Article by Feng Huakui, founder of Naughty E-commerce

Nearly 100 million yuan share buyback: Beingmate restructures its team

On October 22, Beingmate announced that it would use self-raised funds of 30 million to 100 million yuan to repurchase 18.6916 million shares, accounting for about 1.83% of the company's total current share capital, to bind the interests of core employees.

This news boosted employee morale. But why announce the buyback at this time? It is actually one of a series of actions after founder Xie Hong's return.

Beingmate was one of the first maternal and infant brands to rise in China. Founder Xie Hong established the brand in 1992. During the 2008 melamine scandal, it was one of the few safe brands, and leveraging that domestic milk powder incident, it jumped to the top three in overall market brand ranking. In 2011, Beingmate went public, and by 2013, sales reached a peak of nearly 6.2 billion yuan.

However, three months after the 2011 listing, Xie Hong withdrew from management due to health reasons. After 2013, with the development of e-commerce and the surge of imported milk powder, Beingmate declined year after year. Multiple management changes failed to reverse the trend. Last year, it still suffered a huge loss of over 700 million yuan, with sales only around 2.6 billion yuan, and was warned by the CSRC about potential delisting.

(Beingmate Chairman Xie Hong)

With Beingmate in trouble, Xie Hong, who had been behind the scenes for seven years, felt obligated to return. In early 2018, he became chairman and formed a new team. In July, he invited Bao Xiaofei, a veteran who had worked at Wyeth for 13 years and then moved to Friso, to serve as general manager.

(Beingmate's new general manager Bao Xiaofei)

Xie Hong gave the new team a free hand. A detail: in the appointment announcement, Beingmate emphasized: "In company operations, the chairman fully authorizes the general manager, and the general manager has long-term and stable development plans for the company."

Authorization alone is not enough; incentive measures must also be adjusted. That is the background of the opening scene: using nearly 100 million yuan to incentivize the new team and boost morale.

Six months after Xie Hong's comeback, he built a brand-new management team and gave it full authorization. The new team has not been idle and quickly took new actions.

New retail restructures channels

In September this year, Beingmate partnered with JD.com and the Forbidden City to hold a special press conference at the Summer Palace. At the event, they launched a new product combining Forbidden City court culture: an 800g limited edition of Beingmate Aijia, designed exclusively by court culture designers, fully distributed through JD's unbounded retail. Feng Yi, head of JD's FMCG business unit, also spoke at the event.

The driving force behind this event was Beingmate's new general manager Bao Xiaofei. Choosing the 800g Beingmate Aijia to combine with the Forbidden City has quite a story.

Beingmate Aijia is a bestseller in Beingmate's current product matrix, accounting for 50% of Beingmate's sales. However, Beingmate had long struggled to find a good product for online sales because the 900g packaging was designed for offline channels. Beingmate hoped to have a product that could operate both online and offline.

So they designed an 800g product. But if the 800g product differed from the 900g only in packaging and content, the 800g would lack competitiveness online, and offline channels would also be dissatisfied.

Brands typically resolve online-offline conflicts through differentiated packaging, but Bao Xiaofei used a new approach: differentiated culture.

The Forbidden City culture has become an internet trend. The tape printed with "I know" (朕知道了) was a hit a few years ago, making many brands realize that traditional culture can perfectly combine with contemporary brands. Since then, major brands have launched co-branded marketing with the Forbidden City. In recent years, with the popularity of Qing dynasty dramas, an online cultural trend of "I like life in this palace" has formed.

Bao Xiaofei, skilled in packaging and marketing, realized that if Beingmate wanted to achieve Xie Hong's goal of rebranding, it couldn't just find breakthroughs within the maternal and infant circle; cross-industry collaboration was the opportunity. Thus, the partnership between Beingmate and the Forbidden City came about.

Why choose JD.com?

Behind the cultural trend is brand-user interaction, especially with young groups. Now, most milk powder buyers are post-90s, a generation that grew up on the internet and has a natural affinity and stickiness to online culture.

So Bao Xiaofei hoped to attract young consumers through social and marketing methods, cultivate their stickiness, and stimulate their interest in Beingmate.

Especially since third- and fourth-tier markets have become the main growth driver, major brands want to penetrate lower-tier cities. However, Beingmate currently has only 7,000 to 10,000 physical stores nationwide, which cannot fully cover the market. Now, through JD's unbounded retail, consumers in third-, fourth-, and fifth-tier cities can quickly purchase Beingmate products. Bao Xiaofei said, "As long as JD is there, my life is easier."

In fact, besides the cooperation with JD in September, Beingmate also reached a new retail cooperation with Alibaba in February this year. Beingmate has been aggressive in e-commerce, having been the category champion on Tmall's Double 11 for many consecutive years. Last year's Double 11 saw its fan base exceed 700,000. This year's 6.18 also achieved good results.

Xie Hong, born in the 1960s, pays close attention to e-commerce and likes to embrace new technologies, methods, and changes. Therefore, he has made great efforts in channel restructuring. At the 2018 Global Maternal and Infant Conference, he said the company would boldly test new retail and unbounded retail, implement omni-channel marketing, not just simple online-offline, maternal and infant, or supermarket channels, and would lay out an open maternal and infant ecosystem.

In the first half of the year, they launched a full-channel brand communication campaign through offline "store events" and online "Beisao Talks" linkage, as well as Shandong TV's "Parenting Battle" program, recruiting many new users.

These measures greatly boosted distributor confidence.

Counter-trend growth: Where does Beingmate's confidence come from?

Of course, team restructuring and channel restructuring are important, but the most critical is that the product must be strong enough.

If the 2008 melamine incident gave Beingmate a chance to soar, then the milk powder formula registration system implemented in 2017 gave Beingmate another opportunity.

After the registration system was implemented, Beingmate obtained the national registration formula approval number 001. Although 89 companies received approval numbers in the same batch, earning the reputation of "National No. 1" is not easy.

Beingmate's R&D team has nearly 300 people, and its R&D strength is relatively strong in the industry. Currently, Beingmate has secured 17 formulas, 51 SKUs, and exclusive registration numbers 001-009. This means Beingmate has almost exhausted all registrable formulas in the industry, which is undoubtedly its greatest asset.

By restructuring products through Forbidden City culture, restructuring channels through new retail and unbounded retail, and restructuring the team through talent introduction and incentive systems, Beingmate has completed partial restructuring in the more than half a year since Xie Hong's return. These restructurings have formed Beingmate's comparative advantage in third- and fourth-tier markets, thus achieving performance takeoff within a few months.

The current economic environment is sluggish, and consumption is polarizing. This year, with the implementation of the infant formula registration system, new policies, and the efforts of domestic milk powder companies, the market landscape is being reshaped. Foreign milk powder is sinking to third- and fourth-tier markets, while domestic milk powder is sparing no effort to conquer first- and second-tier markets, almost engaging in hand-to-hand combat.

It is not easy for Beingmate to achieve significant performance growth at this time. I hope they can make greater breakthroughs in the upcoming fourth quarter, after all, Double 11 and year-end promotions are the most critical times for ensuring annual sales.

Source: Naughty E-commerce (ID: tiaopiEC)

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