Layoffs, store closures, capital retreat... 2022 has been bleak for new consumer brands. It is said that new consumer products have entered the second half. Indeed, from boom to bust, new consumer products have shifted from wild growth to a period of transformation. In Mr. Li Ke's view, although the market is full of uncertainty, new consumer products in the second half are still a star in the night sky and a glimmer in the darkness. No winter lasts forever; when the烟火气 (vitality) rises again, new consumer products will also gather strength to rise from the trough. At the 5th China FMCG Conference, we were fortunate to have Mr. Li Ke, a veteran in the tobacco industry, known as the "first person in tobacco and tea." He participated in the development and design of China's top four high-priced cigarettes by sales volume: "Heworld," "Da Zhong Jiu," "Tianye," and "Huanghelou 1916." At the conference, Mr. Li Ke delivered a brilliant sharing session on the theme "Ten Insights into the Second Half of New Consumer Products." The following is Mr. Li Ke's speech, organized into text for readers (Due to limited speaking time, Mr. Li Ke's ten insights could not be fully presented at the conference; with his authorization, they are presented in text form, with some deletions and modifications). The media platform is named "New Distribution," and the conference theme is "New Era," both emphasizing "new." When encountering new things, I always find them difficult. But no matter how difficult, we must carry on, so we always need to find some highlights. The first sentence that comes to mind: "Layers of darkness are the prelude to dawn." The second: Nietzsche said, "Overcome this era within yourself." So, new consumer products have entered the second half, a name I take from the perspective of e-cigarettes. In the first half of e-cigarettes, we saw the emergence of Smoore with a market value of HK$700 billion and RLX Technology with a market value of US$50 billion. When I entered the industry young, building a brand took 30 or even 50 years; when Alibaba and Tencent came to build brands, it took 10 years to create a truly systematic brand; when Meituan and ByteDance came, it took 5 years to achieve scale and system. Brands like Genki Forest, RLX, and Zhong Xue Gao became famous worldwide in just two or three years. When I was young in the industry, I found this completely incomprehensible and incredible. So, for our generation to return for a second venture, where is the opportunity? In the second half. Uniqueness The first half of new consumer products was a mixed bag; the bold rushed in, armed with internet knowledge, 3C electronics knowledge, and new knowledge, making it hard for others to compete. Thus, "change" and "newness" are the best weapons. So-called bestsellers and explosive products are born fast and die fast. My life experience tells me that things that come quickly are disasters—like typhoons, earthquakes, and mudslides. Anything that comes quickly is a disaster for our lives. The most beneficial things for our lives are, first, reading, and second, exercising—these are lifelong pursuits and cannot show results in a year or two. So why do we demand "fast, fast, fast" when developing products? From my life experience, when making products, you must calm down. It's not about comparing with competitors or just finding differentiation; in today's era, differentiation is far from enough. Steve Jobs said, "I never do market research." It's not that he didn't do market research, but rather he didn't foolishly look at Amazon or Taobao to see what sells well and then make that. Instead, he aimed for uniqueness. For example, Moutai cannot be produced outside of Moutai Town; that's its uniqueness. Running a high-end restaurant, I deeply understand that the top restaurants and the most common fast-food joints meet the same diner requirement: to be full. I think the most important thing for a restaurant is four words: appetizing and goes well with rice. But high-end restaurants are for business banquets. In such settings, people are there to discuss work; they don't have their minds on the table, frequently raising glasses. If you don't get drunk, you feel embarrassed to ask the client, "You must help me with this." All liquors, like baijiu, if you get drunk and vomit, you can still go to work the next day—three words: no hangover. Even the 20-yuan-per-jin pure grain rice wine from Northeast China claims "no hangover." Among all high-end Chinese baijiu, which one is closest to "no hangover"? Only Moutai. So when it says "good wine leads to health," people believe it and are willing to follow. That's Moutai's most endearing quality—it has uniqueness. Consensus Efficiency After achieving uniqueness, for a new consumer product, I think a very important marker of becoming a brand is consensus efficiency. When the whole society sees your product and brand and forms a conditioned reflex, you must achieve this in FMCG. For example: "Bodi 99, take a puff when you have nothing to do." One day, Liang Ning came from Beijing. Sister Liang Ning said, "Brother, you should make a short video." So I rapped at the dinner table, had my assistant film it with a phone, and posted it on my WeChat Moments. By the 7th post, it suddenly went viral: I had never seen 3 million or 5 million reads on WeChat in my life. I call that consensus efficiency. In today's world, we have several misconceptions. First misconception: thinking that with computers and phones, our lives would become more leisurely. But since we got computers and phones, fewer people are sunbathing by the wall; we've actually become busier. Second: thinking that with PPT, our communication efficiency has improved. I understood this 20 years ago: don't use PPT, because when you meet with clients and use PPT, it's like reporting. PPT is a process document, not an approval document. We should develop the habit of writing Word documents so leaders can write "approved" on them. We only predict things that have already happened, so our predictions are always accurate. I only predict what has already happened, as Comrade Lenin said, as clear as day. In Hunan, when giving gifts, if you give Diamond Furongwang, you spend 10,000 yuan on 10 cartons, but you have to explain that the cigarettes are not 25 yuan but 1,000 yuan each. Can you say that? Heworld is just one pack, but it sells for 1,888 yuan. Ten cartons equal a gift of 20,000 yuan, no explanation needed. That's the consensus effect. Today, when hosting a dinner, putting a bottle of Feitian on the table proves that I'm serious about this meal. That's consensus efficiency. So, the first thing we should do in anything is to think about how to convey our consensus efficiency accurately in one sentence. Over the years, we've said "product is king," then "channel is king." In the second half of new consumer products, you need to be the "king of kings." Trinity, Linear Extrapolation Macro outlook certainty, corporate earnings predictability, growth narrative—trinity, linear extrapolation. Nvidia, the best-performing stock in the US this year, is the best practice of the trinity:

  1. With the US economy emerging from recession shadows and strong expectations that the Fed will stop raising rates, the macro environment has become extremely favorable for high-growth tech blue chips.
  2. Nvidia's GPUs have an unshakable industry position and cash flow generation capability in the supply chain, with extremely high visibility of revenue and profit over the next few years.
  3. Finally, over the past six months, with the emergence of OpenAI's ChatGPT, Nvidia's GPU orders have soared, demand has exploded, and it has become almost the only viable large-model production tool in the new AI era, with a unique grand narrative. The positive superposition of these three factors directly pushed Nvidia past the trillion-dollar market cap mark. It also pushed the P/E ratio of a highly cyclical chip stock to a dizzying 40 times or more. Whoever Wins the Greater Bay Area Wins the World Historical patterns are often reflected geographically. In the military era, the north led the south, and the north conquered the south, with no exceptions in history, including Chiang Kai-shek's Northern Expedition victory and Yuan Shikai. In the economic era, the south drives the north, and the east influences the west. This is especially evident today: policies go from north to south, trends from south to north, and wealth from east to west. Lock the Yangtze River, make the Greater Bay Area the home base, cross the Beijing-Guangzhou line, and control the Yangtze River Delta. The Greater Bay Area base has become the strategic choice without alternative. Growth Third, Development Second Survival First There's a story: a lion chased a rabbit but didn't catch it. The fox laughed at it, and the lion self-deprecatingly said, "It was running for its life, while I was running for a lunch." But imagine if the lion realized that if it didn't catch the rabbit, it would starve to death—would it catch it? It definitely would. But if you had to struggle every day as if starving to death, how long could you last? Human energy is very limited. Doing everything perfectly is not impossible, but it's not cost-effective. A tiger walks as if sick, an eagle stands as if sleeping. It's important to maintain a low-energy state close to hibernation before drawing your sword. Your Strengths Are Your Ceiling First state your problems, and the rest will be your strengths. Trust your intuition, especially for a seasoned professional. When we move from traditional industries to new tobacco, our innovation will still be in familiar areas, but the tools must rely on new technologies. People's perception of a company or brand usually starts with a specific product, and most profits usually come from one or two SKUs. The upper limit of management is rhythm; the lower limit is focus. The upper limit of marketing is discretion; the lower limit is priority. Have insight: consumers say one thing and do another. Everyone says they like the Audi TT, but when it comes to paying, they buy the Audi A6. Do Easy Things Don't do things that are too difficult. Compare Nongfu Spring and Genki Forest. Genki Forest did one difficult thing: it needed big ideas every day, which is unsustainable. Nongfu Spring's business is about doing one thing right: buying the most expensive and best water sources, until there are no competitors left. A great undertaking must solve a fundamental problem. Smoore solved only one problem: the penetration of e-liquid. Cotton wicks couldn't achieve uniform penetration, but Smoore solved it with ceramic cores, creating a company with a market value of US$100 billion. Queen Bee Project The Queen Bee Project, simply put, is to influence those who have influence. For example, within the system, if a division chief drinks a new liquor, the section chief will follow, and the staff below will see the bosses drinking it and buy it for New Year gifts. So you must first influence the division chief to drink it. These influential people are like queen bees; all the bees gather around them. How can a table tasting find greater consensus efficiency? Differentiation is far from enough; that's a product of an era of scarcity. Like Moutai, all distributors say its quality is the best because of profit incentives. "Convenient and cordial conversation"—this has no consensus efficiency. People don't know what you do, only that you're high-end. What's the difference from other high-end products? No difference. The second point based on consensus efficiency is uniqueness. Uniqueness: Moutai can't be produced on the outskirts of Beijing, nor even in Zunyi. That's uniqueness. Whether hardware or software, if only you have it and others don't, that's resource uniqueness. Case: a trendy toy scalper app platform. New products go directly into the scalper market. For high-end products, scalpers are the most important. The scalper platform is the distribution center of the secondary market. Without a secondary market, Moutai wouldn't exist—drink a bit, store a bit, gift a bit. The essence of Moutai's marketing is the financial attribute formed by the scalper market. The true opinion leaders are not the so-called high and mighty; they are the scalpers. Each scalper has 100 high-spending customers, buying high and selling low. High-end products must be driven from high to low, and must be hyped by scalpers. Moutai is like this, as are foreign liquor, cigars, and trendy toys. Only then do they have financial attributes and can they be cashed out. Three Principles of Prediction 1. Create new markets, don't entangle in past markets. When you keep entering past markets and fighting with past market giants, you'll invest more time and energy in the original market. This battle lasts two to three years at the shortest, four to five years at the longest. You can't advance or retreat, stuck in the mud, extremely painful. Hindered by PC search, Sina and NetEase missed the mobile opportunity. One step slow, every step slow. 2. Enter from the edge, seek to be first in a vertical market, even monopolize. Don't attack the competitor's core point, always believing you're the god of war; you'll end up dying miserably. You must pursue being first in a vertical market. As long as you're first in the high-end, no matter what, when you mention it, it's very distinct. This is no longer the "number one or two" rule of the Welch era. This era is the "number one" rule. Once you become "first," you can truly cut down from that position. WeChat Pay after WeChat, Alipay under Taobao—what does this show? It's because you have the "first" that you can easily create the "second." 3. Don't attack uphill, don't rely on execution. If the competitor is many times stronger, can this battle be won? The answer is yes. Because I almost tilt all executives, manpower, and resources. The company, from top to bottom, cuts back and forth on the point of satisfying tobacco flavor. This posture is incomparable for competitors. But prediction alone is not enough. After finding such a direction, how to cut in? Cutting in is not a sweeping entry; that won't work. Or if you don't have such resources, you must first find a breakthrough point. That is, find a key point in the big direction. Breakthrough Point Find the key point that can move the whole situation The industry is full of buzzwords like layout, closed loop, etc. When you think this way, you first fall into the big company model. Think about what differentiates you from big companies and where the breakthrough point is. If there's no point of breakthrough, you're no different from any other mediocre company. Everyone is mediocre; why should you win? Because you want to win? Because you're a good person? These are meaningless. So, find a breakthrough point like an awl. WeChat Red Packet: Tencent had over 30 million payment users, and no matter how many years or how much investment, it couldn't move. One WeChat Red Packet now has about the same daily users as Alibaba. The peak on New Year's Eve almost exceeded Alibaba's Double 11. At the time, Ma Yun wrote an internal email saying it was a Pearl Harbor sneak attack. I think it was the Eight Banners entering the pass. Even with a million troops, it can't withstand a focused point repeatedly striking. Like an axe cutting wood, no matter how many routes you come, I only go one way. The breakthrough point is the point of life and death. If you can't find such a point, you can't cut in. The breakthrough point must align with the big direction and the big prediction. Because this is an era where a single product drives the system. Apple cut in through the phone, and the entire industry was transformed. This is like "cigarettes without tar"—such a simple phrase that can be accepted by the masses is very important. In the mobile internet era, there are too many choices, and users open too many windows. The only thing users need is simplicity. Summary: Where is the dividend of reform? Where is the potential for development? Where is the goal to catch up? When making products, it's product is king; when doing channels, it's channel is king. In today's era, you must be the king of kings. Traditional brands are companies that combine product and channel. But product-channel integration is not enough; you must also look upstream for technology, even to the upstream of your upstream. Behind Uniqlo's success, another company was also made—Toray, a fabric company. Uniqlo realized early that true competitiveness lies upstream in the apparel industry, in fabric breakthroughs. For example, the excellent Uniqlo down jackets that sell tens of millions of units couldn't be made without Toray. Product-channel companies must go further and care about your upstream's upstream. How to achieve zero calories and zero sugar? How to achieve zero alcohol in beer? These are not achieved in beverage factories, food factories, or breweries, but rely on upstream and technology. Focus on monk fruit extract sweeteners, not erythritol and other sweeteners. The technology of the upstream's upstream is where your product can form huge differences. Product is king and channel is king are both correct, but in today's era, a national brand must be the king of kings. PS: Friends interested in the on-site speech content can follow the recent posts on the "New Distribution" WeChat official account. We will organize and publish all speakers' speeches for readers. Click Read Original to see more of the 5th China FMCG Conference and the 1st China FMCG Distributor Conference...