"According to incomplete statistics, private labels account for only about 7% in China, indicating significant growth potential. We believe that in 3-5 years, this will be a rapid growth phase. This year, we have incorporated ODM as a strategic supplement to our overall business direction, complementing and promoting our branded products." Zheng Tongjian, Vice President and General Manager of Marketing Center at Leyuan Health, said this in an interview with New Distribution. ODM involves providing customized product development and production services for large retailers, channel partners, or brand owners. The ODM model is well-developed in Europe and America. Looking at large retailers introduced from abroad to China, such as Costco and ALDI, we can see that private labels account for over 50% of their store products, sometimes up to 80%. In contrast, private labels in Chinese supermarkets account for less than 10%, indicating slower development. However, this situation is gradually changing. Previously, products reached consumers through a chain of manufacturer, distributor, sub-distributor, store, and consumer. With the evolution of new retail models, such as supermarkets, e-commerce, live streaming, and hard discount stores, and the changing dynamics of supply and demand, the traditional product distribution model has transformed. Currently, a consumer-demand-driven product logic is permeating every link in the chain. As channel partners consider how to select products for consumers, ODM service providers with R&D capabilities, product realization, assurance, and service capabilities have risen, offering more suitable product solutions for channels. Leyuan Health, a comprehensive beverage company driven by both ODM and branded business, is seizing the opportunities presented by the transformation of the industry's distribution model. This article uses Leyuan Health as a case study to illustrate its strategic layout, dual-business development, and innovation-driven growth. ****Leyuan Health's 2024: Seizing Five Industry Trends Riding the Wave Since its establishment in 1998, Leyuan Health has been deeply involved in the juice and fruit/vegetable juice sector for nearly 30 years. Headquartered in Hangzhou with production bases in Deqing, Zhejiang, Leyuan Group has become a comprehensive beverage enterprise with full capabilities in R&D, production, sales, and ODM services. Throughout its development, Leyuan Health has not only innovated in branded products but also accumulated rich experience and outstanding strength in ODM, gradually becoming a leader in this field. At the beginning of 2024, Leyuan Health proposed five major development trends under the theme "Riding the Wave":
1. Healthy Eating
2. Street Drink Culture
3. Private Labels
4. O2O Model
5. Quality and Affordability These five trends define what Leyuan Health intends to pursue. First, under the healthy eating trend, Leyuan Health has launched a series of fruit/vegetable juices, pure fruit drinks, and low-temperature brewed products, emphasizing "clean labels" to meet consumer demand for healthy beverages. By using traditional processes like simmering, Leyuan reinforces the health image of its products. In response to the street drink trend, Leyuan Health implements an orderly expansion strategy, integrating resources to enhance supply chain efficiency and R&D capabilities, ensuring product diversity and innovation, successfully creating trendy street beverages to cater to younger consumers. Regarding private labels, compared to foreign markets, China has significant room for growth. Leyuan Health aims to capture 80% of the ODM market share in China and become the industry leader. The O2O trend drives Leyuan Health to deepen online-offline integration, strive for ultimate service efficiency, and connect consumer demand through direct operations and category expansion, with the goal of increasing O2O's share from 30% to 50%, achieving convenient "everything to home" service. Under the trend of quality and affordability, Leyuan Health optimizes procurement and R&D processes to offer high-quality products at competitive prices, thereby enhancing repurchase rates—a strategy particularly important in the FMCG industry. From New Distribution's perspective, Leyuan Health's strategic layout demonstrates its sensitivity to market dynamics and ability to respond quickly to changes. In an era of uncertainty, Leyuan Health finds certainty by following industry trends, and this forward-looking strategy deserves recognition and reference. Next, New Distribution elaborates on Leyuan Health's two major business segments and how they develop and plan to achieve strategic goals. ********Leyuan Health's ODM Business Years of Accumulation, Outstanding Strength Through nearly 30 years of continuous R&D and innovation, Leyuan Health has established a full-category, full-system, full-chain supply system in ODM, capable of meeting diverse and personalized customer needs. To date, Leyuan Health owns two self-built production bases and seven advanced automatic filling lines, covering an area of 117,800 square meters. Additionally, by establishing stable strategic partnerships with raw material suppliers from 23 countries, it ensures high-quality and cost-effective raw materials and can quickly adjust procurement strategies during supply fluctuations to protect production. Image source: Leyuan Furthermore, Leyuan Health has deployed an extensive flexible production cooperation network across the country. When facing customized production needs, many large factories lack adaptability, and small factories may not meet technical standards. Leyuan Health leverages its flexible production strategy to ensure rapid growth in ODM business, enabling it to quickly capture and respond to market changes and provide tailored product development and production solutions. As a significant ODM service provider in the beverage industry, Leyuan Health has established solid partnerships with several well-known retailers. In collaboration with Pangdonglai, it launched a 50% juice series and a 100% FC juice series that are well-received by consumers. The NFC juice series developed with Hema maintains an annual sales growth rate of over 25%. The strategic partnership with Yonghui Superstores introduced a small lime juice beverage that significantly enhanced consumer loyalty. Additionally, large-capacity juices customized for Metro have successfully attracted family and corporate group purchases. In online e-commerce channels, it launched "Miao Manfen" with Tmall; in O2O channels, it cooperates with Pupu Supermarket, JD Daojia, and Meituan Maicai; in the foodservice channel, it customized small lime juice for Haidilao and partnered with Peet's and Costa to launch juice-flavored coffee. Image source: Dingdong Maicai, Yonghui, Haidilao Leyuan Health, as a leading ODM service provider, aims to become China's "ODM King." Zheng Tongjian stated in an interview with New Distribution: "Our benchmark is Spain's AMC, which covers almost all of Europe's ODM business with up to 3,000 SKUs. In the process, it also does very well with its own brands. My plan is to grow into a company like that, or even surpass it." Zheng Tongjian, Vice President and General Manager of Marketing Center at Leyuan Health ********Leyuan Health's Own Brands Deep Roots, Leading Innovation In addition to ODM, Leyuan Health operates three major brands: Leyuan Beverages, Zero Fruit Workshop, and Fruit & Vegetable Secrets. When it comes to branded products, Leyuan Health's own brands are also competitive. Products like "Leyuan Small Lime" and "Zao Cheng Hao NFC Juice" have become leaders in their categories. In terms of product categories, Leyuan Health focuses on healthy and diverse juice products, including but not limited to fruit/vegetable juices, pure fruit series, ambient and low-temperature beverages, clean-label products, and Chinese-style simmered series. Its product line includes small lime juice, grapefruit tea, double grapefruit juice, prebiotic prune drink, and Leyuan Yipin 50% juice drinks, as well as 100% juice, NFC juice, and Zao Cheng Hao series, aiming to meet market demand for healthy beverages. Image source: Leyuan Zheng Tongjian told New Distribution: "Currently, our ODM and branded business are roughly 50:50, which is a healthy and balanced ratio. We have a complete strategy for brand planning and product iteration." In juice drinks, the Leyuan Beverages brand targets trendy street drinks. It leverages its strengths to quickly convert popular street drink flavors into its own products. Zheng told New Distribution that this brand series benchmarks against Zara in the fashion industry, keeping up with mainstream trends. In NFC, the Zero Fruit Workshop brand has been producing NFC for 11 years. This year, it will continue to expand upward, enhancing the experience for high-end consumers and innovating in superfruit categories and fruit+vegetable combinations. Additionally, it will increase the development of the 100% FC juice series. The success of the 100% FC juice series with Pangdonglai validates its potential, so it will continue to invest in LK channels nationwide to allow more consumers in third- and fourth-tier cities to experience high-quality products like 100% FC juice. In the simmered series, Leyuan Health innovatively launched the Chinese-style health simmered series last year, which became an instant hit like the small lime juice, receiving positive feedback in channels like Hema and RT-Mart. This year, it will increase development in this series. Image source: Hema Finally, regarding innovative tea beverages, Zheng Tongjian revealed: "Leyuan Health always insists on making every product with care. We are very optimistic about the healthy development trend of fruit tea and sugar-free tea. We firmly refuse to use tea powder and insist on using tea leaf extracts for our tea products. We are currently planning and exploring this area." New Distribution believes that Leyuan Health's successful parallel development of ODM and branded business is due not only to its advantages in upstream raw materials, production equipment, and supply chain management but also to its outstanding capabilities in R&D, product design, and marketing resources. With its professional R&D team and adherence to the "clean formula" principle, Leyuan Health continuously introduces innovative products that meet consumer health needs. This not only strengthens its ODM services but also promotes the diversification and personalization of its own brands, increasing market share. In formula R&D and product design, Leyuan Health has a team of top industry talents. They are well-versed in market trends and consumer needs, dedicated to developing natural, organic, low-sugar, low-calorie healthy beverages. Leyuan Health's product line is rich, covering various flavors and needs, and is highly professional in product innovation and customization. In marketing resources, through its extensive marketing network and deep partnerships, Leyuan Health achieves strong market coverage, with over 100,000 national outlets and a community user base of over 5 million, enabling extensive brand exposure and promotion. It not only provides opportunities for partners to co-develop products but also offers a range of customized marketing services, such as PR communication, product display, design, and brand event support. Leyuan Health combines the flexibility of ODM with the brand power of its own labels. By deepening production technology, strengthening R&D innovation, optimizing supply chain management, and meticulous R&D design, it has achieved differentiated competitive advantages in a fiercely competitive market and successfully realized the dual-wheel drive development of branded and ODM businesses. Final Thoughts From the case of Leyuan Health, we can see that the rise of such comprehensive enterprises with both manufacturing and branding capabilities is essentially a dividend brought by the transformation of the FMCG distribution model. By co-developing products with enterprises like Leyuan Health, they connect high-quality upstream products with downstream consumer demand. The era when retailers simply opened stores, stocked shelves, and profited from whoever could pay for shelf space is over. In the future, major channel partners will focus on identifying target customer groups, planning categories, and collaborating deeply with upstream partners to create product assortments that meet consumer needs. These channel partners, in various forms—whether B2B platforms, new retail, community group buying, live streaming e-commerce, snack discount stores, or other new species—will become significant forces in the product distribution model, greatly impacting brands, distributors, and retailers in the FMCG ecosystem. Some products still on shelves, and brands without brand advantages, supply chain advantages, or especially manufacturing capabilities, will lose their survival space. Meanwhile, opportunities will be reserved for enterprises like Leyuan Health that possess supply chain strength, and they will grow in this wave of transformation.