China's retail industry's "Pang Reform" and private brands are just the trigger, initiating a reverse integration of retail, distributors, and brand owners. The subsequent impacts will be greater than the initial phase.
For retail, it will drive an increase in retail concentration, especially the significant development of retail chains, and a large number of independent stores will disappear. Historically, China's retail industry has been very fragmented. The emergence of private brands will cause retailers without the capability to endorse private brands to quickly exit the market, and retail will enter the chain era. Leisure retail hard discount stores are an example.
For distributors, the new supply chain directly bypasses distributors, and their share will continue to decline. In the future, distributors will be unable to "distribute" and will have only three development directions completely different from traditional distribution: first, becoming category operators; second, becoming B2b platform operators; third, becoming scenario operators.
For brand owners, private brands will initiate a major reshuffling of leading brands. The retail strategy of "wide category, narrow product" will cause a large number of SKUs from leading brands to exit shelves, and the past strategy of piling up sales through SKU quantity and buying shelf space will become ineffective.
In this environment, it can be predicted that the rise in private brand share will correspond to the decline in leading brand share. When the private brand share exceeds a certain threshold, such as above 20%, leading brands will inevitably face a major reshuffling.
In mature markets like Switzerland (52%), the UK (44%), and Germany (41%), private brand shares are so high, indicating that China's private brands have enormous growth potential. It also implies that leading brands have equally huge room for decline.
Only a few national brands (NB) can survive and be qualified to stably occupy retail shelves, becoming the benchmark for private brand (PB) cost-effectiveness.
In simple terms, in the future, there will be two types of products on retail shelves: NB and PB. They are a pair of CP.
NB drives traffic, PB makes money. NB is the anchor for PB.
NB focuses on consumption upgrading, PB focuses on consumption downgrading.
NB has premium pricing power, PB has cost-effectiveness. PB's cost-effectiveness only has a clear scale when anchored to NB. PB is the shadow of NB.
Why does NB have premium pricing power? Because NB not only has good products and high public trust, but also represents the category, with natural advantages in emotional connection and brand narrative.
So, we must ask: Are the current leading brands the NBs in consumers' minds?
If not, then the day when leading brands disappear is not far off.
We must also ask: How can leading brands qualify to occupy a place on shelves dominated by private brands? This article aims to answer this question.
Shaping During Category Upgrading
Note my wording: not product upgrading, but category upgrading.
Some people think that current leading brands are naturally NBs. I believe that is incorrect. Because China's category upgrading is not yet complete, and categories have not been finalized.
In other words, your product upgrade should represent category upgrading. Currently, European and American NBs have long had finalized products. Has Coca-Cola's quality been upgraded over the years? No. Because they were already finalized during the upgrading process.
What is category finalization? It means there is no more room for upgrading, and the highest quality level has been reached.
Have China's leading brands been finalized during the upgrading process? Far from it!
Leading brands chose involution when they should have been upgrading. The essence of involution is cost-effectiveness orientation. This is the survival mode for PB, not for NB. Involution is a fatal trap for leading brands to become NB. They may preserve some sales, but they give up the future.
Currently, we are in an era of consumption stratification, with both consumption downgrading and upgrading. PB is occupying the downgrading market, while NB should turn to occupy the upgrading market.
How far are leading brands from category upgrading finalization? My feeling is about 1-3 upgrades away. Because of this gap, Pang Donglai's PB products have quality that surpasses leading brands.
It's not that Pang Donglai's quality is too good, but that leading brands' quality is somewhat low, bowing to cost-effectiveness.
Only leading brands that represent the top of their category will be qualified to become the NB of the category in the future.
Therefore, upgrading and category finalization should become the main theme for leading brands that aspire to become NB.
NB Must Create Emotional Connection Through Brand Narrative
PB's cost-effectiveness must start from functionality, being cost-effective on the basis of being useful.
However, the "useless" use has premium pricing and no comparable object. As long as there is a thought of cost-effectiveness, it enters PB's narrative logic.
Humans need usefulness for survival; humans need uselessness for value and meaning.
Psychological satisfaction is the use of the useless; emotional value is the use of the useless.
The emergence of PB is both the disenchantment of traditional brands, turning to pursue cost-effectiveness, and the re-enchantment of NB, creating new emotional value.
Today's consumers, on one hand, are frugal in the realm of cost-effectiveness, and on the other hand, are generous in pursuing emotional value. These seemingly opposite aspects are both correct. It's not a matter of consumption upgrading or downgrading, but a pursuit of both "useful" and "useless" values.
This is the natural advantage of brand owners.
What is brand narrative? It is storytelling. Gathering more people through stories is the reason humans surpass all mammals and become the masters of the earth.
"Wide Category, Narrow Product" and "Category First Choice"
The retail strategy of "wide category, narrow product" has changed product selection strategies and will also change the operational strategies of leading brands.
In the past, retail also had elimination of the bottom, but that was based on SKU sales ranking. Now it is based on category ranking.
In other words, in the past, the "phoenix tail" of large categories could be on shelves, but now the "chicken head" of small categories can be on shelves.
What is the "chicken head" of a category?
In the past, star products were all in mass categories. Sales in mass categories have peaked, with little room for growth, but many niche categories have emerged. Especially since China is a vast country with significant differences in lifestyles across regions, a large number of localized products have entered the national market, giving birth to many niche categories.
In each niche category, only the top one or two brands may be selected, becoming the category's first choice.
Thus, the following phenomenon may occur: the fourth or fifth in a large category with high sales may not be selected, while the leader of a small category with low sales is selected.
This is a major problem facing leading brands. They not only face competition from PB but also from many small categories they previously ignored.
In the past, leading brands focused on mass categories and then extended more SKUs under large categories. However, in the era of "wide category, narrow product," the more categories, the greater the chance of being selected. Of course, they must be the category's first choice.
The success of niche categories is the result of wild growth, basically not within the planning of leading brands. Niche categories may not be large in scale, but they are numerous. When niche categories have not emerged, leading brands do not pay attention. When niche categories enter the vision of leading brands, they are already unstoppable.
For niche categories, following up is not a good strategy for leading brands; acquisition is the wise move. However, China's brand acquisition strategy is still not mature enough. This is a skill that leading brands need to cultivate.
Leading Brand Elimination Tournament
Leading brands became leading because they won in the process of industry concentration. On the road to victory, a large number of enterprises died or were acquired. However, PB has initiated a new elimination tournament for leading brands, which is the real final.
For retailers, NB means that without this product, the supermarket should not open its doors.
For brand owners, NB means "I represent the category," and if only one product is selected in this category, it should be me.
Current leading brands are confirmed by total scale, with great attention to sales ranking. Total sales are spread across a large number of SKUs.
For leading brands to become NB, they must also begin the process of concentrating sales into a single SKU. Because NB must be a super large single product, larger than all current large products.
In the future, a phenomenon will occur: even if they become NB, domestic sales will not grow, and may even decline. Then, becoming a domestic NB is only the first step, and true growth will come after becoming NB.
The magic of the Chinese market is that it has cultivated world-class enterprises with the market of one country. China is a manufacturing powerhouse and a major exporter. However, although China's leading brands have world-class scale, their overseas market share is surprisingly low.
That is to say, with the current strength of China's leading brands, they do not have brand competitiveness in overseas markets. But after becoming China's NB, it will be different.
China's NBs will surely become international brands originating from China. The shrinking domestic market will be compensated in the international market.
Around these issues, on June 4-5, 2026, we will hold the first China Private Brand Industry Chain Conference in Hangzhou.
Three forums are specially set up for brand owners:
「Brand Dual-Track: National Distribution + Channel Customization」
「Brand × Retail: Joint Development and Collaborative New Mechanisms」
「Regional Retail Transformation and New Opportunities for Brands」
Dingdong Maicai, Tmall Supermarket, JD Innovation Retail, Tianhong, FamilyMart, Metro, Want Want, Junlebao, Liby, Shanghai Jahwa, Tsingtao Brewery, and other top retail decision-makers and brand operators will gather at the scene, with 200+ retailers' procurement from various formats and regions, as well as brand owners and factories, for zero-supply matching, precise alignment, and efficient cooperation!