On December 26, the 'Guozi Shule' (Fruit Ripened) Hunan production base was officially completed and put into operation in Zhuzhou Economic Development Zone. In the summer of 2024, a dark horse emerged in the sugar-free tea market—'Guozi Shule'. With its unique market strategy and rapid new product launch pace, the brand has repeatedly made a name for itself in the industry. This significant move to establish its own factory marks a milestone for a beverage company founded just five years ago. Image source: Zhuzhou Daily New Distribution learned that as the company's first self-built factory, the Zhuzhou factory project has a total investment of 1 billion yuan, covering 100 mu (about 6.67 hectares). It has now built approximately 50,000 square meters of standard factory buildings and the industry's highest standard Log6 fully automatic aseptic production line, achieving 'signing, construction, completion, and operation within the same year', setting the fastest record for industrial project commissioning in Zhuzhou Economic Development Zone. Once fully operational, the project is expected to have an annual production capacity exceeding 400,000 tons. This means that Guozi Shule will no longer rely solely on OEM production but will enter a new stage with its own production capacity, demonstrating its determination to invest in the beverage market and strengthen its core capabilities. What strategic considerations lie behind this 1 billion yuan investment in a self-built factory? Building a Self-Owned Factory to Solidify the Brand's Moat In fact, as early as August this year, a news release on the official website of Zhuzhou Economic Development Zone about investment attraction had already reported the news of Guozi Shule building a factory locally. At that time, during the peak beverage consumption season, Guozi Shule's sugar-free tea products were rapidly penetrating markets across the country, drawing industry attention. (Information from Zhuzhou Economic Development Zone official website) Industry insiders analyzed that from a long-term perspective, continuously increasing investment in supply chain layout is Guozi Shule's consideration to lay a solid foundation based on its future growth strategy. With the growing market demand for healthy beverages, the market size of China's sugar-free tea industry is expected to reach 11.258 billion yuan by 2026; at the same time, the Chinese-style health drink market is also expanding rapidly, with the market size expected to exceed 10 billion yuan by 2028. Driven by optimism about the market, Guozi Shule continues to increase investment in these two areas. Since its founding in December 2019, Guozi Shule has expanded from a single sugar-free tea product to include multiple categories such as Duoduo Lemon Tea, Youqi Herbal, Fruit Juice Tea, Light Milk Tea, and Shou Nai Cha, totaling over 80 distinctive products. From a market perspective, as of now this year, Guozi Shule's products have achieved remarkable results in market share. Relevant data shows that in the first half of 2024, Guozi Shule's year-on-year growth rate in the domestic sugar-free tea category was 851.07%, with its market share jumping to fourth place. As the product line gradually enriches and market demand expands, supply chain strength is crucial to the brand's future development, and building its own factory has become an important guarantee to support its strategic implementation. Independent Production: Strengthening Core Capabilities Marketing expert Liu Chunxiong once proposed a viewpoint: 'A competitive company must pass two hurdles: the first is to create a star single product, and the second is to broaden the width of that single product and build multiple barriers.' However, looking back at the industry's definition of the Guozi Shule brand, most people consider it a stage-specific product with a stronger internet celebrity attribute, which is difficult to sustain in the long run. Although it has become popular, it lacks representative products and is not focused enough; although it adopts a multi-matrix, multi-category strategy, this is also a major weakness for the company—like a sky full of stars but without the brightest one, its growth confusion is gradually becoming clear. Undeniably, Guozi Shule has indeed seized the right time, place, and people, but as a new star in the industry, it is still in a climbing phase. To overcome the next major hurdle, the company needs a more stable rear base, sharper trend awareness, and faster product upgrades and iterations. First, by building its own factory, Guozi Shule can improve efficiency while better controlling costs. Industry insiders point out that in the catering and food and beverage sectors, raw materials and supply chain service costs typically account for 30%-40% of terminal sales. Therefore, as price wars in the sugar-free tea market intensify, companies need to continuously and effectively control costs to maintain price advantages. In addition, a self-built factory helps ensure the stability and consistency of product quality. As an important part of the production process, every link in the supply chain directly affects the quality of the final product. For Guozi Shule, ensuring a high-quality product supply is one of its lifelines. The high-quality products brought by a self-built supply chain have also become a competitive barrier that competitors find difficult to surpass in the short term. Moreover, a self-built factory enhances the company's flexibility and control in product R&D. For example, to cater to the personalized needs of young consumers, Guozi Shule has launched various distinctive bottle designs, such as the 500ml flat square bottle, the 970ml large hammer-textured bottle, and the 'round sky and square earth' bottle. However, in actual production, many OEM factories may not be able to meet these innovative requirements, and such unusual packaging usually brings higher costs to the brand. Therefore, establishing its own production line can better support continuous product innovation. From new product R&D, production, to quality control, the increasingly large product matrix also poses greater challenges to this young brand. Stable production capacity is the basic guarantee for realizing its differentiated competitive strategy. Chen Miao, executive director of Guozi Shule (Hunan) Biotechnology Co., Ltd., stated, 'This will become the company's production and research innovation center, and all new products of Guozi Shule will be tested here in the future.' Doing Difficult but Correct Things Looking at the industry, Guozi Shule's approach is not unique. In recent years, more and more companies have begun to seek to strengthen their 'internal skills' in the supply chain to better achieve scale. China Resources Beverage previously disclosed in its prospectus that, in addition to cooperative production partners, as of December 31, 2023, it already had 12 self-owned factories in operation in China. Currently, the company is still increasing its self-owned factory construction. Not long ago, it announced the start of construction of its Zhejiang factory—the Wenzhou production base. Genki Forest has also made similar arrangements. To date, it has completed the layout of self-built factories in six locations: Chuzhou, Anhui; Xiqing, Tianjin; Zhaoqing, Guangdong; Xianning, Hubei; Dujiangyan, Sichuan; and Taicang, Jiangsu, to cope with continuous new product development and supply. This fully demonstrates that in the beverage industry, building a strong supply chain has become a consensus and is key to long-term corporate development. After all, in the long run, this is also part of brand assets and value accumulation. What returns will Guozi Shule's 1 billion yuan investment bring? Although the subsequent results are still unknown, one thing is certain: this is not just the growth of a company, but also represents the trend of supply chain upgrading in China's beverage industry. In the future, we will see more companies invest in the supply chain, thereby bringing consumers more high-quality products and services. 【New Order · Symbiosis】 The 10th China FMCG Innovation Conference Date: March 17-19, 2025 Location: Chengdu, China