In August this year, Wanglaoji's parent company Baiyunshan released its 2021 semi-annual report: in the first half of 2021, Baiyunshan achieved revenue of approximately 36.129 billion yuan, a year-on-year increase of 18.57%, and net profit attributable to shareholders of the listed company was 2.502 billion yuan, a year-on-year increase of 41.84%. Among them, Baiyunshan's wholly-owned subsidiary Wanglaoji Big Health Company achieved revenue of 6.006 billion yuan, operating profit of 2.854 billion yuan, and net profit of 1.17 billion yuan, accounting for 44% of Baiyunshan's total net profit. The big health segment centered on Wanglaoji achieved revenue of 6.604 billion yuan, a year-on-year increase of 46.71%. Key point: In the first half of 2021, Wanglaoji Big Health achieved revenue of 6.604 billion yuan, a year-on-year increase of 46.71%! As is well known, in December 2018, Baiyunshan purchased all rights to the Wanglaoji series trademarks held by Guangzhou Pharmaceutical Group (GP Group) for 1.389 billion yuan, and in April of the following year, Baiyunshan completed the transfer of the Wanglaoji series trademark assets from GP Group. After taking over Wanglaoji, in the first half of 2019, Wanglaoji Big Health's net profit was 1.114 billion yuan, and in the first half of 2020, net profit was 841 million yuan. The big health segment centered on Wanglaoji achieved revenue of 5.854 billion yuan in the first half of 2019, a year-on-year increase of 10.98%, and an increase of 12.12 percentage points; in the first half of 2020, revenue was 4.501 billion yuan, a year-on-year decrease of 23.11%. From the data, although Wanglaoji's performance declined in 2020 due to the pandemic, it quickly recovered in 2021, and its ability to generate cash remains strong. After the long-running commercial war and litigation with JDB, Wanglaoji's short-track speed-up in performance is impressive. ****Short-Track Speed-Up After the Commercial War The first eye-catching step is Wanglaoji's "big single product re-innovation". ▲Source: Wanglaoji official Weibo Following the super big single product canned Wanglaoji, Wanglaoji's newly launched Ciningji is a key achievement of rural industry revitalization in Guizhou. It is a natural high-vitamin C beverage developed from prickly pear, with the slogan "vitamin C content is 100 times that of lemon." Leveraging Wanglaoji's original brand and channel advantages, it quickly distributed nationwide, while inviting well-known actress Lan Yingying to endorse Ciningji, and setting up a canned production base in Huishui County, Qiannan Prefecture. With its refreshing sweet and sour taste, appetite-stimulating and greasiness-relieving properties, and high vitamin C content, it quickly gained popularity among young consumers, and within half a year of launch, it delivered a retail sales performance of over 100 million yuan. From sales volume and word-of-mouth, Ciningji provides the possibility for Wanglaoji to create another big single product; from its marketing strategy and positioning, this veteran in the herbal tea industry has a bit of a "younger and younger" vibe. Indeed, Wanglaoji had already begun to position itself for younger consumers several years ago. Fruit wine, flower wine, milk beer, craft beer and other new-style alcoholic beverages have improved problems such as product aging, single taste, and sticky texture. The largest product investment share is still placed in the catering market, where Wanglaoji is most skilled. It once achieved extreme marketing to the point of near-monopoly, with high penetration of products into dining scenarios, even reaching every dining table, driving terminal sales. In addition to product innovation, Wanglaoji also attempts to deepen development by broadening consumption scenarios. The once deeply ingrained advertising slogan "Afraid of getting heaty? Drink Wanglaoji" captured a large market for canned Wanglaoji, deeply reaching rich marketing scenarios. Therefore, evoking user resonance through emotional marketing is also one of Wanglaoji's most skilled marketing techniques. Wanglaoji focuses on various auspicious cultural marketing scenarios, extending the "auspicious culture" into scenarios of users' quality life, achieving brand culture penetration in multiple scenarios such as wedding auspiciousness, housewarming auspiciousness, college entrance exam auspiciousness, school opening auspiciousness, promotion auspiciousness, work start auspiciousness, topping-out auspiciousness, and family auspicious events. With such multiple product expansions and consumption scenario innovations, Wanglaoji is frequent in its actions. After all, after the struggle with JDB damaged its vitality, Wanglaoji urgently needs a way to break through. But it is worth mentioning that one of the reasons Wanglaoji is eager to improve performance may be related to the "Performance Compensation Agreement" signed between Baiyunshan and GP Group back then. According to the "Performance Compensation Agreement" signed by both parties at that time, the performance commitment period for the Wanglaoji trademark assets was 3 years, with trademark licensing net income of 153 million yuan, 163 million yuan, and 171 million yuan to be completed in 2019, 2020, and 2021 respectively. If the cumulative trademark licensing net income fails to meet the above requirements, GP Group must compensate Baiyunshan in cash. In 2019, the performance commitment was barely completed, with a completion rate of 105.79%, but in 2020, due to the impact of the COVID-19 pandemic, the completion rate was only 75.03%. As the three-year agreement is about to expire, in August this year, Baiyunshan and GP Group signed the "Supplementary Agreement on Performance Compensation Agreement" and passed the "Proposal on the Controlling Shareholder's Deferred Performance Commitment and Signing of Supplementary Agreement." The agreement shows that after communication and negotiation between GP Group and Baiyunshan, both parties adjusted the performance commitment period, changing it from 2019, 2020, and 2021 to 2019, 2021, and 2022, with the committed performance amounts unchanged. Although this year's modification of the performance agreement means Baiyunshan has more time to complete it, behind Wanglaoji's short-track speed-up, negative effects frequently occur. ****Brand Consumption Caused by Cross-Border Diversification Yes, Wanglaoji was "besieged" by franchisees. In 2017, Wanglaoji crossed over into the tea beverage market, launching the offline tea beverage brand "1828 Wanglaoji Freshly Brewed Herbal Tea," focusing on health-preserving tea drinks, attempting to open up a new market. It once announced in 2019 that it would expand to 5,000 stores within 5 years, but as of now, "1828 Wanglaoji" has only opened 80 stores, and more than half of the franchisees have collectively defended their rights. Franchisees directly point out the multiple faults of "1828 Wanglaoji": exaggerated promotion, false investment attraction, unprofessional operations... These have led to continuously expanding losses for franchisees, ultimately making it impossible to continue operations. Many franchisees said that after the rights protection ends, they will no longer trust Wanglaoji. Next, Wanglaoji also made a move in the catering track. In October 2020, Wanglaoji launched a hot pot and barbecue ingredients brand - "1828 Wanglaoji Xiaojiguopai." It is understood that 1828 Wanglaoji Xiaojiguopai was jointly established by Wanglaoji Catering Company under GP Group and Xiaojiguopai Food Co., Ltd., with its headquarters in Zhengzhou. The brand adopts a "offline stores + online mall" model, providing consumers with a one-stop procurement platform for hot pot and barbecue ingredients. Wanglaoji's "cross-border" moves seem to be popular categories in the wind, but in reality, they are already a red ocean. Looking at the new-style tea beverage industry: in the high-end market, Heytea and Naixue stand as "two heroes," with Lelecha around; waist brands such as Shanghai Auntie and Sexy Tea have gained a large number of fans with their respective characteristics, and their store expansion is rapid; low-price brand Mixue Bingcheng also became the first tea beverage brand to exceed 10,000 stores this year. Similarly, the hot pot market has long formed a well-known tiered brand lineup: when it comes to service, Haidilao comes to mind; when it comes to tripe, it's Banu; when it comes to small hot pot, it's Xiabu Xiabu... Therefore, the tea beverage track and hot pot market have never lacked players. Wanglaoji's entry just adds a bit of excitement; it got up early but arrived late. Whether Wanglaoji's diversified layout can ultimately break out of the circle remains a question mark. And Wahaha, which has the same "origin" and the same approach as Wanglaoji, faces the same problem. Wahaha, which accompanied the childhood of the post-80s and post-90s generations, after sales of its series products declined, also began to reform for younger consumers and accelerate diversification. With the title of "Wahaha + nostalgia," it opened a milk tea shop. Many users checked in to taste "childhood drinks," setting off a wave of nostalgia, while attracting franchisees from all over the country, and Wahaha milk tea shops expanded rapidly. But with the same fate as Wanglaoji, a few months after opening, Wahaha milk tea shops cooled down, with 70% of franchisees in severe loss. Franchisees complained: "Wahaha brand side has problems such as not fulfilling investment promises, chaotic operation management, false investment attraction, and never solving store problems or answering franchisees' questions positively." Uncoincidentally, Wahaha was also "besieged" by franchisees. In addition, Wahaha once declared in 2010 that it would enter the infant milk powder field and rank among the top of all milk powder brands in 3 years; in 2012, it entered the retail industry, and its first Waou mall began operations; in 2013, Wahaha high-profile entered the liquor industry. Such drastic business expansion ultimately yielded little results. Looking at these two once-dominant brands, whether it is Wanglaoji or Wahaha, there is nothing wrong with implementing a diversification development strategy. Diversification can increase corporate profit points and enhance anti-risk capabilities. But both have a common problem: expansion is too rapid and scattered, and their advantages in cross-border tea beverages, catering, and other industries are not significant. Rashly entering will excessively consume brand value. After all, for users, Wahaha means AD calcium milk and Nutri-Express; Wanglaoji means canned herbal tea. In the case of weak growth in the main business, relying on diversification may not necessarily spread risks, but may instead become a drag and fail to form brand focus. ****Brand Focus = Occupying Mind Share At this year's Tianjin Autumn Sugar Fair, Zhang Liaoyuan, founder of Three Squirrels, expressed this view on brand focus: The long-term value of a brand is measured by the extent to which your brand can represent a certain category. When consumers have a demand for a specific category, can they think of your brand first? Therefore, the ultimate battlefield of business is not channels or traffic, but consumer mind share. How to occupy consumer mind share? The answer is undoubtedly brand focus. If a brand's positioning is too broad and cannot focus, it cannot establish user mind share, nor can it establish long-term brand value. For example, Three Squirrels. Three Squirrels took seven years to become a 10-billion-level snack food brand. At the Tianjin Autumn Sugar Fair, Zhang Liaoyuan stated: Three Squirrels' latest brand strategy is adjusted to single focus, multi-brand alignment, shrinking the front, and returning to product brand attributes. Undoubtedly, in the minds of consumers, Three Squirrels is nuts, which is its strongest brand advantage. Zhang Liaoyuan told reporters: Currently, the entire Chinese tree nut (excluding peanuts and sunflower seeds) market is nearly 70 billion yuan in scale, with about 20 billion online and 50 billion offline. Three Squirrels is relatively leading online, accounting for about 20% share, but in the national 70 billion market, the overall share is still relatively low. So Three Squirrels' next move is to use brand momentum, focus on the nut category, continue to amplify advantages, until it becomes a strong brand capable of occupying user mind share in the nut category, that is, forming a brand logic: Three Squirrels equals nuts. Obviously, when nuts are built into the strongest brand trunk and brand focus is completed, the next step is to develop empowering categories. Like Coca-Cola's big tree development model, with deep roots and lush leaves, the trunk brand is Coca-Cola, and the empowering product lines include Fanta, Smart, Sprite, etc.; Procter & Gamble is the same. P&G cannot represent shampoo, but it uses Pantene and Rejoice to represent smoothness, and Head & Shoulders to represent dandruff removal. Looking at Wanglaoji again, its trunk brand is canned herbal tea. In the past, canned herbal tea sales once surpassed Coca-Cola, firmly sitting in the first position in the herbal tea category. The three characters "Wanglaoji" have become an intangible asset. Under the premise of continuous brand growth, further segmentation can produce more sub-brands representing segmented categories, which may achieve the empowering effect. From Wanglaoji's current business path: First, self-launching new products and self-operated model, such as Wanglaoji Black Herbal Tea and Ciningji; Second, trademark licensing model, entering new fields through authorized operating enterprises, such as the "1828 Wanglaoji" tea beverage cross-border layout; Third, acquisition model, which becomes the most direct way for Wanglaoji to break into diversified fields, with its strategic approach combining product structure expansion, consumption scenario development, and promotion of "auspicious culture" and "new national trend." In this regard, Chinese liquor industry analyst Cai Xuefei believes that Wanglaoji is a fast-moving consumer goods brand with very strong brand resources, but it only stays in the herbal tea category, and it is also the pioneer of the herbal tea category. In other cross-border categories, it actually does not have many advantages, and may even cause a "strategic defocus," leading to problems such as decreased consumer recognition. Looking at the past five years, Wanglaoji's diversified exploration in tea beverages, catering, beer, and other fields has always hovered at the boundary of product innovation, seemingly unable to accurately capture consumers' minds and create a second hit. Even if it once achieved remarkable results, it has become a topic of conversation among consumers, with no more capital to show off. Finally, borrowing a sentence from Zhang Liaoyuan: The brand moat is two things: occupying mind share and occupying mainstream channels. In the long run, perhaps this is what Wanglaoji should consider. After all, if Wanglaoji continues to shine, its old owner will also benefit endlessly. Are you "watching" me?