Too Many Competitors
Liby, a giant in China's daily chemical industry, is also getting anxious. As a customer manager at a regional company of Liby Technology Group, Wang Chu was forced to leave the company at the end of last year, despite having devoted six years of his youth and effort there. Wang Chu eventually received severance pay, which was the result of two or three rounds of negotiations with Liby, with both sides making concessions. This round of personnel adjustments was based on a horse-racing ranking system, implementing a bottom-out elimination mechanism, primarily targeting sales staff. Entering 2024, Liby's internal adjustments continued in the form of downsizing. "Compared to last year, the headcount has been reduced, and some positions are no longer being recruited," Zhang Xiao, a current employee at Liby's headquarters, told the author on May 26. This is uncommon in Liby's 30-year history. Even during the pandemic, Liby not only avoided layoffs but also recruited many fresh graduates. Wang Chu had noticed some signs of what was happening today. Before receiving the layoff notice, he noticed that the reimbursement process in his regional company was slowing down. Moreover, Liby's product circulation had also slowed. "Many distributors are now being forced to stock up, with low gross margins, high costs, large inventories, and little motivation for the team. Some distributors are unwilling to stock up," Wang Chu said. Over the years, Wang Chu witnessed Liby's online sales performance improve, but it also encroached on distributors' market share. In some areas, due to various factors, distributor positions remained vacant. For example, in a county in Huanggang, Hubei Province, there had been no distributor for nearly two years, causing Liby's presence to weaken locally. "I stopped selling Liby products a few years ago. Some Liby products are not as effective at removing stains as others," a local small shop owner told the author. Now, consumers in his store rarely ask for Liby. Wang Chu, who has worked as a Liby customer manager and managed business for Liby distributors, is well aware of the difficulties Liby faces. He summarized, "The market size is not what it used to be, gross margins are insufficient, company costs are high, so they compress regions, need fewer people, and thus lay off and downsize." Liby's costs include marketing expenses, material costs, new product promotion fees, and entry fees. All these point to a fact: like other leading daily chemical companies, Liby's era of rapid growth is gone. According to the "Top 500 Private Enterprises in China" list, Liby's ranking has declined for three consecutive years: 449th in 2021, 486th in 2022, and 495th in 2023, dropping 9 places. The 2023 list shows Liby's revenue at 28.419 billion yuan, a year-on-year increase of 5.09%, compared to 7.37% growth in the previous year. In response, Liby told the author that as a traditional manufacturing enterprise, it does not experience leapfrog growth like emerging industries, and its revenue has maintained steady growth. But Liby has too many competitors. Ahead is Nice Group, which is in the same tier as Liby and has highly overlapping product categories. "Our number one competitor has always been Nice," Zhang Yang, a regional sales manager at Liby, told the author. Behind is Blue Moon's high market share in laundry detergent. "The overall market capacity has shrunk," Zhang Yang said with a hint of helplessness, adding bluntly, "Overall, Liby's sales are indeed weak." Besides daily chemical giants like Nice and Blue Moon squeezing Liby's market share, some emerging daily chemical companies have risen in recent years, such as the old domestic brand Vitality 28. On September 13, 2023, the Douyin live stream of "Vitality 28 Clothing Cleaning Flagship Store" attracted 30,000 fans. They went on a buying spree, creating a "miracle" of 5 million yuan in daily sales for this brand that nearly disappeared. The author learned from several senior daily chemical industry insiders that Vitality 28's products are increasingly present in the daily chemical market, even becoming the first choice for community group buying in many cities. This is undoubtedly a potential threat to Liby. Moreover, in the context of consumption downgrading, consumers are price-sensitive. Liby's pricing is not advantageous. To protect distributors' interests, Liby has always emphasized price stability online. "Distributors have their own business teams, with established customer relationships and market foundations. Many distributors only sell Liby and do not carry other brands," Zhang Yang told the author. It should be noted that Liby's rise to become the leader in China's daily chemical industry is largely due to its distributors' efforts. However, stabilizing prices may reassure some exclusive distributors, but the impact is visible: more cost-effective products are eroding Liby's market share. For example, with Vitality 28, "with platform subsidies, a 3.5 kg laundry detergent can sometimes be obtained for just three to five yuan," said Song Nan, a daily chemical industry professional in Xianyang, Shaanxi. He found that consumers he deals with compare prices across online shopping platforms and buy whichever offers the best value. Vitality 28, with its high cost-effectiveness, has become a popular choice. "Liby's product performance and price are not outstanding, lacking distinctiveness; consumers think buying any brand is similar," Song Nan said. He has conducted ingredient tests on some Liby products. Also, because it is difficult to scale up, Liby has shifted its focus to profits in recent years. For a long time, Liby's business model relied mainly on traditional regional distributor channels, allocating more profits to distributors, resulting in lower gross margins. In recent years, due to rising raw material prices for daily chemicals, Liby's profits have been further squeezed. For example, in the detergent category, major raw materials such as alkylbenzene, liquid caustic soda, and 1.6 water glass have all seen price increases since 2021, ranging from 0.24% to 23.08%. This makes it easy to understand Liby's layoffs last year and downsizing this year. However, Liby denied this to the author, saying, "It is not true; the company has never had layoffs." Regardless, as of now, Chen Kaixuan has fully handed over management of Liby Technology Group to his son Chen Zebin and has been behind the scenes for nearly half a year.
First Generation Starts Business, Second Generation Maintains It
In Liby, there is a saying: those who followed the boss in the first batch all bought houses in Guangzhou; those in the second batch all bought houses in Foshan. The implication is that those who followed Liby early on generally became wealthy. The first and second batches followed Chen Kaixuan and his elder brother Chen Kaichen, who founded Liby in Guangzhou in 1994. Liby's rise from a bag of laundry powder to a giant in China's daily chemical industry is, on a macro level, attributed to the wave of individualization in Chinese commerce. On a micro level, it is due to the efforts and choices of Chen Kaixuan and Chen Kaichen. For a long time, three moves by the Chen brothers were widely discussed. First, Chen Kaixuan chose the asset-light model of "OEM production"; second, he created the "exclusive distributor" system, adopted the strategy of surrounding cities from rural areas, and the settlement model of payment before delivery; third, Chen Kaixuan seized multiple opportunities for precise marketing. For example, in marketing, early Liby chose Chen Peisi as its spokesperson. The平民 comedy star's portrayal of grassroots life, with light and humorous plots, made consumers immediately remember the "non-hand-hurting" dishwashing liquid and Liby. The sponsorship of the phenomenal variety show "I Am a Singer" in 2013 even boosted Liby's monthly sales by 66% year-on-year. It is said that Chen Kaixuan believes in Wang Yangming's philosophy of mind and advocates karma. Before every formal meeting, Liby employees recite a long passage of corporate culture. A Liby employee said that the "Five L's"—Li Xin (establish trust), Li Ze (establish responsibility), Li Zhi (establish quality), Li Zhen (establish truth), and Li Xian (establish pioneering)—written by Chen Kaixuan himself, are generally recognized by employees as a value system, regardless of the degree of implementation. Because of riding the wave of the times and relying on the foundation laid earlier, even in the increasingly competitive daily chemical industry in 2022 and 2023, Chen Kaixuan and his wife Li Ruohong remained China's richest in daily chemicals for two consecutive years, with fortunes of 31 billion yuan and 32 billion yuan, respectively. However, the first-generation entrepreneurs, after decades of hard work, eventually face the day when aging takes its toll. By 2024, Chen Kaixuan, born in 1958, is approaching 70. So, at the beginning of this year, Chen Kaixuan fully delegated authority. He handed over the entire Liby to his son Chen Zebin. Chen Zebin, born in 1987, is Chen Kaixuan's eldest son. Like other second-generation entrepreneurs, Chen Zebin entered the family business early and trained at the grassroots level. In 2010, Chen Zebin started as an intern in Liby's brand management center. Since then, he served as brand manager, deputy general manager, and general manager of the brand center. In 2017, Chen Zebin officially became the group's CMO. In 2019, Chen Zebin took over as president of Liby Technology Group. This was seen by outsiders as the official start of the generational transition. At this point, Chen Zebin was only one step away from truly taking control of Liby. Wang Chu still remembers that after Chen Zebin became group president, under his leadership, Liby's brand logo and packaging were fully upgraded. According to public information, Liby described the upgrade as "more concise, fashionable, and meeting young people's demand for high aesthetics." Apart from that, there was little information about the effects of the packaging and logo changes. In Wang Chu's view, the market feedback after that packaging change was not good. First, the new logo and packaging made consumers feel unfamiliar, as most were accustomed to the original packaging; second, after the change, some consumers found it hard to distinguish genuine products from fakes, with many thinking they were counterfeit imitations. "At that time, it was said that Chen Zebin would take full management, but because of the packaging change, the old man came back," Wang Chu recalled. It was not until the beginning of 2024 that Chen Zebin took over as chairman of Liby Technology Group. In response, Liby said, "Any company's succession is gradual; there is absolutely no such thing as delayed succession." It is worth mentioning that during his years of training at Liby, especially in the past five years, Chen Zebin has tried his best to prove himself, calling himself Liby's "chief reformer." Besides the packaging change in 2019, Chen Zebin also initiated Liby's digital transformation. This reform, which began in 2015, was praised by his father Chen Kaixuan years later: "He (Chen Zebin) had foresight." Developing online e-commerce channels became a key part of Chen Zebin's digital reform. To this end, Chen Zebin personally went live to sell products. On July 24, 2020, Chen Zebin appeared in the "Liby President Selects Good Products" live stream, teaming up with "national uncle" Wang Yaoqing, Zhejiang TV host Yi Yi, and Douyin e-commerce influencer Beibei Tu, for his live-stream debut. According to official data, the live stream attracted over 2.756 million online viewers, driving Liby's total sales across online and offline channels to exceed 400 million yuan that day. However, Wang Chu told the author, "For this live stream, the sales team communicated with distributors in advance, locked in orders, and placed orders as soon as the stream started." Wang Chu also participated, going to distributors to pull and lock orders. In response to the suspicion of order locking during Chen Zebin's live-stream debut, Liby explained that its live streams are mainly of two types: one for distributors, which are ordering meetings, and one for consumers; distributors do not place orders through consumer-facing live streams. Although Wang Chu felt that online sales squeezed distributors' market share, he also admitted that Liby's digital reform was the right path. Because e-commerce has grown to a scale that cannot be ignored, Liby's digital reform has also driven incremental growth. Public data shows that by the end of 2021, the e-commerce department had become Liby Group's second-largest channel, contributing 30% of revenue. But this does not mean Chen Zebin's succession path has been smooth.
A Tough Battle, Difficult for the Younger Generation One man's meat is another man's poison. Chen Zebin's digital reform, while boosting Liby's sales performance, also affected the interests of offline distributors. In the early days, Liby's distributors were mostly relatives of Chen Kaixuan. Later, recruitment expanded to those with consumer industry experience and certain capital and operational capabilities. These two groups made significant contributions during Liby's early and mid-stage development. Chen Kaixuan once said that distributors are "Liby's brothers and sisters, as close as lips and teeth." In an article by Cheung Kong Graduate School of Business, it was mentioned that Chen Kaixuan did not shy away from the special relationship between Liby distributors and the company, saying that some regional distributors were "royal relatives" and not easy to touch. Chen Kaixuan found it difficult to move distributors, but Chen Zebin did, leading to "few old distributors thinking well of him (Chen Zebin). What old distributors truly respect is She Chuhong. She considers the distributors' interests," Wang Chu learned from distributors. She Chuhong joined Liby in 1994 to handle marketing, making her one of Liby's "founding veterans." She did two noteworthy things at Liby. First, she solved the problem of distributor payments that seriously affected Liby's cash flow, and after thorough market research, she ceded profits to distributors, helping Liby quickly gain market share in the short term. Second, she led the marketing team to compete with the two international giants P&G and Unilever, forming a three-way standoff in the Chinese daily chemical market. Because of these complex issues, any reform related to old distributors often faces resistance. Chen Zhansheng (eldest son of Chen Kaichen), then a director of Liby Group, had carried out channel reforms and experienced joint resistance from old distributors. Chen Zebin's digital reform was no exception. "In the early days, when we talked to offline channels about these things, they looked down on it and ignored it. They thought their business volume was the largest, online business was small, and they didn't value the results I mentioned," Chen Zebin once told the media about his difficulties. "I forced everyone to go digital; there was no discussion, it had to be done, or people would be replaced." Even though Chen Zebin took a strong stance, Wang Chu believed that the young Chen wanted to create a down-to-earth, digital-new-rich persona, but his personality was somewhat weak and he couldn't lead the distributors. "Gentle" is also the most common word used by Liby employees lurking on Zhihu to describe Chen Zebin's personality. However, besides convincing distributors, Chen Zebin has another important task: how to defend Liby's market share. Many of Liby's products are facing encirclement from other brands. Take the laundry detergent pod segment, which Liby has high hopes for. According to data from the Jingwei e-commerce data analysis platform, from January to April 2023, brands with high market share in the laundry detergent pod market included Liby, Mama Yixuan, Omo, and Chao Neng. By April 2023, Liby's sales exceeded 100 million yuan, with a market share of over 22%. Although Liby is the brand with the highest market share in laundry detergent pods, it is closely followed by Mama Yixuan, which has about 14% market share. Also a second-generation successor at Liby, Chen Zebin's cousin Chen Danxia, has instead seen clearer skies in the past year. Chen Danxia is Chen Kaichen's eldest daughter, and in 2021 she led Chaoyun Group to a successful listing on the Hong Kong Stock Exchange. Chaoyun Group is a one-stop multi-category home care, pet care, and personal care platform, owning brands such as "Chao Wei" and "Wei Wang." Public information shows that Chaoyun Group's insect repellent brand has maintained the number one market share for eight consecutive years, and its home cleaning brand ranked second nationally in market share in 2022. However, from 2020 to 2022, Chaoyun Group's performance almost stagnated: revenue declined by 200-300 million yuan over three years, and profit fell by over 150 million yuan. It was not until 2023 that Chaoyun Group achieved growth in both revenue and net profit: revenue increased 11.7% to 1.616 billion yuan, and profit increased 164% to 173 million yuan. Not only Chen Danxia, but also other second-generation members of the Liby family across various business lines are doing well. Chen Kaixuan's eldest daughter Chen Danli founded the maternal and infant brand "Yin Yuansu" for Liby; Chen Kaixuan's second son Chen Zexin is interested in the pharmaceutical industry and serves as director and executive vice president of Guangzhou International Medical Harbor, the health sector of Liby Kaisheng Holdings; the youngest son Chen Zexing founded Sulikang Biotechnology, which owns brands like Heye and Jiaozhimiyu; and the "little princess" Chen Danna is chairman of Liyi Technology, which focuses on investment. They each have their own place in their respective fields. For example, as of April 2023, Liyi Technology had incubated and nurtured over 70 innovative startup projects, covering industries such as oral care, home cleaning, and e-commerce operations. Additionally, Liyi Technology has set up the Lizigu physical incubator. Among them, Yuechuang Industrial, invested by Liyi Technology, saw revenue grow 100% year-on-year in 2020, with sales exceeding several hundred million yuan. In this context, pressure is on Chen Zebin. But this does not mean Chen Zebin is fighting alone. Wang Chu told the author that the old Chen still acts as a general advisor. This is corroborated by Chen Kaixuan's remarks to the media at the end of 2023. Chen Kaixuan said that he now basically does not interfere with Chen Zebin's business decisions. "If he (Chen Zebin) encounters difficulties, he can come to me. I position myself as the 'general director'; my existence is to 'help without causing trouble,' but the protagonists are still them," Chen Kaixuan said. However, it is easier to start a business than to maintain it, and easier to cultivate the Dao than to prove it. Facing an increasingly competitive daily chemical market, this tough battle is not easy for Chen Zebin, the son of China's richest man in daily chemicals.
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