During the National Day holiday, while exiting a high-speed rail station, I happened to notice a green train parked nearby. What caught my attention wasn't the train itself, though it's rare to see one now, but the "Laocunzhang" advertisement plastered on the side of the carriage. If you look closely, you'll see Laocunzhang's ads almost everywhere across the country: on buses, minivans, at small shops, and outside restaurants. Don't underestimate low-end bottled liquor brands like Laocunzhang. According to official data, in 2014, Laocunzhang's baijiu sales reached 6.5 billion yuan. While its net profit margin wasn't as high as the 30% seen in mid-to-high-end baijiu, it still generated 600 million yuan in net profit. Similarly, Longjia Garden, another northeastern low-end bottled liquor brand, saw sales exceed 2 billion yuan. This year, amid continued global central bank easing, price increases and purchase restrictions have become major focal points. Price hikes aren't limited to commodities like crude oil, zinc, nickel, and coal, but also include investment goods like housing, gold, and silver, as well as consumer goods such as vitamins, baijiu, meat products, and condiments. For stock investors, the inflation logic this year means that picking the right sector can yield substantial returns. For A-share investors, the simplest approach is to buy baijiu companies. For most A-share baijiu investors, knowing how much baijiu prices have risen and how much sales have grown this year should be a simple question. But if you ask how much low-end bottled liquor prices have risen and how much sales have grown, few investors could answer. If you ask me, I can only regretfully say I don't know either. However, according to data from 1919, on its platform, from January to August 2016 compared to the same period in 2015, low-end bottled liquor sales volume grew by 156%, and sales revenue grew by 376%. A representative from Beijing Zhengyitang Strategic Consulting Agency said, "Low-end bottled liquor has become an industry trend, entering a stage of simultaneous volume and price increases. Since 2012, the average growth rate has not fallen below 15%, and the current market size is estimated at 65 billion yuan." Based on the current 500 billion yuan baijiu market, the 65 billion yuan low-end bottled liquor segment accounts for 13% of the baijiu market. Since the overall baijiu industry growth rate is below 15%, the share of low-end bottled liquor is likely to continue expanding in the coming years. Isn't this phenomenon quite different from what you might expect? Actually, there's no need to be surprised. If you do your homework, you'll find that the total revenue of nearly 20 listed baijiu companies in A-shares in 2015 was only 111.9 billion yuan. Adding in major unlisted baijiu companies like Jiannanchun, Langjiu, Zhijiang, and Baiyunbian, with combined sales of about 60 billion yuan, the total sales of clearly identifiable baijiu companies is around 170 billion yuan, translating to a market share of roughly 250-300 billion yuan. This means that nearly 40%-50% of China's baijiu market still exists in the form of bulk liquor. Bulk liquor, as a product of a specific era, has been relegated to the low-end market in contrast to today's high-quality bottled liquor. In many major liquor-producing provinces, bulk liquor has long been eliminated by formal liquor enterprises, with only sporadic remnants in the market. However, in less developed provinces and those with lagging liquor industry development, bulk liquor still dominates the market. For example, Yunnan has an annual bulk liquor consumption market of 700,000 tons. Therefore, in our impression, the low-end bottled liquor market should be shrinking as it gets replaced by mid-to-high-end baijiu. But the bulk liquor market provides vast space for low-end bottled liquor to harvest, so instead of shrinking, the low-end bottled liquor market is growing year by year. Now, back to Laocunzhang. Many have already conducted in-depth analyses of why Laocunzhang has become the "Moutai" of low-end bottled liquor. Let me briefly recap. 1. Brand positioning on the "mass-market, affordable liquor" route In terms of brand positioning, Laocunzhang does not aim for the high-end. It consistently adheres to the "mass-market, affordable liquor" route, targeting migrant workers and low-income laborers, and insists on making low-end products its core strategy. Based on this positioning, it focuses on the three-tier main markets of counties, townships, and villages, steadily and thoroughly penetrating them. Most importantly, it aims to be a national brand, never considering itself merely a local northeastern brand. 2. Meticulous cultivation of a "channel coat" The image below shows the items that salespeople are required to prepare when visiting terminal sales outlets, as specified in the "Laocunzhang Salesperson Terminal Visit Manual." Laocunzhang selects distributors with excellent networks, helps agents choose good township second-tier distributors, and assists them in implementing the "village-to-village" project. Standard configuration: one vehicle, one salesperson, one driver, plus regular product introductions, terminal visits, and prize redemption, continuously deepening communication and exchange with terminal outlets. Any store that can sell Laocunzhang liquor, whether a small tobacco and alcohol shop, a small restaurant, or even a small stall, eventually becomes part of the "Laocunzhang" interest alliance. 3. Media placement: high-density advertising for low-end products Walking through the streets and alleys, you can see Laocunzhang's store signs, posters, and push-pull stickers at every terminal, whether tobacco and alcohol shops or small restaurants. There are also TV drama product placements, celebrity endorsements, and slogans like "Don't treat the village chief as a non-official" to bring the brand closer to consumers. Additionally, OEM manufacturing and sufficient distributor profits are important factors contributing to Laocunzhang's 6.5 billion yuan success. Many have summarized these factors, but in my view, they overlook a crucial factor, perhaps one of the most important: price upgrade. In fact, many question the so-called consumption upgrade in the market, arguing it's merely a price upgrade. This is partly true and partly not. Why is it partly true? Because we can look at the price history of low-end bottled liquor. In the 1980s, the mainstream selling price was 1-1.5 yuan per bottle; by the early 2000s, it had risen to 3 yuan per bottle; in 2003, the average price rose to 5 yuan per bottle; by 2009, it had risen to 10 yuan per bottle; and from 2012 to 2015, the average price further increased to 15 yuan per bottle. This year, amid the wave of price increases for most commodities, some low-end bottled liquors are selling for 20-30 yuan per bottle. Although the price of low-end bottled liquor has risen nearly 20 times since the 1980s, the gross margin, net profit margin, and product quality of these companies haven't improved much; at best, the packaging design has gotten slightly better. So, the price increase of low-end bottled liquor is more of a monetary phenomenon. All raw materials for producing low-end bottled liquor have risen in price. If the product doesn't increase in price, it will be eliminated. Zhu Zhiming, chairman of Zhizhuo Consulting, said, "On the surface, the upward shift in the price band of low-end bottled liquor is consumption upgrade, but it's not driven by consumer demand. Drinkers of low-end bottled liquor are very price-sensitive. If prices rise even slightly without promotions, consumers will switch to other brands." Therefore, the root cause of price increases for low-end bottled liquor is the bottoming out of traditional channel profits. Think about it: a retailer can earn 2-3 yuan from selling a can of "Tongan Ganlu" beverage, while the profit from a bottle of low-end liquor is less than that of a can of beverage. Would distributors be motivated? Coupled with rising factor prices in recent years—production, transportation, labor, rent—the already thin net profit margin of less than 10% quickly turns into losses. So, the price increase wave for low-end bottled liquor is different from that of traditional mid-to-high-end baijiu. Each price increase wave for low-end bottled liquor is a response to the industry or company facing rising factor prices. For this reason, every rise in factor prices is a test for low-end bottled liquor companies, meaning a re-division and re-occupation of consumers and markets. If a company fails to adapt to the trend during a price increase wave, upgrading its products and prices, it may face bankruptcy. Why is it partly not true? Because although the root cause of price increases is rising factor prices or a monetary phenomenon, during the price increase process, to attract consumers, low-end bottled liquor companies still continuously optimize their products and propose better promotional concepts. For example, regardless of whether the liquor sells well, we see that the design and packaging of some low-end bottled liquors are becoming increasingly stylish. As mentioned earlier, price upgrades driven by rising factor prices mean a re-occupation and re-division of markets and consumers for low-end bottled liquor companies. So, Laocunzhang is not the only company facing price upgrades. Recently, Niulanshan has released low-end bottled liquors priced at 45 yuan, 68 yuan, 78 yuan, and 108 yuan per bottle. Of course, Laocunzhang has a forward-looking vision. At the end of last year and the beginning of this year, it launched a new product called "Lecun," with a terminal price of 30 yuan per bottle. Longjiang Jiayuan launched "Super Chunrou" priced at 20-25 yuan per bottle. Heilongjiang Hecheng Liquor Industry, known for its low-end boxed liquor, recently launched two low-end bottled liquors under the "Heitudi" brand: "Da Dizhu" and "Xiao Dizhu," with the latter positioned at a circulation price of 20 yuan. During the National Day holiday, I rewatched "Nature's Great Events," which I had seen several times before. The sixth episode, "Coastal Feast," talks about the largest annual explosion of life along the Pacific coast of North America. In this explosion of life, predators that feed on herring participate in this feeding frenzy. While watching, I thought about how, through biological evolution, these predators know from thousands of kilometers away when and where a feeding feast will occur, and they prepare and travel in advance. As humans, in our economic society, whether running a business, investing in companies, or speculating in stocks, we too must anticipate important trends in advance, like these predators, to survive or thrive in this biological competition. Now, the price upgrade feast for low-end bottled liquor has begun. It remains to be seen who can catch the most prey. -END- Click the image to read directly FMCG industry's most professional and practical knowledge base [ Reply with yellow numbers to view the following keywords ] | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation |