---
title: "Undercurrents in New Consumption: Traffic-Driven Companies Abandoned, Yet Some Players Thrive"
description: "Since consumption is an industry with a long slope and thick snow, those who believe in it should continue to believe. This is a compilation of first-hand information from the recent consumption industry. In the past month, '暗涌Waves' has learned from multiple sources about financing progress of key consumer companies or institutions, including Florasis, Saturdance, HotMaxx, and Meituan Longzhu. Over the past two years, the new consumption industry has experienced rapid rise and cooling, largely due to massive capital injection and unrealistic expectations."
author: "任倩 刘旌"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-04-11"
language: "en"
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# Undercurrents in New Consumption: Traffic-Driven Companies Abandoned, Yet Some Players Thrive

> Since consumption is an industry with a long slope and thick snow, those who believe in it should continue to believe. This is a compilation of first-hand information from the recent consumption industry. In the past month, '暗涌Waves' has learned from multiple sources about financing progress of key consumer companies or institutions, including Florasis, Saturdance, HotMaxx, and Meituan Longzhu. Over the past two years, the new consumption industry has experienced rapid rise and cooling, largely due to massive capital injection and unrealistic expectations.

Since consumption is an industry with a long slope and thick snow, those who believe in it should continue to believe.
This is a compilation of first-hand information from the recent consumption industry. In the past month, '暗涌Waves' has learned from multiple sources about financing progress of key consumer companies or institutions, including Florasis, Saturdance, HotMaxx, and Meituan Longzhu. Over the past two years, the new consumption industry has experienced rapid rise and cooling, largely due to massive capital injection and unrealistic expectations.
From this perspective, using 'capital trends' to measure the true temperature of an industry may not be the most scientific approach. However, in the past six months, in financing news and venture capital market discussions, the new consumption industry has been on the brink of a trough—the capital market's attitude towards new consumption is the most obvious indicator. It is hard to say there is no 'overcorrection' involved. Through this article, '暗涌Waves' attempts to present the 'contrarian' phenomena under the seemingly bleak landscape of the consumption industry, and to reiterate the truth everyone understands: since consumption is an industry with a long slope and thick snow, those who believe in it should continue to believe.
******Investment Dynamics in New Consumption**
### **Florasis Welcomes CFO with Long Investment Banking Career**
'暗涌Waves' exclusively learned that April Fan, former Executive Director at Morgan Stanley, recently joined Florasis as Chief Financial Officer (CFO). April Fan has a long career in foreign investment banking. After graduating from the Red McCombs School of Business at the University of Texas at Austin, she worked as a senior auditor at Deloitte from 2004 to 2007; from 2007 to 2009, she worked at Merrill Lynch Asia Pacific, focusing on mergers and acquisitions; she joined Morgan Stanley in 2010 and worked there for 12 years.
According to '暗涌Waves', during her time at Morgan Stanley, she mainly focused on fintech and insurance companies. The addition of a CFO is often seen as a signal that a company intends to go public, so some industry insiders speculate that Florasis may have IPO plans. However, some consumer investors told us that given the highly uncertain secondary market, an IPO would face more obstacles, making it 'a challenging timing.' Other consumer investors believe that since preparing for an IPO takes a long time and many companies do a Pre-IPO round before listing, bringing in a CFO now does not necessarily mean Florasis will IPO in the short term.
It is worth mentioning that in January of this year, Shangmei Group, which owns brands like KANS and One Leaf, also submitted an IPO application to the Hong Kong Stock Exchange. In the fast-paced consumer goods market of the past two years, Florasis is an outlier: it has never formally raised funds. In March 2021, media reported that Florasis's team was in contact with Hillhouse and Sequoia Capital, and was seeking a CFO at that time. But it was officially denied. Cover source: IC photo
Looking back at the new consumption market over the past two years, IPOs of companies like Pop Mart and Perfect Diary ignited the consumer fire, but just a year later, the wealth-creation dream of new consumption quickly faded. Perfect Diary (Yixian E-commerce), once hailed as the 'light of domestic color cosmetics,' now has a market value of $457 million. But in the eyes of some industry insiders, Florasis's outcome may be different. 'Its concept of Eastern beauty and national style is still scarce in the beauty track,' a seasoned consumer investor told us. When mentioning Florasis, industry insiders often mention its determination to build high barriers through R&D. Earlier this year, Florasis executives made three visits to invite Li Huiliang to join. Li Huiliang, former deputy general manager and CTO of Bloomage Biotechnology, is known in the industry as 'the first person in Chinese cosmetics R&D.'
His addition led outsiders to speculate that Florasis intends to enter the skincare track. Recently, Florasis also announced that it will invest 1 billion yuan over the next five years in multiple basic research fields, and its parent company already holds 130 patents. **Saturnbird's Latest Valuation Quoted at $3 Billion** There are reports that Saturnbird has called for a financing round at a $3 billion valuation. '暗涌Waves' sought confirmation from Saturnbird, but the company declined to comment. An investor close to Saturnbird told us this is a 'high-price mentality': since the necessity and urgency of this financing are not high, they first test market reaction with a high price. A consumer industry insider close to Saturnbird revealed that in 2021, the company's revenue doubled to over 900 million yuan. At a $3 billion valuation, the P/S ratio would be nearly 20 times. Many consumer investors contacted by '暗涌Waves' believe this valuation is too crazy. But some investors say, '20x P/S is indeed high at the moment, but top assets can give a sense of security, and you have to pay a premium for high security.' Saturnbird founder Wu Jun said last year that over the past three years, Saturnbird has maintained a growth rate of 2-3 times annually, with a repurchase rate of nearly 50%. At that time, after achieving a certain degree of self-validation online, the biggest issue Saturnbird faced was that its offline sales performance had not yet been verified. Compared with other brands in the specialty coffee track, Manner, which has over 300 stores, saw its valuation jump to $3 billion after ByteDance's investment last June; %Arabica also received investment from well-known fund PAG, which is now its controlling shareholder. **HotMaxx Launches Financing Round, Valuation May Reach $1.5 Billion** Local discount store HotMaxx is also conducting a new financing round at a $1.5 billion valuation. We sought official confirmation from HotMaxx, but had not received a reply by press time. Since receiving angel funding in 2019, HotMaxx has completed five financing rounds, with investors including Sky9 Capital, GSR Ventures, Richland Capital, and 5Y Capital, and New Journey Capital as shareholders. According to public reports, in September 2020, HotMaxx's valuation was $500 million. **Meituan Longzhu's First Dollar Fund Closes with Over $300 Million** We also exclusively learned that Meituan Longzhu's first dollar fund completed its first close: with a scale exceeding $300 million, with LPs including sovereign funds, pension funds, and other institutions. Established in 2017, Meituan Longzhu is an important equity investment arm of Meituan, currently focusing on consumer and technology sectors. Before former GGV partner Hong joined, Meituan Longzhu's investment committee consisted of Wang Xing, Chen Shaohui, and Zhu Yonghua.
******Current Status of Traffic-Driven Consumer Companies:****Contraction and No Growth Targets**
It is not difficult to see that in the visibly bleak new consumption market, companies that are currently more aggressive in financing mainly come from segments such as new-style tea drinks, coffee, and new retail. Although according to capital market rules, the colder the winter, the more capital concentrates on leading companies—and the above companies are indeed almost leaders in their respective segments—they also share a common feature: they basically do not rely on online traffic to grow. We have stated in many articles that with the rise of new traffic platforms like Douyin and Xiaohongshu, many new consumer companies have been created. But since the second half of last year, due to the sharp increase in traffic costs and the sharp decline in ROI, many consumer companies relying on traffic have dried up. A typical example is 'Perfect Diary,' which many in the consumer circle describe as 'successful because of traffic, failed because of traffic.' According to '暗涌Waves', many new brand companies closely related to traffic have now chosen strategies of contraction, preserving funds, and not setting growth targets.
'In simple terms, they all have strong self-sustaining capabilities,' a consumer investor who also learned about the financing progress of the above companies optimistically told '暗涌Waves'. This wave has truly falsified only the model of using traffic to drive user growth and the 'collusion system' with capital, while some companies that did not start with a money-burning logic will see a rebound this year.
******Consumer Investors Flow into Four Major Areas**
### The consumer industry that emerged in 2020 is actually at a delicate juncture: not only because of the opportunities in consumption itself, but also because of the systematic exhaustion of TMT opportunities. Thus, new consumption investment has attracted a considerable number of mobile internet investors—who may be the largest group among Chinese investors.
When the consumer market as a whole falls into a slump, where will they go? Some media reports say consumer investors have turned to technology. This may be a trend, but according to '暗涌Waves', given that consumption and typical technology are far apart, more consumer investors are focusing on four directions: consumer technology (e.g., medical aesthetics, synthetic biology), consumer electronics (e.g., small appliances, energy storage), agriculture, and going global. Embedding technology attributes into consumer products is a topic frequently discussed by many consumer funds recently. In summary, this shift stems from their belief that technology has actually been an important driver of the rapid growth of Chinese new consumer brands over the past decade.
For example, He Yu, managing partner of Black Ant Capital, said in a recent article: 'In the past, the business boundaries of consumer goods were determined by supply chain and channels; in the future, they may be determined by technological capabilities and organizational capabilities.' This also reveals a common feature of many current venture capital sub-trends: interdisciplinarity. Many consumer investors told us that synthetic biology, which was very hot last year, is a typical combination of consumption and biotechnology.
Data shows that 2021 was the best year ever for synthetic biology startups in terms of financing, raising nearly $18 billion in total—almost the sum of all previous years since the field emerged in 2009. In addition, there are consumer electronics and energy storage applications. Representative companies in the former include Dreame, Narwal, etc., while the latter includes outdoor mobile power brand EcoFlow. In the agricultural field—especially the agri-food sector—it is inherently intertwined with the concept of consumption. This can be seen from the investor lists of well-known companies in this field, such as Huang Tian'e and Shiyue Daotian: a considerable portion are typical consumer investors or consumer funds. Consumer investors looking at going global follow a similar logic. Any large consumer goods company will expand globally at a certain stage, such as the aforementioned Florasis and Perfect Diary, which have varying degrees of overseas strategies. Of course, in the increasingly cramped domestic venture capital market, going global has become a larger logical line—almost every field can be embedded with a going-global story, not just the new consumption industry.
******New Consumption from Short-Term and Long-Term Perspectives**
### Will New Consumption See a New Wave?
Reviewing the fundamental reasons for the recent slowdown in consumption, besides the decline of traffic dividends and the impact of the epidemic, it is also related to the emotional effects of the capital market. Undoubtedly, in the consumer market of the past two years, the intensive betting of capital exceeded the fundamental development of the consumer industry. This is not only the fundamental reason for the alternation of hot and cold in consumption, but also in almost all venture capital themes over the past few years. Qingshan Capital mentioned in a recent article that traffic dividends and capital dividends will not come again in the short term; cognition of users, brands, supply chains, and differentiation will be the core weapons for the next battle. Since this year, many catering companies, including Yang Guofu, Lao Xiang Ji, Country Style Cooking, and Hefu Noodles, have updated or announced listing plans. In the second half of last year, Lao Wang, Green Tea Restaurant, and Lao Niang Jiu also reported IPO news. Some consumer investors believe that these IPOs may have some positive incentives for the primary market. But others are not optimistic: 'These companies are not large enough to have a broad demonstration effect.' In the long run, consumption is an industry with a long slope and thick snow, a truth everyone understands. So theoretically, regardless of the coldness or warmth of the capital market, this industry should be viewed favorably in the long term. Combined with the extreme uncertainty of the current capital market, the stability of consumption remains an advantage that should not be ignored.
'Consumption, like technology and healthcare, is a concept at the same level. These three are long-term huge industries related to China's national economy and people's livelihood. There are ups and downs in development, but they will not disappear,' Huang Hai, an investor focused on consumption for many years, told '暗涌Waves'. The mission of investors is to discover long-term valuable companies. Opportunists who leave due to temporary difficulties are destined not to become great investors. (Thanks to Zhang Yi for contributing to the text)
Source: 36Kr (ID: wow36kr)
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