Studying short-term fluctuations is meaningless; it is more interesting to glimpse the methodology of giants changing direction through such fluctuations. Are instant noodles really not selling? In five years, Master Kong's total market value evaporated nearly HK$90 billion. Master Kong, which occupies half of the instant noodle market, is a microcosm of the industry: starting from 2012, the entire instant noodle industry experienced five consecutive years of decline. Not only the instant noodle market, but also the traditional food and beverage industry generally suffered strong impacts due to factors such as global economic fluctuations, China's economic slowdown, consumption upgrades, and channel diversification. However, according to Nielsen data, in 2016, the instant noodle market sales increased by 1.3%, and Kantar Worldpanel monitoring data showed that the entire instant noodle industry grew by 0.9% year-on-year, achieving the first positive sales growth in recent years. Various signs indicate that the instant noodle market may have begun to recover in 2016. Master Kong's first-quarter 2017 financial report also indirectly confirmed this. According to Master Kong's first-quarter report, revenue was 14.1976 billion RMB, of which instant noodle revenue was 5.811 billion RMB, a year-on-year increase of 5.76%, accounting for 40.93% of total group revenue. To cope with temporary fluctuations, Master Kong made adjustments in marketing, organizational structure, and other aspects, which may have added a significant stroke to its own recovery. "Price War" Comes to an End, Targeting Middle-Class Consumers The market recovery is reflected in instant noodles as the "price war" has come to an end, with major brands focusing on the high-end market. According to Kantar Worldpanel monitoring data, in the 52 weeks before September 2016, high-end noodle sales accounted for 13.4%, and market penetration increased, with 22.5% of urban households having purchased high-end instant noodles, a year-on-year increase of 1.6 percentage points. Nearly 30% of urban households with monthly income above 9,000 RMB have purchased high-end instant noodle products. Facing the rise of the middle class, companies in the first tier have launched high-end noodles, hoping to break out of the highly competitive, low-margin instant noodle industry on one hand, and on the other hand, to gain more room for price increases through the high-end concept, providing greater profit upside in the red ocean. Uni-President has been effective in cultivating high-end hit products. In the 52 weeks before September 2016, the single product Tang Daren contributed 77.3% of Uni-President's instant noodle sales growth. In 2016, Master Kong also focused on the development of the 5-yuan product line, launching Black and White Pepper instant noodles, subverting the traditional classic "red" color. In addition to the pepper series, it also included the Golden Soup series, Tonkotsu series, Jiang Tang series, Pot-Cooked Ramen, and the upgraded Ai Xian Da Can. According to public data, the pepper series achieved monthly sales of 700,000 boxes. Testing Asset-Light Strategy Similar to Coca-Cola's logic in selling bottling plants, this food and beverage giant may in the future focus more on product sales and R&D, taking an "asset-light" path. According to media reports, on June 22, it was learned from the Ministry of Commerce that Zhangzhou Yilaifu Food Co., Ltd.'s acquisition of equity in five companies under Master Kong Holdings Co., Ltd. was being publicized. According to relevant documents, these five companies mainly involve the production and sale of ready-to-drink tea, fruit juice beverages, carbonated beverages, and bottled water products. The acquisition means that Master Kong is attempting to outsource some production operations to reduce its fixed assets. In April this year, Coca-Cola's "dual bottler strategy" in China was finalized, with COFCO and Swire, two major bottlers, authorized by Coca-Cola to produce, bottle, sell, and distribute Coca-Cola beverages. From the restructuring of bottling operations, it can be seen that this globally significant beverage company is reforming its long-standing business model to become a flatter, more efficient enterprise. Master Kong's divestiture of non-core production bases also aims to make itself lighter, and this may become a tentative trend in the transformation of China's beverage industry production model. Riding on Young Idols: Master Kong's Age-Reduction Marketing With the rise of the younger generation, especially the post-90s and post-00s becoming the mainstream consumer group of FMCG, entertainment IP, internet celebrities, live streaming, and sports are increasingly valued by brands and used in brand promotion. In addition to inviting Li Yifeng and Wu Lei to endorse its star product Master Kong Green Tea, and Yang Yang and Zhao Liying to endorse the Jasmine Tea series, Master Kong also sponsored NBA events, creating a "entertainment + sports + interaction" marketing model, and also embedded promotions for Ice Green Tea in TV dramas such as "Noble Aspirations." This year, Master Kong leveraged its flagship store to launch a multi-flavor combo pack "Huan La Song" corresponding to the five female leads of "Ode to Joy 2," and invited food KOLs to spread the word through social media. These marketing tactics are basically centered around this young consumer group. Although hard product placements in TV dramas can be off-putting, and if the borrowing of trends is criticized, the damage to the brand cannot be underestimated, this is a common attempt by consumer products to get closer to users. Consumer brand awareness is rising. For Master Kong, people's recognition of it began with a bowl of instant noodles. The key to marketing is how to break through this bowl of noodles, and through instant noodles, create emotional resonance with consumers. After all, brand added value can cultivate consumer goodwill and loyalty more than simple price cuts. Despite making these attempts, it is undeniable that Master Kong's transformation path is still fraught with difficulties. Frequent Organizational Adjustments, Moving Closer to Distributor Channels Some media reported that in recent months, the internal organizational structure of Master Kong's beverage segment in East China has undergone frequent adjustments, including the adjustment and replacement of many positions. "As Master Kong's market share in beverages declines and e-commerce impacts, its channel sinking strategy has temporarily come to an end. Master Kong is re-adjusting its channel strategy, focusing on major distributors and sub-distributors to ensure channel stability in various regions." In the past, Master Kong's beverage operation model relied on a human-wave tactic, intensively cultivating channels and markets. If Master Kong is changing its organizational structure to save costs, it indicates that Master Kong intends to cede more profits to distributors and sub-distributors. According to industry insiders, in the current food market, especially in first- and second-tier cities, traditional "mom-and-pop stores" are difficult to support business growth needs. 24-hour convenience stores have become a channel that beverage companies compete for, but most convenience stores are chain-operated systems, and Master Kong, which relies on a human-wave tactic, does not have an advantage in the convenience store channel competition. Chain-based convenience stores, due to higher costs, require higher display fees and high gross margins, leading to higher product elimination rates. For products with relatively low gross margins, Master Kong's intensive channel approach has little room to play in systematic retail terminals. Only by giving terminals more gross margin space can the main problem be solved. This personnel turnover and organizational restructuring reflect trends in the FMCG industry. First, the beverage industry has entered a bottleneck period, and the transformation and upgrading of product structure have led to original personnel not necessarily adapting to new organizational needs; second, in recent years, facing market segmentation trends, Master Kong's new product development has been unfavorable, and high-value-added high-end products have not stood out. As one of the giants in the beverage industry, Master Kong currently lags far behind competitors like Uni-President in new product replacement. While Uni-President has been reaping profits with hit products like "Xiao Ming Tong Xue" and "Hai Zhi Yan," Master Kong seems to remain silent. In fact, Master Kong has been committed to new product development, with new products launched this summer, but insiders say the promotion intensity is not strong, making it difficult to surpass competing products. So, whether it's testing asset-light strategy, marketing, or adjusting organizational structure, companies always use the same few tactics. The key to whether this "elephant" can dance lies in how quickly it can match the new market under consumption upgrades. Source: Pitu Company Journal (ID: e-qika) -END-