First, a question: What is premiumization? Is Moutai premium? Most would say yes. But today we found a vivid case: Dayao Beverages' President Yun's case. Cola sells for 3 yuan, Dayao sells for 6-8 yuan. Is Dayao premium? Yes, Dayao is the premiumization of carbonated drinks. So premiumization is not a leap to Moutai in one step; it's a series of steps upward. From level one to level two is premiumization, and from level two to level three is also premiumization. In the FMCG world, there are two approaches to premiumization: positional warfare and infiltration warfare.

Now is the golden age of premiumization

First, let's establish a viewpoint: we are in the golden age of premiumization. Why? Look at a data table. This is a data table for a certain industry from 1989 (reform and opening up) to today. The first table's unit is tons, the second is yuan. Before 2013, it was the golden time for scale. As long as you distributed the goods, sales were basically no problem. This period created the greatest sales model in Chinese marketing history: the deep distribution model. During this period, demand surged, and sales growth rose at a 45-degree angle. So from 2000, the magical deep distribution model was established. After 2013, another voice emerged: deep distribution no longer works. Distribution doesn't move products. Is that a problem with deep distribution? Not entirely. A big reason is declining demand. Overall sales began a 30-degree decline, lasting eight consecutive years. In this context, the former scale-focused, highly capable "war wolves" were troubled. No matter how much effort they put in, they couldn't get rising sell-through data. Some companies began to feel lost, and after two years, they reacted: Can we only do scale? No, we must do value. Starting in 2018, the industry's per-ton alcohol hit its lowest point and then rebounded. From a profit perspective, in 2022, the industry's profit grew 20%, like picking up money. This verifies the industry's shift from scale to value. So we conclude: now is the golden age of premiumization.

Paths for premiumization

A beverage or alcohol product typically has two major scenarios: on-premise (immediate consumption) and off-premise (non-immediate consumption). From these two scenarios, we can extract five characteristics and paths for premiumization:

  • Instant decision: FMCG convenience and immediacy
  • Channel dependence: Semi-closed scenarios are easy to move through owner recommendations
  • E-commerce: Time lag, lacks convenience and immediacy
  • Bring-your-own (BYO): High-value products, circle products, niche products
  • O2O: High-value products, fresh products, niche products

If it's beer, on-premise accounts for 60% of sales, off-premise 40%. But due to FMCG characteristics, there's a decision called "instant decision." When thirsty, you need water; you don't overthink. You drink whatever is convenient. You won't stay thirsty just because a certain brand isn't available. This instant decision psychology is what FMCG emphasizes: convenience and immediacy. Strictly speaking, this is distribution rate. So FMCG is highly dependent on channels. Many products aren't what you want to buy; they're what the store owner recommends. You buy what the store sells. Especially in restaurants, which are semi-closed in the operating channel, your consumption is not free; it's forced. If the store doesn't have a brand, consumers can't buy it. So recommendation is greater than bringing your own. Because premiumization creates a special channel: without premiumization, there's no BYO. I don't buy to drink immediately; I buy and bring it along. The premise of BYO is premiumization. Without premiumization, there's no BYO. Another channel is O2O. For example, if I want to drink, a WeChat message or phone call can deliver to my home or restaurant within 15 minutes, maintaining temperature. So in these two scenarios, there are two types of premiumization:

  1. Under the deep distribution system, distribution-based, based on high-density coverage, emphasizing product structure. Product structure will lead you to premiumization.
  2. If you adopt infiltration warfare, start from O2O, BYO, e-commerce, and niche channels. Especially niche brands find it hard to generate sell-through through distribution in mass channels.

Positional warfare tactics

What are positional warfare and infiltration warfare? There's a shield that nothing can break; there's a spear that is invincible. Positional warfare is a shield. Its tactic is channel control to drive product sell-through. This reminds brands to have a clear understanding of which channels suit your company or category. Dayao has a deep understanding of channels: first hit the restaurant channel, then the circulation channel, and finally full coverage. This layout wasn't planned; it was discovered through practice. The heavy model's shield: channel control drives product sell-through. With channels, you block or reduce consumer choices, cutting off competitors' sales opportunities. Does this happen in supermarkets? No, supermarkets are open channels. Restaurants are semi-closed or even fully closed channels with exclusivity. I can sell, you can't, reducing consumer choices. For example, in Chengdu, it's very hard to drink beer other than Snow. Why? Snow holds 80-90% of that channel, with 100% distribution in restaurants. This is positional warfare. It's a team of thousands, building a massive B2B organization for high-density coverage.

Unlike positional warfare, the light model has an important C-end organization. Its characteristic is brand and product pull, i.e., C2B, requiring dual recognition from consumers and terminals. This requires digital marketing to create brand stickiness. Sales can be achieved without distribution rate through O2O, e-commerce, or other channels. This is the spear tactic. The spear and shield differ: the shield emphasizes distribution rate; the spear does not.

Three key handles for premiumization infiltration warfare

  1. High-end, high-value products This has three dimensions: from cost to high cost and high value; high appearance, low density, scarcity; from recommendation to self-order and BYO. So premium is not changing color or packaging; premium is forming high value. In the past, low cost was emphasized; now high cost may be needed, high appearance, low density, scarcity. Now we emphasize from recommendation to self-order and BYO.

  2. Broad sowing, thick harvest, nationwide layout For example, Lidu Gaoliang has over 500 distributors and experience stores nationwide. Each distributor must have 2-3 KOLs, 5 KOCs, and 10 big Cs as survival thresholds. These are essential for distributor survival. Another example: Taishan Original Pulp has 3,000 stores nationwide. Each store connects with 2,000 general users and has 20 group-buying capable customers. With this foundation, distributors can take root. A ToC organization can succeed. Ublau has 1,700 community beer-dispensing stations nationwide. Each store survives on two WeChat groups, with 700-1,000 user connections. There may be no distribution in terminals. In Chengdu alone, there are 60 Ublau bars and dispensing stations. For example, 430 meters from our venue, there's one. If you need Ublau craft beer, call and order, and it arrives within 20 minutes. Their beer sells at three times the price of Tsingtao, yet they survive well.

  3. C-end organization Dayao plans 45,000 ground promotions nationwide this year. That's a C-end organization, a marketing organization connecting consumers. For example, in the white spirits category, group-buying business: without a C-end organization, it's a 2B product, only for scale and low price, not high. Through C-end organization, you build a strong C-end entry, panning for gold. This is a brand's nationwide layout, present everywhere. This is called broad sowing, thick harvest, nationwide layout.

These are the three key handles for premiumization. Detailed interpretation:

  1. No need for large-scale distribution. On products with high value, strong stickiness, and self-propagation value, consumers get extra value, driving the main product's spread. Here's a problem: most companies limit high value to packaging, but don't know that product + service is also value. What is service? The same bottle of beer sells for 5 yuan in a supermarket. But if it can be delivered to your table within 15 minutes at the right temperature, it can sell for 20 yuan. That's service, value-added service.

  2. Products that fit high-value word-of-mouth: differentiated, valuable, with a story, penetrating, and ice-breaking. That is, the first glance makes you feel amazed.

  3. Choose the right point, find the right person, let them drink, and let them spread. This is what the 2C organization does: find your KOL, let them help you spread, such as through tasting events, annual meetings, high-end organizations, etc.

  4. Quality must be high, appearance good, price high, stable, and small. Do promotions, accumulate word-of-mouth over ten years. Premium must be a nationwide layout with low-density penetration, not high-density coverage.

Finally, summarize the key characteristics of premiumization: Must have a B-end organization; must have a C-end organization; must have the "three key handles" of premiumization.