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Source: New Consumption Insider (ID: cychuangye) Introduction Recently, a article titled 'P&G Delisting' has been circulating on social media. People seem to rejoice at any minor negative news about big companies, as if their own business would improve if the giant collapsed. In fact, for a company like P&G, with annual sales of $50 billion, a decline in performance is quite normal. So for those truly engaged in business, don't be like novices who lack discernment and just join the bandwagon. Additionally, Longmao Jun wants to clarify: I don't know any P&G executives, nor do I hold P&G stock. Apart from using P&G products at home daily, I have no connection to P&G. This article is not intended to whitewash P&G. It simply presents the following viewpoints:

  1. Why won't P&G, even if it seems to be losing favor among younger consumers, face real existential danger in the near future?
  2. Why is the rise of small brands not necessarily linked to P&G's decline?
  3. What are the real challenges P&G might face in the future, and what methods could it use to consolidate its advantages? The following content may take 15 minutes to read, but it will help you think through many issues. It's a deep, quality article; I recommend spending 15 minutes reading it carefully, preferably taking notes. 01 Why Is P&G Hard to Defeat? As someone who has long advocated for Chinese innovative brands and actively supports local Chinese brands, emotionally, I would welcome the rise of various new brands. So, whenever I see brands claiming to challenge Starbucks or P&G, I'm happy to see them rise. But this slogan has been repeated for years, and objectively speaking, most have proven to be more hype than substance. Therefore, the moats of big companies, especially brand moats, are indeed deep. Especially a company like P&G, founded during China's Qing Dynasty, which has survived multiple consumption cycles, must have unique strengths. It's not easy to topple. Many people have witnessed the internet disruption wave, where seemingly large companies were quickly defeated by new business models. That's because the internet industry follows Moore's Law, with rapid updates in knowledge structures and top-level applications. Even in the mobile internet era, business model waves change every three months. But the consumer goods industry is different. Once consumer awareness is truly established, it's very difficult to get consumers to switch. The Matthew effect is strong: once a big brand captures consumer awareness, it's hard to change their minds. Only outsiders casually talk about the downfall of large consumer goods companies. So you'll find that companies like Coca-Cola and P&G, once they establish brand awareness, change very slowly unless there's a structural shift in perception. Some might cite Nokia and Kodak as examples, but as tech consumer products, technological change is the biggest gray rhino in such industries. Such technological revolutions are unlikely in traditional FMCG. Therefore, structural changes in FMCG only occur in the following three variables: 1. Demographic Structure Recently, I've been pondering how we make decisions in this world. Essentially, we decide based on information input and output; the world runs on continuous decision-making using information. This means some inputs are effective signals, while others are noise. In my view, the core of structural change in consumer brands is demographic shifts, which bring new brand variables. I vividly remember He Yabin, President of P&G Greater China's Braun & Innovation Investment & Consumer Insights, mentioning in a recent Chaos University speech that P&G's two real stalls and crises occurred in 1997 and 2014. In 1997, it faced a sniping from domestic daily chemical brand Diao Pai. The demographic change was due to China's SOE reforms, leading to many laid-off workers. The impact on P&G was that its products were too expensive, and the affordable Diao Pai rose rapidly. Similarly, demographic changes like the trend toward single living led to rapid growth in pet brands. In large family households, average living space is too small to keep many pets. Similarly, baby booms and fertility waves create opportunities for new companies. I'll continue writing research articles on demographics. 2. Media Changes The current wave of new brand opportunities is essentially due to changes in media channels. A brand's growth factors are: being remembered, being seen, and being available. Missing any one means consumers can't buy the product. This differs from spiritual consumer goods, where seeing, buying, and remembering happen simultaneously, as with most internet-based products. For physical consumer goods, service acquisition and payment are separated in time and space. So to bridge this time-space gap, monopolizing media and information dissemination periods to achieve full coverage of user frequency becomes crucial. But today, with traditional mass media being deconstructed by internet channels, monopolizing channels is increasingly difficult. Social media, KOLs, and live-stream e-commerce have fully risen, which is a fundamental reason for the birth of so many niche brands. 3. Channel Restructuring Demographic changes bring changes in product demand and pricing systems. Media restructuring brings changes in product information and marketing methods. Channel transformation is another important change in how consumer goods are delivered. The flatter the channel, the higher consumer efficiency. Flatness here means not only spatial but also temporal flatness, and a revolutionary change in delivery methods. So e-commerce transformation brought a wave of brand opportunities, but unfortunately, among the many brands relying on a single platform, none grew into Chinese world-class brands. That's another topic. Instead, traditional brands familiar with consumer insights and brand tactics seized new opportunities in this e-commerce wave. Fortunately, a new channel transformation is underway. Although traditional offline distributor logic has been greatly impacted, the dissolution won't be so fast as to collapse quickly, so it won't challenge companies like P&G for now. What truly challenges P&G today are niche brands leveraging new channel dividends and changes. So in the second part, I'll discuss strategies small brands might use to challenge P&G's position. So the above three elements are structural factors that can bring fundamental changes. As He Yabin, President of P&G Greater China's Braun & Innovation Investment & Consumer Insights, noted, the real challenge for P&G is how to change the way it tells stories. Insights generate content; in the past, it was based on distributor logic, telling distributors certain stories. Today, with the rise of direct-to-consumer social media, how to tell stories that new-generation users love is a change in business logic. Under the context where these three basic signals haven't undergone major restructuring, talking about overturning a giant like P&G is laughable. 02 How Can Niche Brands Challenge P&G? This is a question everyone cares about. All big brands started as small brands, so how should small brands defeat big brands? Here are several key theories: Theory 1: Dividends Bring Opportunities for Niche Brands A. Opportunity Cost Dividend If you can seize the dividend window when new changes occur, even as a new entrant, you can fear no giants. So, for a small brand to rise, you must leverage dividend release. For example, when WeChat public accounts like Yitiao appeared, and few brands cooperated with them, daring to try was seizing a dividend. But when all brands tried selling on Yitiao, the dividend was gone. So the first rule for new brands, or defeating big brands, is to seize dividends. Today's biggest opportunity cost dividend is leveraging new media waves like Douyin and Toutiao as new traffic channels. People miss new opportunities largely due to bias. For instance, when Douyin started, many habitually dismissed it, but early on, there were excellent e-commerce ad opportunities on Toutiao. So, growing with new traffic, being among the first to try when it commercializes, is key to seizing opportunities. B. Blue Ocean Category Dividend Big companies are reluctant to innovate when business is good, because innovation is costly and failure-prone. Small brands have nothing to lose, so they can experiment freely. There are many blank markets giants overlook, which may initially look like saline-alkali land. For example, in the tea drink sector, there are constant opportunities for new categories and products; consumers never stop seeking new products. The cost of switching to new products is low. But if you find an innovative category, giants may hesitate to enter your territory, giving you a significant dividend period before they understand it. Of course, the failure probability of such innovation is also high. C. New Channel Dividend I know a brand whose product is average, and the founder had no prior brand or store experience, but he had long-term dealings with real estate developers. He developed a strong ability to assess the value of commercial properties, judging which locations are valuable. With good relationships with developers, his brand gained a monopoly in his city's commercial districts. He could secure locations others couldn't, with cost-effectiveness. To some extent, he's enjoying a dividend. This dividend might also be absent for big companies in that locality. So you'll find that a new venture or brand always seizes some kind of dividend. This dividend theory also applies to investors. When evaluating a brand or project, repeatedly ask the entrepreneur: What dividend are you seizing? Category dividend? Traffic dividend? Price dividend? If you haven't figured this out, you'll be defeated by big brands. Because without a dividend point, you have to compete on hard strength, which in military terms is hand-to-hand combat. So try to find edge channels, provide content for rapidly growing new edge channels, and serve small ecosystems. Theory 2: Edge Innovation Theory I've said small brands need to seize dividends. Some will retort: Do you think dividends are easy to seize? How do I know where dividends are? Seizing dividends relies on foresight and action, but that sounds like chicken soup. Sometimes, seizing dividends depends largely on luck. It's the luck advantage under accidental judgment that leads to first-mover advantage. To form or discover dividend advantages, sometimes you need not have good luck; even bad luck can help. Why? If someone has very good luck early on, they might become an expert in their field early and make a lot of money. But an expert who has made money is less likely to enter a new opportunity area because the opportunity cost of trial and error is too high. Conversely, someone who has had bad luck and hasn't succeeded is more likely to enter a new field without constraints, establishing a first-mover advantage before many others cultivate the market. So where do dividends typically arise? They arise in areas others are unwilling to do, in niche markets others look down on, and in markets where many haven't reacted after new opportunities change. These places often harbor the most dividends; they're in marginal zones, ignored by giants and powerful players. Recently, Longmao Jun met a brand founder whose business path is worth sharing. He made a good product but couldn't enter mainstream channels. Mainstream hypermarkets looked down on his small brand. He also felt big channels didn't match his product; the real reason was he lacked money for big channels. But he needed to sell. Then he discovered a fragmented channel market others ignored. These were channels in small cities, very marginal and not in his industry, like wedding candy stores, milk tea shops, and fruit shops, which normally couldn't match his product. He developed these small channels one by one, along with fragmented traffic on WeChat. The results were excellent; the initial channel disadvantage became an advantage. Serving small channels, his quality product became a strong brand relative to them, so they valued him and were willing to sell his products diligently. Imagine if his product entered big channels: aside from high costs, such a small brand wouldn't get promotional effort from the channel logic. There's a Chinese saying: 'Better to be the head of a chicken than the tail of a phoenix.' That's the idea. After establishing a foothold in these edge fragmented channels, with sales and sufficient profits, he could later aggregate the scale sales advantages from these small channels and force his way into traditional big channels. I believe when his sales and user base grow large enough, with good word-of-mouth, users will actively seek his product, and big channels will come to him for cooperation. This is the value of finding innovation opportunities at the edge and gaining dividend momentum. So, seeking opportunities at the edge is the only way for new brands to overtake. If they still rely on traditional tactics without seeking edge breakthroughs, they remain traditional brands. Theory 3: Single-Point Breakthrough and Compound Interest Effect A new brand, even with dividends and an edge-cutting strategic perspective, will fail without a sharp tactical entry. Returning to building a consumer brand, the ultimate focus is single-point breakthrough. Why do single-point breakthrough? Why do single products? Many have read theories and cases, but still don't understand why to do single products. Without understanding the underlying logic, you can't use the single-product mindset to transform supply chain and organizational structure. Doing a single product can form local advantages. In warfare, to annihilate a superior enemy, the best way is to divide them, concentrate superior forces, and use local advantages to destroy them. The same applies to single products: a small company doing a single product can form a local advantage against big companies. More importantly, single products align with professionalism under the social division of labor. When the product stage moves from early extensive to intensive cultivation, local professional advantage becomes crucial. When a company makes only one product, it can accumulate extreme professionalism in local details. With a single product, your workers, technology, supply chain, and machine磨合 have greater advantages. In the social division of labor, any work requires learning. Learning accumulates human resources assets but also consumes time and money. So the shorter the learning time and the more skilled the worker, the higher production efficiency. Taylor's scientific management broke down all worker actions into standardized steps; workers just repeat. Workers focus on their process and become experts in it, minimizing learning costs. Under the single-product model, machine learning costs, worker learning costs, and supply chain learning costs are all minimized. What remains is the power of repetition. Speaking of repetition, we must mention the second concept: compound interest. Many investors know about compound interest. As we know, with mobile internet, compound interest's power has become enormous. A quality article can spread virally through WeChat Moments, with many transmission nodes. So the internet industry shows the most obvious compound interest effect. You make a standard product, and using channel compound interest, you can quickly expand to a huge scale. Mobile internet amplifies this effect. Since your product is a single product, every process is standard, fitting compound interest perfectly. With the acceleration of mobile internet's compound interest leverage, a new standard single product can be rapidly amplified. Mobile internet's greatest value is faster information flow. If traditional media takes 10 days for one information flow, mobile internet might take only 1-2 days. Due to product professionalism, good word-of-mouth, and compound interest propagation, the amplified value of good word-of-mouth is terrifying. To illustrate: a mediocre product spread once via traditional channels might reach 100,000 people. An excellent product via mobile internet might also reach 100,000 initial contacts, but due to faster information flow, the secondary amplification could be 10 to the nth power. This compound interest and word-of-mouth effect is unavailable to traditional media. To generate word-of-mouth, you need product professionalism. To form professionalism, you need repetition. To enable repetition, your product structure and backend supply chain must be simple and standardized. So this is the value of single products and mobile internet's compound interest multiplication effect. Based on the above three strategies to defeat big brands, an important brand investment model emerges: 03 P&G's Breakout Strategy Companies like P&G have their own strategic advisors; Longmao Jun doesn't need to provide strategic thinking. They certainly have their own strategies to escape small brand encirclement, but Longmao Jun has some thoughts: 1. The best way for large companies to change is internal entrepreneurship! Today, big companies face many challenges, and each challenge-solving process is a new opportunity. I used to not understand the phrase 'opportunities and challenges coexist,' but now I see they are philosophically intertwined. For P&G, setting up small internal incubators for small categories and brands, using its own methodology for internal entrepreneurship, is feasible. It might even need the determination to 'rebuild a P&G.' I highly advocate the Amoeba organizational form, with market sensitivity and flexible incentives, meaning future companies will trend toward small company states. 2. Investment and M&A, especially increasing M&A in the Chinese market. We firmly believe M&A in China will become extremely active. So starting early investments in early-stage consumer brands, using P&G's methodology, open ecosystem, and open channel system, to accelerate innovation brand investment. If anyone can disrupt itself, it should be itself. 3. Pay more attention to KOL changes, tailor content and brands for KOLs. In the US market, the Kardashian family's beauty business rose rapidly by leveraging social media strategies. In the future, KOLs with traffic will become brands themselves. Tailoring products and services for them will become a trend. 4. Mutual learning with Chinese local companies. Using this PR opportunity, New Consumption Insider also calls on P&G to communicate, exchange, and cooperate with Chinese innovative brands in a more open manner. A good market has not only competition but also exchange and cooperation. So welcome P&G to contact us for discussions. In conclusion, P&G will not die, at least not now. The alarmism from self-media, besides venting emotions, is meaningless. As a firm supporter of local brands, we should calmly focus on making products and learning from others. That's the greatest significance of one day having local brands become world-class. Industries like consumer goods are built by generations of hard work, not by competitors dying. -END-