Click the image above for details C'estbon, which had maintained revenue growth for years, saw a decline in 2019. Recently, C'estbon released its 2019 social responsibility report stating that its operating revenue was 10.396 billion yuan, a slight decrease year-on-year. In fact, C'estbon's revenue has remained at the 10 billion yuan scale for three consecutive years without significant growth. From C'estbon's perspective, the revenue decline is mainly due to industry-wide impacts. Industry insiders believe that the industry's downward trend is an external factor; internally, C'estbon still relies heavily on drinking water revenue, a field that is saturated with limited growth space. Although C'estbon has launched new products continuously, they have yet to form a new breakthrough point. -01- Revenue Decline C'estbon's 2019 social responsibility report shows that in 2019, C'estbon's revenue was 10.396 billion yuan, a slight decrease of 0.3% compared to 2018. This is the first revenue decline for C'estbon in recent years. Data shows that from 2014 to 2018, C'estbon's revenue was 7.855 billion yuan, 8.922 billion yuan, 9.347 billion yuan, 10.035 billion yuan, and 10.435 billion yuan respectively, with revenue increasing for five consecutive years. Regarding the reasons for the performance decline, C'estbon stated in the report that in 2019, the beverage industry's turnover decreased by 5.2% year-on-year, the overall beverage industry showed negative growth, and terminal sales growth slowed. Xu Xiongjun, a strategic positioning expert and founder of Jiude Positioning Consulting, believes that under such an environment, it is not easy for C'estbon to maintain its 10 billion yuan scale. Zhang Weitong, CEO of China Resources C'estbon Beverage (China) Co., Ltd., stated in the report that despite the decline in operating revenue, China Resources C'estbon's overall performance continued to maintain a steady development momentum in 2019, achieving a 7% year-on-year increase in annual turnover (note: turnover and operating revenue have different statistical calibers). It is worth noting that C'estbon's total profit maintained growth. From 2017 to 2019, total profits were 631 million yuan, 727 million yuan, and 863 million yuan respectively, with growth rates maintained above 15%. Shen Boyuan, a marketing strategy management expert, believes that the phenomenon of declining revenue and increasing profits is generally due to reduced marketing and sales expenses, but it also leads to a decline in product market share. It also indicates that although the drinking water market has large space, the competitive landscape is relatively stable. In the drinking water market, by sales volume, in 2019, Nongfu Spring, C'estbon, Ganten, Master Kong, and Wahaha held major market shares, with market shares of 11.7%, 10.4%, 5.5%, 5.3%, and 3.3% respectively. This pattern has persisted for many years and is difficult to adjust significantly. -02- Internal Adjustments In addition to changes in the external industry environment, C'estbon has also adjusted its internal structure and operating model. Xu Xiongjun believes this will also have a certain impact on C'estbon's overall performance. In February 2019, C'estbon further streamlined and optimized management interfaces and key business processes, changing the organizational structure from three levels to two levels, and established a marketing center. The marketing center is responsible for specific business management in various regions and major areas. At the same time, it set up a marketing department, sales management department, new product development department, sales operations department, sales finance department, and comprehensive management department. The adjustment of the management structure promoted the upgrade of the business model. C'estbon stated in its social responsibility report that, driven by technology and relying on the deep integration of supply chain and online-offline channels, C'estbon established a "beverage distribution service provider" model specifically for delivering beverages. A C'estbon representative said, "In the traditional model, distributors originally acted as channel intermediaries, with many layers and low profit margins; in the distribution model, channels are flattened, and distributors act as delivery providers directly facing terminals, with larger profit margins, increasing customer enthusiasm for expanding sales and ensuring the freshness of beverage shelf life." The model adjustment improved customer response speed. Sales personnel place orders directly and check the distributor's inventory and shelf age through the app, making data clearer. At the same time, customer initiative is strengthened, and fee returns to distributors are faster; distributors directly advance and reimburse fees, reducing the turnaround time by one month, increasing customer enthusiasm for delivering C'estbon beverages. With fast delivery, customers can make small-batch, high-frequency deliveries. Xu Xiongjun said, "The adjustment of structure and model brings positive changes, but it also brings impacts. Whether they are distributors or circulation providers, under the new model, they all need time to adapt." -03- Difficult to Break Through Industry insiders believe that C'estbon hopes to strengthen its competitiveness through internal adjustments. However, it may be difficult for C'estbon to break through in the short term. From a product perspective, C'estbon currently offers consumers a more diversified range of products. As of the end of 2019, it had 29 single products, including purified water, mineral water, milk tea, coffee, functional drinks, lactic acid drinks, and fruit drinks. It owns its own brands such as "C'estbon," "Jialinshan," "Moli," "Honey Lemon," "Xiaozhujun," "Grape Holiday," and Japanese-licensed brands like "Afternoon Milk Tea" and "Huoka." However, C'estbon only has a certain advantage in the drinking water field, with no obvious advantages in other areas. In 1990, C'estbon launched the "C'estbon" brand purified water nationwide, becoming one of the early Chinese enterprises to produce and sell packaged drinking water, and one of the initiators and drafters of the national standard for "Bottled Purified Drinking Water." However, in the ready-to-drink coffee field, C'estbon's ready-to-drink coffee brand Huoka has not yet entered the mainstream, with the market firmly occupied by brands such as Nestlé, Starbucks, Wei Chuan, and Uni-President. In the bottled milk tea field, Uni-President's Assam milk tea has maintained the industry's top market share in recent years. At the same time, the emergence of Xiangpiaopiao's cup milk tea and street-side freshly made milk tea has also eroded C'estbon's market share to some extent. In the sports drink field, "Moli" faces competitors mostly backed by international companies, making competition particularly fierce. PepsiCo's "Gatorade" has been deeply rooted in China for over a decade and is the world's largest sports drink brand. Danone's "Mizone" has also undergone drastic reforms recently. Nongfu Spring's "Scream" sells nearly 2.7 billion yuan annually. Data shows that C'estbon's new products still appear "weak." In 2019, C'estbon's new product sales were approximately 252 million yuan, less than 3% of total revenue. In previous years, this figure was even lower. In 2018, C'estbon's new product revenue was 86.71 million yuan, and in 2017, it was 61.41 million yuan. In response, Xu Xiongjun analyzed that there are still many blank areas in the national market, and the potential for continued growth is large. C'estbon needs to further strengthen its position in the drinking water field, while also optimizing other categories, divesting underperforming products, and optimizing its product structure. Source: Beijing Business Today