In 2019, the health industry faced a downturn, but brand innovation remained vigorous. Driven by the internet, new brands that fully leveraged traffic dividends achieved the fastest growth in history. Amid competition from emerging brands and various internet-famous products, traditional leading brands also stepped up their efforts to solidify their market positions, leading to a vibrant scene of innovation in the health and functional markets. As witnesses to the accelerated innovation cycle, Wu Wanrong, Director of Brand Marketing and Communications at Tmall, and Shi Qiwei, General Manager of Xiaohongshu, both shared this view. According to Wu Wanrong from Tmall, this year's Tmall Double 11 saw 90 million new products released before the event, compared to only 40 million in the same period last year, a doubling in new product numbers within a year. Meanwhile, the number of consumers purchasing new products on Tmall has reached 75 million. Shi Qiwei, General Manager of Xiaohongshu, also acknowledged the changes in speed and quantity over the past few years. However, he also noted that the lifecycle of brands is also shortening; many brands rise quickly but also fade away very fast. How to make consumers remember you, and how to ensure that emerging brands continue to accumulate value and become truly meaningful brands in the minds of more users? This 2019 annual consumption review, Precise Nutrition, will explore variables in the functional food and beverage industry from three dimensions: new brands, new channels, and new consumer groups, and extract 11 interesting observations from them.
-01- New Brands: A Year of Rapid Growth, Ensuring Brand Value Accumulation
1. Emerging brands grow rapidly, and food giants lower their profiles to join the fray According to Star Data, during the 2019 Double 11, food and beverage sales reached 6.2 billion yuan, accounting for 1.0% of total online sales, ranking 8th in the TOP10 industry categories. Compared with last year, half-day transaction volume in the food and beverage category doubled year-on-year, and dairy category transaction volume was 5 times that of the same period last year. Three Squirrels, Hankou Second Factory, Single Grain, Super Zero, Genki Forest, Baicaowei, Liangpin Shop, Smeal, Ruofan, Wang Baobao, etc., have spawned many emerging online brands in the era of internet traffic, and these brands also achieved significant growth in 2019. With rapid category growth, giants are not missing opportunities. Domestic and international giants such as Yili, Mengniu, Nongfu Spring, Wahaha, Want Want, Coca-Cola, and Danone have all begun to emphasize marketing layout and product functional innovation: They are deploying price wars, co-branded merchandise, celebrity endorsements, KOL带货, sponsoring variety shows, inserting ads in TV dramas, pop-up stores, and new retail, among various channels and methods, continuously creating topics and traffic to stimulate consumption. For example, during Tmall Double 11, Coca-Cola leveraged co-branded merchandise and celebrity-customized products to drive growth and sales, ranking first in beverage sales.
2. Emerging Brands: Find the Right Product Positioning to Achieve Differential Competition The key to commercial success is to become distinctive in the minds of customers; this is positioning. In an era where brand lifecycles are infinitely shortened, whether a new brand can find the right product positioning to achieve differential competition is crucial for its long-term survival. Genki Forest can be considered a dark horse in domestic beverages. The brand focuses on the positioning of "zero sugar, zero fat, zero calories," targeting the post-90s and post-95s as the main consumer groups. Its packaging design is simple and refreshing, fitting the aesthetics of young people. After three years on the market, the brand is valued at 4 billion yuan. Founded two years ago, its annual sales exceed 300 million yuan. Another brand with faster development and more "ferocious" growth, known as the "internet-famous soda machine," is Hankou Second Factory, whose development over the past two years has also been astonishing. People always have a sense of nostalgia; deep memories/childhood memories not only do not fade but become more vivid over time. The success of Hankou Second Factory is inseparable from their insight into this sentiment of the consumer group; this is positioning. It can be said that the brand initially replicated the collective memory of Wuhan people living in the 70s-90s, a kind of sentiment. If you give consumers what they want, they will naturally be willing to pay!
3. Pursuing Health and Functionality, with Sugar Reduction and Low Sugar as Key Points If there is one most obvious trend in the food and beverage industry in the second half of 2019, it is sugar reduction, low sugar, and sugar-free. It seems that domestic and international giants have all agreed to label their products as "sugar-free," "low sugar, low calorie," and these products are now occupying shelves in both domestic and international markets. In the past year, beverages, dairy, snacks, etc., have all launched similar products. Danone (North America) emphasized in its 2020 new product plan last month that "low sugar" is a key focus for the new year. Nongfu Spring launched low-sugar Carbon Bing coffee, Coca-Cola launched Fiber+, Le Pur even directly used low sugar/zero sugar as product names, launching sugar-free check-in yogurt, and Genki Forest launched LP28 sugar and fat countermeasures with zero sucrose and no additives.
4. Plant-Based Fermentation and Traditional Chinese Medicine Fermentation of Medicinal and Edible Homologous Origin When reviewing the characteristics of products in 2019, "plant-based" is unavoidable. According to a Nielsen report, plant-based food sales exceeded $3.3 billion in 2018, and it is expected to exceed $5 billion by 2020. Market institutions are continuously paying attention to this market. Innova Market Insights released the trend "Plants Breakthrough" in 2017, and then "Plant Kingdom" in 2019, predicting that the entire industry will usher in a "Plant-Based Revolution" by 2020. So, in 2020, how exactly will plant-based "revolutionize"? In the past year, plant-based fermented products have been a key development direction for giants, such as Nongfu Spring's plant-based yogurt, Sanyuan St Hubert's French-style yogurt, and Six Walnuts' walnut fermented milk, sparking a plant milk revolution in the dairy sector. Plant-based fermentation aligns with people's pursuit of natural, healthy, and sustainable needs, so in 2020, the market for plant fermentation will only expand further. In recent years, the market demand for medicinal and edible homologous traditional Chinese medicine/herbal plants has increased year by year, herbal fermented products are hot, and plant-based fermented beverages such as kombucha and enzymes are gaining popularity in the beverage market. Fermentation of medicinal and edible homologous traditional Chinese medicine is an upgrade and innovation based on plant-based and herbal fermentation. Experiments have shown that after fermentation, traditional Chinese medicine has advantages such as enhanced efficacy (improving its own efficacy, producing new efficacy), reduced toxicity (reducing drug toxicity), and saving medicinal resources. Traditional Chinese medicine fermentation now has a broad cognitive foundation among domestic and international populations, conforms to national policies and industry trends, has strong vitality, and broad development prospects. Junyao Life Science Health Research Institute, invested and built by Jiangsu Junyao, mainly engages in the development of traditional Chinese medicine fermented products, research on fermentation mechanisms, functional evaluation of fermented traditional Chinese medicine, and industrialization. It is a research institution focusing on traditional Chinese medicine fermentation, especially medicinal and edible homologous fermented foods. The institute is located in Beijing Economic Development Zone. The institute was selected by the Traditional Chinese Medicine Fermentation Professional Committee of the China Association of Traditional Chinese Medicine as the vice chairman unit of the first Traditional Chinese Medicine Fermentation Professional Committee. It has established a joint research center for medicinal and edible homologous and special medical foods with Peking University, and a joint research center for fermented traditional Chinese medicine and new drug development with Beijing University of Chinese Medicine, with strong scientific research capabilities.
5. More "Water" Means More Beauty 2020 will still be an era where people are willing to pay for appearance, and oral beauty products will continue to be popular. In the new year, in addition to young women, the number of men purchasing oral beauty products will also increase. According to Tmall data, the number of men purchasing beauty products surged in 2018, which also reflects that men are beginning to pay attention to personal image and appearance. Of course, body and face need to be taken care of. Refreshing "water" gives consumers a feeling of "less burden" and "lightness." The popularity of Rule collagen water also fits this requirement. The product proposed the concept of "light supplementation," targeting young women just entering the workplace. It entered the market early this year, and within three months of launch, 300,000 bottles were sold. Red beans and coix seed are known for their beauty and dampness-removing effects. Keyang 1000 Red Beans launched red bean and coix seed water, which entered JD's offline 7fresh supermarket channel last month. The product has a rich red bean flavor, zero sugar and zero calories, and contains over 110mg of polyphenols per bottle, adding to beauty. The peak sales season for beauty and weight loss products is spring and summer, and refreshing water beverages also better meet the market demand for "summer drinks." If a product makes you more beautiful and slimmer, who wouldn't love it?
6. Flavor Innovation (1) Bright Yellow, the Most Touching When it comes to this color, the first thing that comes to mind is the "salted egg yolk flavor" that has been popular in the past two years. In the past year, Pizza Hut launched salted egg yolk pizza, milk caps, and ice cream series; Lelecha launched salted egg yolk toast; Lawson sold internet-famous double egg yolk ice cream; Mengniu launched salted egg yolk milk; and Le Pur and New Hope launched salted egg yolk yogurt. The salted egg yolk flavor has become an undisputed "internet-famous flavor." Since it's bright yellow, cheese is naturally indispensable. According to Ruinong Consulting data, the market growth rate of cheese has exceeded 25% in recent years. Domestic consumers have gradually accepted and recognized high-nutritional-value cheese. Due to different eating habits, consumers are more willing to try conceptually added cheese-flavored products, such as cheese yogurt. Another bright yellow is pumpkin. Mengniu's Tianxiao Hai previously launched a salted egg yolk pumpkin flavored yogurt, which is both salty and sweet, with a good taste. Heytea launched a Halloween limited edition last year, combining cheese, salted egg yolk, and pumpkin flavors, adding pumpkin dices, pumpkin sauce, salted egg yolk cookies, and cheese ice cream, launching a holiday-limited Bobo Ice.
(2) Pursuing "Special Smells" The post-90s and post-95s are gradually becoming the main consumers. They are willing to try new things, and unique smells like durian and river snail rice noodles have also become internet-famous favorites among consumers in the past year. According to data from the Haohuanluo river snail rice noodle Tmall store, on 618 last year, within just one hour of sale, the brand sold 100,000 bags. Durian is also a flavor that makes lovers crazy and haters avoid. Now there are many products made from durian, and durian-flavored products have also been launched, such as Xinjiang Tianrun's durian yogurt - Shua Liu Mang Le, and durian-flavored river snail rice noodles.
(3) Low Alcohol Content, Satisfying Consumers' "Desire for Health and Pursuit of Indulgence" In addition to beverages themselves, alcohol is a cultural symbol that satisfies social needs and emotional expression. It can be said that alcohol is a beverage that never goes out of style. However, with people's increasing attention to health, consumers desire to relieve stress through drinking while not wanting the discomfort of drunkenness. Therefore, healthy and refreshing alcoholic beverages have broad market prospects in the future. We have previously written articles on trends in alcohol and alcohol-flavored foods, reviewing the major trends in "alcohol-flavored food/beverages" and "alcoholic beverages."
(4) Coffee Flavor, Mostly Related to Refreshing and Anti-Fatigue Nongfu Spring launched Carbon Bing carbonated coffee in the first half of last year; Heytea and other major milk tea brands also launched coffee drinks; Starbucks' second-largest shareholder invested in Luckin Coffee; Yili partnered with Luckin to launch coffee yogurt; UK kombucha brand Equinox launched coffee kombucha; and Pepsi announced last month that it will launch carbonated coffee in 2020, targeting Coca-Cola's coffee+ product. Urban work pressure is high, and staying up late and working overtime is extremely common. In response to market demand, coffee was a major trend in 2019, and this trend will continue into the new year.
-02- New Channels: Live Streaming Is the Biggest Increment, Offline Formats Slowly Iterate
1. Live Streaming with Goods, Driving 20 Billion in Sales in One Day: "Live Streaming" Grows Rapidly In 2019, live streaming emerged as a new force. According to statistics, during the 2019 Double 11, Taobao Live alone contributed 20 billion yuan in sales, with 10 live rooms exceeding 100 million yuan. Within 1 hour and 3 minutes of the Double 11 opening, the transaction volume guided by Taobao Live had already surpassed the entire day's live streaming transaction volume of Double 11 in 2018. Of course, Li Jiaqi and Viya contributed significantly to these sales. As introduced in a previous article, Viya's live streaming transaction volume during Double 11 in 2019 exceeded 2.7 billion yuan, surpassing her total sales for the entire year of 2018. For a review, click here: Viya's sales during Double 11 exceeded 2.7 billion: What are the business logics behind live streaming with goods? Influenced by live streaming, consumers are no longer "buying what they need" but have shifted to "buying what the anchor recommends." The rapid growth of live streaming is centered on "goods." The development of live streaming has greatly shortened the distance between consumers and products. While shortening the path between "people" and "goods," it also poses a great test to the responsiveness of the product supply chain: to sell products well, companies must upgrade their supply chains to cope with greater consumer variability. For the industry, product innovation and supply chain upgrades are mutually influencing and promoting changes, stimulating the acceleration of product innovation cycles. Now, top anchors have formed their own private domain traffic. With the complete breakout of live streaming during Double 11 last year, Taobao is vigorously supporting store live streaming, and giants like Pinduoduo and Tencent have successively entered the game. The impact is: Live streaming will become one of the mainstream shopping forms after social gameplay like "group buying and bargaining," gradually becoming "normalized."
2. Offline OYO Gives Rise to a Franchise Operation Model At the end of 2017, Indian economy hotel chain OYO entered China with a unique light franchise model of "zero franchise fee." Within a year and a half, 10,000 hotels and 500,000 rooms had been launched in China. Although the company has been controversial since entering China, the "OYO speed" has inspired a new model in the market: franchise operation. "Individual single stores" still constitute the majority of offline businesses in China. The chain rate for catering is 5%, while in the US it is 30%; the automotive aftermarket is less than 6%, while in the US it exceeds 80%; beauty institutions are 3%, while in the US it is 48%; and the more than 6 million mom-and-pop stores nationwide contribute 40% of retail channel shipments. How to find new opportunities in the stock economy will be an important proposition in the coming years. "Catering OYO" first became a focus of capital attention, with companies like Fanyimeng, Shixianxing, Chituobang, and Xinhuolin receiving investments. In other fields, nail salons, beauty salons, convenience stores, internet cafes, gyms, music stores, flower shops, home goods stores... players of all sizes are exploring in various formats.
-03- New Consumer Groups: Segmented Groups, Downward Groups, Huge Potential in Future Markets According to Kantar Worldpanel data, "town youth" and "silver-haired generation" are two groups with huge future consumption potential.
1. Town Youth: Huge Potential in Downward Markets Compared with urban youth, town youth generally have more free time and money. According to the "2019 Town Youth Report," 30% of town youth have achieved car ownership, home ownership, and financial independence. In addition, compared with urban youth's two to three hours of commuting time and 996 work schedules, town youth also have higher disposable time.
2. The Rise of the Silver-Haired Generation Should Not Be Underestimated The silver-haired generation is also a consumption force that absolutely cannot be ignored. According to the latest data from the National Bureau of Statistics, as of 2018, China's population aged 60 and above was approximately 249 million, accounting for about 18% of the total population. According to UN predictions, by 2035, China's elderly will reach 28.5%, exceeding 340 million, approximately one in four people will be elderly. This group pays more attention to health than other groups. Many people over 60 now have pensions and children's subsidies, have strong purchasing power, and are willing to pay for health. At the same time, consumers of elderly health products also include younger generations buying for their elders. According to the "2018 National Health Cross-border Consumption Trend Report," the number of young users purchasing health products for middle-aged and elderly people increased by more than 10% compared with the previous year, accounting for 1/4 of the purchasing population.
3. Baby Family: The Family's Treasure As Kantar data suggests, families with children, "baby families," spend more. Whether it's the parents or the grandparents, they are all potential consumers of infant and toddler-related products, including the baby itself. Families with children are willing to spend more money on children. There are many children's products on the market, but functional, healthy, zero-sugar children's products better meet parents' needs. They are willing to pay higher prices for children's products that claim to be healthy. Packaging is also a key focus for children's products. Junyao launched the Qingmu Probiotic Fermented Carrot Juice Beverage last year, creating an independent IP image "Qingxiaomu" (carrot cartoon image), which is closer to children's perspective and has been loved by many children since its launch. At the same time, because it is rich in vitamin A and fermented with abundant probiotics, it is also a healthy children's product, recognized by parents.
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