---
title: "New World of FMCG: Launching the High-End Penetration Battle!"
description: "Amid widespread talk of consumption downgrading, high-end upgrading is a rare rationality. Hou Xiaohai, chairman of China Resources Snow Breweries, proposed the concept of a \"New World\" for the industry, which is the most resounding correct voice amid the noise of difficult times. This article recalls a similar experience after the 1998 Asian financial crisis, where structural adjustment drove growth, and argues that high-end trends are often masked by crises, but history's upward trajectory remains unbroken. It outlines the high-end growth timeline and introduces new marketing strategies for the FMCG New World, including 2C organizations, scenario-based terminals, immersive experiences, and bC integration."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-03-02"
language: "en"
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# New World of FMCG: Launching the High-End Penetration Battle!

> Amid widespread talk of consumption downgrading, high-end upgrading is a rare rationality. Hou Xiaohai, chairman of China Resources Snow Breweries, proposed the concept of a "New World" for the industry, which is the most resounding correct voice amid the noise of difficult times. This article recalls a similar experience after the 1998 Asian financial crisis, where structural adjustment drove growth, and argues that high-end trends are often masked by crises, but history's upward trajectory remains unbroken. It outlines the high-end growth timeline and introduces new marketing strategies for the FMCG New World, including 2C organizations, scenario-based terminals, immersive experiences, and bC integration.

Downgrading is "reasonable," upgrading is "right." Hou Xiaohai, chairman of China Resources Snow Breweries, proposed the concept of a "New World" for the industry, which is nothing less than the most resounding correct voice amid the various noises during difficult times for all industries. Amid the widespread sentiment of consumption downgrading, high-end upgrading is a rare rationality. The beer "New World" concept reminds me of a memory. After the 1998 Asian financial crisis, China abruptly transitioned from a shortage economy to a surplus economy. The corporate response was "involution"—price cuts. At that time, I worked at a leading company in the industry, and initially we followed the trend of price cuts. Later, sensing trouble, we developed new products and began "product upgrading"—raising prices. At that time, the boss set two major targets for the sales department: annual sales growth of 30% and structural adjustment of 5%. Structural adjustment meant that the proportion of high-end products (at that time) increased by 5% annually. This was a very powerful move; without the 5% annual structural adjustment, the 30% sales growth might not have been achieved. In one sentence: structural adjustment is the biggest driver of growth. The market performance was that "profits from high-end products supported price wars for ordinary products." Later, the industry leader disappeared amid price cuts, and my company went from "second" to "first." This experience is extremely similar to the current situation. After the pandemic, there are voices of "consumption downgrading" everywhere, but the companies that truly thrive are those that launch high-end products. For example, China Resources Beer achieved "the fastest growth in history" during the three years of the pandemic, with profits quadrupling in three years. The result of a major "uncertainty event" is that initially it feels "downgrading is reasonable," but later it feels upgrading is right. Social development may be disrupted by "uncertainty events," but the historical process of moving upward and forward will not be interrupted by any uncertainty event. Of course, upgrading is not as simple as just launching high-end products; accompanying high-end upgrading, there must be marketing transformation and adjustment. China's channel transformation began with "channel sinking" after the 1998 Asian financial crisis, from "provincial agents" to "city agents" to "county agents," and then entered the era of deep distribution, which continues to this day. So, will the FMCG "New World" be accompanied by new marketing changes?

FMCG "New World"

Every decade or so, there is a world event that affects economic development. Examples include the 1998 "Asian financial crisis," the 2008 U.S. "subprime mortgage crisis," and the 2020 "COVID-19 pandemic." Each crisis produces consumption divergence (K-shaped recovery), forming two consumption routes: one is a long-term "upward" route; the other is a short-term "downward" route. Both routes are correct; the key is the enterprise's strategic choice and the tactical actions after the strategic choice. China Resources Beer achieved "the fastest growth in history" during the three years of the "COVID-19" pandemic, with profits quadrupling. This was because, during the consumption divergence, they saw the major trend of "consumption moving upward" that was masked by the pandemic. Hou Xiaohai proposed a "high-end growth rhythm timetable," which I quite agree with.

- 2008, high-end budding period: small capacity. In developed regions, "the tip of the lotus leaf just appears," mainly international brands, high-end is niche.
- 2009-2014, high-end growth period: fast growth. Capacity expands. Domestic brands enter first-tier and provincial capital cities.
- 2014-2019, high-end development period: growth accelerates. Penetration into second-tier cities, domestic brands grow rapidly.
- 2019-2025, high-end explosion period: faster growth, share increases sharply. Popularized to county-level and above cities, high-end is the main growth point. New growth mainly comes from high-end growth, and profits mainly come from new growth.
- After 2025, high-end maturity period: growth slows, gradually becoming mainstream.

From the high-end growth rhythm, the high-end explosion period exactly overlaps with the "COVID-19" pandemic period. The overlap brings a serious problem: the high-end trend is masked by the pandemic. The high-end trend is masked by short-term crises. This is a test of top-level strategic judgment. Either they fail to grasp the high-end trend, or they rush to deal with short-term crises, delaying the high-end opportunity. This phenomenon occurs in almost every world economic crisis: the trend rhythm is disrupted by the crisis, and many enterprises choose the opposite of the trend. Being swayed by crisis-ridden emotions rather than believing in the historical firmness of trends easily leads to misjudgment. Especially in an environment where self-media tends to appeal to emotions. After the first round of the pandemic in March 2020, it was precisely the high-end that recovered first. However, many did not observe this. China Resources Beer's strategic firmness lies in believing in the certainty of historical trends, which will not be disrupted by any major "uncertainty." Uncertainty can only disrupt the rhythm of the trend, not the trend itself. The high-end trend means that the long-standing scale-oriented enterprise development trajectory will be changed by structure orientation. Traditional industry rankings are based on scale. The marketing logic under scale orientation is: pre-emptive marketing investment will be diluted by scale growth. The above sentence is somewhat difficult to understand. To achieve scale growth, pre-emptive marketing investment is required. As long as scale growth is achieved, there will be new scale effects, thereby diluting the cost of pre-emptive investment, achieving logical self-consistency in growth. However, when pre-emptive marketing investment does not achieve scale growth, it is equivalent to "throwing money away," and there is no logical self-consistency. Since 2013, the industry's "total volume cap" has made the scale-oriented "logic no longer self-consistent."

Now we have entered a new logical self-consistency: **Structural pre-emptive investment → Structural growth → Use profits from structural growth to support ordinary product "involution" → Achieve scale growth.**

The scale-oriented logic is: **Scale pre-emptive investment → Scale growth → Drive profit growth.**

The structure-oriented logic is: **Structural pre-emptive investment → Structural growth → Profit growth → Scale growth → Scale, structure, and profit all grow.** Scale shares costs, structure generates profits. Use profits from structure to support mass product "involution." This will create a win-win situation for mass scale and high-end structure. China Resources Beer proposed the "Beer New World." In fact, every industry will form a new world during high-end upgrading. This is no longer the old world ranked by scale, but a new world ranked by value and influence. In the old world of FMCG, scale is everything. In the new world of FMCG, emerging enterprises have the opportunity to turn the tables. The "high prices" in the original price system may become the "bottom prices" in the new world price system. In recent years, we have seen some multinational brands whose prices are no longer looked up to. More emerging brands (products) have prices higher than multinational products. Because many multinational brand products are only "high-priced" in the mass product field.

**New World, New Marketing**

The traditional marketing system is the marketing of the old world; the new FMCG world requires new marketing. The deep distribution system is deeply bound to the promotion of mass products. The promotion of mass products has two major drivers: one is brand-driven, the traditional approach is CCTV advertising "loudspeaker shouting," which leading FMCG companies have experienced; the other is channel-driven, precisely deep distribution to terminals. Brand-driven is a 2C system, deep distribution is a 2b system. 2b and 2C are two lines, one is the work of the marketing department (brand department), the other is the responsibility of the sales department. High-end is not for everyone; initially, the ratio of high-end to mass may be 10:90, then 20:80, then 30:70. The three major tactics of deep distribution: distribution (shelf management), promotion, and in-store demonstration. These are ineffective for high-end products. With a 10% high-end rate, how do you assess distribution rate? Do high-end users care about promotions? Will high-end users believe the sales pitch of demonstrators? In short, the high-end and deep distribution marketing systems do not match. Do not hope to use the deep distribution team and logic to fight the high-end marketing battle. What is the high-end marketing system? From current practice, it roughly includes three aspects:

**First, high-end 2C organization**

Deep distribution is a 2b organization, focusing on terminals (b-end) for distribution, display, shelf management, promotion, and customer relations. The high-end 2C organization is a new organization that focuses on b-ends where high-end users gather, doing C-end awareness and promotion. The focus is on awareness, not transactions. Not only manufacturers but also distributors need to build 2C organizations. The 2C organization differs from the 2b organization in two ways: first, it selects b-ends where high-end users gather, not ordinary b-ends. So, it is necessary to screen and classify b-ends; second, reaching C-end is not a long-term job but a phased job. Once C-end awareness is completed and b-end is activated, the phased job is done. Therefore, the 2C organization is an agile organization, not a fixed regional organization, but a mobile organization.

**Second, terminal scenario-based**

Mass products emphasize functionality, cost-performance, and other appeals. For high-end products, functional satisfaction is a prerequisite, but emotion and value are emphasized more. Mass products only need vivid display, but high-end products need scenario-based presentation. Mass product consumption is more about the product itself, while high-end product consumption is a consumption system, which includes both the product and the scenario. For example, a birthday cake differs from an ordinary cake in that it has a scenario. Lighting candles, singing the birthday song, making wishes, and other steps together constitute a consumption system. You cannot separate the product from the scenario and only talk about the product's function. Consumption scenarios, marketing scenarios, and terminal scenarios—these three scenarios come from insight into consumption scenarios. Unlike vivid display, which makes visual articles around the product.

**Third, immersive experience**

Experience is the best awareness. However, experience is also the least efficient awareness. This problem has a solution with the advent of the internet era. This is the relationship between individual awareness and group awareness. Immersive experience has two key links: **First, experience design centers on the C-end**, where users are "actors" and the manufacturer is the "director," allowing users to experience through performance; **Second, user structure**, using structure to improve experience efficiency. Earlier, we discussed the classification of b-end; in fact, C-end also has classifications. In practice, we divide C-end into KOL, KOC, big C, and ordinary C. Use C-end structure to solve the awareness efficiency problem.

**From deep distribution to bC integration**

Deep distribution is B2b, distributing from B-end to b-end. C-end awareness is solved through mass communication methods like advertising. In the internet era, IP-based self-media communication methods have been added. The three major actions of high-end promotion are b2C, doing C-end around b-end, which can be called **bC integration.** bC integration is a double lever. From b to C is one lever, optimizing structure. It is not easy for manufacturers to find KOC and big C, but it is not difficult through b-end; from activating C to activating b is the second lever. Once b-end is activated, the bC integration actions around b-end come to an end. This is why the 2C organization is an agile organization. bC integration is a typical trinity of awareness, transaction, and relationship, or brand-channel integration. 2C is brand awareness; 2b is channel, traffic, and transaction. Therefore, bC integration is also brand-channel integration. Brand-channel integration solves the problem of high-end product penetration. Mass products fight positional warfare, so distribution rate is assessed. High-end products, because of the low user ratio, can only fight penetration warfare. However, it is important to create momentum in penetration warfare. Immersive experience may be quiet, doing experience one user at a time, which is too inefficient. But with the involvement of KOL and KOC, plus scenario-based design, it can achieve the effect of "deep experience, strong awareness, high dissemination." This is the reason why Lidu has been able to achieve "light model, nationalization" in high-end liquor through immersive experience in recent years. With the decline of mass media, pure brand-driven is also declining. With the saturation of mass products, the deep distribution model has become a pawn crossing the river—pushing to the end. On the basis of deep distribution, take half a step forward to reach C-end, achieving a new model for high-end product promotion. The era of the bC integration new model has arrived. Why only take half a step toward C-end, rather than fully moving toward C-end as some propose with new retail or private domain? Because in the FMCG industry, the offline-online ratio is 10:90, with the focus offline. In bC integration, one foot is on the b-end, the other on the C-end. The focus is on the b-end, ready to retract the other foot at any time.

Brand-channel integration completes C-end brand awareness; leave transactions to the b-end.

**Final note:**

**From April 6 to 8, 2023, the 2023 China FMCG Innovation Conference will be grandly held in Chengdu.** On April 7, **Mr. Liu Chunxiong, channel digital marketing expert, advocate of new marketing, and dean of the Marketing Digital Research Institute**, will attend the [High-end and New Product Promotion] forum of this conference, sharing on-site topics such as how to build high-end in the new FMCG world. Stay tuned!

The **2023 China FMCG Innovation Conference** will focus on the theme **【New World, New FMCG】**, with 3 days, 130 guests, and 13 parallel forums, gathering top brand executives, platform founders, and excellent distributors from across the country to discuss the latest trends in the FMCG industry, the latest changes in channels, and the latest market development trends in the new world era, learning how to respond to new changes, achieve new growth, and become new FMCG in the new world!


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