Sina Finance, February 19: The 16th Annual Meeting of the Yabuli China Entrepreneurs Forum was held from February 19 to 21, 2016, in Yabuli, Heilongjiang. Tao Shiquan, chairman of Chongqing Jiang Xiaobai Liquor Co., Ltd., shared his thoughts during the "Yabuli Youth Forum: Tribute to the Times" session. When asked why he started his business, he said that even in such a traditional industry, he holds imagination and hopes to validate it with future time. "Regarding the industry's conventional impressions, we don't talk about disruption, but rather explore another possibility."
In his speech, Tao Shiquan said that his imagination for entrepreneurship partly comes from the industry's vast market size. Data shows that the global distilled spirits market is $1.6 trillion, with Chinese companies currently accounting for only $80 billion, or 5%. "But in fact, China's population accounts for far more than 5% globally. Why does this result occur?" In his view, it is due to the absence of the baijiu industry in internationalization and among young consumers. "If we had started cultivating young consumer groups earlier and made internationalization attempts earlier, then perhaps in the future we could at least reach the average level relative to our population. If China's market could achieve 20% of the global market, that would be $320 billion, a fourfold growth space."
Tao Shiquan also revealed that Jiang Xiaobai's goal this year is to achieve 100 million consumer interactions, cultivating consumption habits among young groups.
Tao Shiquan admitted that when he first founded the brand, some asked why he chose baijiu when young people don't drink it. "I don't have any grand sentiment, like Jiang Xiaobai saving the entire industry—that's not the case. But I believe there will definitely be a portion of consumers who will eventually be interested in traditional Chinese products. We need to complete the transformation."
Tao Shiquan also specifically discussed his understanding of entrepreneurship: "I think entrepreneurship is not just registering a company, forming a team, and making a product. It's about using new methods and new ideas to establish a business within an existing industry. That's what I understand as entrepreneurship." (Sina Finance, Guo Jinxia, reporting from Yabuli)
The following is the transcript of the speech:
Tao Shiquan: Good morning, friends of Yabuli. I am from Chongqing, and our company is also from Chongqing. We are an innovative brand of sorghum liquor. In fact, when we received the organizing committee's theme "Why I Want to Start a Business," I didn't know where to start. First, we don't have a dramatic story, nor did we start a business because of extreme hardship. Later, I summarized it: I can describe it in one sentence—"It is because of our familiarity with the traditional baijiu industry that we feel imagination can arise within it, and we want to validate that imagination." This is our original intention and the force driving us forward.
As everyone knows, China has four national treasures: Peking opera, ceramics, traditional Chinese medicine, and baijiu. These are very Chinese symbols, with traditional labels and Chinese tags. Perhaps friends from other countries around the world will label these four categories with a Chinese tag when they think of China.
But when we talk about our national treasures, especially the Chinese baijiu industry, we find that it naturally carries some labels. I want to ask everyone here: What cognition do you have of the four characters "Chinese Baijiu"? What thoughts come to mind? How do you perceive this industry? Perhaps everyone has different answers, but like you, after working in this industry for eight years, I have found some things that cannot be changed, or some conventional perceptions. These perceptions might be that baijiu tastes spicy, that it is an industry with a long history, and such a product. With a long history, it naturally gets labeled as a product consumed by old comrades. The user group naturally has a profile: young people going to bars or restaurants are willing to drink beer or other imported spirits, but not the baijiu left by their ancestors. We naturally think of baijiu, and it seems everyone is moving in the same direction: making the brand high-end, with class distinctions, representing a certain group. Drinking this brand gives face; it's high-end.
There are also other labels representing relationships and the round-table culture. Chinese culture is particularly interesting; we have a round-table culture. When sitting at a round table, there is a strict order: who is the main guest, who is the host, and you must sit according to your position; you cannot sit incorrectly. If a young person doesn't understand and sits in the wrong place, people will criticize you. When toasting, you also need to follow the seating order; you can't go to the wrong table. So for the entire traditional baijiu industry, there are many traditional conventions that have formed impressions in people's minds. Can we make some changes? Can we do something imaginative? This drives our team; we are willing to do it because we are very familiar with this industry, and we believe the current environment is a good opportunity for us to make some changes.
Basically, regarding the keywords I just mentioned, everything Jiang Xiaobai does is opposite to those impressions. We do things that are opposite. We don't talk about disruption; we just explore another possibility. Today, I will talk about driving something, opening a new business, or starting a business. My understanding of entrepreneurship is not just registering a company, forming a team, and making a product. I understand entrepreneurship as using new methods and new ideas to establish a business within an existing industry. That's what I understand as entrepreneurship.
So after doing consumer insights and market insights, we started doing such things.
First, we made a simple and plain product. Chinese liquor, like mooncakes and other industries, pays great attention to packaging—it must be luxurious and high-end. We did the opposite: very life-oriented, very simple, simple enough. Our single products are also very few; we focus on 100ml (2 liang) small bottles. Why small packaging? Because it matches our target consumer group. We target casual dining markets, young people's gatherings, and casual parties. The consumption volume of the product may be more matched with small bottles, with no burden.
Second, we first thought of achieving "de-stratification," a new era brand impression. In China, at least I know my industry well, I think our manufacturing can produce very good products without any problem. But the problem lies in our ability to operate brands. In our industry, it is not strong enough, generally not strong enough. At least compared to other industries, we have a gap. So we can create a different brand impression. The original impression was high-end and class-based. We can do the opposite: "de-stratification," not so high-end, matching contemporary young people's culture, emotions, and aesthetics. So our brand proposition is "I am Jiang Xiaobai, life is simple." We follow our inner spiritual claims. In fact, an important point about liquor is that it carries strong emotions; we call it "emotional beverage," which must match emotions. Many people, when consuming products, will compare with their identity. In fact, there were few products on the market that could highlight the spiritual claims of contemporary young people.
Third, we need to capture the young generation consumer group. The young generation consumer group and youthful products may be the hope of our industry. In fact, I estimate other industries are similar. Why do I say this? We find that today's post-80s and post-90s have different cognition of products and brands compared to the previous generation. They have their own consumption claims and "brand democracy." They think they should choose according to their own preferences, not follow what the previous generation consumed or what high-end products they consumed. So there is a "brand democracy." Therefore, we meet the needs of young people. Although this is very difficult, many people told me, especially when our brand just came out, that young people don't drink baijiu now, so why do you make baijiu? I said, precisely because young people don't drink baijiu. I don't have any grand sentiment that our company or brand will save the entire industry—that's not the case. But I believe there will definitely be a portion of consumers who will eventually be interested in traditional Chinese products. We need to complete the transformation. For example, we see herbal tea is a very traditional Chinese product, but through fashionable brand operations and youthful brand operations, it can re-cultivate the brand. We see that at one APEC meeting, everyone wore Tang suits. Tang suits are very traditional, but the brand culture became fashionable, and then it was accepted by young people and the world.
We will see that our industry, if there is imagination, is a relatively large industry among consumer goods worldwide. We are very confident about tomorrow. We believe that the business of eating and drinking is generally less affected by cycles. The global distilled spirits market is $1.6 trillion, and Chinese companies currently account for only $80 billion, or 5%. But in fact, China's population accounts for far more than 5% globally. Why does this result occur? This result is that our Chinese products with Chinese characteristics have not gone out. Not only have they not gone out, but even our young generation of consumers may be lost. So I think the imagination is that if we start cultivating young consumer groups earlier and make internationalization attempts earlier, then perhaps in the future we can at least reach the average level relative to our population. If China's market could achieve 20% of the global market, that would be $320 billion, a fourfold growth space.
So our goal this year is to achieve 100 million consumer interactions, cultivating consumption habits among young groups. Finally, I will make a conclusion. For this industry, a very traditional industry, we also hold imagination, and we hope to validate our imagination with future time. Thank you all.
Yabuli Youth Forum Rotating Chairman Chen Yilun: Do any of the commenting guests have questions?
Zheng Boren from Xin Yuan Capital: I invest in high-tech, so I may not have much experience in your industry. But I myself, with a group of entrepreneurs in Silicon Valley, invested in a wine company. We positioned it as a social enterprise; we donate 30% of the profits from selling red wine. At that time, from the perspective of the entrepreneurs, it was a breakthrough in sales channels. So I think when new brands like this come out, sales channels need some newer methods. I wonder if you have any interesting ideas. Thank you.
Tao Shiquan: The industry you mentioned is actually very close to ours; we even consider it the same industry—both are in the alcohol market. Channels are very important. I just said brand is very important; brand solves consumer awareness and also solves the problem of consumers being able to buy the product. In fact, we have made some innovations in channels. First, the original Chinese channels had too many levels: one level after another wholesale, one level after another markup. In fact, consumers end up paying a lot of money for the product. Now, with internet tools, we can do better optimization and management, so our channels are very flat, basically one to two levels of distributors. Actually, it's not a complete innovation; we consider it an optimization. Originally, three or four levels, or four or five levels, were reduced to one or two levels. This is an innovation in traditional channels.
Second, the development of e-commerce has brought us opportunities. We are vigorously expanding e-commerce.
Third, a relatively unique channel in the Chinese market is that our communities are very active. We have many youth communities and online communities. We participate in these communities, which can also generate some channel sales. These are roughly the three aspects. Thank you.
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