In recent days, I have been doing media live streams, not to promote Jiang Xiaobai's development or business, but to convey meaningful things to the industry and society as an enterprise, brand, and industry practitioner after the outbreak. The epidemic brings challenges of varying degrees to every enterprise, practitioner, family, and individual. Overall, challenges outweigh opportunities, so there is widespread anxiety. I want to share some thoughts to help alleviate this anxiety. Today, I want to share on the topic of 'Anti-Fragility Thinking in Chinese Business.'

-01-

Take a Long-Term View

Treat the Epidemic as Another Investment Period

Every enterprise and individual has different abilities to confront difficulties, overcome them, and self-repair. Some are fragile and get knocked down when difficulties arise; others have stronger anti-fragility. This is an important concept in biology: our bodies have immune and anti-fragility capabilities. When enterprises face difficulties, especially major ones, most people feel fear and anxiety; only a few feel excitement and see it as a challenge. In fact, this is not a bad thing for enterprises but a good thing. If you overcome it, it's like bamboo growing a new node. Without nodes, bamboo would be fragile; with them, it becomes stronger and more resistant to wind and rain. Every enterprise and distributor in the liquor industry may be particularly concerned about the impact on performance and business in the short term. How to adjust emotions under the epidemic, deploy the right things, and embrace future development is a major question worth pondering, and it's something I've been deeply thinking about recently. For the industry, Q1 performance will likely be affected by the epidemic, Q2 will still see some impact, but by H2, most enterprises should recover and get back on track. Every trough has an end, and opportunities will emerge. Now we are at the end of this trough, which is reassuring. When communicating with internal colleagues, I emphasize one thing: For at least five years, the entire company should be treated as an investment period. Taking a long-term view makes things more manageable. If in an investment period you expect quick results, rapid scaling, and fast profits, that goes against objective laws and is unrealistic. So we need to change our mindset. Except for financially strong liquor companies, most liquor companies and distributors should treat the epidemic as another investment period, control expenses within their means, strive to survive the tough times, and calmly wait for the next harvest period. In daily operations, every enterprise cares about business results because only results align everyone's goals and guide work. But I think we can extend the time scale. Some distributor friends have worked hard for years and were confident of reaping rewards this year. Now, the harvest is simply delayed by half a year or a year; for the faster ones, maybe just a quarter. As an operator and entrepreneur myself, the toughest time in my entrepreneurial journey taught me that a company's conviction must be strong. You must persist in investing what needs to be invested, and then be patient in waiting for business results. It's not that a company starts off well and maintains continuous growth in business volume and profit; such a situation almost never exists.

-02-

Distributors Must Think About Capabilities Below the Iceberg

To Truly Sustain Across Cycles

Personally, I believe that even without the epidemic, only a small portion of distributors in China's liquor industry are in good shape today; the majority are not. Not only is their current situation poor, but the challenges they face will only grow in the next 3-5 years. Because China's economy is at the intersection of three waves: the traditional commercial era, the internet commercial era, and the big data commercial era. This is a massive change. Many operators feel confused and lost, wondering where to start. I've been in the liquor industry for nearly 20 years and often marvel at the huge number of distributors in China. Every city, county, and even township has distributors. But looking back over the past decade or two, how many truly competitive distributors have emerged? Not many. Historically, there have been groups of distributors with strong capital and organization, with brand operation and channel capabilities, achieving scales of several billion, even larger than many liquor companies. But the proportion of distributors who can truly sustain across cycles and continue developing is small. Every distributor can review: which year did you enter the industry, how many years have you been in it, and why didn't you seize certain opportunities amid the ups and downs? These are worth thinking about and exploring. I once shared at Jiang Xiaobai's internal distributor conference: Can distributors look deeper when viewing their business? Today, most people look at enterprises with particular attention to superficial things: annual sales revenue, profit, growth rate. They think these three indicators tell them whether the company is good. But these superficial revenue, profit, and growth figures are just the results presented by each enterprise. I particularly like the saying, 'All beings fear the result; Bodhisattvas fear the cause.' These three indicators are just the tip of the iceberg above water. What lies beneath the water, not easily seen, may be the foundation and core competitiveness of the enterprise. In Jiang Xiaobai's strategic design, Jiangji Distillery is its foundation beneath the water surface. So, where are the distributor's capabilities? Warehousing and distribution, market development, distribution, terminal control, customer development and maintenance. Another capability that most distributor friends may not particularly value is organizational capability, which is a more important capability for evaluating a distributor or company. Looking from the tip of the iceberg downward, if you have capabilities in all aspects, I think the company will eventually succeed. It's just that opportunities may not have come, or it's still in the early investment period. At this time, you need more patience to strengthen and consolidate capabilities in all aspects.

-03-

Five Thoughts on China's Business Ecosystem

Going one level deeper, it's about each distributor's way of thinking, values, or basic cognition. This may seem intangible, but the greatest truths are simple. When we see excellent benchmark companies talk about certain concepts, we should think about why they view problems that way and why they lay out their future that way.

Thought 1: Why do distributors exist? In this industry, why are some called agents and others distributors? These two terms are different. Agents act on behalf of manufacturers to perform all functions of sales, branding, and promotion; they play the role of a representative. Distributors are at a lower level, more of a trading activity. Most distributors in China are only in the role of distributors; only a few can truly take on the role of agents, achieving higher efficiency than the principal. This is my thinking on distributors. Why talk about distributor philosophy, values, and cognition? Many of Jiang Xiaobai's distributors and customers are diligent and hardworking, but changing their mindset is extremely difficult. Why do distributors exist? I think it's because manufacturers can't do many things, such as localization and boundaryless management. If every manufacturer opened branches in all markets across the country, in every prefecture-level city and county, I doubt many Chinese companies have such management capability, nor the financial strength. Moreover, their management efficiency would be very low, including local customer development and understanding of local markets. Distributors are the ones who can hear the gunfire, not the manufacturers. Manufacturers are often not on the front line; they are far away, not just physically but also in understanding consumption trends and users. At the same time, distributors should realize that your competitor is not your peer but the times, or some new species. A distributor is essentially a provider of solutions for capital flow, logistics, and information flow. But these capabilities may be dismantled in the future.

1. Capital flow. There are now many supply chain finance options. Through the internet, it's easy to connect with supply chain finance, and the distributor's capital advantage may not necessarily be competitive in the entire system. Especially for small and medium distributors, a supply chain finance company might come along and replace your capital capability.

2. Warehousing capability. Large logistics and distribution companies can provide better solutions for localized warehousing and distribution services in the future. ZTO and SF Express have already made significant layouts in this area; their future warehouses can become cloud warehouses for manufacturers.

3. Distribution. Whether it's trunk logistics or same-city logistics, more efficient 'species' have emerged. Companies like Meituan and Ele.me have very high distribution efficiency, with stronger point-to-multipoint capabilities than many distributors. Meituan's same-city delivery plus B2B order system will replace many core capabilities of distributors in the future.

4. Information flow. In the commodity circulation of society, distributors are essentially middlemen, and some businesses rely on information asymmetry. But in the future, businesses based on information asymmetry will basically cease to exist.

Thought 2: What value do you create for manufacturers and customers? In the past two years, I've been observing other industries, such as B2B, unified warehousing and distribution, supply chain logistics, supply chain compatibility, etc., including the emergence of new business forms like Meituan and Ele.me, which have greatly changed the survival environment for distributors. Let's assume: will distributors still be divided by region in the future? Is it possible to divide by industry or by consumer group? I believe this will happen in the near future. I once communicated with ZTO Logistics. They believe they are fully capable of helping many manufacturers achieve higher-efficiency logistics because they have many warehouses nationwide, all of which can serve as the front end for warehousing and distribution. For distributors, warehousing and distribution capability is very important, but this capability is likely to face challenges from other industries in the future. This includes capabilities for developing other markets. Currently, wechat business, community group buying, some internet companies and tools, and some third-party companies are likely to impose a dimensionality reduction strike on our original capabilities for developing and maintaining customers. So distributors need to think about what value they exist for. I find that many distributors tend to fall into self-awareness and self-centeredness when thinking about problems. For example, what brand is beneficial for me to represent, how to get more resources from manufacturers, how to gain more profits, etc. But have we thought about what value we bring to manufacturers? What value do we bring to customers? One is your upstream, the other is your downstream. If you can figure out these two questions of creating value for upstream and downstream, it may provide a more stable foundation for your medium- and long-term development. This question is hard for me to answer, but we can look at it from another angle: what kind of customers do manufacturers like? Manufacturers must like customers who can solve problems, who focus on the market and expand it. What manufacturers want is very simple: market increment, market health, price stability, and knowledge of frontline consumption trends. The same goes for customers: for every downstream customer, distributor, terminal, or group-buying customer you face, what value can you create for them? We need to figure this out, rather than just selling goods and making money. Selling goods and making money is just the 'result'; creating value is the most important 'cause.'

Thought 3: Who gives us our rice bowl? This question is particularly interesting. The current theoretical system of the business world overemphasizes competition, believing that my success is due to beating others and peers; conversely, if I do poorly, I blame intense competition and being defeated by others. Returning to the essence of business operations, or the essence of everyone's existence in this world, we need to think about who truly gives us our rice bowl. Humans have animal nature; we often overlook who gives us our rice bowl but are particularly concerned about who snatches it away. If I have a bowl of rice, I become very nervous, afraid someone will take it away. But we often ignore who gave us the bowl. Whether manufacturer or distributor, our rice bowl is given by users. In business communication with customers, I say bluntly, 'You are not my god; my god is the consumer, the user.' It is because of millions of users who drink Jiang Xiaobai's liquor that we have this rice bowl. Distributors are also people who give us rice bowls, but not the most important. The order should be users first, customers second, employees third. Together, these people give the enterprise its rice bowl, not competitors. As long as we continuously create bowls of rice, so-called peer competition and industry competition become less intense. Sometimes we feel industry competition is fierce because employees and distributors repeatedly emphasize policies; when they see others doing something, they feel competition is intense. At such times, we need to see the truth. In managing Jiang Xiaobai, I have never regarded any brand or peer enterprise as a competitor. Letting users lead the 'Brand Creator Conference,' Tao Shiqiang wants product improvements to listen to consumer opinions. I have always held a view about the liquor industry: the reason it thrives is diversity. The baijiu industry is different from beer. Today, baijiu is still a highly fragmented market. Although the head is increasingly concentrated and the strong get stronger, this is just a process. The global spirits market is also diverse, with various popular brands and flavors. Now China's economic development is transitioning from irrational to rational, and in this process, diversity will continue. So don't overemphasize competition. Especially for distributors, don't focus energy on peer competition but on creating value for customers. At any time, it's not profit first, not management cadre first, but customer first.

Thought 4: Are you the driver or the passenger? Only a few are driving. From a market perspective, those who create value, create increment, and push things forward are the drivers. In the liquor industry, among various brands and regional markets, distributors who can play the role of driver have a promising future. But if you have a serious passenger mentality—like if this brand is doing well today, I'll hitch a ride, get an agency, and make quick money, then the company can develop for a few more years—this attitude will inevitably affect the company's development. This is a dialectical view: when we can make quick money, we tend to be complacent and find it hard to think about concepts and capabilities, focusing only on the result of making money. This situation can cause the company to miss opportunities to update concepts and improve overall capabilities. Conversely, distributors or companies with a driver mindset may start with low starting points and insufficient resources, but through long-term efforts to improve overall capabilities, they will develop better. Many successful companies have grown by forcing themselves to improve capabilities in tough environments with insufficient resources. Such companies become more anti-fragile and better at creating rice bowls than others.

Thought 5: Be an athlete or a commentator? In the liquor industry, distributors often criticize and discuss, expressing views on development, trends, and opportunities. This phenomenon has persisted for many years, but there are too many critical voices and too little action. For example, analyzing how good sauce-flavored liquor is every day—sauce-flavored liquor is indeed good, but how many people have accumulated resources and capabilities in it? How many are willing to be athletes and get into the game? This is worth thinking about. Especially for the distributor group, who are doers, they should put more energy into execution and be giants in action. Including the current environment: after the epidemic, the biggest challenge and opportunity for every enterprise lies in transformation and upgrading. But we have more theory than practice. I am no exception. The theory is clear, but we haven't done it yet, haven't done it well. I raise these five questions hoping they can inspire you.

-04-

Every Company Must Improve Cognitive and Execution Capabilities

Finally, let me talk about one point: every company should think about and build long-term operational capabilities. My personal experience is to often ask myself two questions: First, have I thought things through clearly and understood them? Second, have I done what I understood? I once scored Jiang Xiaobai, and it only got 48 points. People were surprised: 'You don't even have 60 points? Only 48?' Jiang Xiaobai has thought through 80% of its strategy, operations, and concepts, but many of that 80% cannot be executed because our capabilities are limited, management level is limited, and resources are limited. So we only executed 60%. 60% × 80% equals 0.48. That's a self-evaluation. I personally think 48 points is not a low score. People often make many plans in daily life, like annual plans: run so many kilometers, read so many books, lose so many pounds, achieve so much business performance. Looking back, execution is often very low, with big discounts. During the epidemic, I promoted many practices across the company. One is to think clearly about what we can do, list them, and execute according to the list. Once we understand, we try our best to implement. This is also the cognitive and execution capabilities that every merchant needs to improve. But in terms of cognition, facing huge changes, no one understands clearly; we are all moving forward in the fog. When the Chief Brand Officer visited Jiang Xiaobai's headquarters, he casually took a photo of the 'Xiaobai Spirit.' I have been running Jiang Xiaobai for nine years. Many times I haven't thought too far ahead because my capabilities aren't that strong. The concept we uphold is: to be an enterprise with pioneering spirit, entrepreneurial spirit, and Xiaobai spirit. When we think of something within our capabilities, we quickly do it, trying to minimize discounts in execution. Up to now, the enterprise has a moderate scale, but there is still a big gap compared to many excellent enterprises in the industry. From operational capabilities, organizational capabilities, to strategic formulation capabilities, there are still significant shortcomings. But I think it's all fine. Running a business is like moving forward in the fog. Even if you don't understand clearly, you still need to firmly execute and push forward. So in my view, this epidemic has given many enterprises an opportunity to enhance their anti-fragility. Overall, in today's Chinese economy and liquor industry, most enterprises, manufacturers, and distributors are relatively fragile. We may need to start from concepts, cognition, views on future trends, and how to improve capabilities. If after the epidemic, after 2020, or after the next three to five years, we look back and see that enterprises have further developed while overcoming difficulties, that is the greatest revelation and significance of the epidemic for us.

-05-

Jiang Xiaobai Is Actually a Stumbling Explorer

Some peers in the liquor industry have given us an evaluation, saying we are an explorer and have brought some inspiration to the industry. Inspiration? I don't think it's that profound. Every enterprise has different operating conditions. I self-summarize as 'a stumbling explorer.' I may be bolder and more willing to do different things. China's overall business environment, or our way of thinking, tends to be collectivist. From childhood, we are taught to stand at attention and align in a straight line. So under the entire Chinese business and social environment, innovation awareness is insufficient. Jiang Xiaobai is willing to try and explore. We have made many attempts and explorations, sometimes not developing well. Some have succeeded, while others that didn't may not have been seen. Looking to the future, to the next decade, there are still plenty of opportunities. Distributor friends can also pay attention.

First, consumption habits will undergo significant changes. Jiang Xiaobai was originally a brand targeting young people, but today we also face a trend of more young people's products diverting. In recent years, many new liquor types, such as whiskey, premixed drinks, and other imported products, are diverting young users of Chinese baijiu. This challenge is not just for Jiang Xiaobai but for the entire industry in the future. Why do we want to go young? Many people don't understand. They say Jiang Xiaobai has done so much to appeal to youth, but in a few years, young consumers will grow up and may not drink Jiang Xiaobai. I think as a member of the liquor industry, as long as I have my small share, that's enough. We hope the entire industry thrives. So I think it's necessary to pay attention to multiple liquor types, especially those growing fast. In the next decade, foreign spirits will see significant development. In economically developed places like Beijing, Shanghai, Guangzhou, and Shenzhen, some who have done well in baijiu group buying and have strong high-end product operation capabilities might consider trying the foreign spirits market. For Chinese baijiu to develop well, it also needs to be inclusive and open, and go international. International brands entering the Chinese market also help us become more open, diverse, and mature. We can learn a lot from them about brand and channel operations. This is a big opportunity for distributor friends.

Second, the opportunity of digitalization. Are the manufacturer's digital warehousing and distribution, warehouse management, and logistics distribution online? Is terminal management online? Is logistics online? Can all daily business operations be online? This is a huge opportunity for the next step. Some customers with stronger awareness may get ahead.

-06-

The Essence of Service Is Altruism

I see a friend in the audience asking: 'You mentioned in the live stream that our rice bowl is given by consumers. Please share how Jiang Xiaobai does service, making many post-70s and post-80s become loyal fans of Jiang Xiaobai.' Indeed, we find that not only young people become our consumers, but many post-70s are also our consumers. Xiaobai's overall product unit price is not particularly high; it's an affordable product, so we follow a logic of universal distribution. In serving customers, we don't have the ability to be more detailed, down to serving every customer, because the product unit price can't support it. We can't do one-on-one customer service like high-unit-price categories such as phones, cars, or high-end brands. But the essence of serving customers is to be attentive and think from the user's perspective. For example, we have user interaction activities like appointment drinking parties, same-city appointment drinking, and online interactions with users. First, we must have an altruistic heart, consider from the user's perspective, and have empathy that values users.

-07-

Facing the New Era, Launching the New Liquor Drinking Plan

Some industry friends also ask: What marketing plans will Jiang Xiaobai have in the post-epidemic era? What are the strategic goals and paths? Personally, I think after the epidemic ends, the first step is to pay special attention to and help customers solve difficulties in their operations. During this period, customers' goods are not selling well, capital pressure is high, and most importantly, pessimistic and anxious emotions are particularly severe. We will pay special attention to the 'resilience' of the entire market. As long as an enterprise can overcome difficulties and has strong resilience, the organizational capability and anti-fragility of the entire system will be stronger. In terms of strategy, facing a new era, we have formulated a 'New Liquor Drinking Plan.' The 'new' reflects new drinking culture, new consumption habits, new consumer groups, and product innovation. For example, last year we launched a fruit-flavored sorghum liquor, selling over one million cases in a year. In fact, such products are very common abroad. Whether rum, whiskey, vodka, or Korean soju, besides original flavors, they all launch fruit-flavored products, which are especially popular among young users. So this is the future increment, meeting consumers' demand for new tastes and textures. ●The launch of fruit-flavored sorghum liquor aims to meet consumers' demand for new tastes and textures. Additionally, we hope to transform from an operation-oriented company to an asset-oriented company. We will place more emphasis on production assets, base liquor reserves, and overall brand assets. We will also tentatively develop second and third brands. Of course, we cannot be rash; we need to take a longer time cycle and be patient in building products. We also hope to move from a single-product, single-brand enterprise to a multi-product, multi-brand operation platform. Finally, I wish all enterprises in the industry and all merchant friends can emerge from fragility and possess anti-fragility. I pray the epidemic passes quickly and everyone can operate normally. I pray everyone is safe and sound. After the epidemic, I warmly welcome all sectors of society to Chongqing and to Jiang Xiaobai. Thank you!