On April 27, Chu Orange NFC fresh juice was "quietly" officially launched in Yuxi, Yunnan. Wang Shi, founder of Vanke Group and close friend of Chu Shijian, was appointed as the chief consultant of the producer, Yunnan Shijian Fruit Industry Co., Ltd. As Mr. Chu Shijian's final work, Chu Orange NFC carries the mission of breaking into the fruit and vegetable beverage industry for Chu Orange, and the terminal price of 18.8 yuan per bottle continues Chu Orange's "high-end premium" product line, extending the brand effect formed by "Chu Orange" to "Chu Orange NFC". Data source: Prospective Industry Research Institute After a decade of golden growth, the total output of soft drinks in China surged from 51.1 million tons in 2007 to 180.51 million tons in 2017, but for the first time in 2017, total output declined by 1.6%. At the same time, due to the relatively low entry barriers in the soft drink industry, competition has become increasingly fierce. Data source: Prospective Industry Research Institute According to data from the Prospective Industry Research Institute, from 2011 to 2017, the number of beverage manufacturers above designated size in China increased from 4,594 to 7,122, with a compound annual growth rate of 7.58% in 2017. The domestic soft drink market has entered a fully competitive market. Data source: Prospective Industry Research Institute Behind the overall slowdown in the growth of the entire soft drink market and the intensifying competition is a profound change in consumer demand and consumption concepts. Looking at the distribution of production by segment in the beverage industry, packaged drinking water and fruit and vegetable beverages still occupy a large market share, while the gradual decline in the share of carbonated beverages reflects consumers' increasing focus on health factors when choosing drinks. Under this change in demand, the consumption demand for fruit and vegetable beverages has entered a new growth phase. Data source: China Business Industry Research Institute Data from the China Business Industry Research Institute shows that in recent years, retail sales of fruit and vegetable juice beverages in China have grown steadily. In 2016, the retail volume of fruit juice beverages in China was 13.447 billion liters; retail sales reached 100.914 billion yuan, a year-on-year increase of 1.88%. According to relevant forecasts, by 2022, the average annual compound growth rate of domestic fruit and vegetable beverages will reach 7%. Currently, the domestic fruit and vegetable beverage market is dominated by low-concentration juice drinks with a concentration of no more than 25%, while foreign markets are dominated by pure juice consumption. Under consumption upgrades, the health trend of fruit and vegetable drinks will drive significant growth in the domestic 100% concentration juice market. Demand-oriented, Building "Category Barriers" with the Z=PNS Model to Gain Premium Space Changes in consumer demand orientation also affect changes in category share. Before 2000, carbonated beverages dominated the domestic soft drink market; from 2001 to 2006, tea drinks and functional drinks became the mainstream; since 2007, packaged drinking water, fruit and vegetable beverages, and protein drinks have become the mainstream demand. The era of "explosive single products" represented by the rise of carbonated drinks and tea drinks has ended, and the entire soft drink market is showing a trend of category segmentation. From the perspective of changes in the main consumer groups, the post-80s and post-90s consumer groups are gradually entering middle age, and they tend to prefer healthier fruit and vegetable drinks when choosing beverages. In addition, the new generation of consumers, mainly post-95s and post-00s, is gradually rising. Compared with post-80s and post-90s, they have stronger consumption willingness and lower price sensitivity, and they pursue "personalization" in their choices. At the same time, they are more likely to accept higher-priced 100% juice products. If we use Z=P×N×S to represent the relationship between future revenue space of fruit and vegetable beverages and unit price, demand, and market penetration rate, then when penetration rate S remains basically unchanged, revenue space Z will multiply with the growth of unit price P and demand N. That is, under existing modern and traditional channels, the larger the unit price (premium space) of fruit and vegetable drinks, the more the revenue space will multiply with the growth of category demand. Uncle Neng believes: Under the dual influence of consumer groups' consumption ability and habits, brand, health, packaging, and convenience have become new demand directions, while the decline in price sensitivity is more conducive to new product promotion and high-end product placement by companies in the industry. In new category segments, by building brands to achieve premium space and blurring the boundaries between categories and brands, the construction of "category barriers" can be achieved. Category segmentation is actually market segmentation. The significance of building "category barriers" in new market segments lies in two points: one is the "barrier" between categories, and the other is the "category barrier" of brands. Under constantly changing market demand, the necessity of health needs is self-evident. Compared with other categories, the natural advantage of fruit and vegetable beverages in meeting consumers' health needs constitutes a "category barrier." Perhaps some fruit and vegetable drinks are not as healthy as people imagine, but in consumers' inherent cognition, the healthiness of fruit and vegetable drinks is definitely greater than that of functional drinks and carbonated drinks. The other meaning of "category barrier" lies in the "categorization" of "brand barriers," such as Coca-Cola in the cola category, Master Kong Iced Black Tea, Yili Youqinru, etc. In category segmentation, by consciously blurring the boundaries between brands and categories, the construction of "category barriers" is achieved. The vitality of a beverage product largely depends on the vitality of the entire category, and the vitality of the category depends on changes in consumer demand. Simply put, people drink beverages to satisfy various needs, such as mineral water to quench thirst, carbonated drinks to quench thirst, functional drinks to refresh, dairy products to supplement protein, and fruit and vegetable drinks to supplement vitamins. Under current changes in consumer demand, the market demand for carbonated drinks has further shrunk, while the demand for fruit and vegetable drinks has become stable. The relatively small market size and "category barriers" determine the current state of "small but certain happiness" for fruit and vegetable drinks. "Mule Product" Thinking in Building "Category Barriers" and "Conditioned Reflex" Marketing As mentioned earlier, "brand barrier" has two meanings. Hereafter, "brand barrier" refers only to its second meaning, i.e., the categorization of "brand barriers." The "categorization" of a brand actually requires blurring the boundaries between product brand and category in a segmented market. There are only two ways to achieve the blurring of brand and category boundaries: First, create a new category; second, use "mule product" thinking to blur the boundaries between product and category. Under the existing category structure of the entire soft drink market, the investment cost and market education cost required to innovate a completely new category from 0 to 1 are almost unimaginable, and accompanied by high investment is the huge operational risk brought by the unclear market prospects of the new category. Therefore, the path of category innovation is undoubtedly a "road of no return." In contrast, the "mule product" thinking carries much less risk in execution. Although born by chance, apple cider vinegar is a typical result of "mule product" thinking. There is an interesting story about the birth of apple cider vinegar. It is said that more than ten years ago, the head of Tianyi No.1 enterprise was inspired by a national leader's novel way of drinking Sprite mixed with aged vinegar at a banquet during an inspection in Guangdong. He organized nutrition experts to scientifically formulate the first "vinegar beverage" using high-quality Shanxi aged vinegar and honey. According to public information, "Tianyi No.1" is a company listed on the New Third Board, a joint-stock enterprise integrating R&D, production, and sales of vinegar beverages and other drinks. Apple cider vinegar is its main product. According to its public financial reports, its full-year revenue in 2018 was 2.117 billion yuan, with a net profit of 339 million yuan. Interestingly, one day after the launch of Chu Orange NFC juice, this "vinegar beverage" brand Tianyi No.1 acquired the famous Huiyuan Juice for 3.6 billion yuan. In Uncle Neng's view: Under the "mule product" thinking, new product development for fruit and vegetable beverage companies should also start from actual market demand. For fruit and vegetable beverage companies, on the one hand, they should accurately position consumer needs in segmented markets; on the other hand, in vertical categories, they should blur the boundaries between products and categories with high-quality products, making the brand a "synonym" for the category to achieve the construction of "category barriers." In addition, in essence, fruit and vegetable beverages are FMCG products, and the marketing-driven characteristic is still very obvious in the soft drink industry. Therefore, using marketing as a means to establish a "conditioned reflex" between the brand and consumers is the ultimate way to build a moat for fruit and vegetable beverage brands. Secondly, high-frequency and sustainable advertising is an important path to achieve a "conditioned reflex." After that, further cultivating consumer loyalty and strengthening value identity and spiritual core are the ultimate stages of marketing and the key core of forming a "conditioned reflex." The so-called "conditioned reflex" actually refers to the instant decision-making mechanism when consumers choose a certain brand after a consumption need arises. For example, a young person who loves cola, when thirsty, unthinkingly chooses to buy a bottle of Coca-Cola at the supermarket. The "unthinking" decision process here is the meaning of the "conditioned reflex." The formation of a "conditioned reflex" is not only the result of occupying consumers' minds, but also the "unconditional" trust of consumers in the brand after experiencing brand value identity and spiritual core identity. Once such a trust relationship is established, it will become an impregnable moat for fruit and vegetable beverage companies. For fruit and vegetable beverage manufacturers, the importance of marketing is self-evident, and the importance of channels cannot be ignored either. In an increasingly competitive industry, the view that channels are king is increasingly regarded as a golden rule by more companies. It can be said that whoever has absolute control over channels will master the discourse power of the entire market. Even the best products, lacking effective channels to reach the market, are doomed to fail to increase sales and achieve conversion at the consumer end. Conclusion The slowdown in the overall growth of the soft drink industry does not mean that opportunities are decreasing. Under the new demand orientation, there are still new opportunities in the changes in market share of segments. The soft drink industry, already a red ocean, is undergoing profound changes under the trend of consumption upgrades. How to timely insight into market changes and seize the new opportunities given by the times to fruit and vegetable beverage companies is the issue that needs in-depth research. Source: Uncle Neng on FMCG (ID: zzd1312) Tips will be paid 400-2000 yuan once the tip is adopted. China FMCG + Internet Professional New Media Committed to FMCG manufacturer transformation and upgrade and channel digital solutions