---
title: "Jiang Xiaobai Founder's Reverse Thinking: If I Were an FMCG Investor"
description: "This article is based on the keynote speech 'If a Consumer Goods Founder Were a Brand Investor' delivered by Tao Shiquan, Chairman of Jiang Xiaobai Distillery, at the Black Ant Capital investor annual meeting, with significant abridgment. It discusses the shift from ABC to CBA thinking, the importance of long-term value, and the 'airplane takeoff curve' model for brand growth."
author: "陶石泉"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-05-22"
language: "en"
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# Jiang Xiaobai Founder's Reverse Thinking: If I Were an FMCG Investor

> This article is based on the keynote speech 'If a Consumer Goods Founder Were a Brand Investor' delivered by Tao Shiquan, Chairman of Jiang Xiaobai Distillery, at the Black Ant Capital investor annual meeting, with significant abridgment. It discusses the shift from ABC to CBA thinking, the importance of long-term value, and the 'airplane takeoff curve' model for brand growth.

Note: This article is compiled from the keynote speech "If a Consumer Goods Founder Were a Brand Investor" delivered by Tao Shiquan, Chairman of Jiang Xiaobai Distillery, at the Black Ant Capital investor annual meeting, with significant abridgment.

**From ABC to CBA: A Shift in Thinking**

In running a consumer goods company, it is crucial to think through "who we create value for" and the order of that value.

During a break before the meeting, someone asked me what Jiang Xiaobai's "killer move" was. **I told him that Jiang Xiaobai has no so-called killer move; rather than pursuing tricks, we focus more on tracing back to origins, returning to common sense, and finding the starting point, because we value the most essential aspects behind things.**

So, in the consumer goods industry, how should we grasp the most essential things? The answer lies in having the "CBA thinking model."

In the value ranking of most companies, "self" value is often intentionally or unintentionally placed first, meaning an excessive focus on "to A." The so-called "to A" refers to the company's internal systems, processes, and sales volume, all pointing to how to create value for the company and for oneself. Then, we think about how to create value for distributors, entering the "to B" level. Finally, we do "to C" work, thinking about how to create value for users and employees.

In other words, the value ranking of most companies is actually ABC.

What is the essence when we return to it?

It is that the order of value creation shifts from ABC to CBA. First, we must think about how to do well in the C-end, creating value for users. Even if the company's business focus is on the B-end, it must clearly and firmly recognize that the driving force for realizing B-end value comes from the C-end.

Therefore, we must think in reverse. Only by realizing C-end value can we realize B-end value, and then realize value for ourselves, which is the A-end. This is the "CBA thinking model for brand value enhancement."

**The Visionary Thinking of a Consumer Goods Investor**

(Figure: What kind of visionary thinking does a consumer goods investor need?)

**1. Focus on the Long Term, Expand the Scale to See Industry Development**

From today's theme, if I were an investor, what kind of visionary thinking would I need?

First, expand the time scale to see development.

Let's look at the data for Moutai, ranked first in the baijiu industry, and Yanghe, ranked third.

From 2004 to 2018, Moutai's revenue grew from 3 billion to 73.6 billion yuan; Yanghe grew from 400 million to 24 billion yuan. Of course, Yanghe was not listed in 2004, and the 400 million figure is my rough estimate; I also used 2010 as a time node for analysis.

Usually, others don't make charts with such jumpy year-scale intervals like I do, but if not, it's easy to over-focus on short-term changes and ignore long-term changes. So, expanding the 14-year time scale, what do we see from this data?

(Figure: Comparison of Yanghe and Moutai revenue)

Over the past 14 years, Moutai's sales have actually grown 35 times, and Yanghe has grown 60 times.

(Figure: Comparison of Yanghe and Moutai profits)

Looking at profits, Moutai grew from 856 million in 2004 to 5.34 billion in 2010, and to over 30 billion last year. Yanghe grew from tens of millions in 2004 to 8.1 billion last year, achieving several hundred times growth.

(Figure: Comparison of Yanghe and Moutai market value)

Looking at market value, in 2004, Moutai's market value was already very high, reaching the tens of billions level, which was rare in the industry at the time. Now Moutai's market value is 1.1 trillion yuan, an increase of 70-80 times. Yanghe is even higher because it had no market value then; I estimate it at 200-300 million, and now Yanghe's market value is over 180 billion, an increase of 900 times.

If you were an investor and had invested heavily in these two companies in 2004, could you guarantee that you wouldn't have cleared your positions over the past 14 years?

According to realistic investment logic, once an investment project rises, investors immediately exit and quickly look for the next newer model, more brilliant entrepreneur, or company. But if you don't focus on long-term value and are only attracted by short-term value, you are very likely to miss the explosive growth of Moutai and Yanghe 14 years later.

This case touched me. I am 40 years old this year, and I have been in this industry since the first day after graduating from university. As an investor with investment energy, I would be satisfied if I could do well in the liquor industry in my lifetime; there's no need for a second startup or diversified investments. So I am not interested in many things, I don't do other industries, and I force myself to invest enough energy into this long-term value.

**2. Begin with the End in Mind, Strengthen Magnitude Thinking**

From childhood education to management training after work, we have too much "quantity thinking" in our subconscious.

What is quantity thinking?

If you have 100 sesame seeds and I have 80, you have 20 more than me, and we haggle over who reaches 120 first—that's quantity thinking.

If someone brings out a watermelon, we don't need to compare anymore; the matter of quantity is not worth discussing because sesame seeds are not in the same magnitude as a watermelon.

Therefore, what we need to do is not to have more sesame seeds, but to try to have a watermelon that is essentially different from sesame seeds, to seek the "feel" of a magnitude change.

The early days of entrepreneurship are always difficult. Although the company is small, it has all the functions, and there are as many things to worry about as in a large company. But as the company's magnitude changes, the magnitude of our talent and funds also changes, and management becomes easier.

(Figure: Magnitude thinking)

Regarding magnitude thinking, I have the following thoughts.

**First, whether you are an investor or a founder, only after reaching a certain magnitude can you find substitutes.** Zeng Guofan said that to achieve great things, you must find substitutes.

In the early stages of entrepreneurship, we only had a few people, and we had to do everything ourselves, including being drivers and receptionists. But once we break through the magnitude, attract a large number of talents, build a team, and find substitutes, we don't have to do everything ourselves.

**Second, less is more.** Here, "less" means precision and clarity; "more" means efficiency and qualitative change. When making decisions, it's not about pursuing quantity, but focusing on truly important decisions that can produce magnitude changes. Making such decisions right can easily lead to a big magnitude change.

**Third, a major variable in decision magnitude is mindset.** To a certain extent, mindset can determine the situation. As long as we are anxious in our hearts, the things we do may be urgent. For example, if you are anxious about sales, you are likely to make marketing decisions to accelerate spending and increase advertising.

Some outsiders say Jiang Xiaobai often promotes sales, but this is a misjudgment. I can even tell everyone that we basically don't do promotions.

You might think, don't investors want sales? If we promote more this year, can't sales grow by 50%?

But this sales volume is meaningless. Using low prices to attract C-end consumers only proves that promotions generated purchases, but the brand effect is not visible at all, and such C-end consumer stickiness is insufficient.

**If you want to create value with a brand, you must invest a lot of time.** So personally, I think many funds in the consumer goods industry have too short a cycle and too weak stickiness.

For example, in consumer goods industries like apparel, sportswear, dining, and chain coffee, if you expand the time scale to 15 or even 30 years, focusing on the long term, many sub-categories may also produce companies like Moutai. Although they may not be as strong, the scenery is completely different when the time scale is expanded. Of course, I don't invest; I just think from the founder's perspective in reverse.

**Fourth, the financial statements in the CEO's mind are inconsistent with those of the CFO.** Regarding the data reports of Moutai and Yanghe I just showed, a CFO would definitely say, "This report is not acceptable. From 2004 to 2018, over 14 years, your horizontal axis has only 3 time nodes, with too coarse granularity. You should use each year as a unit, making 14 nodes."

If I followed the normal quarterly reporting method, my chart would have 180 points. However, overly fine granularity can affect operators' long-term decisions.

**Of course, we must look at key data and control cash flow, but we should not overly focus on short-term sales and profits.**

My habit is to focus on reports on a three-year cycle. Investors worry that our sales this month fell compared to last month. I really don't care, and I think we shouldn't care too much. As long as it doesn't decline for three consecutive months or six months, it's fine.

In certain periods, short-term fluctuations are not very important. Therefore, what we need to do is to do well the elements that drive long-term value, think clearly about what we really want, and begin with the end in mind.

**3. Airplane Takeoff Curve: Exploring an Efficient Engine**

People often talk about "not forgetting the original intention." Of course, the starting point, passion, and courage—these original intentions—must be kept. But when it comes to magnitude issues like spending money, considering problems, allocating resources, and building organizations, it is wrong to say "don't forget the original intention."

On these issues, we should begin with the end in mind, first look at what the company will be like in ten years, and then consider how to form core competitiveness by allocating resources such as talent.

When Black Ant Capital invested in Jiang Xiaobai, we were precisely at the inflection point before magnitude growth. I sincerely think the investment was very good because enterprise development does have cycles.

(Figure: Airplane takeoff curve)

I invented a growth model chart for consumer brands, called the "airplane takeoff curve." When an airplane takes off, it needs to taxi on the ground for a long distance. During taxiing, the engine is at maximum, but there is no altitude; only when it reaches the inflection point does it rise sharply. Completing the entire takeoff process is not achieved overnight; it requires a long taxiing process.

Famous consumer brands like Red Bull and Wanglaoji were not big ten years ago.

Red Bull's development process particularly fits my model. Red Bull took 8 years to grow sales from 0 to 1 billion, another 8 years from 1 billion to 10 billion, but only 2 years from 10 billion to 20 billion.

In fact, early-stage consumer goods companies are not much different. Don't have high hopes for rapid early development of consumer goods companies, especially traditional liquor companies like ours. Our e-commerce capabilities are not strong; liquor must be brewed bottle by bottle and sold bottle by bottle, so it can't be fast.

To prepare for national-scale operations, Jiang Xiaobai spent a full 5 years. In the early stage, we restrained our desires, focused on the Chongqing market, and were a local small brand. We also validated the model in the Sichuan-Chongqing market, only reaching a magnitude of hundreds of millions. It was only the year before last that we began to lay out national expansion. But doing the national market must be slow, not rushed, because achieving nationalization requires a lot of funds and other capabilities.

And to achieve national-scale operations, Jiang Xiaobai only took a year and a half. **The initial stage of enterprise development must be slow, but once you reach the critical point of magnitude change, you must be fast.** Black Ant Capital invested just before Jiang Xiaobai achieved nationalization, on the eve of the inflection point, when it was about to reach a magnitude change.

When an airplane taxis on the runway, the engine is at maximum, which is very strenuous. But it is accumulating kinetic energy to prepare for takeoff.

In the taxiing period, focusing on sales and profits is meaningless. If I were a consumer goods investor, in the early stage, I would look at the team, values, and brand genes, and see whether the company's engine efficiency is sufficient and whether it has the ability to reach the critical point for takeoff.

If it can reach that point, the amount of investment doesn't matter much. If it can't reach that point, and it takes off when it shouldn't, even if short-term data looks good, it's useless.

Black Ant Capital was lucky to guess Jiang Xiaobai's inflection point. To be honest, I didn't even guess it accurately. Of course, whether you can guess it accurately is not the most important thing. If you expand the time scale, whether the inflection point comes a year earlier or later doesn't make a big difference. On the contrary, if we are too anxious, always hoping the inflection point comes quickly, or even giving up immediately if it doesn't come, that's also wrong.

**Operators Are a Twisted Combination of Realism and Idealism**

As a founder, you need to balance two things.

**First, the balance between rationality and sensibility.** On one hand, founders must study rational things like reports, models, and methodologies; on the other hand, they must study emotional things like brand spirit, core appeals, and consumer positioning. You are constantly oscillating between extreme rationality and extreme sensibility.

**Second, the balance between fast and slow.** In decisions at the magnitude level, we must maintain extreme calm in our mindset. At the same time, daily execution must be accelerated and efficiency improved.

Thus, founders are constantly pulled and twisted between fast and slow, rationality and sensibility. If I can work in this industry for another 15 years, I must first ensure that I don't become a "schizophrenic."

So how do I ensure I don't become "crazy"? I've made a small summary.

(Figure: The twist of realism and idealism)

**Enterprise development is divided into three layers: macro vision, middle rationality, and micro sensibility. Among them, only the middle layer is rational.**

The middle layer refers to strategy, tactics, methodology, organization, KPIs—all this systematic stuff, including finance. The middle layer must remain rational, but that's far from enough.

We also need to open up our horizons and go upward to touch the ceiling, so we have the upper layer of mission, values, and vision—these are emotional things.

At the same time, looking at the micro level, to build a brand, you need good aesthetic, artistic, and literary cultivation. Truly good consumer goods can bring users beauty, emotion, and warmth, which also belongs to the emotional level.

From this perspective, what is our product? What is liquor? It is an emotional beverage, a companion. This is what our users said on Weibo. Some people said that when they were heartbroken, they drank Jiang Xiaobai, and Jiang Xiaobai accompanied them through the pain.

The value of liquor includes both materialized value and other added value. Brewing high-quality fine liquor is our core competitiveness, and creating a brand that brings warmth and emotion to consumers is also our core competitiveness. Both are indispensable. This is Jiang Xiaobai's brand value, and this is the value we create.

Source: 42 Chapters

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