▎Source: Food Industry Entrepreneur
In recent years, the downturn in the macro economy, changing consumption patterns, and the impact of the internet have all had a profound impact on the development of China's food industry, leading to two contrasting views within the industry: one view holds that China's food industry's 20-30 year period of high growth has ended, and the future will see low-speed, slow growth; the other view holds that as long as you find the right direction and discover the structure of growth, you can still maintain 50-60% or even 100% growth. The reason for this clash of views is that China's food industry has entered a period of 'restructuring,' where brand patterns, product composition, and original promotion and dissemination methods all need to be restructured. Faced with such changes, what opportunities and challenges do enterprises and distributors face, and how should they grasp them?
Sluggish sales and loss of control—two key words for the food industry in 2015 In 2015, many enterprises and distributors reported significant operational pressure, with two specific keywords:
First, sluggish sales Everyone says terminal sell-through is poor. In fact, sluggish sales are just a surface phenomenon; the underlying root cause is overcapacity, meaning that homogeneous production capacity far exceeds consumer demand. In the past, we operated with a scale-oriented philosophy, resulting in a large number of homogeneous, undifferentiated products that piled up at terminals and were hard to sell. How to solve the overcapacity problem? Researching consumer needs and launching differentiated products is key.
Second, loss of control In 2015, the chairmen of Mondelez and Nestlé Greater China both reflected that enterprises could not keep up with the speed of change in Chinese consumers. Many large enterprises faced declining sales and were at a loss. What is the reason behind the loss of control? It is disconnection—disconnection from the entire consumption environment and from consumers. Not long ago, Baidu released a set of data, namely the ranking of Baidu search keywords in 2015, including one item: 'Top 10 hot search terms for the post-00s generation,' and surprisingly, I had never heard half of the words. As we all know, the core consumer group for FMCG is young people aged from teens to thirties, and their focus points are constantly changing, which requires enterprises and the products they launch to also change constantly. Without fully understanding the focus of young consumer groups, the decisions of enterprise leaders and consumer needs will become disconnected. The era when the will of enterprise bosses, managers, and distributors determined what consumers eat is over; now we should use changes in consumer demand to restructure our brands and products.
'Four Major Restructurings' Drive Future Structural Growth in China's Food Industry Based on industry cycles, economic downturn, consumption generational shifts, and changes in channels and communication, Sugar Tobacco Wine Weekly believes that from 2016 to 2020, China's food industry will enter a restructuring period. China's food industry has maintained extensive high-speed growth for 20-30 years, and in the future it will enter a stage of structural growth. So, in what aspects will the restructuring of the food industry manifest?
First, brand restructuring Looking back at the development of China's food industry, it has gone through four major stages: First, the 1.0 era, the workshop era, with simple production and local production for local sales; second, the 2.0 era, the factory era, introducing technology and equipment, starting industrialized mass production and mass distribution; third, the 3.0 era, the rise of brand awareness, achieving brands like Wahaha and Master Kong through high-altitude media投放; fourth, the 4.0 era, 'my brand era,' where it doesn't matter if you're well-known; what matters is that you like it and your circle recognizes it. Currently, China's food industry has entered the 4.0 era, achieving a leap from big brands to exclusive brands.
Second, channel restructuring This is specifically manifested in four aspects:
First, see it and buy it. In the past, channels were divided into modern channels, supermarkets, special channels, etc., but this traditional classification cannot cover many effective terminals, such as sales directly through communities, cross-border terminals, etc. In the past, when we mentioned channels, we thought of supermarkets, convenience stores, etc.; now we need to use reverse thinking to find product sales channels, that is, wherever consumers are, channels are there.
Second, omni-channel integrated development. Now the food industry has entered the omni-channel development stage, and the future will be a stage of integrated online and offline development. What is omni-channel? It is actually defined according to consumer needs. Where consumers like to buy, where they hope to buy products, enterprises should place their products accordingly.
Third, media-channel integration. In the past, media and channels were two concepts. After launching new products, enterprises would advertise through media and sell through channels. In the future, media and channels will be integrated. For example, doing product displays at terminals is both a form of communication and can also achieve sales. Or when you see a video about Qiaomama online, you can easily place an order and buy Qiaomama products, achieving the integration of media and channels.
Finally, circle management. Wherever consumers are, their circles are the product's channels and terminals. Therefore, for food manufacturers, it is essential to strengthen links with target communities, study who your core consumers are, and which terminals they frequent.
Third, restructuring of communication and promotion In the past, the understanding of communication was TV advertising, so the traditional communication method was to make consumers aware of the enterprise's products through TV ads, and then when consumers reached the terminal, they would learn more about the enterprise and products through sales assistants, thereby achieving purchase. This is a funnel-shaped communication form where the covered population decreases layer by layer. Under the new communication concept, Sugar Tobacco Wine Weekly proposed a form of community marketing.
First, what is a community? Generally speaking, groups based on common goals, such as profit (companies, micro-businesses), political platforms (political parties), beliefs (religions), or based on shared hobbies (such as brand fan groups, celebrity fan groups, self-driving tour groups, pets, parenting, etc.), or based on commonalities of people (such as industry associations, hometown associations, alumni associations, etc.), can all become communities. Communities are divided into tangible and intangible communities. For example, residents in the same community, classmates in the same class are tangible communities. Online QQ groups for pregnant women and parenting are intangible communities.
So, what is community marketing? Consumers interact closely, share their consumption experiences or stories in the community, recommend to friends with similar lifestyles, and amplify influence. Community marketing is different from the traditional funnel-shaped communication; it is a trumpet-shaped communication method that can achieve the expansion of communication and promotion.
How to do community marketing well? First, build your own brand community. For example, Qiaomama's high-value employees and partners, and high-value consumers can form Qiaomama's own brand community.
Second, establish connections with existing communities. There are many existing communities in society, such as mother groups, Xiaomi fan groups. Enterprises should closely associate with these communities and do a good job of brand and product communication.
Fourth, price restructuring For a long time, China's food industry has developed rapidly in a 'double low' environment, which is low quality and low price. Despite the temporary impact of e-commerce price comparison and inventory dumping, some enterprises' product prices have fluctuated slightly, and sales have declined slightly, but in the long run, from price route to value route is still the inevitable trend for China's consumer goods. For distributors, it is essential to choose value-based products in the future.
As we all know, in the past two years, leading enterprises like Uni-President and Master Kong have seen declines in sales and profits. Recently, Uni-President's general manager Hou Ronglong said in an interview: 'The day the media no longer compares Uni-President with Master Kong, that will mean Uni-President's transformation is successful.' Currently, the mainland market is severely oversupplied, and Uni-President will no longer launch mid-to-low price products, but will shift from quantity to quality, launching 2.0 products, with the goal of becoming the most valuable company in the mainland market by 2020. 2.0 products are marked by gross margin and pricing: instant noodles' gross margin must exceed 35%, retail price over 5 yuan; beverages' gross margin over 40%, retail price over 4 yuan. This also shows that in the future, high price and high quality will become an inevitable trend in the food industry.
'Six Transformations' to Help Go from Success to Excellence From 2016 to 2020, China's food industry will transition from the old mainstream to the new mainstream. The young-style sub-brand products launched by old leading enterprises, newly emerging expert and fashionable leading brands, and niche brands for segmented communities will together form the mainstream brand pattern of China's food industry. During the industry's 'restructuring' transition period, innovative enterprises inevitably face imitation. So how to break the negative impact of being followed and achieve the transformation from success to excellence?
First, seize the position first, brand categorization Changyu is a wine company registered brand, but for some reasons, it is shared by many wine companies, many of which overuse this brand to produce low-price products and impact the market. In response, Sugar Tobacco Wine Weekly suggested to Changyu that they connect Changyu and Cabernet, i.e., Changyu Cabernet, to make it a categorical brand, making it synonymous with high added value and high quality, thereby shielding the negative impact of low-price products.
Second, continuous innovation, single product serialization Many enterprises, after launching a good product, begin to decline because they lack the ability to innovate continuously. Only through continuous innovation and serializing single products can they sustain development. In 2015, big single products like Six Walnuts and Mizone saw rising sales, and they all launched products with different specifications, flavors, and formulas to meet the consumption needs of different groups and scenarios.
Third, rigid price system, normalized marketing I have always admired a Taiwanese brand—Zhang Junya Little Sister. The company has always emphasized 'marketing strategy, no price reduction strategy.' The product price is relatively high, but they never engage in low-price promotions. Since 2009, Zhang Junya Little Sister has continuously conducted campus and supermarket tasting and promotion activities, online and offline interactions, and in 2014, sales were around one billion yuan.
Fourth, sensory brand, visual symbolization When we see an apple with a bite taken out, we immediately think of Apple phones and computers, and it gives a sense of quality and fashion; when we hear Intel's 'ding ding ding' sound, we think the computer's processor is of good quality. In the past, people's emphasis on brand building was shown in choosing a nice name, but they did not pay attention to graphics, visual, and auditory images. This will be the direction for enterprises to build brands in the future.
Fifth, vertical alliance, vertical integration Upward, strengthen cooperation in exclusive technology development to raise the technical threshold of products; downward, strengthen channel and terminal services, such as enhancing distributors' sense of satisfaction, happiness, and honor in operating products.
Sixth, scenario marketing, product lifestyle Scenario marketing is to closely link products with the lifestyle of a group. For example, when eating hot pot, we think of herbal tea. Qiaomama's products can also achieve strong relationship marketing. For example, when watching TV, you can eat jelly pudding; when children come home from school, you can give them a jelly pudding as a reward. There are many scenarios that can achieve a close link between products and consumers.
Through these six steps, I believe enterprises can definitely grow from growth to success, from success to excellence, become iconic brands in the food industry, and thus build a high firewall against competitors.
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