---
title: "New Consumption: A Year of Life and Death"
description: "As of the end of June, 2022, the new consumption sector has seen no encouraging news, with capital retreating and widespread pessimism. The question remains: does new consumption have a future? This article explores the challenges and strategies for survival, emphasizing product quality, repurchase rates, and channel diversification."
author: "AI财经社"
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published: "2022-07-15"
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# New Consumption: A Year of Life and Death

> As of the end of June, 2022, the new consumption sector has seen no encouraging news, with capital retreating and widespread pessimism. The question remains: does new consumption have a future? This article explores the challenges and strategies for survival, emphasizing product quality, repurchase rates, and channel diversification.

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As of the end of June, 2022 has entered the second half, but no encouraging news has emerged from the new consumption track. Against the backdrop of capital retreat, the market is flooded with pessimistic voices about new consumption. Many investors are wary of the term, and some investment institutions have already shifted their focus to hard technology. So, does new consumption still have a future?
In 2022, the investment boom in new consumption took a sharp downturn. As the first half of the year draws to a close, there are still no signs of significant improvement in the entire consumer sector.
From the first-quarter results announced by major listed companies in the consumer sector, most have seen revenue growth without profit growth, and some have even fallen into losses. The second quarter remains difficult to be optimistic about. On the macroeconomic data front, from January to May this year, China's total retail sales of consumer goods reached 17.1689 trillion yuan, a year-on-year decrease of 1.5%. Among them, May saw 3.3547 trillion yuan, a year-on-year decrease of 6.7%.
In the capital market, some newly listed new consumption companies have been abandoned by investors, with stock prices falling below the issue price and market values declining. The performance of the secondary market has transmitted to the primary market, causing the heat of new consumption investment to plummet. According to incomplete statistics from "Finance World" weekly, in the first quarter of this year, financing amounts in multiple new consumption tracks were less than 10% of last year's figures. The era of becoming famous overnight through "Douyin + Xiaohongshu + Taobao top anchors" is gone, and some media have even shouted slogans like "Within 3 years, 99% of new consumption companies may die."
As investment enthusiasm fades and consumers become more discerning, changes in market structure have already led to the elimination of some brands. When the entire industry reaches its most dangerous moment, does the new consumption industry still have a future? After the capital retreat, how will new consumption companies survive?
**01 The Year of Life and Death: How to Survive?**
For most new consumption brands, 2022 is a year of life and death. Capital retreat, peak traffic, and sluggish consumption have become three major obstacles facing brands. Without the support of capital and traffic, companies will rely more on their own造血能力 (self-sustaining ability) to operate, posing significant challenges to cash flow and profitability.
In the view of Pan Pan, managing partner of Tiantu Investment, the current market is a stress test for all new consumption brands, testing their ability to respond to black swan events and economic fluctuations. "Realistically speaking, this is a process of market reshuffling and survival of the fittest, but it is also a process of washing away the sand to reveal gold." Photo/Visual China
Facing numerous difficulties, some brands can no longer hold on. According to media reports, some new consumption brands with GMV exceeding 1 billion yuan are seeking acquisition, with asking prices less than 10% of their peak valuations. To survive, some new consumption companies have begun to reduce costs and increase efficiency, shrink business lines, optimize personnel structures, and control various cost expenditures.
Crisis is both a challenge and an opportunity; what remains after the waves are the gold. In the face of the current situation, some companies have undergone multiple tests and still achieved good growth, and some loss-making companies have even turned profitable. In the first quarter of this year, Luckin Coffee, known for its aggressive expansion, announced profitability, injecting a shot of confidence into the entire new consumption industry.
In fact, unlike the previous "bloody sprint," profitability has become a common pursuit for all new consumption companies, as it determines whether they can persist and see the dawn of victory. In the view of Zhou Jianhong, investment director of Tsingshan Capital, the consumer industry should be a cycle of making good products and gaining repurchases. The model of burning money for expansion is not suitable for this industry. "Only by making good products, achieving repurchases, and successfully turning a profit can a company enter a virtuous cycle and go further." Some new consumption companies have gradually realized that past approaches can no longer better meet the growing consumer demand and the ever-changing market environment. Genki Forest told "Finance World" that companies need to strengthen their competitive barriers and profitability.
Under the urgent need for profitability, the market has raised higher requirements for multi-product operations, consumer repurchase, and refined operational efficiency. Previously, these things were just icing on the cake, but now they may directly determine whether a brand can survive. "If we used to look at growth first and then efficiency, and then change efficiency after growth, today it's reversed: first efficiency, then growth, and even efficiency without growth, because that's how you survive," Pan Pan told "Finance World."
One of the few profitable brands in the first tier of new consumption is "认养一头牛" (Adopt a Cow). The company told "Finance World" that they have maintained stable and sustainable business growth for many years and have been "unswervingly" building their own pastures and factories to further enhance profitability.
Wang Xiaolu, the leading brand of tiger-skin chicken feet, emphasized channels. According to Wang Xiaolu, the offline sales channels built over the past two years are bringing strong acceleration to its growth. In the first quarter of 2022, its offline sales increased by over 90% year-on-year. As of May in the second quarter, offline sales accounted for nearly 70% of total sales, allowing Wang Xiaolu to not be constrained by traffic and platforms.
Photo/Wang Xiaolu
Amid the industry upheaval, both investors and consumers have become more discerning than before. Facing this difficult exam, all brands are using every means to cross the cycle and deliver satisfactory results to investors and consumers. In the process of communicating with multiple investors and new consumption brands, "Finance World" found that many brands and investors unanimously mentioned several common keywords: product—good products are always the core competitiveness of consumer goods; users—always grasp the pain points and needs of consumers; channels and supply chain—control your own destiny. The "newness" of new consumption lies in new products, new demands, new channels, and supply chains. However, in terms of specific implementation paths, how to make good products and achieve profitability? How to maintain close communication with users and solve their pain points? How to better break through channel and supply chain limitations and grasp brand destiny? These remain questions that the entire consumer industry needs to think about and solve.
"Product innovation and service differentiation are the foundation of any consumer enterprise. Many brands that claim to have 10, 50, or even 100 years of history will be abandoned by consumers if their products and services cannot keep up," Pan Pan analyzed.
**02 No Repurchase, No Future**
Under the big test of the new consumption industry, what are the surviving brands doing? Undoubtedly, the first priority is still to polish products. High-quality products are always the most important moat for consumer companies. Around products, different companies are making efforts in user research, raw material control, and creating products that satisfy consumers.
When communicating with "Finance World," Wang Xiaolu summarized its core competitiveness as "really delicious enough." Even in the consumer industry, such confident statements are rare. To ensure its products are "delicious" enough, Wang Xiaolu has specially formed a user evaluation team of a thousand people and given it "veto power." "Only when more than 70% of the evaluation users express willingness to buy will we consider launching the product; otherwise, we will never launch it."
Similarly, to launch good products, "Adopt a Cow" recruited over 1,000 "co-creators" online during the launch of its A2β-casein pure milk, inviting consumers to offline events in Hangzhou to experience and evaluate the new product still in development. Later, this product sold over 200,000 boxes in its first month on the market. Photo/Adopt a Cow
Genki Forest also mentioned that in the iteration of its products, they have established a complete testing and verification mechanism, using a large amount of test and verification data to replace and upgrade products, ensuring that the products launched meet user needs.
Another aspect of carefully polishing products is that these brands are all striving to achieve repurchase. Repurchase is an important prerequisite for consumer goods to be profitable—possibly second only to gross margin. Multiple brands and investors told "Finance World" that consumer brands without repurchase have no future and are just a flash in the pan under the capital wave.
"We must truly pay attention to whether users buy your products and whether they are willing to repurchase after finishing a bottle. All situations where repurchase cannot occur mean the approach is wrong," Genki Forest said.
"For a consumer product, the repurchase rate is a very important indicator. Without a repurchase rate, it's a one-off deal with no second or third time," Wang Xiaolu told "Finance World," revealing that the repurchase rate for its tiger-skin chicken feet category is nearly 30%.
Another core focus beyond products is deep communication with users, which includes marketing, brand building, and other means to occupy user minds, as well as listening to user voices extensively and forming good information communication between the company and users.
New consumption brands are mostly marketing experts and are also skilled in community operations, especially the successful brands that have ultimately survived.
"Adopt a Cow" has set up a membership day, where some member families can visit the company, and some members are invited to trace the source at the pasture. They invite users and brands to co-create products and do various private domain traffic operations around the membership system. In addition, to let the company hear user voices more directly, "Adopt a Cow" requires some management to do at least one day of customer service, make 100 user follow-up calls, and do one ground promotion each year.
Wang Xiaolu's user communication is reflected not only in repeated taste tests and a user evaluation team of over 1,000 people but also in the layout of new products. "We will reverse-customize products based on users' needs—what products they want, what flavors they want," Wang Xiaolu said.
As a consumer brand known for its youthful user label, Genki Forest promotes user feedback on products through many communities and social platforms, then datafies these opinions to guide product iteration.
In terms of omni-channel construction, new consumption brands are also making concentrated efforts. Currently, a large portion of new consumption brands on the market started online, but as online traffic peaks, many are moving toward omni-channel and starting to lay out offline channels. At the same time, some offline brands are also starting to do e-commerce.
Wang Xiaolu revealed that after achieving success online in 2020, they quickly laid out offline channels and have basically entered all mainstream supermarket channels, including large supermarkets like Walmart and Carrefour, as well as new retail formats like Hema, Dingdong, and Meituan Maicai. They have already achieved considerable results.
According to "Adopt a Cow," they began offline layout in 2019 and have now entered supermarkets and convenience stores such as Hema Fresh, Yonghui Superstores, Wumart, and Lawson. Genki Forest also revealed that in April this year, its offline terminal count exceeded 1 million, covering more than 800 cities nationwide.
Of course, some brands that focus on offline are also moving online. New tea drink giants Heytea and Naixue are betting on online, accumulating over a million followers on Taobao. Luckin Coffee, in addition to e-commerce, is also betting on Douyin, livestreaming there long-term and having over 1 million followers on Douyin.
In Pan Pan's view, consumer brands have no distinction between online and offline; online and offline are just channels. Brands truly recognized by consumers must be omni-channel.
Supply chain, like channels, is a major barrier in the consumer industry. Brands with their own supply chains often have stronger risk resistance. According to "Finance World," many new consumption brands are now investing in upstream and downstream industry chains to make their brands thicker and heavier, which has become a consensus.
The three companies interviewed by "Finance World" this time—"Adopt a Cow," Wang Xiaolu, and Genki Forest—are all making efforts to build their own factories. According to "Finance World," in 2020, "Adopt a Cow" built a dairy processing plant with an annual output of 300,000 tons in Linyi, Shandong. In 2022, a second processing plant was confirmed to be located in Hebei and is currently under preparation. Wang Xiaolu is currently preparing to build its own factory, having signed an agreement with local government to invest 1 billion yuan in a central factory. Genki Forest has already landed five self-built factories in Anhui, Guangdong, Tianjin, and other places.
Photo/Wang Xiaolu
Overall, no new consumption company that has survived to this day is "lying flat." To survive better, even companies with the most optimistic growth data are making intensive efforts.
The history of the consumer industry has repeatedly proven that only products that are still chosen by consumers after consumption downgrades are good products; only needs that are still needed by users after capital retreat are true needs; and only business models that can still achieve growth and profitability under economic fluctuations are good business models.
**03 Crossing the Coldest Cycle**
For new consumption brands, the cooling of the industry is not entirely a bad thing. Only after the tide recedes can you know who is swimming naked.
Against the backdrop of industry contraction, consumer choices tend to be rational, and the new consumption industry returns to normal. This is the time for new consumption brands to cultivate their internal skills. Under a stricter market system, companies with poor foundations are eliminated, while those with good foundations are rewarded more. At the same time, with the clearing of bubbles, the development of the entire industry becomes healthier.
In Zhou Jianhong's view, the capital and traffic dividends in the new consumption track over the past two years have spawned a wave of new consumption brands, but some of them are not suitable for consumption. Their products have not truly solved users' long-term needs. Now, with capital retreat and peak traffic, these brands are gradually being reshuffled out.
"Some brands only seized some traffic dividends and got a wave of growth, but without repurchase and brand loyalty, once the capital market has any disturbance, survival becomes very difficult," Zhou Jianhong told "Finance World."
The elimination of these companies gives more opportunities to those that seriously make products, because "fewer people are following the crowd." The premise of all this is that companies must choose tracks that users truly recognize and meet users' real needs, not pseudo-needs propped up by capital and traffic.
But even in China, the world's largest consumer market, discovering a brand-new user need and satisfying it well is not easy. However, once achieved, it often directly drives the explosion of a category.
In 2019, Wang Xiaolu launched tiger-skin chicken feet. At the beginning, users had little awareness of this new braised snack category. As a pioneer, Wang Xiaolu almost educated users from scratch. With precise grasp of user needs, Wang Xiaolu sold over 100 million yuan in the second year, and in 2021, sales of tiger-skin chicken feet alone exceeded 700 million yuan. Under Wang Xiaolu's leadership, some snack giants have also entered the tiger-skin chicken feet track, making it a new super category. According to Wang Xiaolu, the market size ceiling for tiger-skin chicken feet should be over 3 billion yuan.
After Genki Forest first launched sparkling water in May 2018, it also experienced a period of accumulation: market education in 2018, rapid growth in 2019, and full explosion in 2020. With the big explosion of Genki Forest's sparkling water, soda sparkling water has become a mature category, with production value moving toward 10 billion yuan, and a bunch of beverage giants have entered.
Photo/Genki Forest
There are many similar examples. For instance, after Luckin's coconut latte success, almost every coffee shop now has a coconut latte, even Starbucks.
"Opportunities in the consumer industry have always been there, but only brands that are trusted by users for a long time can stand out in the new consumption wave," Genki Forest said.
Of course, opportunities also exist in mature categories and market-verified demands. The key is still how to better meet user needs through better products. "Adopt a Cow" initially entered such a track, where demand has been verified countless times, but the market has been firmly occupied by industry giants and local dairy companies. By leveraging its professional "cow-raising" ability and insight into users' pain point of "safe milk sources," it still achieved rapid growth in the "red ocean market" crowded with giants. Photo/Adopt a Cow
Does the new consumption industry still have a future? The answer to this question can be summed up in one sentence: "There are no bad industries, only bad companies." Any industry will have good companies and bad companies. Just like even if the college entrance exam is extremely difficult, every year some people stand out and become top scorers, while others fail.
Recently, during interviews, "Finance World" found that most people in the new consumption industry and investors still have confidence in the entire track: backed by a huge market of 1.4 billion people, the new consumption track will surely produce more super brands and super categories with Chinese characteristics.
"From the underlying logic, we continue to be optimistic about China's huge and increasingly mature consumer market. We also firmly believe in the resilience and potential of the Chinese economy, which will continue to grow in the future, and the domestic consumer market will recover quickly after this wave of the epidemic," Pan Pan told "Finance World."
Zhou Jianhong also said that Tsingshan Capital is still betting on consumption as always. Not long ago, it disclosed investments in a coffee brand and an outdoor lifestyle brand, and other undisclosed projects are also progressing in an orderly manner.
So, which new consumption brands can cross the coldest cycle and become the remaining kings? The answer to this question is actually in the hands of consumers. Brands that can gain consumer recognition will surely go further.
Source: AI Finance and Economics (aicjnews) Author: Zeng Guang, "Finance World" Weekly
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