Taoism says, "Great truths are simple, but knowing them is easy, while practicing them is difficult." The basic principles, methods, and laws of the world are extremely simple; they are easy to know but hard to do. The essence of things appears simple, but its origins are complex. For example, in the 21st-century FMCG business wars, due to changes in supply and demand, shifts in consumer needs, and increasingly fierce market competition, we all know that only innovation can win the future.
But how can we innovate to achieve sustained high growth and break out of the red ocean of competition? How can we not just understand the winning strategy but also achieve impressive results in practice?
Perhaps we can find answers from business cases in recent years. Looking at the FMCG market over the past five years, who can claim to be the growth champion in the food industry?
Jinmailang, the "double champion" in the instant noodle and beverage categories, is a formidable newcomer, narrowing the gap with the top two players and even threatening to overtake them. Junlebao, recently spun off from Mengniu and speculated to be listed independently, achieved double champion growth in 2018 in the two main business categories of low-temperature yogurt and milk powder. These two are the most outstanding growth "double champions" in the entire food industry over the past five years.
So, how did they successfully break out of the red ocean and maintain rapid growth?
In the following, we will use case analysis to deeply analyze the common growth "way" behind their business strategies, decoding the secrets of breaking out of the red ocean and achieving sustained high growth against the trend.
Turning Crisis into Opportunity: The Food Industry Growth Champions Rising Against the Odds - "Double Champions" Jinmailang and Junlebao
1. The Upsetter in Instant Noodles and Beverages: Jinmailang
In 1994, in Xifan Village, Longyao County, Hebei Province, 34-year-old Fan Xianguo scraped together tens of thousands of yuan and cautiously founded Hualong. Twenty-five years later, the former Hualong, now Jinmailang, achieved total revenue exceeding 20 billion yuan in 2018, achieving a phoenix-like strong growth after the growth difficulties of 2015.
Jinmailang Chairman Fan Xianguo speaking at the 2019 Hebei Agricultural Product Processing Industry Development Conference. Image source: Great Wall Net
Jinmailang's instant noodle business sold over 7 billion packs in 2018, ranking among the top three in China's instant noodle market. In recent years, despite the downturn in the instant noodle category, Jinmailang has maintained double-digit compound annual growth, gradually narrowing the gap with the top two and even threatening to overtake them.
According to Ries Consulting statistics, from 2017 to 2018, Jinmailang's growth rate increased by 20% year-on-year, while Kangshifu and Uni-President only grew by 5.7% and 3.7% respectively. Jinmailang is closing in on Uni-President, and Ries Consulting predicts that in 2019, Jinmailang's sales will surpass Uni-President. Notably, Jinmailang's products "One Bucket Half" and "One Bag Half" achieved a remarkable 70% year-on-year growth in 2018 compared to 2017!
Image source: Ries Consulting
Image source: Ries Consulting
Not only did the instant noodle segment win the turnaround, but in the 2018 Chinese beverage market, Jinmailang's sales growth also far exceeded domestic and international beverage giants such as Kangshifu, Uni-President, Wahaha, Pepsi, and Coca-Cola.
According to a previous report by media outlet "Food Business," in 2018, Jinmailang's beverage business grew by 46%, ranking first in the beverage category, far ahead of the second place.
Meanwhile, Kangshifu and Uni-President, the traditional beverage powerhouses, both fell into negative growth; Kangshifu's parent company, Ting Hsin International Group, ranked last with a -16% growth rate. The former beverage giants are facing slowing growth or even Waterloo-like difficulties. [1]
At the FBIF2018 Food & Beverage Innovation Forum, Chairman Fan Xianguo said in an interview with the media, "In the next ten years, the group will focus on developing instant noodles, flour, beverages, and hanging noodles industries, and Jinmailang's sales revenue will exceed 100 billion yuan."
2. The Pioneer of New Dairy Categories and the Game-Changer in China's Milk Powder Industry - Junlebao
After resigning from the Hebei Provincial Department of Agriculture in 1989, Wei Lihua founded the "Junlebao" brand in 1995. With 90,000 yuan in funds, three bungalows, one yogurt machine, and two human-powered tricycles, he stepped into an industry he had never tried, and Shijiazhuang Junlebao Dairy Company was born. After initially opening the market with yogurt and lactic acid bacteria products, Wei Lihua gradually built "Junlebao" into the largest yogurt production base in North China, making it the largest dairy enterprise in Hebei.
Junlebao President Wei Lihua giving a speech. Image source: Official website of the Advertising School of Communication University of China
Twenty-four years later, in 2018, Junlebao Dairy Group achieved annual sales revenue exceeding 13 billion yuan. Among them, the milk powder business, established in 2014, achieved sales revenue exceeding 5 billion yuan, a year-on-year increase of over 100%, "entering the first tier of the milk powder industry."
Infant milk powder sales exceeded 46,000 tons and 52 million cans, with some star products seeing sales growth of over 350%, and Junlebao Banner milk powder sales growth exceeding 200%. In 2019, Junlebao's milk powder sales target is 75 million cans, and it will build two new milk powder factories. It is worth mentioning that Junlebao milk powder has also entered the Hong Kong and Macau markets: it launched in Hong Kong in August 2016, selling 60,000 cans in one year; in August 2017, it launched in Macau, becoming the only domestic milk powder available in both Hong Kong and Macau markets.
Wei Lihua stood at the forefront of rebuilding trust in China's dairy industry, creating infant milk powder that passed the world's top food safety standards. The industry calls him "the game-changer in China's milk powder industry." In an interview with China Entrepreneur, Wei Lihua said that Junlebao's goal is to break 10 billion yuan in milk powder business within five years, "It may not take five years; we will achieve 10 billion yuan. The goal is to become the number one in milk powder."
In the low-temperature yogurt market, according to Ries Consulting data, Junlebao, which achieved strong growth by creating the new cheese yogurt category "Zhang Zhi Shi La" yogurt, also overtook the veteran dairy company Guangming, which had held the third place in low-temperature yogurt for years, in the first half of 2019, successfully entering the top three in China's low-temperature yogurt category.
Image source: Ries Consulting
In the past year, in China's yogurt market, Junlebao's "Zhang Zhi Shi La" cheese yogurt has sparked a "cheese new storm" nationwide, surprising many. Just two months after launch, monthly sales exceeded 10 million yuan, and within one year of launch, sales exceeded 200 million packs. As of September 2018, "Zhang Zhi Shi La" held an 82% market share in the cheese yogurt category, firmly ranking first nationwide. It is expected that monthly sales will exceed 100 million yuan in September this year, creating a business legend of tenfold sales growth in one year.
Image source: Junlebao E-commerce Flagship Store
Peter L Nilsson, CEO of internationally renowned supplier Ecolean, said at the first anniversary launch of "Zhang Zhi Shi La" yogurt that in the past year, orders for Junlebao's "Zhang Zhi Shi La" packaging exceeded 200 million packs, and among all Chinese customers, Junlebao's single-product packaging procurement volume was the largest.
"From category creator to category leader, 'Zhang Zhi Shi La' took only a little over a year, creating a new miracle in China's dairy industry," said Zhang Yun, Global Partner of Ries Consulting, General Manager of China, and brand strategy expert. "Relying on the power of the category, 'Zhang Zhi Shi La' has the potential to become a multi-billion or even ten-billion-yuan brand!"
So the question is, why have these two Hebei enterprises been able to achieve such rapid counter-trend growth in recent years? Please see the in-depth analysis below.
Analysis of the Innovation Path of the "Double Champions": What is the Secret to Sustained High Growth?
1. Become the Creator and Leader of New Categories in the Red Ocean
Looking back at the essence, through in-depth research, we found that both companies are deeply influenced by positioning theory. By differentiating and creating new species, they successfully created new categories while also occupying the leadership position, finding their own territory in the battle with giants.
Take Jinmailang as an example. Chairman Fan Xianguo stated at the 2017 Positioning China Summit that within the enterprise, to achieve growth, either create a new category and become the leader, or occupy a category and become the number one, or develop a new business model.
Jinmailang, targeting the mass market, first launched the "One Bag Half" bagged noodles in 2014, which was a great success upon launch. So in 2015, Jinmailang launched "One Bucket Half." This category has maintained rapid growth over the past five years due to its high cost-performance ratio, prompting Kangshifu to also launch similar products.
Image source: Ries Consulting
Jinmailang, moving from the rural market to the mid-to-high-end urban market, through differentiated innovation and upgrading, launched "One Dish One Noodle" in 2015, introducing stir-fried dishes into instant noodles. It pioneered the use of aerospace-grade low-temperature vacuum freeze-drying (FD) technology, meeting the needs of first-tier city consumers for delicious and nutritious instant food. The new product was revolutionary.
In 2018, Jinmailang used self-developed straight-cut noodle technology, special steaming processes, and segmented drying methods to develop the fourth-generation instant noodle, Laofanjia Instant Noodle Restaurant Noodles, which is called "a reinvention of instant noodles." The new product launch was held in Japan, where instant noodles were invented. Top Japanese ramen master Tsuyoshi Yamamoto gave it very high praise, and Japanese competitive eater Yuka Kinoshita also tested it immediately, saying "super delicious"!
Image source: Jinmailang official website
Whether it's "Da Jin Ye" for family daily life, "One Bucket Half" for large appetites, "Knife-Cut Wide Noodles" for those who love special flavors, or "One Dish One Noodle" for those who want the taste of home, Fan Xianguo's Jinmailang has been seeking breakthrough innovation - creating new categories and becoming the leader. Jinmailang continuously optimizes products to meet consumers' different scenario needs, and constantly carries out disruptive innovation in the noodle-making process itself. Fan Xianguo calls this innovation "differentiated transformation."
Take Junlebao as an example. Based on keen industry insight and strong R&D strength, Junlebao launched "Zhang Zhi Shi" yogurt in 2017, creating a new category in Chinese yogurt. Cheese is known as "milk gold"; 1 pound of cheese is extracted from 10 pounds of fresh milk, with high nutrition, rich milk aroma, and delicate texture.
In September 2017, monthly sales just after launch reached 10 million yuan; within one year, monthly sales increased tenfold, from 0 to 200 million packs, making it another billion-yuan product in China's food industry, occupying 82% of China's cheese yogurt market share. Junlebao completed the upgrade from creating a new category to leading the category, ultimately becoming the leader of the new category.
Junlebao Dairy Group President Wei Lihua speaking at the new product strategy launch conference
Adam Smith, author of "The Wealth of Nations," pointed out that the driving force of economic growth comes from specialized social division of labor. Mr. Ries, the "father of positioning," further pointed out that the driving force of business development lies in the continuous differentiation of (categories). When the original category becomes mature and saturated, a new category will enter a new growth cycle and lead the brand and enterprise growth.
From Ries Consulting's practice, when the original category growth slows down, it faces a new round of category innovation and layout. Those enterprises that achieve category innovation often break the industry cycle and achieve counter-trend growth. Jinmailang's launch of "One Bag Half," "One Bucket Half," "One Dish One Noodle," and "Laofanjia Instant Noodle Restaurant Noodles" during the downturn of the instant noodle category, and Junlebao's creation of the new cheese yogurt category "Zhang Zhi Shi La" against the backdrop of slowing yogurt category growth, are both very successful examples of applying positioning theory in the past five years, worthy of reference.
2. Innovation is the First Step, but Also "Creating Mind" - Seizing the Leadership of the New Category in Consumers' Minds
After creating a new category, it's just the beginning. It's easy to conquer the world but hard to keep it. After a successful launch, companies will inevitably face imitation by peers. How to maintain the first-mover advantage and build barriers?
"Innovation, on the one hand, is market innovation; on the other hand, it is 'creating mind,' that is, occupying consumers' minds," said Jinmailang Chairman Fan Xianguo. Innovation is the foundation for long-term development. At the same time, enterprises cannot use their internal thinking to view consumer needs; they must also pay attention to what opportunities competitors leave for you. This requires enterprises to seriously think about category and brand expression, analyze their own advantages, do quality innovation, and use "craftsman spirit" to do it to the extreme, building their own brand and characteristics.
Jinmailang launched different products positioned at different target groups, adopted different marketing strategies, and carried out all-round product upgrades. Jinmailang's 2015 new product "One Bucket Half" solved the user embarrassment of "one bucket is not enough, two buckets are too much," and combined with diversified social marketing, achieved good results.
In 2018, it launched "Laofanjia Instant Noodle Restaurant Noodles," which no longer targeted specific groups or, like other mid-to-high-end brands, claimed high-end flavors. Instead, it used the slogan "the taste of freshly made noodles in a noodle shop," specifically proposing the need to restore the noodle shop experience, allowing consumers to associate with the scene of eating noodles in a noodle shop, rather than associating with quick hunger relief or instant food scenes. Unlike traditional methods such as TV advertising, this new product used limited pre-sale on e-commerce platforms and new marketing hype, "infiltrating social processes and using experience to mobilize users' emotions."
Jinmailang sold through e-commerce channels like Tmall, and also managed content on Xiaohongshu and Weibo to build word-of-mouth and product stickiness, further optimizing user experience, thus forming a positive cycle and seizing the user mind of the new category leader of "noodle shop freshly made."
In occupying user minds, Junlebao is also good at brand building, firmly grasping the hearts of target consumers. Whether it's actively organizing taste tests for 10,000 people or using sports marketing like marathon races, Junlebao has always been good at capturing the minds of young consumers, leveraging big media and big platforms, integrating communication resources, promoting the brand enhancement of "Zhang Zhi Shi La," and building brand barriers for the new category.
Conclusion
Facing increasing global market turmoil and increasingly challenging market environments, the best way to predict the future is to "create" the future. Jinmailang and Junlebao, the growth champions of the past five years, have both found and created blue oceans in the red ocean by combining their own advantageous resources, thus achieving strong growth in adverse markets and crises.
References:
- "China's Beverage Circle 15 Brands Last Year Growth Competition: Jinmailang First, Jiawang 'Ice and Fire Two Heavens'!", April 3, 2019, "Food Business" media
Source: FBIF Food & Beverage Innovation (ID: FoodInnovation)