Source: Shangyin Society (ID: shangyinshecj) According to the "2021 China Top 500 Private Enterprises List" released by the All-China Federation of Industry and Commerce, Wahaha's revenue in 2020 was 43.98 billion yuan. This figure seems only a 5.29% decline from 46.4 billion yuan in 2019, but it has reached the company's lowest point in a decade, equivalent to its revenue level in 2009. For many years, Wahaha has been a banner for domestic beverages, but under the new consumption wave, traditional beverage brands represented by Wahaha are undergoing repeated major tests. Unconsciously, supermarket and convenience store shelves are filled with new faces like low-calorie drinks and low-alcohol beverages, while Wahaha is hard to find. A few months ago, it was revealed that Zong Qinghou had obtained fund qualification. It is understood that the 76-year-old "taking the exam" was not for "endless learning and self-improvement," but to meet the filing requirements for private fund managers, so that Wahaha could formally enter the venture capital circle. At 76, still seeking a breakthrough for Wahaha, his "old steed in the stable" spirit is admirable, but also somewhat lamentable. Consider traditional beverage companies represented by Wahaha: some are stagnant, some are forced into bankruptcy liquidation and exit the historical stage, and some continuously launch new products with little effect... Traditional beverage brands are in adversity, while new beverage brands are aggressive. Survivors of the Foreign Acquisition Curse Traditional domestic beverages have experienced two peaks and declines: first, the decline of soda drinks during the foreign acquisition wave at the end of the last century, and second, the fall of "national old brands" under the impact of new consumption in the past decade. In the 1980s, Coca-Cola had entered China but had not yet taken root. China's own production of Tianjin Shanhaiguan, Beijing Beibingyang, Shanghai Zhengguanghe, Shenyang Bawangsi, Qingdao Laoshan, Wuhan No.2 Factory, Chongqing Tianfu Cola, and Guangzhou Asian Soda, as the "Eight Major Factories" of Chinese soda, dominated the market and were the leaders in the soda industry at that time. Unfortunately, at that time, the just-starting local beverage companies lagged far behind foreign companies with strong capital and rich experience in brand awareness and marketing, causing domestic soda to be left behind and market share to shrink severely. Later, domestic beverages sought to "learn from foreign strengths to compete with them," but most failed and were swallowed by foreign capital. They mainly wanted to use the channels and popularity of these soda brands to "claim territory" in China and then take root in the Chinese market. Under the siege of "Two Colas" and other foreign beverage brands, Chinese soda lost sales, formulas, and even trademarks, once disappearing from the market. "Cola" replaced "soda" as the most common carbonated drink in Chinese hands. The "Eight Major Factories" were not isolated cases of domestic beverage companies declining after being acquired by foreign companies. Wahaha, established in 1987, and Robust, established in 1989, were once the "two heroes of the north and south" in China's beverage industry. In the late 1990s, Wahaha used a rural-encircling-city strategy, causing Robust's market share to shrink significantly. Facing enormous pressure, Robust founder He Boquan decided to introduce foreign capital and take a gamble. Coincidentally, French food giant Danone extended an olive branch, and the two companies quickly hit it off. In 2000, Danone spent $2.38 billion to acquire Robust, holding 92% of shares, while He Boquan and other founders held only 3%. Expecting to have found a backer, Robust was about to make great strides, but the parachuted foreign management team was "not adapted to local conditions," the enterprise fought internally, and Danone's motives were impure, wanting to replace it and expand influence. Since then, Robust's development has been surprising, with performance declining sharply, multiple business segments stripped away, and eventually only the water business remained. Danone also used the same method to destroy Yili, a strong drinking water brand in the South China region. In fact, before these two acquisitions, Danone had established a joint venture with Wahaha, Robust's competitor, producing purified water, eight-treasure porridge, etc., with each holding 49% shares, and the remaining 2% held by Hong Kong's Peregrine Investments. Later, during the Asian financial crisis, Peregrine transferred its 2% to Danone, giving Danone control. In the following years, Wahaha established dozens of non-joint-venture companies across the country, with assets and revenue far exceeding the joint venture. Danone wanted to forcibly acquire 51% of the non-joint-venture companies' equity for 4 billion yuan, but Wahaha refused, leading to a conflict that attracted social attention. At that time, in a survey by an authoritative financial website on the "Danone's forced acquisition of Wahaha incident," 92.36% of respondents believed that Danone's acquisition of Wahaha's non-joint-venture equity was aimed at monopolizing China's beverage market. After 70-80 lawsuits worldwide, Danone and Wahaha entered peaceful negotiations under the mediation of both governments. Besides Wahaha, other domestic beverages that survived under the noses of foreign capital include Jianlibao, focusing on sports drinks, Huiyuan, China's first juice brand, and Wanglaoji, a century-old herbal tea brand. They avoided direct confrontation with the "Two Colas" through differentiated competition and thrived in beverage sub-segments for a time. But today, Jianlibao is a memory, "national brand" Huiyuan was exposed to forced bankruptcy a few months ago, becoming a thing of the past, Wanglaoji is no longer glorious, and Wahaha's revenue has returned to 2009 levels. If the decline of the "Eight Major Factories" was more due to the impact of foreign capital, the decline of brands like Wahaha is more due to poor management by the brands themselves. Childhood Drinks Lacking Innovation "Where have Wahaha's salespeople gone? On supermarket shelves, besides bottled water and AD calcium milk, other products are nowhere to be seen. How did a good brand get lost?" When talking about once-favorite beverage brands, friends born in the 80s and 90s often feel frustrated. In recent years, Wahaha has quietly disappeared from young people's beverage options. From large supermarkets like Yonghui to convenience stores at street corners and subway entrances, almost no Wahaha products are seen on shelves except bottled water and eight-treasure porridge. Even in the lower-tier markets that Wahaha was once proud of, it is hard to find. In the beverage industry, those who win the youth win the world. The rapid development of new consumer soft drink brands is riding the youth wave. Obviously, compared with new brands, old brands find it difficult to bridge the generation gap with young people. Not only Wahaha, but other old brands are also declining or dying in the predicament of brand aging. To cater to young people's personalized needs, the beverage market is becoming increasingly segmented, with many competitors in the same category. For example, in bottled water, brands include Nongfu Spring, C'estbon, Wahaha, Kunlun Mountain, etc. The same product has diluted market share, and hundreds of various beverages emerge on the market every year, giving users more choices. The beverage industry is fiercely competitive, and a single product can no longer sustain a brand for long. Zong Qinghou obviously recognized this. He once said in an interview on CCTV's "Dialogue" that the most important reason for Wahaha's decline was the lack of innovative single products. At the end of the last century, China's brand awareness was low, and many companies started with knockoffs. This low-cost, fast-development model brought Wahaha immeasurable success, but it also became a weakness that made it difficult for Wahaha to gain fresh blood. Wahaha has been jokingly called the "Tencent" of the beverage industry. On one hand, it built a "beverage empire"; on the other hand, it has had no original single products since bottled water. One of Wahaha's earliest hits, "Children's Nutritional Liquid," benchmarked against Guangzhou Taiyangshen, and then targeted Robust's calcium milk, launching an upgraded product - AD calcium milk. Wahaha's best-selling product, Nutri-Express, was modeled after Xiaoyangren's Miaolian, with annual sales of 20 billion yuan at its peak, providing nearly one-third of Wahaha's revenue. It can be said that almost every Wahaha hit followed the path of follow-up - appropriate innovation - channel expansion - market grabbing. However, with insufficient innovation, the advantages of these single products could not be sustained, and they were overtaken by similar products. New blockbuster products were slow to appear, making decline inevitable. Although Wahaha has made efforts in rejuvenation and innovation in recent years, launching many new products, it has only been lively but with little effect. Single-product seems to be a common problem for traditional beverage brands. For example, Huiyuan Juice, as of the first half of 2017, 100% juice accounted for 37% of the company's product revenue. Although the company has continuously launched new drinks in juice products, including Bingtanghuluzhi, Bailiwa, mixed juice, and also ventured into cocktails, Pu'er tea, etc., neither the taste nor the packaging can impress young people. With the intensification of industry commercial innovation, more and more beverage categories such as sugar-free drinks, milk tea, and low-alcohol drinks have emerged. Brands like Genki Forest and Heytea, which have developed well recently, have also entered different beverage categories. Huiyuan's single product competing with these brands and categories is like fighting alone. Xiaoye, born in 1995, expressed deep regret over Huiyuan's decline. When asked how often she drinks Wahaha, she said basically never, "The brand sounds like 'for the elders,' and the taste has been the same for ten years without any novelty." Not wanting old brands to disappear may just be due to childhood nostalgia. But relying solely on nostalgia, brands cannot last long. Kangshifu and Uni-President, which are relatively better off among the "older generation," also face problems of single products and brand aging. The combination of instant noodles and drinks has failed, outdated packaging, unchanged tastes, and new products that fail to grasp consumer preferences have led to declining revenue year after year. Although domestic brands have not lagged in product R&D, their diversified development routes are hard to understand. Rashly entering white liquor, clothing, furniture, etc., only confuses consumers. The era of blindly expanding and aggressively advertising to brainwash consumers is over. Product development capabilities based on consumer insights and needs are clearly what old enterprises lack most. Making Good Products but Not Good Brands Chinese people once made Future Cola, comparable to Coca-Cola and Pepsi, and Jianlibao, which sold well overseas. But why did these brands with good quality and popularity eventually disappear? The reason is that compared with century-old brands like Coca-Cola, domestic time-honored enterprises lack brand awareness and brand-building ability. Take an extreme example: Coconut Palm (Yetai) coconut juice, which has long been the top seller in the coconut juice market, is recognized by many consumers for its reputation and quality. But its ugly and rustic packaging and eye-catching advertisements have been criticized by the State Administration for Industry and Commerce multiple times. The packaging and ads feature increasingly busty female models, accompanied by slogans like "white and tender, with beautiful curves" and "drinking since childhood," causing widespread consumer disgust. Looking deeper, behind the vulgar packaging and marketing is the dilemma of difficulty in improving performance, and behind the seemingly high exposure and traffic hides the crisis of brand image deterioration. Most netizens believe that Coconut Palm has some fame and makes good products. It could win by taste, but instead relies on vulgar, sexually suggestive ads to attract attention, becoming increasingly unsavory. It has been proven that Coconut Palm is out of touch with today's consumer market, lacks product innovation, and is incapable of brand building. Facing market shrinkage and brand aging, it can only resort to negative marketing stunts to gain exposure. Of course, Coconut Palm's suicidal marketing is an isolated case. Generally, domestic old brands tend to use star-studded heavy marketing. For example, Tianwo honey grapefruit tea, endorsed by Fan Bingbing, became popular overnight but then faced a downturn and is now basically invisible. In the entire beverage industry, there are countless examples like Tianwo. How to go from following trends to leading fashion is the key to capturing young consumers and a required course for traditional brands. Many domestic brands in memory, facing changes in consumption concepts and fierce competition from similar brands, often lose market share due to a lack of effective brand management, and some even become synonymous with "cheap goods" or "inferior goods." Generation Z is the main force in beverage consumption, but the old-fashioned image of old beverage brands runs counter to young people's demands. The "Two Colas," which once "looted" China's soda market, are good at playing the brand story card, making people pay for emotions. Coca-Cola once ran a "one cap for one long-distance call" campaign, allowing poor workers in South Africa to use a cap to get a long-distance call to communicate with their families. They also launched "City Cans" in China, depicting the customs and masks of different cities, evoking strong nostalgia among those away from home, firmly grasping people's hearts. So, facing different brand images, some "old" becomes "rustic," while another "old" becomes "classic." Channel Transformation Challenges In earlier years, experts in China's FMCG industry said that for fast-moving consumer goods, the brand is not the most important, the product is not the most important, and even consumer demand is not the most important; the most important is the channel. That is, if you can display your products in supermarkets and stores in first-, second-, and third-tier cities across the country, you have already achieved half the success. Wahaha, as the channel king of that era, relied on the strong radiation capability of traditional food wholesale markets and dominated the beverage industry for over a decade, showing the importance of channels. We are all familiar with the wholesale system. Product production and commodity exchange increase the volume of purchases and sales, expanding the scope of circulation. Direct exchange between producers and consumers is often difficult to achieve, so dealers serving a certain region and wholesalers who purchase goods from producers and resell them to other producers or merchants emerged. Commercial society thus has wholesale and retail. Traditional food and beverage enterprises mostly conduct refined management on this basis. Although the radiation range is wide, it is not difficult to see the crux of the traditional channel model: manufacturer - dealer - distributor - wholesaler - terminal merchant - consumer. The supply chain is complex, with too many links, making terminals difficult to control. In the past, Jianlibao was not well-regarded in the industry for its channels. It first adopted the traditional multi-level dealer agency system, recruiting large dealers everywhere as agents. The distribution channel was too long, lacking proper guidance and control over terminal product promotion, advertising, and product placement. Then it adopted Coca-Cola's direct sales model, opening over a hundred business offices in various provinces and cities to distribute goods to terminals. The combination of the two was contradictory: on one hand, it hoped to control terminals like Coca-Cola; on the other, it hoped to increase volume through large dealers' automatic flow of goods. Jianlibao soon experienced channel conflicts, price chaos, and cross-regional sales, followed by capital crises, delayed payments to suppliers, factory shutdowns, and dealer pressure, directly leading to weak sales and insufficient product innovation. Today, internet e-commerce has transformed channels. Consumers have more ways to buy things, and a considerable number have abandoned traditional shopping methods in favor of online purchases. Especially with the global spread of the pandemic in 2020, new retail has developed rapidly and unstoppably, and traditional channel advantages are gradually disappearing. For old players, this is very fatal. Since the rise of e-commerce, many physical industries have recognized the urgency of transformation, combining physical stores with e-commerce. However, some regard e-commerce as a mortal enemy and resolutely resist it. Why was Wahaha able to achieve a winning streak of "always imitating, always surpassing"? Mainly due to its indestructible "joint sales system" distribution system. This huge and efficient sales system was once its greatest advantage. But when more and more Wahaha products became difficult to sell, the once-strong sales system was challenged. Various contradictions began to emerge between dealers and sales teams, with serious mutual deception in some markets. Wahaha's sales system severely restricts its development, and Zong Qinghou's stubbornness about sales channels is also a major factor in Wahaha's decline. "No matter how powerful e-commerce is, it cannot impact Wahaha," Zong Qinghou once said, when Wahaha was still at its peak. When Zong began to underestimate e-commerce, Wahaha's revenue began to decline. Facing the unstoppable new retail, Zong's stubbornness did not allow him to continue Wahaha's glory. Years later, he "condescended" to the internet, first trying the WeChat business channel, then laying out community new retail, cooperating with Hangzhou Nutrition Happy New Retail Technology Co., Ltd. to create offline life stores. Wahaha's "princess" Zong Fuli has in recent years carried out urgent reforms in both products and marketing, but whether under Zong Qinghou's helm or his daughter Zong Fuli's operation, Wahaha's many years of transformation have repeatedly failed. New retail, crowned with novel titles like "Internet+", "community", and "O2O", has one less level of wholesalers, but has more advanced ordering systems, more efficient distribution, more comprehensive warehousing, and more bargaining power with brand manufacturers. Wholesale markets across the country are shrinking, and convenience stores, chain supermarkets, and hypermarkets are spread across urban and rural areas. If traditional beverage companies continue to rest on their laurels and follow old paths, they can only wait for ruthless market elimination. Other beverage companies such as Kangshifu and Uni-President are also continuously seeking digital transformation of sales channels. They were once leaders in products and channels, but old players are somewhat unfamiliar with new retail, and their sales performance in recent years has been unsatisfactory, being overtaken by "young" Genki Forest. Lack of "Clock-Builders" In the early days of reform and opening up, traditional beverage brands were strong and capable, wielding "centralized" family management and leading China's beverage market into a new glorious era. However, when such enterprises reach a certain scale, family management methods find it difficult to keep up with the market pace and have become a frequent criticism. Huiyuan, which started in this period, is also a family enterprise. As the founder, Zhu Xinli, with strong local ties, did not leave room for entrepreneurs and professional managers to develop, but instead let his relatives enter management. It is said that Zhu's son, daughter, brothers, and son-in-law all held management positions at Huiyuan, and most other middle and senior managers were his fellow Shandong townsfolk. Later, after the acquisition ordeal, a weakened Huiyuan saw revenue decline year after year. Huiyuan's self-rescue began with management reform. In 2013, Su Yingfu, former CEO of Lee Kum Kee Sauce Group, became CEO. He immediately moved against Zhu's people, laying off many old Huiyuan employees. The two could not coexist, so after Su resigned, Huiyuan returned to the old family-style path. Later, Huiyuan successively hired executives from Coca-Cola bottling plants, Uni-President and Jianlibao, and Tetra Pak China, but the family business model hindered professional managers' reforms to a certain extent, causing many executives to leave in frustration. This power structure has obvious drawbacks. First, personal will is prominent, financial and strategic risks are difficult to prevent, and the lack of a sound professional manager and financial management system makes it difficult to make the enterprise both large and stable. There are many domestic beverage companies like Huiyuan. The successive declines of once-familiar brands like Jianlibao and Xurisheng are actually naked failures of organizational management. Jianlibao had chaotic internal management and lacked a sound talent management system. The young successor Zhang Hai, without any awareness of corporate development strategy, made consecutive decision errors, leading to a decline in Jianlibao's brand value and eventual decline. As for Xurisheng, it was mainly due to chaotic internal management, especially in sales channel construction, where corresponding rules and regulations were not established. Later, management carried out drastic radical reforms, and after failure, it eventually declined. Collins in "Built to Last" describes two types of leaders: those with a great idea or being a visionary charismatic leader, like "telling time"; and those who build a company that thrives long after any leader and through many product life cycles, like "building a clock." When asked "What is Wahaha minus Zong Qinghou?", Zong Fuli once answered "Zero." It is reported that Wahaha is a highly centralized company, the only one among the hundred-billion club enterprises without a vice president. Zong Qinghou has authority that commands a hundred responses, personally handling everything, down to the smallest detail, which requires him to have the ability to grasp the overall situation. It can be said that Wahaha relies more on the extraordinary abilities of its leader than on the organization. In a rapidly changing market, Wahaha's decisions have relied on one person's experience and intuition for many years, inevitably leading to a decline in market sensitivity, difficulty in coping with many market changes, and to a certain extent inhibiting product innovation and transformation, also restricting its development. Zong Qinghou is more like a charismatic "time-teller." When the "time-teller" ages, the company may fall into a state of confusion. In July this year, Zong Qinghou obtained a fund qualification certificate. The industry speculates that he will formally enter the venture capital circle and seek new transformation targets for Wahaha from an investment perspective. At 76, he is still seeking a way to return Wahaha to its former glory. There is admirable "old steed in the stable" spirit, but also some sadness. Looking at the entire industry, the reasons for domestic beverages' "wealth not lasting three generations" include insufficient innovation, brand aging, and channel defects, but perhaps the most important is the lack of "clock-builders" who can build sustainable excellent organizations. Are you "watching" me?