Behind the boom of new consumer brands lie hidden issues, such as increasingly expensive traffic and marketing costs accounting for over half, or even 60%, of revenue for many brands. "We're working for marketing agencies all year round." Amid brands' lamentations, the DTC (Direct-to-Consumer) concept is gaining traction. DTC originated in the U.S. It refers to brands interacting with consumers directly through their own official channels (websites or apps abroad, WeChat mini-programs or Moments in China) to prompt purchases, bypassing distributors or intermediary platforms. For example, in February this year, Heytea released its 2020 annual report. In addition to easily accessible information like raw material consumption, store expansion numbers, and new product development speed, the report contained extensive content on consumer purchase preferences, such as whether consumers prefer online ordering or in-store pickup, flavor preferences, and sweetness levels. Data can be specific to regions. Previously, brands often had to pay third-party agencies hefty sums for such data, and the results weren't necessarily the metrics they cared about most. Heytea's approach of accumulating user data on its own mini-program and providing a direct purchase channel without third-party platforms like Meituan or Ele.me is one application of the DTC model. So, how exactly does this seemingly attractive model work? Is the DTC model suitable for your brand? This article will explore typical DTC models by examining domestic and international food industry DTC brands. What characteristics should brands have to try it? If the DTC model isn't a perfect fit, what lessons can food brands learn from its advantages? -01-

What Exactly Is DTC? Why Are Pepsi and Unilever Using It?

Abroad, the DTC model is widely applied. Unilever spent £150 million (approximately RMB 1.36 billion) to acquire Graze, a healthy snack brand and a typical DTC brand that sells products via its website through subscription delivery. Graze snack box A Unilever executive explicitly stated that the acquisition aimed to accelerate the DTC layout of its business. Graze became a successful example of the "subscription economy," with over 100,000 registered users in the U.S. by 2017. So, how did the DTC model emerge? How does it differ from traditional brand models? What makes it so appealing? First, DTC's birth and rise abroad can be attributed to two main reasons: First, in countries with vast territories and sparse populations, third-party e-commerce platforms have slower logistics than in China, and their commission rates are high, making them neither the first choice for brands to distribute products nor for consumers to shop. Data shows that foreign e-commerce platforms like Amazon and eBay charge commission rates above 10%, while domestic Chinese platforms charge below 5%, with Pinduoduo even below 3%. Second, due to well-developed related industry chains, the costs of building websites and promoting abroad are slightly lower than in China, and foreign consumers are accustomed to purchasing on brand official websites. Google, in collaboration with Deloitte, surveyed 5,005 online consumers in the U.S., UK, Germany, Spain, and France. The results showed that brand official websites are the primary online purchase channel for foreign consumers. Brand official websites are the main online purchase channel for foreign consumers Data also shows that from 2016 to 2019, U.S. DTC brands grew at a rate 3-6 times the e-commerce average, and in 2019, 40% of e-commerce users were DTC buyers. By 2021, the total number of DTC consumers is projected to reach 95 million. After understanding the origins of the DTC model, let's compare typical DTC and traditional brand models across four dimensions: product, price, channel, and marketing within the 4P framework. First, product: Brands using the DTC model (hereafter "DTC brands") offer more options for consumers to customize products, letting consumers act as product managers and participate in product design. For example, U.S. meal replacement beverage brand Dirty Lemon allows consumers to freely choose which ingredients to add, customizing meal replacement drinks to their taste. Dirty Lemon products In terms of price, DTC pricing models often differ from traditional tiered pricing, instead using shared value pricing. How to understand tiered pricing versus shared value pricing? Let's illustrate. When the iPhone 8 launched at RMB 6,999, it dropped to RMB 5,999 after the iPhone 9, and to RMB 4,999 after the iPhone 10. This is tiered pricing, common for most consumer goods. Shared value pricing, on the other hand, means "consumers and brands share costs and profits," which is often heard as "passing benefits to consumers." For example, a regular milk tea costs RMB 10. If you want to add an extra topping, you pay an additional RMB 5... But if you only buy a regular milk tea, you pay just RMB 10. DTC brands often adopt this more flexible pricing to create a price band for the same product, allowing the brand to reach consumers across more segments. In terms of channel, DTC brands have "no middlemen," unlike traditional brands that go through distributor systems, retailers, and other links. Instead, they reach consumers directly through self-built channels like official websites. On one hand, this reduces costs in the distribution chain. On the other hand, information previously scattered across various channels is now fully presented on the official website, enhancing the consumer shopping experience and fostering brand loyalty. Factors that increase consumer trust in brand official websites FoodSpring, a German functional food and beverage brand majority-owned by Mars, clearly displays real-time prices for various products on its official website, supports multiple payment methods, and allows consumers to choose whether to receive professional nutritionist pairing advice before purchase. FoodSpring products PepsiCo's DTC website also does this: various Pepsi products are bundled into "gift packages," and consumers can purchase at discounted prices according to their needs. PantryShop homepage In terms of marketing, since DTC brand websites serve the function of directly promoting and shaping brand image to consumers, pages are often meticulously designed. The official website of French chocolate brand Le Chocolat des Français is very exquisite. From product information to brand stories, everything is clearly and beautifully presented on the brand's official website, allowing consumers to complete the four main stages of the consumer journey: awareness, evaluation, trial/purchase, and sharing all on the site. This not only avoids customer loss during path switching but also makes it easier for consumers to form a comprehensive impression of the brand. -02-

Genki Forest, Want Want, Oreo... Which Brands Are Suitable for the DTC Model?

After looking at foreign brands, let's turn to domestic brands. Which brands are suitable for the DTC model? Let's start with the conclusion: If conditions allow, all brands should add a channel that directly reaches consumers. On one hand, it bypasses middlemen and saves costs; on the other, it effectively captures user data and allows quick responses to demand changes. Let's first look at how brands that have begun testing the DTC model are doing it. The first case is Genki Forest, which frequently launches new product testing activities in its "Genki Member Store" WeChat mini-program. According to incomplete statistics, it has invited consumers to test products like "0-calorie sugar," "chicken breast jerky," Beihai Ranch's "Gem Cup Yogurt," and "Boba Yogurt." Genki Forest invites consumers to try products on its mini-program Second is Want Want. We've repeatedly noticed that Want Want's official website and WeChat mini-program are the first platforms for launching new products, such as the two products below. Want Want's Flash Vitality Sugar and Light Beauty Vitality Sugar As early as late March, we saw Want Want Group's official website showcasing Flash Vitality Sugar and Light Beauty Vitality Sugar. It wasn't until April 16 that Want Want's WeChat official account began promoting them. Oreo's WeChat mini-program has clearly been developed as a hub for refined operations. Points games, discounts, flash sales, and mini-games that earn points are all on Oreo's mini-program. Games on Oreo's WeChat mini-program This interactive approach is clearly warmer than e-commerce customer service that only sends automated replies. Moreover, compared to scattered promotional information across platforms, this "one-stop" collection saves consumers time. Ambrosial (Anmuxi) also has such a layout. At the end of every WeChat official account post, Ambrosial includes links to its various platforms. Official channel information at the end of each post You might think that Genki Forest, Want Want, Oreo, Ambrosial... all have strong brand recognition. Are new brands that aren't yet widely known suitable for the DTC model? In fact, we believe that the DTC model is particularly suitable for new brands in the cold-start phase. What is cold start? In one sentence: Survive when resources are scarce and budgets are insufficient. With limited budgets, every penny must be spent wisely. Brand operations must be precise, carefully calculating which platforms to use and how to allocate investments. Many new brands have experienced this awkwardness: "We'd sell everything we own to buy a spot on a platform, only to have a big brand casually push us several pages back, crushing us to bits." Therefore, building buzz on a specific platform, using products and marketing to ignite the brand, and then moving to mainstream e-commerce platforms like Tmall has become a common path for new brands in recent years. Brands must always revolve around consumers. So, if they focus on consumers from the start, collecting first-hand data on shopping preferences, might they be more likely to accumulate momentum and scale quickly later? We also noticed a startup brand that chose to do business around WeChat mini-programs from the beginning: Öarmilk (Wudao Milk). Öarmilk's two yogurt products Öarmilk Yogurt told us that choosing the WeChat mini-program as its first channel was to cultivate its private domain community and help consumers develop a habit of regular purchases. Moreover, Öarmilk Yogurt follows a mid-to-high-end route, and the consumer base willing to accept this price range is limited. Öarmilk also wants to use this method to identify and cultivate loyal brand users. We also saw that on Öarmilk's WeChat mini-program, consumers can choose monthly, quarterly, or annual subscriptions with varying discounts. Öarmilk's two yogurt products Initially, Öarmilk chose offline gyms, yoga studios, and sports events as traffic sources. Currently, it has around 800 long-term subscribers, about 10,000 WeChat community users, and over 7,000 enterprise WeChat followers. At this point, you might feel that DTC and "private domain" concepts overlap. In our view, these concepts have different emphases, but their essence converges. Private domain, in one sentence, is "doing business on a platform without paying the platform." It's the opposite of public domain. For example, if I promote and sell products in my Moments, I don't pay WeChat. My Moments are my "private domain" for promotion. DTC, on the other hand, means "bypassing platforms and doing business directly with consumers," but in marketing, both public and private domain traffic are used. For instance, I still sell products in my Moments, but I also pay for advertising on various channels. So DTC is more systematic, while private domain refers to a component of marketing operations. But both aim to establish more direct connections with consumers in marketing, channels, and product innovation. Comparing domestic and foreign markets, we believe that the vast majority of domestic consumers are accustomed to purchasing on e-commerce platforms, making it unlikely that a 100% DTC brand selling only on its own website, as seen abroad, will emerge. So what underlying logic behind the DTC model can we learn and apply? That's what we'll discuss next. -03-

What Insights Can the "Truly Attractive" DTC Model Offer Food Brands?
We can notice that in recent years, major internet platforms have all wanted to integrate content, social, and transactions, concentrating all consumer life scenarios on themselves.

For example, Xiaohongshu started with content and social, and its transaction system is still improving. Xiaohongshu is also supporting brands that transact on it. Compared to platforms like Taobao, channel fees are slightly lower. Brands can seize this opportunity and use Xiaohongshu as one of the direct contact channels with consumers.

Food brands can enjoy the dividends of this process and execute brand actions with a DTC mindset.

For new brands, they can first concentrate resources on specific consumer segments on a particular platform, "ignite" a small circle, and then expand from niche to mass. The core of DTC—directly facing consumers—makes small circles that value emotional connections and shared preferences feel that their hobbies are "noticed," cared for, and even respected. This also aligns with the logic behind the rise of new brands. For large companies and brands, there's always a concern that as organizations grow, they become farther from consumers. Starting DTC construction early allows brands to keep user data in their own hands. China Digital Marketing Metro Map 2020 (click to enlarge) The digital marketing map above shows that marketing digital systems mainly involve three-party data. Previously, due to scattered channels and platform barriers, brands often spent significant money and time integrating three-party data, prolonging decision-making and reducing efficiency. If a brand builds its own mini-program or app to directly collect the user behavior data it needs, it can save most of the time and effort, adjust business strategies promptly, and respond flexibly to changes in consumer demand. Even if the initial user base is small, it's definitely a direction worth investing in. -04-

Conclusion

Brands exist because of consumer recognition and survive by centering on consumers. Therefore, building a channel that directly faces consumers is essential. Source: FBIF Food & Beverage Innovation (ID: FoodInnovation), Author: JoJo (Edith) Tips will be paid 400-2000 yuan once adopted.