Click image for details Looking at other brands that dominate first- and second-tier mainstream markets, they have all created a unique banner in a certain beverage category. But Jinmailang has yet to find a mature category as a breakthrough point, which will constrain its further development in the future. Recently, Jinmailang held a new product launch conference. It released new products including bottled water and vitamin drinks, positioning bottled water as mid-to-high-end, and highlighted the concept of "soft water" as the focus of promotion and marketing. In 2016, Uni-President sold its stake in Jinmailang, ending the 10-year "marriage" between Jinmailang Beverages and Uni-President. After the "split," Jinmailang broke its previous strategy of focusing on low-end products and launched a series of mid-to-high-end new products. Marketing expert Lu Shengzhen believes that Jinmailang, whether in instant noodles or beverages, has always been in the shadow of Uni-President and Master Kong, especially lacking standout performance in first-tier markets. After independence, Jinmailang's pursuit of market share in first- and second-tier markets is a wise decision, but in the future, pressure from brand, category building, and market cultivation capital will determine whether Jinmailang's channel upgrade succeeds. Pressure of Channel Upgrade In May 2016, Uni-President transferred 47.83% of Jinmailang Beverages' equity to a food and beverage private equity fund called Junchi Capital for 1.291 billion yuan. After the sale, Uni-President no longer held any stake in Jinmailang Beverages. This also marked the end of the "marriage" between the two parties since 2006. Uni-President had stated that since 2006, when it established Jinmailang Beverages as a joint venture with Jinmailang Investment Co., Ltd., the strategy was to penetrate 70% of China's vast rural market and 30% of first-tier cities. In other words, Uni-President hoped to use Jinmailang to cover third- and fourth-tier markets, including rural areas. Before the divestment, according to Uni-President's financial reports, from 2014 to 2015, Jinmailang's revenue and net profit faced a double decline. FMCG marketing expert Chen Haichao told reporters that in recent years, the overall beverage market has been pessimistic, prompting Uni-President's beverage segment to adopt a new business strategy, launching high-end hit products like Xiao Ming Tong Xue and Hai Zhi Yan, which brought high returns. In 2015, these two products generated over 2.5 billion yuan in revenue, which was already on par with Jinmailang's 2015 performance. In contrast, Jinmailang did not have strategic big products to support it. In Chen Haichao's view, Jinmailang's corporate strategy has always been to follow Master Kong and Uni-President, resulting in insufficient research on consumer needs and industry trends. After independence, Jinmailang launched a series of new products, including "Liang Bai Kai" (cool boiled water), positioned at mid-range retail prices. In beverages, Jinmailang catered to market trends by launching the "Mangdun Town" series of water beverages, targeting the post-90s generation. However, a reporter's visit to major convenience store chains in Beijing found that these water beverages launched last year were not available, and they were rarely sold in major supermarkets. The reporter also found that Jinmailang products, including iced black tea and honey grapefruit, still had promotional markings like "One More Bottle" on their packaging. When interviewed, Jinmailang stated that its beverage business performed well both online and offline, but in the beverage industry, it had not yet achieved full channel coverage. Lu Shengzhen pointed out that after Uni-President divested its stake, Jinmailang must have recognized the huge consumption potential in the mid-to-high-end market. From a strategic perspective, entering first- and second-tier markets is a wise move, but for Jinmailang and its marketing team, over the past decade, most of its product channels have been concentrated in rural and urban-rural fringe areas of third- and fourth-tier markets. First-tier markets like Beijing, Shanghai, Guangzhou, and Shenzhen have become a familiar yet unfamiliar market environment for Jinmailang. Gao Jianfeng, general manager of Boguan Consulting and a senior marketing expert, believes that after loosening Uni-President's "tightening curse," channel upgrade is definitely necessary, but for years Jinmailang's channels have been laid out in third- and fourth-tier markets. Relying on hit products to gain share in first- and second-tier markets is difficult. The success of Uni-President and Nongfu Spring's hit products relies on brand influence and extensive channels. Compared to them, Jinmailang needs more capital and time investment. The experts above believe that Jinmailang's pursuit of channel upgrade requires capital support on one hand, and sufficient time and capital to accumulate brand awareness on the other. These are necessary conditions for Jinmailang to expand its share in the beverage market. "Traveling Light" Is Not Easy At a recent launch event, Jinmailang promoted the concept of "light," making high-end bottled water and vitamin water the key marketing products for 2017. Additionally, Jinmailang Chairman Fan Xianguo publicly stated that Jinmailang invested over one billion yuan in an intelligent upgrade project for food and beverage, covering beverages, noodles, flour, and other sectors. In the future, it could double tax revenue, equivalent to creating another Jinmailang. Since independence in 2016, Jinmailang has catered to the health trend in the beverage market, launching a series of new products. In bottled water, it promoted the concept of "soft water," positioning the product in the mid-to-high-end segment. Regarding Jinmailang's brand strategy, Zhu Danpeng believes that Jinmailang's promotional concept differs from the current mainstream pure water and mineral water promotions, aiming to create differentiated competition. However, given the current domestic bottled water market environment, whether consumers will "buy" Jinmailang's "soft water" concept remains unknown. But Lu Shengzhen believes that the water market is inherently a market environment with many concepts. Finding a foothold by exploring different selling points is a competitive and marketing method. In beverages, Jinmailang also promoted the concept of health and light beverages according to market trends. However, Zhu Danpeng believes that Jinmailang's moves in the beverage sector have not escaped the shadow of Uni-President and Master Kong, still following their footsteps intentionally or unintentionally. With this lagging layout, new products are unlikely to achieve significant breakthroughs. For Jinmailang's overall brand, its main performance still comes from noodles. According to previously disclosed financial reports, in 2015, Jinmailang's noodle business revenue exceeded 10 billion yuan, second only to Uni-President and Master Kong, far higher than the beverage business's approximately 2.5 billion yuan revenue in the same period. In this regard, Zhu Danpeng believes that Jinmailang previously hoped to use Uni-President's channels and influence to expand its beverage channels, but during its time under Uni-President, Jinmailang's beverage channels and operations were always separated from Uni-President's products, so it did not bring more opportunities to Jinmailang Beverages. After the split, the beverage business may need to rely on noodle channels for a period, which is not conducive to its long-term development and may dilute the brand's overall influence and core competitiveness. Chairman Fan Xianguo's strategic plan and the statement that "introducing Junchi Capital marks the company's successful first step into the capital market" have led outsiders to speculate that Jinmailang may seek a listing. The reporter sought confirmation from Jinmailang, but Jinmailang did not respond to the listing rumors. Regarding the listing rumors, Zhu Danpeng told reporters that given the same product positioning in third- and fourth-tier markets, and the shelved listing of Baixiang Group, Jinmailang may face certain obstacles in listing in the future. Jinmailang's active expansion of upward channels is largely to avoid Baixiang Group's experience. The experts' analysis is divided. Looking at other brands that dominate first- and second-tier mainstream markets, they have all created a unique banner in a certain beverage category. But Jinmailang has yet to find a mature category as a breakthrough point, which will constrain its further development in the future. Source: China Business Journal -END-