---
title: "Top 10 Events in the FMCG Industry in the First Half of 2018"
description: "As 2018 reaches its midpoint, the FMCG industry has witnessed significant events. This article reviews the top ten industry events of the half-year, including the first collective price increase in the beer industry in a decade, Alibaba's acquisition of RT-Mart, price hikes by Master Kong and Uni-President, Tencent's strategic partnerships with Carrefour and Better Life, and more."
author: "澄韵"
publisher: "New Distribution"
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published: "2018-06-18"
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# Top 10 Events in the FMCG Industry in the First Half of 2018

> As 2018 reaches its midpoint, the FMCG industry has witnessed significant events. This article reviews the top ten industry events of the half-year, including the first collective price increase in the beer industry in a decade, Alibaba's acquisition of RT-Mart, price hikes by Master Kong and Uni-President, Tencent's strategic partnerships with Carrefour and Better Life, and more.

2018 has passed its halfway point, and the FMCG industry has seen many major events in these six months. Today, we will review the top ten industry events of this half-year:

**1. First Collective Price Increase in the Beer Industry in a Decade**
In early January, Yanjing Beer, China Resources Snow Breweries, and Tsingtao Beer successively raised prices, with increases ranging from 10% to 20%. The price hikes started in regions with concentrated sales and clear competitive advantages, or for advantageous product lines.
According to the price increase notices issued by major manufacturers, this round of increases was significantly influenced by rising raw material costs, labor costs, transportation expenses, and environmental protection taxes. However, according to New Distribution, the underlying driver of the price increases is consumption upgrading, which to a large extent guides or even "triggers" such changes.

**Comments by Mr. Fang Gang, renowned beer marketing expert:**
1. What impact will this price increase have on terminals and distributors? Or will it fundamentally affect market stability and structure?
**Fang Gang:** This price increase is not the action of a single company. Based on information received gradually, Snow, Tsingtao, Budweiser, and Yanjing have all started raising prices. This is a collective action, even an industry-wide move, so the impact on terminals, distributors, and market stability should not be too significant.
2. Could this price increase lead to changes in the pattern of the top five beer companies?
**Fang Gang:** It is unlikely to change within 1-2 years. As for the pattern after 3-5 years, it is hard to determine now. It is possible that the "Big Five" could become the "Big Four," or the "Big Four" could become the "Big Three." Regardless, industry concentration will further increase.
3. After the price increase, do small and medium-sized enterprises with differentiated and personalized beers have a chance to emerge?
**Fang Gang:** On one side, there are the large, strong players; on the other, the small and beautiful ones. This market ecology always exists. With the upgrading of consumer trends, personalized consumption is becoming more obvious. In the long run, niche beers that pursue individuality have significant development opportunities.

**2. Alibaba Takes Control of RT-Mart**
On the evening of January 12, Alibaba's tender offer for Sun Art Retail Group was finalized, acquiring 71.98% of Sun Art's shares. RT-Mart and Auchan were thus fully integrated into the Alibaba system.
If Alibaba's investment in Bailian Group was one shoe dropping, then the "incorporation" of RT-Mart is the more important one. In a sense, this is the most valuable offline retail asset Alibaba has gained since it began its acquisition spree in physical commerce.
This is because RT-Mart and Auchan together operate 446 hypermarkets in China, with revenues exceeding 100 billion yuan in 2016. RT-Mart accounts for the vast majority of stores and holds over 14% of the national hypermarket market share. Although Bailian is also a giant, in terms of national influence, RT-Mart and Auchan are the true kings.
If Alibaba's previous investments were laying the foundation, then from today, a new era for China's retail industry has officially begun. The integration of online and offline retail will not end with RT-Mart and Auchan.
According to Alibaba's plan, both parties will focus on big data and commercial internetization for new retail transformation, with store upgrades being the core. In the coming years, they will upgrade all 446 hypermarkets of Sun Art for new retail. This means that the hypermarket format, which dominates China's retail market, will undergo revolutionary upgrades and innovation, making previous efforts seem minor. Moreover, this innovation and upgrade will lead international retail, and in a sense, it represents a curve-overtaking by local Chinese retail over the long-dominant foreign retail.
Alibaba's long-term strategy is not about short-term performance but about transforming physical commerce. In upgrading traditional business, it also achieves another strategic turn for itself—this is both an exploration of China's commercial upgrade and a bet on Alibaba's own future.

**3. Master Kong and Uni-President Raise Prices for Noodles and Beverages**
The concentrated price increases in the food industry erupted collectively as the 2018 Spring Festival approached. In the last week of January, food giants Master Kong and Uni-President were reported to have raised prices for both beverages and instant noodles.
Against the backdrop of consumption upgrading, price increases have become an inevitable trend. "Raising prices is suicide; not raising prices is waiting to die." This saying may no longer hold true in today's market environment. Previously, brands, especially leading ones, dared not raise prices due to intense price wars, with everyone watching each other and none daring to move. As a result, some classic best-selling categories had not changed their terminal retail prices for over a decade.
According to interviews by New Distribution, manufacturers are currently adopting a rational attitude toward price increases, generally believing that price hikes are understandable and can promote the healthy development of the entire industry.
It is worth noting that for second-tier companies in the industry, price increases bring hope. In the past, Master Kong and Uni-President's refusal to raise prices limited the development of other companies. Even if other companies had great ideas, they could not move forward with price increases. But this time, the leaders have finally started to adjust prices, sending a signal of industry upgrade.

**4. Tencent Strategic Cooperation with Carrefour and Better Life**
On January 23, Carrefour announced that Tencent and Yonghui would potentially invest in Carrefour China, having signed a letter of intent for potential investment. After the news, industry insiders noted that with Walmart partnering with JD.com, Alibaba investing in Auchan, and Tencent investing in Yonghui Superstores, the "line-up" of offline retail enterprises is basically complete, and the deep integration of internet and physical retail has become a trend.
After several rumors of being "sold," Carrefour ultimately chose Tencent and Yonghui, rather than Alibaba as widely speculated. For Alibaba, which already has RT-Mart, the "King of Land Warfare," the impact may not be significant. But for Tencent, securing Carrefour strengthens the "anti-Alibaba alliance" and secures a key piece in the new retail competition.
On the afternoon of February 2, Better Life Commercial Chain Share Co., Ltd. announced that it had signed a "Strategic Cooperation Framework Agreement" with Tencent on February 1. Better Life and Tencent agreed to establish a long-term strategic partnership with the shared vision of developing "smart retail," cooperating in areas such as building new capabilities, constructing "digital" operation systems, and ultimately creating a new ecosystem to reshape the value chain of the retail industry.
As a result, the retail industry has entered a new landscape. Among the top ten companies in the supermarket sector by market share, only China Resources Vanguard, Wumart, and SPAR Group have not yet aligned with Tencent or Alibaba.
For offline enterprises, choosing between Alibaba and Tencent is like what Better Life founder Wang Tian said: "Alibaba's new retail is like an Apple system; you play within its closed system. Tencent feels more like an Android system, where everyone plays their own game. That's the biggest difference between the two systems." Whether to choose Tencent or Alibaba is a matter of personal experience for traditional retail enterprises.
But one thing is certain: the "vertical and horizontal alliances" of the two giants will continue in 2018. And after the traffic pools of offline supermarkets and hypermarkets are divided, will the convenience store industry become the new battlefield for the giants?

**5. Mengniu and Wahaha Enter WeChat Business**
On January 24, Mengniu's official WeChat account announced the launch of its new product "Manran" fiber milkshake milk, targeting new retail and sold through WeChat business channels. With this, Mengniu officially entered the WeChat business!
Similarly, on April 26, a WeChat business friend tipped off New Distribution that domestic beverage giant Wahaha was about to enter the WeChat business and would hold a new product launch in Hangzhou on the 27th. The product, named "Tianyan Jingqing," is a fermented milk beverage主打"relieving visual fatigue" effects.
According to New Distribution, FMCG companies have long been testing emerging channels like WeChat business, including industry giants such as Wahaha and Mengniu. Previously, COFCO's advertisement "Join the Fortune 500 without investing a penny" went viral on social media, and its entry into new distribution channels was through the WeChat business model. Additionally, Arawana's official account once promoted "One-click follow to become a boss, easy transactions to make money," calling its customers "micro-customers," also using methods like bringing in customers and facilitating orders to promote deep product distribution.

**Comments by Mr. Zhuang Jianzhong, social e-commerce expert:**
Traditional e-commerce represented by Taobao and JD.com took 15 years to carve out about 30% of the commercial landscape. When most people finally became willing to face e-commerce, WeChat e-commerce had already developed rapidly.
WeChat, a national-level super app, has built a very complete "commercial infrastructure" within its ecosystem, allowing product display, payment, pre-sales and after-sales service, with rich and diverse forms. Moments, Official Accounts, WeChat Groups, and Mini Programs are all usable "venues," giving rise to various WeChat e-commerce forms. Besides the familiar hierarchical WeChat business, social e-commerce, community e-commerce, community group e-commerce, and content e-commerce are also maturing. Platforms like Pinduoduo have already reached enormous scale.
Mengniu and Wahaha are testing the waters with traditional hierarchical WeChat business models, while liquor companies like Yanghe and Jingzhi took the lead last year. It is foreseeable that 2018 will be the year traditional enterprises heavily enter WeChat e-commerce. "Traditional enterprises WeChat-ize; new WeChat businesses corporatize" will surely create more legends. WeChat's decentralized, efficient, low-cost ecosystem that empowers individuals, compared to Alibaba's highly centralized traditional e-commerce ecosystem, better reflects the original intent of the internet and deserves our attention and embrace.

**6. Yatang Xiaochao and Dianshang Hulian Collapse**
At the end of January, it was revealed that Yatang Group, which had over 50,000 franchised convenience stores, was besieged by dozens of investors at its headquarters demanding repayment of investment funds. Internal employees also exposed serious internal problems at Yatang Xiaochao.
On January 23, Yatang Finance announced on its WeChat official account that it would voluntarily exit the P2P business from that day. Prior to this, Yatang Finance had suddenly increased its P2P products, with "almost daily annualized rates of 13.8%," attracting many investors to compete for purchases.
In early March, Yatang Xiaochao, a subsidiary of Yatang Group, faced protests from hundreds of merchants in Chengdu demanding their money back after collecting payments for goods but failing to deliver. However, there was no money, only furniture in the warehouse that could be used as compensation. Yatang Xiaochao branches in Yunnan and Beijing also closed, and all employees were dismissed. At this point, Yatang Xiaochao was completely finished.
In early April, the well-known B2B platform Dianshang Hulian faced a tragedy when a female employee committed suicide due to unpaid wages. Prior to this, Dianshang Hulian had been repeatedly exposed for branch closures, unpaid supplier accounts, the founding team being sidelined, and large-scale layoffs.
A New Distribution reporter verified with Dianshang Hulian employees, who revealed that the company had forced employees to resign at the end of March, retaining only a few to handle aftermath. Two months of owed wages were to be paid at 80% by April 20. However, by April 20, many employees still had not received their wages. The founder of Dianshang Hulian confirmed via WeChat that the company's financing had failed and wages could not be paid.

**New Distribution Commentary:**
The break in the capital chain reflects more of Dianshang Hulian's internal management chaos, but this is by no means an isolated case. In the FMCG B2B industry, seizing market share through low prices is nothing new. Buying high and selling at par or even at a loss is common. The direct consequence is that profits cannot cover warehousing, logistics, operations, and other costs. When capital cannot continue to supply, problems are inevitable.
After Alibaba, Tencent, and JD.com entered the market, the capital that was heavily invested early on became awkward. These internet giants invest their own profits, while VCs invest LP money, and their attitudes toward trial and error are fundamentally different. So we saw that in the second half of 2017, there were few large investments in the FMCG field, and even platforms that ran ahead and performed well found it hard to secure funding.
When VCs are hesitant to make large investments, relying on financing to survive is no longer possible for B2B entrepreneurs on this track. However, some B2B companies that expanded too quickly and have not yet achieved self-sustaining cash flow will face a harsh winter; with too large a scale, they will soon run out of resources.
Only when the tide goes out do you discover who's been swimming naked. Self-generated cash flow is a reality every platform must face. This stage is the true test of platform operational capabilities.
But New Distribution has always believed that technology can empower the industry. Transforming the industry with technology requires significant investment and experimentation with various models. Trial and error itself is a barrier, and the overall efficiency improvement of the supply chain brought by technology is the ultimate core competitiveness of B2B.

**7. Dali's Doubendou Achieves 1 Billion Yuan in Sales Through Channel Stuffing**
At the end of February, a securities research report by CICC showed that as of the end of 2017, Dali's Doubendou product contributed approximately 1 billion yuan in sales.
At the end of 2017, a distributor reported to New Distribution that Doubendou was severely sluggish in the channel, with large amounts of inventory piling up in distributor warehouses, while the manufacturer ignored the near-expiry products. Initially, I thought it was due to improper market operations by individual distributors and did not pay much attention.
On January 22, 2018, another netizen voiced online: Dali Group's Doubendou distributor had over a thousand cases of near-expiry, unsold products, and the manufacturer showed no interest.
These two incidents caught New Distribution's attention. Doubendou was launched in April, with a 9-month shelf life. By now, the first batch of products was approaching expiry. New Distribution interviewed multiple distributors of Dali's Doubendou by phone and received a common response: the manufacturer was heavily stuffing channels, terminal sales were slow, and large amounts of inventory were piling up and nearing expiry, with the manufacturer offering no solutions or measures.
A rough calculation: Dali's 2016 financial report showed 4,225 distributors. Based on the initial payment for Doubendou distributor accounts being no less than 300,000-500,000 yuan, at least half of the 1 billion yuan in sales came from the initial payments made by distributors when opening accounts.

**New Distribution Commentary:**
Dali's crude management of simply stuffing channels is harmful to the channel. Marketing expert Liu Chunxiong once said: China's strong enterprises are not those with good brands, but those with good channel management. An important indicator is that channel management is an extension of internal management. When times change and problems arise, brand owners should first reflect on themselves.
As Dali Group's core strategic product, Doubendou should abandon illusions, return to the essence of business, respect market laws, value partners, and genuinely work with distributors to cultivate the market and refine channel operations.

**8. Yili Chairman Pan Gang's "Disappearance" Scandal**
The full story of Pan Gang's "loss of contact" incident:
> On March 26, numerous rumors spread online claiming "Yili Group Chairman under investigation or missing."
>
> On the evening of March 26, the Hohhot public security organ received a report from Yili Company and its chairman Pan Gang. In his written report, Pan Gang stated: "The false articles claiming I was taken away for investigation and 'lost contact' are pure fabrication and malicious defamation."
>
> On March 27, Yili issued its first announcement responding to the false rumors, stating that six suspects had been controlled by police for suspected rumor-mongering and defamation.
>
> On the evening of April 9, Yili shares issued another announcement reiterating that Pan Gang was receiving treatment abroad for "congenital aortic coarctation." During treatment and recovery, Chairman Pan Gang continued to preside over the company's related work and fulfill his duties. The company's production and operations were normal.
>
> On April 30, a reporter connected with Pan Gang via video, and he said, "During treatment, normal document approvals are done online, and important meetings are attended via phone or video."
>
> In early May, the Hohhot police stated that four suspects in the rumor incident, identified as Guo, Su, Shi, and Hou, had been arrested and approved for detention on suspicion of extortion.
>
> On May 31, Yili's 2017 annual shareholders' meeting was held in Hohhot. According to online videos, Pan Gang, who had been absent for a long time, appeared at the meeting. This was his formal appearance one month after his video "appearance" on April 30, and the "disappearance" rumor was thus debunked.
During the period when Chairman Pan Gang was "missing," Yili suffered in the capital market. However, Yili did not stop its expansion, and as Pan Gang returned to the public eye, some doubts naturally dissipated.
The question is: if Pan Gang had the conditions to appear earlier when public opinion was rife, why wait until now? Only time will answer this mystery.

**9. Coca-Cola Invests in Internet-Famous Yogurt Brand Le Pur**
Le Pur was founded in 2015, with the full company name Beijing Le Pur Youpin Trading Co., Ltd. The brand initially focused on Greek yogurt (high-protein, whey-strained yogurt). Its WeChat official account, as the main online channel, has attracted millions of followers, with hundreds of thousands placing orders and tens of thousands consuming a box of Le Pur yogurt every two days, with 90% of users being female. In less than three years, Le Pur grew from an initial daily production of 100 boxes to 100,000 and then 200,000 boxes, expanding distribution to convenience stores in all second- and third-tier cities nationwide.
In April 2018, Le Pur received a strategic investment of several hundred million yuan led by Coca-Cola, making Coca-Cola the "second largest shareholder" of Le Pur. Existing shareholders IDG Capital, ZhenFund, Dahe Capital, and Maixing Investment all followed the investment. This financing was also Coca-Cola's first strategic investment and cooperation in a startup company in Asia.
In New Distribution's view, Coca-Cola's strategic investment and cooperation will help Le Pur expand its offline channels faster and more smoothly. Coca-Cola has extensive channel resources, and with its investment, Le Pur will undoubtedly reduce pressure in offline distribution and increase its channel competitiveness with yogurt brands at retail points.
In 2015, Coca-Cola had already proposed a "total beverage" development strategy, determined to expand into non-carbonated beverage areas. Carbonated drinks, which have accounted for 80% of its overall business, have brought in a steady cash flow, but in an era when the "Coke" myth no longer holds, carbonated beverages have become a "tightening spell" for Coca-Cola.
Health, personalization, and functionality have become mainstream consumer demands. Among these, functional drinks, packaged water, and protein drinks are the three categories most favored by young consumers. Light-tasting, nutritious drinks, which better cater to consumers' health concerns, have become the winners in the beverage industry upgrade.
Clearly, Coca-Cola has recognized this. While managing with "asset-light" principles, it is also diversifying its product lines to spread development risks. There is reason to believe that Coca-Cola China's investment is a manifestation of this philosophy.

**10. After Packaging Paper, Tissue Paper Prices Surge**
In June, leading tissue paper companies Vinda International's "Vinda," Hengan International's "Hearttex," and Gold Hong Ye Paper's "Breeze" successively issued price increase notices. International pulp prices have surged 47% in the past year, making it difficult to control tissue price increases in the near term.
Xie Shiping, secretary-general of the Paper Industry Association, said that the main raw materials for tissue are long-fiber and short-fiber pulp. According to North American long-fiber pulp prices, the price per ton was $630 in January 2017 and rose to $920 in January 2018. Short-fiber pulp also rose from $545 to $805, meaning long-fiber and short-fiber pulp increased by 46% and 47%, respectively, over the past year.
A reporter learned from some tissue paper mills that this year, brands like Breeze and Vinda have adjusted prices several times, with increases of about 5% compared to before the Chinese New Year. Since the price adjustment notices are sent from manufacturers to wholesalers, and it takes time for the information to reach terminals, and many supermarkets have sufficient inventory, tissue prices on the market are currently relatively stable.
It is understood that the domestic tissue market is highly competitive, with ample supply from first-tier to third-tier brands, giving consumers plenty of choices, which will also curb the rise in retail prices.
Additionally, it is worth noting that April 1 marked the first tax period for China's environmental protection tax. This factor will increase paper mill costs in the short term, and the resulting differences in product prices and production scales will further intensify the oligopoly pattern: large paper mills will benefit, while small mills will be gradually phased out.

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