known have closed down. In 2020 alone, nearly 1,000 such companies collapsed. It is precisely in these years that Jiangxiaobai deliberately gave up building brand awareness. According to an interview report by "Entertainment Capital," Jiangxiaobai's founder usually pays more attention to user research, product development, and supply chain. He strengthened the weight of supply chain management and reduced marketing efforts to less than 10%. ▲Jiangxiaobai's full industry chain spans 9 major links Image/Public online materials This shift was most evident in 2017-2018. Even in internal PPT introductions by Jiangxiaobai staff, the latest marketing data materials are from the second half of 2018. That year, the entire baijiu industry saw a major discussion: Is selling liquor using the "FMCG model" a way out or a dead end? The most classic case of the so-called FMCG model might be Three Squirrels, where upstream supply chain and downstream channel distribution can be outsourced. They focus on brand and consumer communication, focusing on hit products. However, the relationship between the liquor category and the upstream supply chain is probably only clear to insiders. Unlike nuts and stir-fried goods, liquor is a category with strong regional characteristics. Scotch whisky, Cognac brandy, Bordeaux wine—each type of liquor has only one or two places with the best quality. The production area is the best endorsement of liquor quality. For example, the sauce-flavor liquor from Moutai Town is certainly the best in the world. Jiangxiaobai's brewing base, Jiangji Winery, is located in Baisha Town, Jiangjin District, Chongqing. This is one of the main production areas for small-qu clear-flavor sorghum liquor in China. It is said that in the early years of the Republic of China, its liquor tax was comparable to Luzhou. ▲Jiangxiaobai's production base in Jiangjin Baisha is located in the Golden Triangle region of Chinese baijiu Image/Public online materials Without Baisha Town, Jiangxiaobai probably couldn't produce smooth sorghum liquor. From this perspective, whether you like it or not, the upstream supply chain is something a liquor company must do. "Even if you do it in a fast-moving consumer goods way, the upstream supply chain must be the core competitiveness." The consumer investor Lao Zheng mentioned earlier said, "What is the most feared in the FMCG field? It's the same as internet competition—fear of dimensionality reduction strikes, fear of competitors flying in from the flank." Liu Yonghao of New Hope would never have imagined that NetEase's Ding Lei could sell a pig for 270,000 yuan; the porcelain tableware makers in Jingdezhen also don't understand how a Yonghui Preferred could steal their business. Currently, a significant phenomenon is emerging in the FMCG industry: the private label phenomenon. For example, Walmart launched "Great Value," and Yonghui Superstores launched "Yonghui Preferred." Channel influence is squeezing brands. If you are not a hard currency like Moutai, you cannot compete head-on with channels. Because they are gaining more consumer trust every day. Therefore, brands are likely to age, or under today's new retail development, the voice of channels may become stronger in the future. After all, the essence of brand business is that the company collects a brand tax from users, and it's just a matter of how much the brand tax is. In interviews, almost every member of Jiangxiaobai affirmed: If we pursue long-term value and ensure one thing doesn't change, it should be a high-quality supply chain. No matter how e-commerce platforms, community e-commerce, content e-commerce, etc., develop, a high-quality supply chain will always be one of the underlying core competitiveness. ▲Jiangxiaobai's red-skinned glutinous sorghum demonstration planting base Photo/Shenke New Consumption A high-quality supply chain is a moat that can attack and defend: Defense: If one day Yonghui, Walmart, or even Muji launches a same-name brand liquor, its brand and culture may not be that important. Everything is endorsed by Muji's channel influence, and consumers are more likely to accept it. What Jiangxiaobai needs to do is stick to a high-quality supply chain. If Muji really sells liquor one day, the liquor in its bottles may be brewed by Jiangji Winery, and the raw materials may be sorghum grown by Jiangji Farm. Attack is much simpler: through a high-quality supply chain, Jiangxiaobai can incubate more products—low-alcohol liquor, high-alcohol liquor, fruit wine, rice wine. In August, Shenke New Consumption went to Jiangxiaobai's production base for research. In its product exhibition hall, not only Jiangxiaobai, but we also found fruit wine, rice wine, liqueur, and even Jiangxiaobai whisky and related drinkware. Some stories may be quietly unfolding. Undercover Analysis What Capital Values in Jiangxiaobai is Its "People" Ten years of Jiangxiaobai, sales from 0 to 3 billion, and the expected value capital gives it is said to be 16 billion, some say 26 billion, some say 36 billion, hard to verify. But if it hadn't been for capital along the way, what would Jiangxiaobai be like? It is certain that it would not have grown so fast. In 2014, the baijiu industry ended a six-year decline in sales and started a new growth cycle. That year, Jiangxiaobai, with revenue of 50 million, received tens of millions of yuan in Series A investment from Hillhouse Capital. But in the following 5 years, Hillhouse did not bet on any liquor company in the primary market. Until 2019, when Jiangxiaobai announced revenue exceeding 3 billion, Hillhouse successively invested in Kaishan and Guangliang, and even obtained a 25.791% stake in Jinsha Liquor. ▲Hillhouse's acquisition of Jinsha Cellar Liquor public announcement on the Anti-Monopoly Bureau Screenshot from the State Administration for Market Regulation An external consultant-level person of Jiangxiaobai, Lao Zhang, analyzed that Jiangxiaobai may be like the first account Hillhouse registered in the baijiu industry investment game. Only when this account levels up and clears the path can Hillhouse dare to raise small accounts. Lao Zhang said that the importance of Jiangxiaobai to Hillhouse may be a group of people who know how to play with liquor. Before this, Hillhouse's layout in the footwear and apparel field was actually a direct acquisition of Belle International, with Zhang Lei personally leading the reform. This is because their team has people who understand the industry's gameplay. In a relatively rigid or even closed industry like baijiu, general capital only has analytical ability, not operational ability. People seem to have become the most valuable asset of Jiangxiaobai. 1. The Unwilling to Be Ordinary Xiaobai Inside Jiangxiaobai, this group is called "Xiaobai," which was a popular internet term at the time, roughly meaning novice or rookie. Huxiu once cited a report from Chongqing local media saying that when Jiangxiaobai was just building its team, it was actually very difficult. Top companies could select talents from 985 and 211 universities, while Jiangxiaobai could only recruit fresh graduates from second-tier universities and junior colleges, or even set up a tent at the talent market with a loudspeaker to recruit... These not-so-outstanding Xiaobai often refuse to be controlled by fate and are more willing to endure hardship and fight harder in the face of any opportunity. It is said that in order to get one more point in Chongqing, many newly recruited employees of Jiangxiaobai voluntarily moved heavy boxes of liquor back to their rented rooms one by one, because after work, they had to run faster to various restaurants to promote, give away liquor, and set up goods. In those years, at street-side food stalls, barbecue stalls, and hotpot restaurants, there were often many people wearing Jiangxiaobai work clothes, drinking with customers, and to build good relationships with restaurant owners, they helped wipe tables and assist in the kitchen. These hardships may be unbearable for 985 and 211 graduates sitting in high-end offices. ▲Jiangxiaobai frontline employees introducing products in the exhibition hall Image/Public online materials Fan Li, assistant to the president of Jiangxiaobai, confirmed this in a media interview. He said, "At the beginning of our entrepreneurship, all employees went to the streets, visited stores, understood store needs and user consumption habits, and then made stocking arrangements." 2. Being Good at Playing is the Strength of Young People But hard work is not the only thing this group has. In 2012, the end of the world, China completed a Guinness World Record challenge for drinking together. 10,000 bottles of liquor, 1.25 tons, with bottles connected over 2,000 meters, was also played by that group of Xiaobai. According to Lao Luo, a founding member of Jiangxiaobai, after this event, a top student from the University of Electronic Science and Technology of China took a train from Chengdu to Chongqing and said he wanted to join Jiangxiaobai. At that time, the company had only a shabby office in Hongqihegou, Chongqing. Later, most people in Beijing, Shanghai, and Guangzhou learned about a brand called Jiangxiaobai from Weibo, and at one point people joked that if the founder was Jiangxiaobai's father, then Sina Weibo was his mother. With the development of the mobile internet, young people seem to have more talent in consumer communication. Why is Douyin so popular? The designer is said to be a post-90s intern. Later, Douyin launched the video social app Duoshan, and the product manager was also a post-90s. In China, companies with more than 3,000 employees are not rare, but Jiangxiaobai must have the most post-90s and post-95s among companies with more than 3,000 employees. These young people have brought new ways of playing to Chinese baijiu. Jiangxiaobai has previously done street dance, graffiti, and other new youth activities. According to internal employees, these were actually initially the employees' own hobbies, gradually growing with the company's support. ▲Jiangxiaobai JUSTBATTLE International Street Dance Competition Image/Public online materials The "little leader" responsible for street dance activities at the time was actually the young man who first clamored to play street dance in the company. And the well-known Chongqing rapper GAI Zhouyan, before becoming famous, had been supported by Jiangxiaobai to do music performances. It is said that a member of GAI's team was actually a former employee of Jiangxiaobai. This group of Xiaobai, while pleasing themselves at work, inadvertently spread this pleasure to all users. And this also successfully attracted the attention of this group of young people in the baijiu industry. Young ideas began to continuously break the thinking and logic that Chinese baijiu has had for hundreds of years. 3. New Industry Cognition Generated by Generation Gap At Jiangxiaobai's Chongqing headquarters, Shenke New Consumption interviewed a post-95 young woman. From her accent, she probably comes from the Guangzhou area. On her desk, besides Jiangxiaobai, there are Martell cognac and a bottle of Macallan 12yo, an entry-level sherry cask whisky. She said, after brainstorming, a drink after work is great! Sitting opposite this young woman is a young man with some hair loss, a master's degree in Chinese language and literature from Wuhan University, and a dad. The girl said that every day before leaving work, he likes to rest in his chair for a while, then drink a couple of sips before squeezing onto the subway. Sometimes it's Jägermeister, sometimes Jiangxiaobai, and sometimes red wine. In their liquor world, there seems to be no sauce-flavor, strong-flavor, or clear-flavor, but whisky, brandy, rum, and Chinese baijiu. A few years ago, Jiangxiaobai kept saying that it uses the full-set thinking of the six major spirits to make subset products of Chinese baijiu, pulling a big scale to see trends. This requires first studying the important trends of global spirits, discovering the elements that make whisky, vodka, and other products popular, and then thinking about how to make products. The reason this thinking can be quickly implemented in Jiangxiaobai is that ideas don't need to penetrate every young person; they themselves already hold such views. The momentum was generated at that moment. ▲Various Chinese and foreign alcoholic drinks on the desks of Jiangxiaobai's Chongqing headquarters employees Photo/Shenke New Consumption To this end, Jiangxiaobai also developed a mini-program called "My Pub", which sells not only Jiangxiaobai's products but also other people's fruit wine, rice wine, and whisky. The main operating logic of this pub is that internal employees or super users act as distributors, and distributors can invite friends to become partners. During sales, distributors and partners can receive corresponding commissions. In internet terminology, this is called achieving user fission. For a period, Jiangxiaobai internally discussed how to operate these users privately and fission more new users through them. The routine is familiar; almost all internet brands play this way. But this group of young people is quite "thorny." When they were about to start, someone said: Do you think users are willing to be used like this? Even though there is an exchange of interests, in such a fission method, users become tools of the brand, becoming a screw in channel sales. Every young person would definitely not be happy to be privatized. In the end, the user fission gameplay was cancelled. Instead, more super users were invited to Chongqing, to the winery and farm. In June, they invited 100 users from more than 20 provinces and cities to Chongqing to play. Among them, the most touching was a post-90s young man. To come to Jiangji Winery, he took two flights and spent 12 hours, and he paid for the travel expenses himself. Money doesn't matter; the 12-hour journey is something ordinary kids can't bear. ▲A post-90s young man who took 12 hours to come to Jiangxiaobai's production base Image/Public online materials This is very similar to the McDonald's boy back then. At McDonald's China annual meeting, a young man also came, from Ya'an, Sichuan, and was very cool at beatboxing. The most eye-catching thing was that he had a tattoo on his neck of the McDonald's logo. The two young men's behaviors are different, but both show a fact: their anchoring and love for the brand. And why are these two young men willing to do this? It cannot be separated from the free personality expression of this group of young people, nor from their empathy that distinguishes them from industry veterans. 4. Behind the Young People is Organizational Innovation In the past 10 years, Chinese consumer product entrepreneurship has experienced social media dividends, capital dividends, and market dividends. But why has Jiangxiaobai been able to step on the few visible era dividends? Why have more than 14,000 new brands died? A large part of the credit goes to that group of young people, whose average age is less than 26. And another part of the credit is the organizational management we cannot ignore. A small story that leaked out a few years ago is that Jiangxiaobai poached an HR supervisor from a large company, and the latter asked the administrative department to re-formulate the employee handbook and required wearing formal attire during work hours. In the end, this requirement was rejected by the founder. He said, just wear clothes; let employees "bloom themselves" in a comfortable state. "Now go and see, at the subway station downstairs from the company, tens of thousands of people pass through every morning. If you see anyone wearing flip-flops and with tattoos, they must work at Jiangxiaobai." The post-95 young woman has a cute tattoo of the Little Prince holding a rose on her arm. ▲Guangdianyuan subway station downstairs from Jiangxiaobai headquarters Image/Bashi How much value did this group of people ultimately generate? Someone simply calculated Hillhouse's returns based on revenue. The investment in 2014 may currently have floating returns of more than 10 times. A Group of People and an Industry Chain Can They Support Jiangxiaobai's Next Decade? By 2020, third-party consulting firm GYbrand released the top 100 list of Chinese liquor brand value. Among the traditional liquor companies, Jiangxiaobai ranked 23rd with a brand value of 9.785 billion yuan. This achievement may not seem outstanding, but it at least surpasses traditional national brands like Shede and Laobaigan. And similar new baijiu brands did not make the list at all. Ten years, Jiangxiaobai has drawn an upward curve like an airplane taking off. First a long run-up, then rapid climb after takeoff. But if you put these ten years into the entire Chinese baijiu industry, the new baijiu brands represented by Jiangxiaobai have not significantly affected that established cyclical curve. Super-first-tier companies like Kweichow Moutai and Wuliangye are still continuously encroaching on the market share of small and medium liquor companies through their high-end layout. At the beginning of the year, data from the National Bureau of Statistics showed that only 956 baijiu enterprises above designated size remained, a year-on-year decrease of 84 in absolute numbers, hitting a new historical low. And according to Tianyancha professional version data, as of August 31, 2020, more than 18,000 new baijiu-related enterprises were added that year. The mid-tier of the baijiu industry has become the Balkans of this share war. ▲In the first eight months of 2020, 18,000 new baijiu-related enterprises were added Image/Tianyancha And the most awkward situation may be Jiangxiaobai. If it tries to break into the leading group, it faces the top 20 giants in the industry; if it maintains the current state, there are 18,000 pursuers behind it. Using Heiyi Capital's investment logic, Jiangxiaobai is in the second stage of its life cycle. Zhang Peiyuan said that the first stage of a consumer goods company's development is product innovation and model prototype from 0 to 1. Breaking through the bottleneck enters the second stage of rapid development, testing the founder's strategic determination, marketing ability, and the development and construction of the team organization. But the most difficult thing is that in the second stage, capital cannot provide acceleration. The brand can only continuously evolve in supply chain capability, brand power, channel power, and organizational power, growing the ability to overturn the giants on the track. This means that the next decade will test not the capital power typical of the internet industry, but the system capabilities that Jiangxiaobai has internally generated in the first decade. A liquor industry distributor said that what Jiangxiaobai needs to do now is let go and let the previously adjusted "company machine" turn by itself. Supply chain, channels, internal organizational system—the foundation was laid firmly in previous years, so the later years will be easier. 1. Benchmarking Dali: Copying the Next Jiangxiaobai The most direct machine operation that the outside world can see is supply chain capability. In 2020, when the epidemic was raging, Jiangxiaobai rarely issued a distress letter looking for "supporters of Jiangji Winery." For a time, online public opinion began to question the ceiling of this new baijiu category. But soon, during e-commerce festivals like JD 618 and Tmall Double 11, Jiangxiaobai's fruit-flavored sorghum liquor began to dominate the sales charts. With the support of supply chain and channels, Jiangxiaobai's offensive began to incubate new products and brands. Alongside fruit wine, and also winning the category sales championship, was fruit-flavored liqueur. It is revealed that its "Guolifang" fruit-flavored sorghum liquor sold more than 100 million yuan in the first half of 2021. This is similar to the tactics of Dali Foods and Taoli Bread. With upstream supply chain support and downstream terminal channel encirclement, the company has the ability to expand any related product and can also quickly lay out channels to reach users in the fastest time. Add to that rice wine Mise, new high-alcohol liquor Sanrenyin, high-end Jiangjin roasted liquor Jiangji No.1... If each product can replicate Jiangxiaobai's past decade, this company is likely to become the Dali Foods of the beverage industry. At a review meeting, several liquor industry experts evaluated green plum wine and fruit-flavored liqueur, and both categories are roughly expected to be above the billion-yuan level. But Shi Wei, an enterprise management expert at the review, further proposed that in product line layout, Jiangxiaobai still needs to be volumetric, targeting market positioning and dividing product lines of different scales and alcohol levels. Various signs prove that with the active operation of supply chain capability, Jiangxiaobai may create several more Jiangxiaobais in the new decade. 2. Full-Set Thinking: Making High-End Daily Drink for Chinese Baijiu Inside Jiangxiaobai, there are actually different views on such a strategy. An internal person with the title "Minister" on Enterprise WeChat said that some believe the company is fully capable of returning to the mainstream baijiu market, while some young people still prefer the "subset under full-set thinking" approach, aligning with the international liquor market. The girl with the Little Prince tattoo is a supporter of this view. She said, "Among the whiskies and wines I often drink, the most popular are some daily drink wines. They are easy to get, won't be out of stock, have balanced flavor and taste, and reasonable prices." But in the domestic young people's beverage market, the good-tasting ones are unaffordable, and the affordable ones don't suit the taste. The daily drink in between could be the space for Jiangxiaobai to develop. The most well-known daily drink might be Korea's Hite Jinro soju. Due to its high cost-performance ratio and good flavor and taste, this liquor has ranked first in global distilled spirits sales for many consecutive years in the rankings released by the UK's International Wine and Spirits Research (IWSR). Jiangxiaobai has the mass foundation to become a national daily drink. During the 2019 National Day holiday, Jiangxiaobai's executive team went to the front line and visited markets in Hunan, Hubei, Guangdong, and Chongqing. They found that in various restaurants, many middle-aged people were drinking Jiangxiaobai, and in bars in Guangzhou and Shenzhen, there were also "Chinese cocktails" using Jiangxiaobai as the base. Jiangxiaobai in a bar Image/Patrón Perfect Cocktail Competition And coincidentally, in the domestic market, high-quality alcoholic beverages in the 20-100 price range are basically in a gap. In September 2020, after receiving Series C financing, Jiangxiaobai also immediately announced the creation of high-quality, affordable national high-end daily drink. But such positioning still has room for discussion. The young woman said: "Daily drink may be positioned as mid-range and affordable, but high-end daily drink is a bit contradictory hahaha." "But Jiangxiaobai Liquor Industry's sub-brands like Sanwu Zhiyou and Jiangji Sorghum Liquor are indeed of good quality, positioned slightly mid-range, and can be said to be the daily drink of the middle class." Yes, China is not short of the middle class. As early as 2017, Zhongwei Consulting estimated that China had become the country with the largest middle-class population. 3. A Platform Company Where Capital Integrates Industry? But can a young woman's words affect Jiangxiaobai's overall development strategy? This still depends on the internal organizational system operation capability. At least, capital may not think so. The external consultant Lao Zhang speculated that capital (especially Hillhouse) could completely build Jiangxiaobai into a platform company. Lao Zhang participated in many internal high-level meetings of Jiangxiaobai and witnessed major events such as Jiangxiaobai's trademark being stolen by "Monkey Steals Peach" and then recovered in court. He analyzed that capital like Hillhouse is more about laying out an industry, such as integrating Belle, Xtep, and other apparel and footwear companies, building a Hillhouse-affiliated pet medical system, and when reshaping the liquor industry, it needs a company like Jiangxiaobai to operate as a capital springboard. A particularly specific case: in June 2019, Hillhouse Capital acquired the Scottish whisky company Loch Lomond Group. But which liquor company under Hillhouse Capital has the most international genes? Who can connect the tradition and internationalization of Chinese liquor? The answer is obvious. ▲Report on Hillhouse's acquisition of Loch Lomond whisky Screenshot from businesswire And in the future, will Hillhouse integrate traditional liquor companies in the primary market through Jiangxiaobai? Will it integrate the various new baijiu brands it has invested in? Will Jiangxiaobai become a liquor platform that accommodates internal and external brands? ...... Jiangxiaobai's next decade, various imaginations about baijiu, new consumption, and industrial platforms seem to have some clues, but everything can only wait for time to give the answer. *From September 23 to September 25, at the upcoming 2021 4th China FMCG Conference, New Distribution has specially invited Mr. Tao Shiquan, founder of Jiangxiaobai, to attend and share "Jiangxiaobai's Ten-Year Exploration of Chinese Baijiu," bringing us a feast of ideas! -END- PS: From September 23 to 25, 2021, the 2021 (4th) China FMCG Conference hosted by "New Distribution" will be held in Shanghai. Focusing on industry trends + practical cases + connecting growth as the core, 3,000 FMCG practitioners will gather for the event. 11 themed forums cover under new consumption: 0 Snack Era·Light Wellness, Small Category·Big Bang, Z Generation·New Wine and Tea; under new retail: Community E-commerce, Midfield? Endgame? Interpretation, Heavy Investment in Same-City Retail (O2O), Short Video and Live Streaming with Goods; under new marketing: Digitalization, BC Integration, Martech, DTC and Private Domain Traffic, Distribution B2B, Big Merchants and Digital Distribution, etc., with operators in each sub-field bringing the latest case interpretations. Some of the confirmed heavyweight guests so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, General Manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, Global Expert Partner at Bain & Company and former Vice President of Marketing for Coca-Cola China; 4. Chen Xiaodong, Senior Vice President of Nestlé Greater China; 5. Zhang Fujun, President of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, General Manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, Vice President of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, General Manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, General Manager of E-commerce at Gold Hong Ye Paper Group... A grand event for FMCG people, you must be there! Are you "watching" me?