Click to read the original text for details In the past, New Distribution has interviewed and reported on dozens of innovative consumer brands in China, but we have observed that all these rising innovative consumer brands have broken through using the 'New Product x New Traffic x New Technology' model. A couple of days ago, I saw a sentence: 'Even under the impact of the epidemic, Chinese food entrepreneurs are still experiencing the best of times!' Without exaggeration, this is an era of brand explosion. This year, the Ali Research Institute released the '2020 China Consumer Brand Research and Development Report', showing that in 2019, the online market share of Chinese brands reached 72%, with the **food industry being active online, and its market size growth rate ranking among the top three, with an increase of 31.5%. ** Chinese consumer brands have expanded their market scale through category innovation, with data showing that category innovation contributed 44.8% to overall growth. Behind these figures is the fact that with the improvement and popularization of new infrastructure, more and more new consumer brands are rising. Today we are not talking about new categories, but about Gu Xiaojiu, an innovative brand in the most traditional category spanning over 200 years—baijiu. △Liu Fei, founder of Gu Xiaojiu A while ago, New Distribution had an in-depth exchange with Mr. Liu Fei, founder of Gu Xiaojiu. This seasoned internet professional, who once worked in public relations at Alibaba and Xiaomi, has now ventured into the traditional baijiu track and secured multiple rounds of financing, totaling nearly 100 million yuan in 9 months. How did Gu Xiaojiu manage to stand firm in the gap between traditional baijiu's blockade and the squeeze of emerging small baijiu brands? -01- New Product For an innovative brand, the most important thing is product strength. Without brand endorsement or channel accumulation, only the product can be the breakthrough. An innovative product, besides having unique insights into the current new consumption era, is most directly reflected in its content and outer packaging. Mr. Liu Fei told New Distribution that because of his past experience in internet public relations, many people mistakenly think, 'You're in marketing, you know how to hype, so your products sell well.' But in fact, how many consumers today still pay IQ tax for marketing? Gu Xiaojiu's recognition comes more from investing over 100% effort into polishing the product, including the liquor body, taste, design, and packaging, and even negotiations with the supply chain. 1. Content Regarding the liquor body, Gu Xiaojiu has publicly stated that it will not spend a penny on advertising, but will use the money where it should be used—all invested in the product. Gu Xiaojiu has a strong internet gene behind it, but it indeed lacks heritage in making baijiu. So, the brewing is left to old distilleries, while Gu Xiaojiu is responsible for branding and sales. Liu Fei spent 3 months traveling back and forth between Yibin, Maotai Town, and Chengdu, covering about 18,000 kilometers, visiting these distilleries one by one, just to select the best in the industry to cooperate with and jointly develop a new liquor body. Of course, in today's highly product-rich environment, making product quality good has become the most basic step. Now, it's often about whether we can go further to make users feel their money is well spent, or even satisfy their unique value proposition. 2. Outer Packaging With excellent creative design, Gu Xiaojiu won the 2019 iF Design Award and the 2020 German Design Award for its outer packaging. If we set aside design, Gu Xiaojiu faced difficulties in choosing packaging supply chain in the early stage, but later, Gu Xiaojiu turned around and 'drove the supply chain crazy.' For example, 'In the middle of the night, Liu Fei saw a user comment saying 'the production dates on the two bottles of Gu Xiaojiu I received have different font sizes,' and immediately had the supply chain manager go to the factory to investigate, scrapping nearly 20,000 bottles that night.' It is precisely because of Gu Xiaojiu's constant nitpicking that each iteration and improvement brings it closer to consumer satisfaction. 3. Cost Performance Although price is not included in the product, pricing together with the product builds product strength. Gu Xiaojiu brings the cost-performance model from Xiaomi's model into the baijiu industry. The gross margin in the baijiu industry is generally between 50-70%, with the highest being Moutai at 89%. Gu Xiaojiu hopes to reduce the gross margin of baijiu to below 10%, making a thousand-yuan quality liquor at a hundred-yuan price, thereby breaking the convention of baijiu being 'only for collection, not for drinking.' On Gu Xiaojiu's official website, it even expresses the company philosophy of 'only making one yuan per bottle.' So, as an innovative brand, Gu Xiaojiu, in the new product stage, relies on high-quality content and excellent visual communication, then targets the high gross margin of traditional liquor, and with absolute price advantage, builds strong product strength, enabling it to quickly stand firm among the traditional 'big liquors' and the rising 'small liquors.' -02- New Traffic Some people distinguish new traffic from new channels, but for most innovative brands incubated online, the discussion is more about how to seize traffic dividends in new channels. In the new environment, media is fragmented, and user transaction scenarios are also highly fragmented. Especially in the past, all traffic from offline stores has been severely 'intercepted' by online social e-commerce and 2C e-commerce. As an innovative brand, the principle is to go where the traffic is, and then be the first to tap into new traffic to achieve rapid rise. Gu Xiaojiu has publicly stated that it will not spend money on advertising, but recently, Gu Xiaojiu sold 10 million yuan in 90 minutes in Luo Yonghao's live stream, attracting attention from inside and outside the industry. Regarding this, Liu Fei explained, 'Live streaming sales are divided into two types: one is the salesperson, the other is the celebrity effect.' The salesperson has actual sales ability, using actual carriers to embellish and close deals. The celebrity effect is more about using one's own image to endorse and shape a new image for the product, thereby achieving sales results. Choosing Luo Yonghao was because Gu Xiaojiu knows Luo Yonghao too well, knowing that this 'first-generation internet celebrity in China' is indeed a very impressive salesperson. More importantly, Gu Xiaojiu analyzed Luo Yonghao's user base, mainly men born in the late 90s and early 80s and 85s, who watched Lao Luo's speeches back then and were moved by his sentiment, and are now the main group drinking baijiu. According to statistics from the live stream on April 1, male users in Luo Yonghao's live room accounted for 73.14%, users aged 18-40 accounted for 85%, and users aged 25-30 accounted for over 30%. This matches Gu Xiaojiu's user profile of males aged 25-40 very well. So when the entire baijiu industry was experiencing the 'severe winter' brought by the epidemic, Tmall platform data showed Gu Xiaojiu's year-on-year growth of 1400%. -03- New Technology Many people may not understand what new technology means here, but we can pick an effective handle to talk about—that is digital innovation. In the past, we didn't know what consumers wanted, and the same was true in the baijiu industry. We could only keep working on the supply side, then distribute nationwide, and rely on the huge consumer base of the liquor industry to drive consumption. So, the wider the distribution, the broader the distribution system, and the stronger the ability to acquire consumers. This is also a current rule in the traditional liquor industry. Nowadays, the concept of digital innovation is 'flowing everywhere.' In fact, e-commerce itself has digital attributes: one is the e-commerce sales network, and the other is the customer service communication network. Whether it's using backend big data to profile users or capturing user needs, it's a basic requirement for internet companies. For example, can user communities, new media communication, and timely user feedback directly reach the decision-making level for rapid advancement? Seize high-frequency and efficient communication with users, get consumer needs in hand, start from the demand side, and research and improve the supply side. Besides the two conventional points, there is another more important point: Gu Xiaojiu's digital micro-innovation—adding a QR code to each bottle of liquor, thereby directly obtaining user terminal data. For most distilleries, once the user places an order and the liquor is sold to the C-end user, it's all over. Even more often, the distillery's last step is selling the goods to distributors. The distillery doesn't care whether the bottle is constantly being 'traded' or drunk, or what the consumption scenario is. For Gu Xiaojiu, selling the liquor to the user is only the first step. It also needs to establish a statistical network for bottle opening, including whether the bottle was sold online or offline, the time and place of opening, and the aroma type of the liquor. All of this relies on a small QR code. By setting up prizes from small to large with a 100% winning rate, it cultivates user habits, and while scanning at the terminal, the backend can automatically compile the data. Then, analyze the data through channels to map to cities and consumers, and at different time points and regions, choose different aroma types and alcohol levels for salespeople to focus on promoting. This approach of taking a small step forward at the offline terminal directly eliminates steps like the past 'bottle opening fee.' Nowadays, all industries are advocating new infrastructure, and the consumer goods industry is no exception. But more often, once we have the tools, do we have specific ways to use them as a handle? Final Thoughts: In the past, New Distribution has interviewed and reported on dozens of innovative consumer brands in China. When we look closely, we find that all these rising innovative consumer brands have broken through using the 'New Product x New Traffic x New Technology' model. Regarding new products, it's not simply an upgrade in product quality or raw materials, but rather solving the 'new pain points' of young consumer groups in the current new consumption era. Each generation has its own new pain points; finding and solving them is an innovative product. Regarding new traffic, in the past, there was no such term as new traffic. Traditional consumer brands focused on channels, especially tangible, visible, and graspable fixed channels. But now, in fact, there are no pure channels anymore. Communication is the channel, social interaction is the channel, and content is the channel. Therefore, for innovative consumer brands, instead of looking for channels, it's better to look for traffic—to find the 'habitat' of the target consumer group that matches their brand. Regarding new technology, the 'new technology' we propose is relative. It refers to innovative consumer brands using new infrastructure, new tools, and new platforms to improve their operational efficiency. Typically, it's about real-time feedback communication with users on e-commerce platforms, using digital tools for transparent, traceable, and digital collaboration with partners, and adjusting marketing ROI on social content platforms daily or weekly. In the new consumption era, innovative consumer brands are thriving. For traditional brands, it's worth thinking about and deeply studying the model behind the rise of these innovative consumer brands. Of course, after innovative consumer brands complete 0 to 1 and 1 to 10, the next step is to face the encirclement of big brands, and competition will follow. How to break through is also a significant hurdle for innovative consumer brands!