Source: Lu Jiu Finance (ID: liujiucaijing69) Escaping the involution of the old industry, Jiangxiaobai is a good sample. From the transformation from "non-mainstream" to "mainstream", to the construction of the industrial chain and moat, standing at a higher pattern will reveal new ways out. Image source: Lu Jiu Finance Double 11 is coming again, reminding me of something quite impressive from back then. In 2017, I had just returned from the UK and wasn't used to traditional baijiu with its cellar mud flavor, so I drank foreign spirits every day. That year on Double 11, Jiangxiaobai sold "a lifetime of wine" at a price of 11,111 yuan, sending you a box of 12 bottles every month until you no longer wanted it or couldn't have it. Some netizens calculated that after drinking for 19 months, you'd break even, and every month after that would be pure profit. This was later stopped by Tmall, but it also made Jiangxiaobai a sensation. However, Jiangxiaobai didn't anticipate that it would later pay an "unexpected price" for this. New Species and Old Problems I still remember that small shop with only four tables. Every evening, it would wildly spray the aroma of fried scallions, ginger, and other seasonings. The shop was on an unknown street in Chongqing, selling various noodles, fried noodles, fried rice, and rice dishes. On each of the four tables was a small bottle of wine, with cartoon characters on the bottle and the slogan "I am Jiangxiaobai, life is simple." That was 2013, less than two years after Jiangxiaobai was born. I was studying in Chongqing, and I guess I was one of the earliest users of Jiangxiaobai. At that time, people thought baijiu should be like Moutai or Wuliangye: dignified and festive, with auspicious red or imperial yellow, preferably with some crown shape or ancient cultural design. Jiangxiaobai was too different. Would such a new thing have a way to survive? After graduation, I drifted abroad, and when I returned to the north, it was already 2017. Suddenly, I found Jiangxiaobai everywhere in Beijing's liquor stores and restaurants. By then, Jiangxiaobai's bottles had more "heartfelt" copy. Before that, no one cared what drinkers thought; I sell wine, you drink it, why should I care about your mood? I was a bit curious: how did it survive all these years, and how did it spread to Beijing and even the whole country? Xiao Masong wrote an article saying that Jiangxiaobai's success had surface and hidden aspects. The surface was the copy, and the hidden was Jiangxiaobai's "ability to quickly distribute products to millions of restaurants nationwide" and "mass production, which must be backed by its own distillery." He believed that the essence of Jiangxiaobai's success was distribution and production. This view is still a bit superficial. For a product to be distributed, consumers must continue to open bottles and drink it, so that the brand can have lasting vitality and penetration to expand. A product that can survive continuously and on a planned basis must be meeting some need of the world. Product: Differentiated Taste Faced with Jiangxiaobai's copy, people think, "This wine is interesting, let's buy a bottle to try." Almost everyone says this on the first purchase, but after drinking, their opinions differ. Some say the wine is too light and boring, not tasty. Some say it's smooth and slightly sweet, without the strong liquor smell. Some mix Jiangxiaobai with Sprite to make "lover's tears," a down-to-earth cocktail, while old drinkers disdain it. As for me, I was used to the taste of foreign spirits abroad. When I first returned, I was still in the stage of not adapting to sauce-flavor and strong-flavor baijiu, and I felt that Jiangxiaobai was even easier to swallow than those famous liquors; it didn't have that sour, astringent, burnt, or numbing "strange taste." Once, a friend who had lived in the UK for a long time and I ate crayfish at Huda in Beijing, and the two of us drank two 500ml bottles of Jiangxiaobai. The next morning, we got up at 7 am to go to work, and we were fine. Why are consumers' opinions about Jiangxiaobai so divided? Who is right and who is wrong? It has been reported that Jiangxiaobai's founder, Tao Shiquan, once felt sad for baijiu at a bar in Shanghai. The bar was full of foreign spirits and beer, but no Chinese baijiu. This reflects two problems with baijiu. One is about fashion. Baijiu is not so fashionable; it is often associated with socializing, power, and utilitarianism, and the drinking scene is not pleasant. The other is about taste. Baijiu is spicy and strong, and after drinking, there is a "liquor smell" and "breath smelling of alcohol," so the aesthetic pleasure of taste is not ideal. Therefore, Jiangxiaobai created a brand distinct from the emperor-and-general style, abandoning cellar mud aroma in the product and emphasizing a body with floral, pine nut, and grass aromas. We must absolutely acknowledge the distinctive taste of Chinese baijiu; that is its charm. The question is, how to forge a new path? Chinese baijiu has twelve aroma types. Why not make rice aroma, light aroma, or sesame aroma instead of sauce and strong aroma? Actually, it's not about the liquor company subjectively setting aroma types for consumers, but about consumers' understanding of taste. In the eyes of most consumers, all baijiu is similar, a spicy liquid. They don't understand why this spiciness and that spiciness taste similar, yet the price can differ by 100 yuan versus 1000 yuan. "We can't make decisions for consumers; everything must be user-centered, let users guide us, let users tell us what good taste is," some industry insiders analyzed. (Jiangxiaobai's aroma description is different from traditional baijiu) Trade-offs: Viewing the Earth from the Moon We need to view the earth from the moon, and look at baijiu from outside baijiu. In 1989, the market held the last famous liquor evaluation for Chinese baijiu, and the market consumption structure underwent drastic changes. Beer became one of the daily consumption options, red wine began to be popular, imports of foreign spirits like brandy and whiskey doubled in recent years, and cocktails in nightclubs became popular among the new middle class... This shows that consumers' choice is "alcoholic beverages," with different characteristics: with foam, with sweetness, with floral aroma, with peat aroma, drinkable on ice... Cellar mud aroma is also a good thing, but it is no longer the only option. The spicy taste and the cellar mud flavor that deviates from normal taste are characteristics of baijiu, but they also set a threshold for consumers to accept it. So, we often see people ordering some beer separately at a baijiu table. For global market users and the vast majority of China's new generation of consumers, they don't want to be heavy drinkers; they prefer low-frequency drinking, like liqueur-style, light-tasting baijiu, and dislike "smelling of alcohol" or "breath full of alcohol." Especially the post-80s, post-90s, and even Gen Z, who grew up in an environment of soft drinks, are naturally more accustomed to floral, fruity, and sweet aromas, and may not reject cellar mud aroma but have no obvious preference for it. So, consumers drank 1.1 billion bottles of Jiangxiaobai in 10 years, which is actually a change in the era's "taste aesthetics." I asked Jiangxiaobai's head of brewing technology a question: after the third generation of the body, will it continue to upgrade? He said that times are changing, and people's perception of "good taste" changes; we need to collect evaluations at the dinner table, in restaurants, and during small gatherings of three or five people to chase this trend. I joked, "Will Jiangxiaobai make sauce-flavor baijiu?" I thought he would deny it, but he said, "That's also possible." Maybe Jiangxiaobai hasn't set limits for itself. Positioning: Non-mainstream is Not Scary Ten years have passed, "we have sold almost 1.1 billion bottles of wine," Jiangxiaobai's founder, Old Tao, told Lu Jiu Finance. "Were they all sold to young people?" "Not necessarily. Actually, we later found that a large part of our fans are old drinkers." Aren't Jiangxiaobai's consumers young people? What exactly is Jiangxiaobai's positioning? In 2018, marketing expert Miao Qingxian made a judgment: Jiangxiaobai is squeezing milk from a stone. Because Jiangxiaobai's positioning is a youthful brand, serving the non-mainstream consumer group of baijiu: "young people." As users age, consumers will be lost, and young small liquor is too niche to develop. This view now seems a bit ridiculous. First, as one generation of young people "grows up," the next "youth" grows into young people; old customers may drink less frequently, but new users can also start their "Jiangxiaobai journey." In addition, consumers' consumption habits and tastes have a certain continuity; not everyone becomes a heavy drinker as they age. Second, Jiangxiaobai emphasizes a youthful mindset and a new table culture that removes identity and class, not positioning by biological age. This explains why middle-aged and elderly people also drink Jiangxiaobai. However, I think the scene positioning of "small gatherings, small drinks, small moments, small moods" is the essence of Jiangxiaobai. Traditional baijiu's culture is often utilitarian, hierarchical, and coercive, such as drinking to build relationships, paying attention to occasions, having etiquette and order, seats with seniority, and rules for toasting... Jiangxiaobai's subtext at the table is to remove class and identity, emphasizing drinking with your own people. A few classmates, brothers, or colleagues have a late-night snack or hotpot, chat, and vent. Everyone puts down their airs and removes their identities; at the table, there are no officials or leaders, only friends and colleagues. Of course, emphasizing small gatherings and small drinks means giving up the mainstream markets of business banquets, political banquets, and wedding banquets. Liu Chunxiong, an associate professor at Zhengzhou University, has observed Jiangxiaobai for many years. He believes that Jiangxiaobai is not targeting all drinkers; it is a niche brand, not mass baijiu. In fact, "niche" is a dynamic concept. When the new generation of consumers doesn't yet have a voice, their needs are niche. When they gradually gain a voice, "niche" has the opportunity to become "mass." In recent years, the originally niche two-dimensional culture has rapidly developed into a battleground for the entertainment industry, and the originally niche "sugar-free" sparkling water has become a key development track for giants like Coca-Cola and Nongfu Spring. "Niche" and "mass," "mainstream" and "non-mainstream" are dynamic definitions rooted in social and historical contexts, and their definitions change with each era. If you broaden your perspective and look at global alcoholic beverage consumption, you'll find that the cellar mud and distiller's grain flavors of traditional baijiu are actually the non-mainstream, while Jiangxiaobai is an easily acceptable "normal person." Moat: Industrial Chain + Food and Wine Experience In September this year, I returned to Chongqing and also visited Jiangxiaobai's distillery. Yes, Jiangxiaobai has a 760-mu distillery, and the brewing workshop was filled with mist. Young and middle-aged workers mixed together, steaming sorghum, spreading it to cool, and roasting the liquor. Their muscles were defined, and their smiles were innocent. They don't know who will drink the liquor they brew, but they know it will definitely be drunk. "Every bottle of wine will find its owner," an old master told me. Jiangxiaobai expanded Jiangji Distillery in 2013, built its own sorghum planting base in 2015, acquired the time-honored distillery "Luxi Distillery" in 2016, started technical upgrades to improve the liquor body in 2020, and had 60,000 tons of aged liquor in 2021. It is said that its current production capacity is second only to Shanxi Fenjiu in the light aroma field. But these are little known. Tao Shiquan might be the most miserable boss in the baijiu industry, using all the financing to expand the distillery, do R&D, and grow sorghum. But everyone thinks he spent the money on marketing. The "lifetime wine" campaign and the copy that made Jiangxiaobai famous had an unexpected "bad influence." Many netizens mistakenly thought that Jiangxiaobai only knew how to do marketing and not make products. These misunderstandings need to be erased by Jiangxiaobai in the next decade with this industrial chain. With the industrial chain, Jiangxiaobai can upgrade the liquor body, expand categories, and meet more segmented needs and positioning. The "Jiangxiaobai" brand insists on small scenes and youthfulness, while sub-brands like "Jin Gai" and "San Wu Zhi You" can either return to tradition or create a style. At the end of the first decade, Jiangxiaobai upgraded its liquor body again, from "simple brewing method" to "original flavor brewing method," and launched the third-generation product "Jin Gai," 52 degrees, 500ml. The liquor is more mellow, higher in degree, and the bottle is bigger. "This is a correction, a value correction for the drinking experience," Tao Shiquan told Lu Jiu Finance. "Our sorghum liquor pursues original flavor and nature, presenting the natural flavor of high-quality grains to the maximum extent." At the "Jin Gai" tasting event, I experienced a food and wine pairing session. Three small dishes—crispy peanuts, salmon sashimi, and cold rabbit—each had their own characteristics. When Jin Gai was paired with the three dishes, most tasting experts thought that "the wine and dishes complemented each other," "the wine didn't overpower the dish," and "the taste and body feel were comfortable." In Jiangxiaobai's understanding, compared to smelling the aroma, taste is more important; compared to tasting wine, the experience of drinking with food is more important. **Lu Jiu Comment
Chinese Baijiu Should Have More "Jiangxiaobai"
Supply chain is the trump card for new consumption. Black Ant Capital made a summary of Jiangxiaobai's first decade: Penetrate the model market, get the ticket to nationalization, build the entire industrial chain, consolidate basic capabilities, and then continue to innovate, iterating towards a multi-category, multi-brand, multi-product combination of alcoholic beverage consumption platform. Many new consumer brands were born in the internet era, inevitably influenced by the radical style of the internet, or becoming impetuous under the push of capital, unwilling to invest time and energy in supply chain and other infrastructure construction and product R&D. But for consumer goods, without a high-quality and reliable supply chain, solid and frequent market research and product R&D, and efficient sales channels, the surface prosperity is a mirage, a bubble at the capital level. The weaknesses of this asset-light model are obvious. First, it is controlled by others; in extreme cases, the baijiu industry might not be able to buy high-quality sorghum, affecting production from the source. Second, the product lacks sufficient characteristics, making it hard to stand out in such a fiercely competitive environment, just like every year at the sugar and wine fair, a large number of new brands appear, and a large number of brands from the previous session disappear. For example, a recently rising beverage giant was "taken care of" by competitors, and later had to accelerate the construction of its own factories. Do differentiated innovation and escape involution. The key to Jiangxiaobai's survival for over a decade is differentiation based on following users. From the past development of baijiu, everyone has fallen into a certain product trap; many still limit "good taste" to the cognitive realm of "distiller's grain and cellar mud flavor." This is bound to lead to homogeneous competition. So, the baijiu industry is undergoing fierce involution, with high-end squeezing mid-to-low-end, and big brands squeezing local and small brands. From 2016 to 2021, total sales of Chinese baijiu fell by more than 40%, and more than 10,000 baijiu production enterprises disappeared. The number of above-scale production enterprises dropped from 1,563 to 957. But many liquor companies are still taking the old path, always staring at the success of similar leaders, but not reflecting on the death of similar tail-enders. Chinese baijiu should not be like this; there should not be only one Jiangxiaobai. Even for segmented products, do good mass communication. Of course, Jiangxiaobai also has obvious shortcomings, such as Tao Shiquan's own summary: "Many aspects are not done well: no mid-to-high-end, low gross margin, poor publicity." As for poor publicity, think about how many people only know Jiangxiaobai's expression bottle and know nothing about other products, and you'll know that Old Tao wasn't "showing off." "The liquor body has been upgraded, and now we are promoting wine tasting," he told Lu Jiu Finance. It turns out that Jiangxiaobai is also afraid of deep alleys. Are you "watching" me?