Since its founding 24 years ago, Junlebao has grown from a little-known local dairy company to a national dairy enterprise with annual sales exceeding 10 billion yuan, ranking fourth in China's dairy industry. In its main businesses, milk powder and low-temperature yogurt, Junlebao has become the growth champion in both categories.
In 2018, despite the overall dairy industry growth rate of only 3% [1], Junlebao's annual sales increased by 28% year-on-year, leading the industry for several consecutive years.
Competition in the dairy industry has always been fierce. In the first tier, Mengniu and Yili are engaged in a "battle for 100 billion"; regional brands in the second tier, such as New Hope, Guangming, and Wandashan, are accelerating their national expansion; and the third tier, composed of provincial dairy companies, is consolidating their positions and expanding into lower-tier markets.
Amidst this intense competition, how did Junlebao break through and successfully rank fourth among Chinese dairy companies? Is Junlebao's success replicable? What can peers in other food and beverage categories learn from Junlebao's rise?
With these questions, we spoke with Wei Lihua, President and founder of Junlebao, and Yang Hongbin, Vice President and General Manager of the Low-Temperature Business Unit.
This article will analyze Junlebao's milk powder and low-temperature yogurt business development, comprehensively examining how Junlebao rose against the trend in an environment of slowing milk powder industry growth and declining low-temperature yogurt industry, becoming a growth champion that cannot be ignored in China's dairy industry.
Junlebao's open pasture
How does Junlebao stimulate product power? Breaking conventions, becoming a category creator
Regarding the phased growth of enterprises, Junlebao President Wei Lihua has always had his own unique insights: "I believe enterprise development can be divided into three stages. The first is the product-driven stage, relying on good products to promote growth; the second is the brand-driven stage, strengthening the brand to win the market; the third is the technology-driven stage, where only through technological innovation can enterprises have a continuous source of power. "
Junlebao President Wei Lihua
Looking back at history, Junlebao's development path precisely confirms Wei Lihua's viewpoint.
In 1995, with three bungalows, two tricycles, and one yogurt machine, Wei Lihua founded Junlebao Dairy in Shijiazhuang. "From the end of the last century to the beginning of this century, people's living standards improved significantly, and China's dairy industry entered a period of rapid development. At that time, including Junlebao, dairy companies in Shijiazhuang all developed rapidly." [2] Taking advantage of this trend, Junlebao quickly grew into a well-known dairy company in Hebei Province.
However, Junlebao, which started with yogurt business, soon discovered that there was a lack of innovation in yogurt products on the Chinese market. Homogeneous products not only intensified competition among brands but also hindered the healthy development of the yogurt market. Wei Lihua was determined to change the products.
In 2007, Junlebao innovatively launched red date yogurt, which was warmly received upon launch. Red date yogurt not only became a classic flavor in yogurt but also gradually developed into a new growth point under the yogurt category. The power of innovation made Junlebao taste success, and since then, breaking conventions has become Junlebao's brand gene.
1. Creating differentiated products, Junlebao aims to be the "game-changer" in the milk powder industry
How did Junlebao milk powder start? Many people simply attribute it to "low price." When Junlebao milk powder entered the market at 130 yuan per can in 2014, it indeed caused a stir, but "low price" was not its killer feature.
In 2014, China's infant formula market was still in the aftermath of the "melamine" incident.
Earlier, some domestic milk powder brands had already reversed some consumers' attitudes towards domestic brands with high-quality products. However, overall, consumer trust in domestic milk powder was still low, and foreign brands still dominated the market. At the same time, influenced by irrational consumption concepts, the average price of milk powder in the Chinese market was around 300 yuan, much higher than in European and American markets.
Therefore, when Junlebao set its milk powder price at 130 yuan per can, it was immediately called a "troublemaker" in the industry. Facts have proven that Junlebao's low-price strategy did not make the milk powder market competition disorderly, but instead drove the average price of Chinese milk powder back to rationality.
Through innovative milk powder production technology and changing traditional sales models, Junlebao continuously improved product quality while making prices rational, becoming synonymous with "quality milk powder" in consumers' minds.
As early as 2014, Junlebao's sub-brand Qizhi Dairy created a new industrial model of "zero-distance integration of breeding and processing." Specifically, Junlebao connected milk powder processing plants with milking plants and pastures, ensuring that high-quality fresh milk goes from milking to processing within 2 hours, maximizing the retention of bioactive substances in milk. With self-controlled milk sources and real-time processing, Qizhi milk powder opened a new era of "fresh" milk powder.
Full view of Qizhi Dairy production plant
Facing the downturn in the infant formula market in recent years, Junlebao also had countermeasures. In 2018, Junlebao launched a stage 4 milk powder for children aged 3-7, Lebo K2 milk powder.
By adjusting the formula, K2 milk powder not only contains nutrients needed for the growth of children aged 3-7 but also adds lutein and zeaxanthin, which have eye-protecting functions.
President Wei Lihua revealed to us that formula milk powder with special functions will become Junlebao's next research and development direction. In addition, he also stated that "driving brand development with technology is Junlebao's future direction." It is through continuous innovation that Junlebao is becoming a "game-changer" and leader of new categories in the milk powder industry.
K2 milk powder with eye-protecting function
2. Seizing the right time, creating a hit product, Junlebao creates the cheese yogurt category
Low-temperature yogurt business is Junlebao's most familiar business. In 2010, Junlebao's low-temperature active lactic acid bacteria beverage sales ranked first nationwide, and its series of yogurt market share ranked fourth nationwide. Yang Hongbin, General Manager of Junlebao's Low-Temperature Business Unit, revealed that in 2019, despite the overall contraction of the low-temperature business, Junlebao's low-temperature business achieved growth against the trend.
In Junlebao's low-temperature product matrix, the "Zhang Zhi Shi La" low-temperature cheese yogurt launched in 2017 is undoubtedly a hit product.
How was "Zhang Zhi Shi La" yogurt born? Why did it sell over 500 million packs within 2 years of launch?
Vice President Yang Hongbin introduced to us that Junlebao had launched cheese yogurt as early as 2006, but a decade ago, consumers had low awareness of cheese, and these products did not attract attention. The turning point came in 2017. A "cheese craze" suddenly swept the food industry, with cheese bread, cheese milk cap tea, cheese rice cake ribs... It seemed that any product associated with cheese could sell well.
After a series of cheese hit products paved the way, consumers' acceptance of cheese, a derivative of milk, gradually increased. At this moment, Junlebao felt the time was ripe and launched "Zhang Zhi Shi La" yogurt, which had been developed over many years.
It is reported that "Zhang Zhi Shi La" yogurt not only created the domestic cheese yogurt category but also ranks first in market share in the cheese yogurt category.
Junlebao creates the cheese yogurt category
3. Dual upgrade of taste and nutritional content, Junlebao enters the low-temperature fresh milk market with technological innovation!
In early July this year, Junlebao also made a major move in the low-temperature fresh milk field, launching "Yue Xian Huo" milk.
The special feature of this product is that it uses Junlebao's innovative INF009S sterilization process, which uses 0.09-second ultra-instant and intelligent temperature control technology to retain more active protein nutrients such as α-lactalbumin and lactoferrin while sterilizing.
At the same time, relying on technological innovation, this fresh milk has a shelf life of up to 19 days, not only filling the market gap for high-activity protein milk but also making cross-regional sales of fresh milk products possible. [3]
With its cutting-edge technology, "Yue Xian Huo" milk also won the "Best Process Innovation Award" in the "2019 World Dairy Innovation Awards."
"Yue Xian Huo" milk
Creating a new category is not enough; Junlebao must occupy consumers' minds and become the number one brand in the category
In the 21st century, launching a new brand in an existing category is not only expensive but also uncertain, while creating a new category and launching a new brand within it almost always succeeds. Therefore, creating a category and becoming the king of the category has become the first law of business competition and brand building in the 21st century. [4]
Junlebao is a classic successful case of practicing this theory. At the "Creating Category Kings" study tour camp hosted by Cliff Positioning Academy, Junlebao President Wei Lihua and Low-Temperature Business Unit General Manager Yang Hongbin reviewed how Junlebao successfully occupied consumers' minds.
1. Breaking through consumers' psychological defenses is the key for domestic milk powder brands to open up the situation
After the "melamine" incident, the quality of domestic milk powder has always been a hurdle in consumers' minds. To break through the last psychological defense of consumers towards domestic milk powder brands, Junlebao milk powder has always used the highest standard raw materials from the beginning of production, determined to impress consumers with high quality. In this process, Junlebao used two key strategies:
Occupying the high ground in consumers' minds with industry "firsts"
Liu Senmiao, General Manager of Junlebao's Milk Powder Business Unit, introduced that all raw milk for Junlebao milk powder comes from large-scale modern self-built pastures, with core indicators of milk sources better than EU standards; for raw and auxiliary materials, it selects world-class suppliers globally, with major suppliers such as Ireland's Kerry Group also passing BRC certification, forming a high-quality and competitive price alliance. [5]
In 2015, Junlebao milk powder successively obtained the EU BRC "Global Standard for Food Safety" A+ certification and the EU IFS (International Food Standard) certification, becoming the first Chinese milk powder brand to obtain dual BRC and IFS certification. This certification result further demonstrated that domestic milk powder has reached international first-class quality standards, and also showed that Junlebao indeed has high-quality milk powder that reassures consumers.
Junlebao milk powder raw milk total bacterial count and somatic cell indicators are better than US and EU standards
Using consumers' existing cognitive resources to ignite public attention
After the trust in domestic milk powder brands was damaged, overseas milk powder purchasing agents quietly emerged. Due to high milk powder access standards and being closest to the mainland, Hong Kong became a "disaster area" for milk powder purchasing. It was common for mainland tourists to carry three or four cans of milk powder, and some even turned milk powder purchasing into a complete industry chain.
To combat these gray industries, Hong Kong issued a milk powder "purchase restriction order" in 2013: each person over 16 years old leaving Hong Kong could only carry no more than 1.8 kg of milk powder per day. Violators were guilty of a crime and could be fined up to 500,000 yuan and imprisoned for two years.
The promulgation of this law not only severely destroyed the purchasing industry chain in Hong Kong, but also stirred up emotions among mainland consumers: Is there no good milk powder in mainland China? It was precisely seeing the embarrassment and helplessness of mainland consumers buying milk powder in Hong Kong that Junlebao decided to bring milk powder to Hong Kong, using public controversy to ignite a public relations battle and launch new milk powder products.
In August 2016, Junlebao milk powder was sold in Hong Kong, with the same quality and price as in the mainland. Many industry insiders said that the Hong Kong market capacity is limited, and its contribution to Junlebao milk powder sales is also limited. Junlebao's entry into Hong Kong this time was mainly to prove the quality of its products and enhance brand awareness, thereby stimulating domestic sales. [5]
2. Mobilizing all resources to create a hit product
After "Zhang Zhi Shi La" yogurt was launched and succeeded, a large number of similar cheese yogurt products immediately appeared on the market. Vice President Yang Hongbin said that Junlebao is not afraid of competitors; on the contrary, he welcomes other brands to enter. The more products, the livelier the market, and the bigger the "cake" of cheese yogurt can become.
Moreover, Junlebao is confident that it can make "Zhang Zhi Shi La" yogurt the number one in the cheese yogurt category.
Vice President Yang Hongbin introduced to us: According to the latest Nielsen survey data, "Zhang Zhi Shi La" yogurt accounts for 61% of the total sales in the cheese yogurt category, with obvious head advantages. And "Zhang Zhi Shi La" yogurt occupies 56% of consumers' mind share. In other words, when you ask consumers what cheese yogurt is, more than half of them first think of Junlebao's "Zhang Zhi Shi La" yogurt.
Junlebao Vice President and Low-Temperature Business Unit General Manager Yang Hongbin
How was such a strong competitive advantage built? Yang Hongbin's answer is, "Mobilize all resources to create a hit product."
First, Junlebao's competitive advantage lies in creating the cheese yogurt category. Not all products that combine cheese and yogurt can be called "cheese yogurt." The formula of "Zhang Zhi Shi La" yogurt has been developed over many years, thus perfectly combining the salty aroma of cheese with the sweet and sour taste of yogurt. An unreplicable taste is the first brand barrier for Junlebao's "Zhang Zhi Shi La" yogurt.
Second, a strong visual hammer also helps Junlebao stand out from competitors. What color is cheese? Most people's first reaction is yellow. To make consumers remember it better, Junlebao broke convention in packaging, boldly choosing blue as the main visual color to differentiate its products from competitors. A unique product image is the second brand barrier for Junlebao's "Zhang Zhi Shi La" yogurt.
Finally, Junlebao spared no effort in brand communication and promotion. To seize consumers' minds, Junlebao adopted a "storm-style" communication strategy, launching a wave of cheese yogurt across the country. By sponsoring popular variety shows on provincial satellite TV and strengthening local channels, "Zhang Zhi Shi La" yogurt achieved the communication feat of "one single product dominating 10 variety show IPs." A strong communication plan is the third brand barrier for Junlebao's "Zhang Zhi Shi La" yogurt.
"Zhang Zhi Shi La" yogurt dominates ten variety show IPs
These three barriers, from inside to outside, have built a solid brand wall for Junlebao. Some may ask, is it worth investing so many resources in just one product?
Yang Hongbin judges that cheese yogurt will grow into a 5 billion yuan category, so "Zhang Zhi Shi La" yogurt still has a lot of room for growth. Junlebao's goal is not only to be a category creator but also to seize consumers' minds and maintain Junlebao's leadership position in the cheese yogurt category.
In addition, after a hit product is born, it will also drive the development of other products under the brand. In 2018, not only did "Zhang Zhi Shi La" yogurt achieve excellent results, but other low-temperature products under the Junlebao brand also grew. This is the brand momentum brought by star products.
3. Junlebao's rise is also a microcosm of the wave of domestic brand rise
In just ten years, Junlebao has grown into a dairy company with revenue exceeding 10 billion yuan. What is the reason?
High-quality products and excellent marketing are naturally factors that cannot be ignored. In addition, with the continuous improvement of domestic product power and quality, consumers' trust in domestic brands is also increasing. The rise of domestic brands is also a manifestation of consumer confidence returning during our country's economic development, which is also an important reason for Junlebao's rise against the trend.
As Huang Hai of Frees Fund said, the rise of domestic brands is related to the rise of the country's overall strength. As for why it has become a phenomenon in the past two years, it is because the post-90s and post-95s have risen as opinion leaders on social media, which has a great relationship with the cultural confidence of the younger generation of consumers.
The efforts of domestic milk powder brands are visible. In 2018, the national food safety supervision and sampling inspection showed that the pass rate for infant formula sampling was 99.9%, and the pass rate for key monitored prohibited additives such as melamine remained 100% for 10 consecutive years. Dairy analyst Song Liang said that domestic milk powder production standards are actually stricter than foreign ones, and processes and technologies have reached international advanced levels. [6]
Junlebao milk powder product matrix
What is Junlebao's next step?
During Junlebao's 24 years of development, one thing has never changed: Junlebao has always held the red line of product quality and relied on technological innovation to drive the company forward. As President Wei Lihua said, in the future, Junlebao will focus on investing in technological innovation and driving growth with technology.
President Wei Lihua shares Junlebao's rise journey
During our inspection and interview, we also constantly felt the unique corporate culture and entrepreneurial spirit emanating from Junlebao and its employees. I want to share a small story from which we might glimpse what supports Junlebao people to strive to this day.
Those familiar with Wei Lihua know that marathon is one of his favorite sports. In 2017, Wei Lihua went to the United States to participate in the Boston Marathon. The Boston Marathon is not only one of the most prestigious marathon events in the world but also has one of the most difficult marathon routes. In the last 10 kilometers of the marathon course, there is actually an uphill section, which is undoubtedly another big test for participants.
Even though the road ahead was difficult, Wei Lihua gritted his teeth and persisted. What supported him to run to the finish line? Wei Lihua humorously said, "That's because my daughter was standing at the finish line early in the morning waiting for me, and I couldn't let her down!"
Perhaps this is also the reason why all Junlebao people maintain high morale. Everyone holds onto their original intention: As Junlebao people, we must revitalize China's dairy industry and let the next generation of our country drink good milk powder! We cannot let Chinese consumers down.
References: [1] "2019 China Dairy (Dairy Products) Marketing Development White Paper" [2] "Running Hard for the Revitalization of the National Dairy Industry - A Record of Wei Lihua, President of Junlebao Group", September 2, 2019, Hebei Daily [3] "Junlebao 'Yue Xian Huo' Wins Dairy Award", July 2, 2019, Xinhua Net [4] "Positioning in the 21st Century: The Father of Positioning Redefines 'Positioning'", Al Ries, Laura Ries, Zhang Yun, Machinery Industry Press [5] "The Secret of Junlebao Winning the Global 'Best' Certification", Guo Tie, August 18, 2015, Beijing News [6] "Feihe, with 10 Billion Revenue, Is About to List on the Hong Kong Stock Exchange, Achieving Two Firsts, and Being the Number One in the Chinese Market This Year", July 4, 2019, Zhongfang Finance
Source: FBIF Food & Beverage Innovation (ID: FoodInnovation)
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