2016 is coming to an end. Looking back over the past year, the FMCG industry has been in turmoil, with fewer land grabs and more cautious survival. Let's take a look at the top 10 events in FMCG in 2016 and their impact on 2017. (This article is a bit long, hope you can read it patiently)

  1. COFCO Sells Off Assets In 2016, COFCO ended its 11-year era under Ning Gaoning and entered the era of Zhao Shuanglian. During Ning Gaoning's tenure, COFCO made over 50 mergers and acquisitions with investments totaling 14.6 billion yuan, growing from a company with total assets of 46 billion yuan to a Fortune 500 company with nearly 300 billion yuan in assets. However, behind these impressive numbers lies a debt ratio as high as 60%. This led COFCO employees to comment that the company was "innovative in capital operations but worrisome in investment returns" and "big but not strong." After taking office, Zhao Shuanglian was eager to reverse this situation. This led to a shift from the buying spree of the Ning Gaoning era to a selling spree under Zhao Shuanglian. The company identified "grain, oil, cotton, and sugar" as its four core businesses, and other businesses were required to exceed 10 billion yuan quickly or risk being divested. In January 2016, COFCO Food sold the Le Conte chocolate brand to COFCO Property for 611 million yuan. In April, production fully stopped, and the brand was packaged for sale. In July, large-scale layoffs began. On December 9, 2016, Fujian Food's "Good Neighbor" acquired the Le Conte brand for 200 million yuan. The former number one chocolate brand in China, after experiencing "no one cares when alive, no one cares when dead," fell into the hands of Good Neighbor. It will take about 600 million yuan for Good Neighbor to integrate Le Conte's business, a significant investment. In September, COFCO sold its 55% stake in Chateau Junding to its partner Longhua Group for 1 yuan. It will focus on Great Wall wine and imported red wine in the future. Unlike Le Conte and Chateau Junding, which quickly found buyers, the Wugudaochang brand has yet to find a new owner. Perhaps only when COFCO sells Wugudaochang will consumers realize that this instant noodle brand, known for its non-fried noodles, is still alive. Some say COFCO made every possible mistake in managing Wugudaochang. With the rise of the mid-to-high-end instant noodle market, Wugudaochang may still have a chance, but COFCO no longer has the patience.

Lao Na says: Slimming down is the main theme of 2016. P&G finally turned a profit through a series of sell-offs. COFCO, by divesting these chicken-rib products, will focus more on its four core categories. Danone also sold the Robust brand at the end of the year. These brands still have some recognition; even if they can't return to their peak, they can dominate a region. In 2017, these brands are worth watching, and more brands will be sold off.

  1. Uni-President Changes Leadership In 2016, Uni-President founder Kao Ching-yuan passed away. In June, Lo Chih-hsien, the son-in-law of the founder, stepped back from the front line, remaining only as chairman of Uni-President Group. Hou Jung-lung, former general manager of Uni-President China Investment Company, took over as group general manager, and Liu Hsin-hua became general manager of Uni-President China Investment. In May 2016, Uni-President sold its 47.83% stake in Jinmailang for 1.291 billion yuan. On November 11, Singles' Day, Uni-President sold its shares in Jianlibao Trade Group to CITIC Group for 900 million yuan, returning Jianlibao to the State-owned Assets Supervision and Administration Commission. Focusing on its own projects is Uni-President's main task for 2017. With a new leader and new ideas, after a profit decline in the third quarter, Uni-President began streamlining and layoffs are on the agenda. In 2016, Uni-President launched many new products, and their designs won numerous awards. However, none of these new products created the myth of Hai Zhi Yan or Xiao Ming Tong Xue. Because of Xiao Ming Tong Xue, Uni-President faced a lawsuit from "Xiao Ming Tong Xue" (the comic character) and lost.

Lao Na says: It is suggested that Uni-President cooperate with Beijing Zhumu Century Network (owner of the Xiao Ming Tong Xue comic) to develop "Xiao Ming Tong Xue" together, as it is a very popular IP. Launching new products is a direction for increasing profits, but it doesn't mean launching new products for the sake of it. Each new product should be made bigger and stronger; no product is built overnight. Uni-President has enough new products; it's time to stop launching new ones. Launching new products and layoffs are two inevitable issues in 2017. More companies will diligently pursue new products. We should be more tolerant and try new products, but layoffs are a topic no one wants to hear. A salesperson once said, "Working hard day and night, only to be laid off." Next year's slogan for FMCG workers will be "Fight for your job."

  1. JDB Partners with Beijing Enterprises On June 12, 2016, JDB reached a cooperation intention with Beijing Enterprises, formulating a capitalization strategy and seeking a Hong Kong listing. This cooperation is a sincere partnership between private enterprise JDB and state-owned enterprise Beijing Enterprises. Ye Xiangzhen, daughter of Ye Jianying, also attended the ceremony. This was a win-win opportunity for both state-owned and private enterprises. But our state-owned enterprise Guangyao couldn't sit still. They didn't realize this was a great opportunity to expand the herbal tea market; instead, they felt their market was threatened and did everything possible to smear JDB. In 2016, JDB was in turmoil. First, rumors spread that poison was put into JDB (a transformation of the 2015 rumor about Wanglaoji), then it was said that factories were shut down and executives left. Our financial experts even shamelessly said JDB shouldn't have launched the gold can. But you who take money, have you forgotten that it was Wanglaoji that didn't allow JDB to use the red can? Herbal tea, a product from Lingnan, has no historical foundation or drinking culture. It can't compare with the public base of black and green tea, the historical heritage of walnuts and peanuts, or the functional effects of Red Bull. Yet this regional product has surpassed cola and is closing in on Red Bull, with national sales exceeding 40 billion yuan. Does it rely on the magic of the product? No, it relies on the strong execution of the JDB team. Our state-owned enterprise Guangyao has used despicable means against its peers. They not only want to plunder your formula, brand, packaging, and advertising slogans, but also want to destroy you spiritually. Now, searching "JDB" on Baidu brings up a lot of negative news. And Wanglaoji, like a bully, beats its own lawyers and uses all means to bully the weak, just like the bad kid in school bullying.

Lao Na says: From JDB's experience, we can see a microcosm of the entire beverage industry. Under rumors, which of Wahaha, Master Kong, or Nongfu can stay clean? The big ship of the FMCG industry is riddled with holes. The herbal tea market should have had a longer fate, but under the active operations of state-owned enterprises, it can't escape shrinking. This is a tragedy for FMCG, but it has become a means for some companies to promote themselves. JDB is still seeking capital help to extend the glory of herbal tea. They are working hard for the product's lifespan. In this difficult time, although JDB doesn't have the boldness of Dong Mingzhu to give all employees a thousand-yuan raise, they still decided to pay bonuses as usual.

Please, state-owned enterprises, give private enterprises a way to survive. You are the big shots; we admit defeat, okay?

  1. Coca-Cola Sells Its Bottling Business The century-old Coca-Cola can no longer hold on in this era and is undergoing global transformation. After completing restructuring in Europe and Africa, Coca-Cola began its transformation in China. On November 18, 2016, Coca-Cola sold all its bottling operations to COFCO and Swire, and will only provide concentrate in the future. In an era of soaring operating costs, Coca-Cola is adopting the most popular strategy of controlling the most profitable upstream industry to increase its profit margins. When Huiyuan intended to sell itself to Coca-Cola, the purpose was the same, but under the wave of "patriotism," the deal fell through, leading to Huiyuan's miserable situation over the years. However, due to COFCO's poor handling of Le Conte employees, employees at Coca-Cola bottling plants sold to COFCO resorted to strikes and banners to protect their rights. Currently, strikes by Coca-Cola employees in Sichuan, Chongqing, and Changchun are still ongoing. Is it a tragedy that a state-owned enterprise, a Fortune 500 company, caused Coca-Cola employees to strike just because of improper handling of Le Conte employees? Your today's results are due to the causes you planted yesterday.

Lao Na says: The century-old Coca-Cola, due to severe profit decline, changed CEOs and sold bottling plants. The myths in the FMCG industry are becoming fewer. Who will be the benchmark in the future? Mergers will be a major trend. Next year, Mars' Wrigley and Dove will merge. How will Red Bull transform? Companies, please treat your employees well. Don't say "we are family" when you need dedication, and then kick employees into the river when difficulties arise. Your decisions yesterday affect your harvest today.

  1. Evergrande Exits FMCG On September 28, 2016, Evergrande announced the sale of its grain and oil, dairy, and mineral water businesses, stating it would focus on real estate projects. Under the favorable two-child policy, Evergrande finally understood the saying "hard work ruins the country, real estate prospers the nation" and returned to the right track. Compared to grain and oil and dairy, Evergrande's mineral water is more regrettable. Since its launch in 2013, Evergrande mineral water has undergone many changes, and the number of endorsers it has changed is enough to fill several mahjong tables. The price of the water has been declining from 4 yuan to 2 yuan, and finally, they simply left, handing the mineral water business to BYD 4S stores. Can it be more unreliable? For Evergrande's current situation, our experts still say, "Evergrande, besides being impatient, what mistake did it make?" At first glance, it seems to make sense, but on closer inspection, it's like saying nothing. It's like telling your boss after a presentation, "Boss, this project of mine has no other problems except losing money." Do you think your boss would give you a slap?

Lao Na says: Evergrande's departure is due to both the lack of retention by FMCG people and the lure of real estate. Some say this is another blow to FMCG, with no one optimistic about it. Anyway, FMCG is already like this; one more bad thing doesn't matter. Those who love this industry are still persisting, which is enough. For those who are just playing around, even if they bring more capital, they mess up the industry. Such people are better off not coming. Think of another brand - Kunlun Mountain. Over the years, it has encountered far more resistance than Evergrande Spring Water, but it still insists on the 5 yuan price point, quietly building the market every year. Although there is no sudden surge in sales, it makes progress every year. Currently, in first- and second-tier cities, Kunlun Mountain has occupied a major position, and consumer acceptance is increasing. In the next year or two, it may achieve the sales of today's C'estbon. The water market has unlimited space and is the only FMCG category that grows year after year. Drinking good water is increasingly accepted by consumers. The most important point is the spirit of Kunlun Mountain's team - never giving up. This is the spirit FMCG people need.

  1. Cocktail Market Collapse In 2014, cocktails suddenly became popular. The stock price of RIO's parent company, Bairun, once soared to 120 yuan. With the help of capital, everyone was extremely optimistic about the cocktail market, especially the gross margin as high as 74.7%, which brought a touch of warmth to liquor companies affected by the three public consumption restrictions. So everyone jumped into the cocktail market. For a time, the cocktail market was blown up infinitely. However, just a year later, in 2015, the problem of high inventory in the cocktail market broke out. Slow turnover, high capital pressure on distributors, price wars, etc. These are actually surface problems. The real problem is the lack of standardized operations. In a new market, too much hot money poured in, and everyone forgot themselves. Before the glass bottle packaging was made strong, they started promoting cans. The boss didn't recognize talent, and all kinds of people entered the market and gave random orders, causing extreme market chaos. Watching the stock price halve, the cocktail bosses no longer had the patience to educate the market, so they began large-scale layoffs. This led to no one educating the market, no one maintaining terminals, and distributors' goods selling even worse. In 2016, Icey cut staff, stopped production, owed fees, RIO's performance plummeted, and layoffs; AK47 laid off staff and owed fees. The cocktail market was a mess.

Lao Na says: New things entering the market need time to be tested. Don't kill them with praise. New products should focus on building the market, not putting all hopes on advertising. In the cocktail market, RIO was a frequent guest on various variety shows, but it didn't settle down to build the market. When encountering difficulties, instead of working together and finding other methods, it chose layoffs. No one's market is built in a day. Your market has only been truly hot for two years, and there is still much foundation to build. As long as you are patient, there is still a chance. Don't be a spendthrift when money comes in, and a miser when money goes out, afraid to develop the market. Money doesn't make money that way. If you're just playing with capital, that's fine, but I suggest such entrepreneurs stay away from FMCG. Give FMCG some peace.

  1. Daily Chemical Turmoil On November 25, 2016, Xie Wenjian resigned as chairman of Shanghai Jahwa. On January 28, Ge Wenyao, former chairman of Shanghai Jahwa, reported Xie Wenjian on Weibo with real-name accusations. Ge Wenyao listed several "crimes" of Xie Wenjian, including using only three years to hollow out Shanghai Jahwa, an excellent market and financial company; filling the channels with goods; "spending money with the power of a flood," traveling abroad more than 10 times a year, reimbursing a large number of personal expenses, investing in factories and offices, bringing heavy burdens to Shanghai Jahwa; his monthly salary was 150,000 yuan, a 10-fold increase; his connections had monthly salaries above 100,000; and his secretary's salary was higher than Jahwa's directors. Unlike other founders who ignore their new owners after acquisition, Ge Wenyao has always been deeply attached to the management sent by Ping An to Shanghai Jahwa, because he loves it more deeply. On August 1, 2016, Liby switched to a contract system, changing from unified company supervision to regional and provincial contract systems. Provincial heads pay 300,000 yuan per year, and other levels also pay a portion to contract a region. In fact, Nice Group has already adopted this model, but Liby's reform has been slow, leading to some employee departures. Some employees reported that "the company has serious corruption, and provincial heads can earn back the contract fees just by taking promotional items, and many fees are not invested in the market. The market has high inventory, and wages are hard to get." Nice Group launched a "national distributor system" internal purchase meeting in 2016, making everyone a distributor. But because too many manufacturers imitated it, this innovation eventually fell into a pit. Blue Moon, the former leader in laundry detergent, focused on online sales this year, with monthly e-commerce channel sales of over 100 million yuan, but offline sales shrank severely, dropping by more than half. The Moon House launched in 2015 is now empty. The newly launched Machine Wash Supreme has high inventory, with distributors holding over 2 billion yuan in stock. As a result, Blue Moon required promoters to have no commission on old products, only on new ones. Sales dropped from over 80 million yuan per month to over 20 million yuan. The funniest thing is that they hired training directors from other companies with annual salaries of one million yuan to serve as deans of the laundry college, and their responsibility was to sell goods in stores or sell to their relatives. Since the results were not ideal, they are now preparing to cut staff. After all these years, Luo Qiuping is still willful. The good news is that Blue Moon has returned to Carrefour.

Lao Na says: The daily chemical industry has also entered a chaotic period in recent years, especially with ineffective anti-counterfeiting, causing great harm to brands. In recent years, daily chemical companies have changed names, launched new products, and changed channels, but overall response has been mediocre. Bosses are under performance pressure and have confused thinking, leading to a new idea every day, and each idea doesn't last long. Currently, Blue Moon needs to strengthen its weak points. After returning to hypermarkets, it must recognize its shortcomings. Liby's reform is still ongoing; give it tolerance. Nice Group is still leading.

  1. Mengniu Changes Leadership During the Mid-Autumn Festival in 2016, Sun Yiping left Mengniu, and Lu Minfang, president of Yashili, took over as president of Mengniu. Niu Gensheng, who had disappeared from Mengniu's management for five years, returned to the group. A series of actions by Mengniu fully reflect the new leadership of COFCO's strong dissatisfaction with Mengniu's performance falling further behind Yili. Professional managers being too gentle and lacking wolf-like aggression is also a major reason for Mengniu's poor development. Now they have brought in Lu Minfang, who made Dumex successful, showing Mengniu's ambition in the milk powder business. As expected, after arriving at Mengniu, Lu Minfang separated the milk powder business into a new division. For Mengniu's distributors, they can also escape from the previous grain, oil, and noodle operations and focus on Mengniu products.

Lao Na says: China's milk powder market is infinitely large, especially with the two-child policy, which has expanded the market by an order of magnitude. However, over the years, competitors have harmed each other by any means, cross-border e-commerce spread rumors about physical stores, and physical stores fought back against e-commerce, causing the national confidence index in the milk powder market to be extremely low. Now consumers don't trust domestic milk powder, and a batch of fake foreign brands has made the public angry. The dog-eat-dog competition in this market has benefited foreign brands. Milk powder is the industry with the most safety issues among all foods. Some are due to poor supervision by milk powder companies, but more are due to smears by competitors. Rumor debunking can never keep up with the speed of new rumors. Eventually, this industry will be destroyed by vicious competition. If Mengniu wants to make a mark in milk powder, it should stop playing dirty PR with competitors, focus on making good products and marketing, and build national confidence. That's the key.

  1. JD.com Acquires Yihaodian The cold wave in hypermarkets continues. Shenzhen's Xin Yi Jia collapsed, Pingdingshan's Jiu Tou Ya collapsed, Carrefour closed many stores nationwide, Walmart closed 30 stores in two years, and RT-Mart closed its first store after 19 years in mainland China. Behind this are the impact of e-commerce and the outbreak of high rents and property conflicts. The closure of these stores is undoubtedly a huge blow to FMCG. However, at such a time, JD.com and Alibaba have shown strong interest in FMCG. JD.com established a new channel, set up the "Locomotive No. 1" project team, and specifically acquired Walmart's Yihaodian to strengthen communication with FMCG. The old rival Alibaba has not been idle either. Alibaba launched the slogan "New Retail, Connecting the World," introduced the Ling Shou Tong project, and recruited a large number of city partners nationwide. Tmall specifically established an FMCG division, with San Xiao, former head of Tmall's marketing department, as its head.

Lao Na says: Perhaps one day, virtual terminals will become popular. We can buy all our daily necessities at home, and delivery will be as fast as Meituan. But how can such virtual shopping replace the pleasure of shopping in malls? Whether it's JD.com's new channel or Alibaba's Ling Shou Tong, you come to grow the pie together with FMCG distributors and make distribution more flexible. But don't think about eliminating distributors. Every industry has its own unspoken rules. For example, Uber and Didi wanted to change the rules of the taxi industry, but in the end, Uber exited China first, and Didi has almost become a dating app.

  1. Rise of E-commerce Platforms Unlike the FMCG industry's dire straits, some e-commerce platforms serving the FMCG industry are thriving, with large amounts of capital pouring in. This year, countless ordering platforms completed financing. From the above chart, we can see that these internet ordering platforms, relying on the integration of distributors and their strong delivery capabilities, have carved out a niche in the B2B sector. If service platforms for distributors are so hot, why should we look down on the FMCG industry we are in? The rise of internet ordering platforms is an unstoppable trend. But if internet platforms only rely on cross-selling and price chaos, they won't have good results. We must always understand that the success of a product is not solely due to its low price, but more importantly, whether distributors and customers have profit. No company survives by selling at high prices; on the contrary, those that go for low prices have more difficulty developing.

Lao Na says: In the past year, the FMCG industry has been thinking about Internet+. Three Squirrels and Liangpin Shop are still striving to move towards terminals. The internet-famous spicy strips store has opened with an Apple-style flair. The real economy has been in a cold winter for the past two years, but that doesn't stop us from looking up at the sun and hoping for warmth. 2016 is almost over, and we will miss it deeply. No matter how bad it was, we can never find a way back to 2016.

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