---
title: "Post-Pandemic Era: Brands Need the Resolve to Navigate Cycles"
description: "At the inaugural FBIF online forum held on December 19, Lu Xiuqiong, Chair of the FBIF Plenary Session and Global Expert Partner at Bain & Company, delivered a keynote titled \"Resolve to Navigate Cycles,\" sharing how brands can leverage crises, discover opportunities, and achieve rebirth in an era of transformation."
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published: "2022-12-23"
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# Post-Pandemic Era: Brands Need the Resolve to Navigate Cycles

> At the inaugural FBIF online forum held on December 19, Lu Xiuqiong, Chair of the FBIF Plenary Session and Global Expert Partner at Bain & Company, delivered a keynote titled "Resolve to Navigate Cycles," sharing how brands can leverage crises, discover opportunities, and achieve rebirth in an era of transformation.

At the inaugural FBIF online forum held on December 19, Lu Xiuqiong, Chair of the FBIF Plenary Session and Global Expert Partner at Bain & Company, delivered a keynote titled "Resolve to Navigate Cycles," sharing how brands can leverage crises, discover opportunities, and achieve rebirth in an era of transformation.

Global Expert Partner at Bain & Company, Lu Xiuqiong

As a senior marketing expert, Ms. Lu (Joanna) has long been deeply involved in the consumer goods industry. With over 25 years of brand operations experience in global and local markets, she is well-versed in brand strategy and growth, particularly with keen insights and forward-looking strategic vision in consumer trends. Throughout her career, she has held global marketing leadership roles at renowned consumer brands, focusing on the Asia-Pacific region and helping major brands achieve significant growth in China and South Korea. She also has deep research on new consumption and extensive cooperation experience with internet giants. With her outstanding leadership, she was named "Asia-Pacific's Most Influential CMO" by Campaign Asia in 2018. Additionally, she is dedicated to nurturing talent and has earned widespread recognition and praise, such as being selected by Advertising Age as one of China's "Women to Watch" in 2014. We have compiled Ms. Lu's sharing for your reference.

# **Shift in Pandemic Policy**
# **Return to Consumer Value**

Today's world is in a new cycle. We are witnessing global economic fluctuations, consumer divergence, and industry stratification. Recently, the new pandemic situation has brought confidence to many brands, but we need to avoid three misconceptions: 1. Policy opening does not mean the pandemic is over; 2. Controlling the pandemic does not mean the economy will recover immediately; 3. Economic recovery does not mean a simple return to the past. From global experience, short-term fluctuations will continue; in most other regions, the economy only began to recover in the second quarter after policy changes. At the same time, post-pandemic consumer groups will polarize. For example, in the U.S., data shows that 25% of Gen Z (born roughly from the mid-1990s to the early 2000s) will lose their jobs, while 66% of Baby Boomers (born roughly from early 1946 to late 1964) will maintain their income levels. Additionally, 16% of low-income households will see their income decrease further, while 13% of the affluent will see continued income growth. However, there is good news: the food and beverage industry is likely to outpace other sectors. From U.S. data, the food and beverage industry will maintain a high compound annual growth rate of 8%, far exceeding personal care, apparel, accessories, electronics, and home appliances. As China officially moves from the "post-pandemic era" to the "post-pandemic era," the Chinese food and beverage industry is likely to maintain good momentum. Bain's consumer report predicts that throughout 2022, especially in the third quarter, the food and beverage industry will continue to grow rapidly, leading sectors like personal care and home cleaning. However, performance varies across sub-categories within food and beverage: juices, beer, and ice cream perform well, while wine and yogurt lag. Exploring the reasons, we find that well-performing categories typically do the following four things right:
1. Category education
2. Scenario association, especially deep binding with home scenarios
3. Product innovation
4. Premium upgrade

At the same time, China is also experiencing the release of medium- and long-term consumption potential. Goldman Sachs' 2023 China Economic Outlook predicts that China's GDP will resume growth in the second half of 2023, with 4%-5% growth in 2023-2024. This growth is mainly driven by consumption, which may reach 6%-7%. However, we must realize that this growth does not mean a simple return, but rather a "return to value" for Chinese consumers. From a macro trend, we are entering an era of "Valuable" (心价比). The so-called "心价比" is one of three stages we have summarized after studying European, American, Japanese, and Korean markets and global economic development. The first stage is when the economy is just starting to develop; consumers focus more on "Value-for-Money" (性价比). The second stage is when the economy takes off; consumers have more disposable income, driving consumption upgrades into the "Value-added" (兴价比) era. In this stage, consumer needs focus on "high-end, high-performance, stylish, and attractive," and companies shift their focus to upgrades and innovation in niche segments. The recent wave of new consumption in China is a manifestation of "兴价比." The third stage is when economic growth slows, and consumer groups become more cautious; consumption returns to "Valuable" (心价比). The entire consumption environment returns to rationality and true needs. The global market after the 2008-2009 financial crisis and the market after Japan's bubble in 1990 are similar environments. Now, changes in the global economic environment and China's "new life norms" have shaken people's inherent life beliefs. Consumers are rebuilding life order and stability, rethinking self, life, and the future. Chinese consumers are also paying more attention to Valuable (心价比), showing a trend of value return. This shift is already emerging. For example, the recent popularity of stove-top tea, online bars, and using medical insurance for massages is a manifestation of this "Valuable" (心价比). Fighting loneliness and relieving aches are true needs, but young consumers try to satisfy these needs with reasonable prices and more suitable methods. In the "心价比" era, consumers do not lack money; they lack a legitimate reason to buy. At this stage, the key for companies is to "reshape value." Do not casually engage in price wars; instead, create a legitimate reason to buy that gives consumers a sense of value. Do not casually engage in "stacking innovation"; instead, truly create new markets. Therefore, when we navigate this new cycle, all companies need to reshape the certainty of growth, which is:
  * Discover certain opportunities
  * Find your own certain capabilities
  * Establish certain beliefs

# **Certain Opportunities**

So, what are China's certain opportunities? Recently, I reviewed a lot of data with Bain colleagues, and we summarized two points: M-shaped community evolution and W-shaped growth opportunities.

## **1. M-Shaped Community Evolution**

What is "M-shaped community evolution"? China is undergoing significant demographic changes, and consumption willingness varies greatly among different segments, as you may already know. If we look ahead to 2025, China's demographic changes and consumption potential form an "M" shape. The upper right of the M is "happy families," including high-tier city families aged 45-70 and low-tier city families aged 45-60. By 2025, the number of these families is expected to increase by 32 million. These families are beneficiaries of reform and opening-up, having accumulated wealth, with reduced life pressure and a greater pursuit of quality of life. This group is an excellent market, generating many opportunities. The popular "silver economy" in recent years is part of this.

The upper left of the M is the "hidden wealthy" group, consisting of low-tier city families aged 30-45, expected to increase by 23 million by 2025. This group is characterized by "money and leisure, living in the moment," with a very high happiness index and strong willingness and demand for consumption upgrades. This market will also birth many new opportunities.

The middle of the M is the "trendy Gen Z," i.e., young people aged 20-30, expected to increase by 12 million by 2025. These consumers can be described as "delicate poor," facing significant life pressure, and the poor economic situation will suppress their consumption willingness, but they still seek various ways to consume "with style." For example, afternoon tea is still necessary, but they find more suitable ways (e.g., "stove-boiled tea") and more reasonable prices (i.e., reducing frequency, increasing ritual).

The lower left and right corners of the M are "small-town elderly" and "urban sandwich" groups. This "M-shaped community evolution" model will clearly tell us where future growth opportunities lie. Among them, three core groups—happy families, hidden wealthy, and trendy Gen Z—will bring "W-shaped growth opportunities."

## **2. W-Shaped Growth Opportunities**

What are "W-shaped growth opportunities"? The top of the W's two sides are the two major future opportunities: classic innovation and future mainstream. The core of classic innovation is **"focusing on the brand itself, building new consumer behaviors on the basis of core business."** Recently, when researching growth issues faced by many companies, we found a phenomenon: in most leading listed consumer companies, core business contributes over 90% of revenue. Therefore, the key to growth is, of course, focusing on the core, but this focus does not mean staying unchanged; rather, it means creating new products, developing new audiences, establishing new habits, and creating new scenarios for consumers based on the latest consumer needs, on the basis of core business. For example, wet wipes and ice cream are very mature classic categories, but wet wipes now have the new need of "epidemic prevention and disinfection," so their growth rate has reached 14% in the past few years. Ice cream has transformed from a summer product for relieving heat to a must-have home dessert, creating new usage scenarios, with home channel growth as high as 20%. Future mainstream is about proactively innovating products, **upgrading products to the future mainstream price band.** In this process, there is a common misconception: many brands are obsessed with creating "high-premium" products, but the market does not care about premium or not; it cares about the future mainstream price band. There are two reasons for this: first, during consumption upgrades, consumers cannot jump directly from the cheapest products to the highest-end ones; they upgrade gradually. Second, under economic pressure, some groups may even experience "consumption downgrade," i.e., moving from higher price bands to lower ones. A concrete example: instant noodles. In recent years, new brands like Laxin Shuo and Kongke have been very popular, with prices typically above 10 yuan or even 20 yuan. But in the instant food category, offline accounts for over 80%, and in all offline channels, products above 10 yuan account for only 2% and are declining. The market opportunity is actually in upgrading from the original mainstream price band of 2-3 yuan to 3-5 yuan. Whoever captures this price band will capture the new opportunity. Another good example is bottled water. In previous years, mainstream mineral water was priced at 1 yuan; now it is 2-3 yuan, and many brands are positioning for the next mainstream price band of 4-5 yuan. The bottom of the W is niche resonance. In the future, such "small but beautiful" niche brands, if they can resonate well with target consumers, will still have opportunities. Therefore, the W-shaped growth opportunities show the certain opportunities of the future.

# **Certain Capabilities**

After finding certain opportunities, the next step is to tap into your own certain capabilities. Such capabilities do not arise from nowhere; they must be based on your core competencies, advancing with the times and iterating growth. From the following five aspects, you can quickly understand what certain capabilities are.

First, the Growth model capability. In the past, growth often came from seizing short-term, quick-win dividends to achieve rapid growth. Now, this rough model no longer exists; it is more about returning to the original intention, intensive cultivation, and sustainable growth. The increasing popularity of long-term topics like ESG in recent years is a manifestation of this.

Second, the Product capability. There used to be a saying, "If growth is insufficient, innovation will make up for it." I usually call this model "stacking innovation," such as launching many flavors, thinking "one will hit consumers." I can responsibly tell you that this approach is not advisable. Brands need to return to value, find their core hero product, and achieve sustainable long-term growth.

Third, the Marketing capability. In the past, marketing focused more on traffic dividends from different platforms. Now, we need a long-term brand thinking, concentrating media firepower and changing user behavior.

Fourth, the Channel capability. In the past, the Chinese market was a "large circulation channel," but the past practice of "one wave to volume" no longer works. Now, brands need "omnichannel growth," need "online and offline as one chessboard," and need to carefully think about how to precisely define the role and function of each channel. Only with intensive cultivation can they build a solid foundation.

Fifth, the Organization capability. In the past, organizations valued stability and control. Now, facing increasingly complex market environments, only more agile and self-driven organizational forms can respond.

In summary, certain capabilities can be summarized in three simple sentences: Build basic products to form core hero products; consolidate the fundamentals, developing channel, brand, and supply chain capabilities comprehensively; and cultivate basic skills, ensuring the company's management system can adapt to a rapidly changing world.

# **Certain Beliefs**

Finally, we must have certain beliefs. Looking back at the global growth leaders from 2007 to 2017, their 10-year long-term returns were 2.4 times higher than other companies. What are the "long-termism" of these growth leaders? We summarized the following four key measures: 1. Optimize efficiency output, i.e., optimize labor productivity and store efficiency. 2. Continue marketing investment; when other companies cut budgets, these growth leaders increase marketing investment. 3. Preserve R&D strength, insisting on better optimizing R&D. 4. Effective M&A optimization; in this period, many very promising companies are facing difficulties for various reasons, making it a very good time for M&A. These measures are very long-term oriented. Only with the certain belief in long-termism can one possibly build the resolve to navigate cycles.

**Summary**

Finally, I would like to end my speech with a quote I really like: In times of change, bad companies are destroyed by crises, good companies survive, but great companies always use such crises and changes to be reborn, truly possessing the resolve to navigate cycles and the growth for the future.


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