In recent years, the FMCG industry has rarely seen the emergence of 10-billion-yuan single products or innovative brands surpassing 10 billion in sales, prompting us to consider why, despite consumption upgrades and retail innovation, there are few phenomenal hits.
In the past, building a brand in the FMCG industry was relatively easy. Simply put, with good product quality, clear differentiation, centralized media promotion, and leveraging large distribution channels, a brand could establish consumer recognition.
Essentially, whoever had the largest production capacity, the ability to advertise on centralized media like CCTV, and the capability for low-cost, large-scale rapid distribution would become the industry's leading brand.
This is a logic of efficiency. Companies compete with rivals on efficiency; as long as you have sufficient scale, the scale effect gives you a significant competitive advantage. At that time, small brands found it hard to rise because most could not cross the "death trap."
The so-called death trap refers to categories where product differentiation is not obvious. Most small brands cannot achieve sufficient production scale, leaving them without the resources to advertise on national media or build a nationwide distribution network. Consequently, their production costs are higher than those of large enterprises.
The low-cost effect of scale also limits the development of small brands. Take the instant noodle industry: Master Kong did not raise prices for 10 years, effectively killing off almost all small and medium instant noodle companies except Uni-President, Jinmailang, and Baixiang. In the beer industry, the top five giants merged and integrated almost all domestic breweries. In the ham sausage industry, apart from Shuanghui's dominance, few other brands can appear in the market. In any industry where production capacity can provide a competitive advantage, the top five players typically capture over 70% of the market share.
Although the logic of scale is not the logic of demand—consumer needs are diverse—in the face of fierce competition, it was uneconomical for brands to only cater to niche demands. Only through mass production, mass communication, and mass distribution could brands efficiently produce low-cost goods. Think of Ford: why didn't it produce cars in other colors?
After Taobao emerged, a large number of Taobao-based brands appeared online. From today's perspective, apart from Three Squirrels, almost no FMCG brands on Taobao have surpassed 10 billion in sales:
On one hand, due to the instant consumption nature of FMCG, online platforms naturally suit high-margin, niche, and aesthetically pleasing internet-famous products. On the other hand, online traffic has a ceiling, and Taobao's search logic reduces the traffic weight of large single products, forcing companies to pay higher costs for traffic.
When traffic costs converge with offline distribution costs, the pure online advantage disappears, and platform development can actually limit brand growth.
Although various innovative retail scenarios have emerged, making it easier for brands to produce niche products, this also means brands essentially lose the opportunity to become national brands, or it becomes increasingly difficult:
Everyone knows that the market with the highest communication efficiency is North Korea, because there is only one communication channel. China was similar at some stage, but now massive amounts of information flood consumers' screens. While you can gather a group of people through personalized personas and products, beyond that group, you may not even have the chance to reach them.
Channels are no longer a barrier. In the past, brands could build strong channel barriers through large-scale recruitment of distributors and "bribing" retail terminals. However, this required producing products that the entire nation liked, and now such products are no longer consumed.
Building a distribution network is increasingly difficult. Even if brands avoid the mainstream product lines of large enterprises and cater to niche production, this creates another problem: a large number of small categories makes it hard to support an independent distributor.
Against this backdrop, will there still be opportunities for 10-billion-yuan national brands in the FMCG industry in the coming years?
I believe it is still possible, based on three logics:
First, the re-upgrading of traditional categories. Teacher Liu Chunxiong once said that all categories have the opportunity to be redone. This contains a profound truth: product redesign, quality upgrading, demand re-segmentation, and new supply chain support.
For example, in the beer industry, most beers on the market have a shelf life of 180 days, but Taishan Beer created a 7-day shelf-life wheat beer that differs from most beers on the market. Through differentiated packaging and a supply chain supporting low-temperature short-shelf-life, they achieved selling Shandong beer nationwide, allowing consumers to experience a different kind of beer.
Not just beer, almost all categories have the potential for category reinvention.
Second, the cost of the entire retail supply chain has significantly decreased. In the past two years, innovative retail channels have emerged in large numbers, especially B2B, which has built a national "highway" for brands. Through B2B, products can bypass distributors for rapid nationwide distribution, significantly reducing distribution costs for small brands. In the past, deep-distribution brands like Master Kong and Coca-Cola prided themselves on channel barriers, but in the face of B2B, these have suddenly become existing assets. Therefore, as long as a brand's products are excellent, even without a distributor network, distributing products nationwide is no longer a problem.
Third, there is an opportunity to leverage platform traffic dividends to complete nationwide consumer education and awareness. Currently, the biggest problem for brands is the significant reduction in media communication efficiency. The internet has almost eliminated centralized media platforms in China. Although there is no centralized media, there are still traffic-heavy media platforms that attract national attention at different stages, such as Douyin and Kuaishou, which have become popular in recent years.
Today, before digital marketing has fully matured, the dividend we see is: wherever there is huge traffic, there is potential to build a national brand. The rise of Weibo brought Jiangxiaobai to fame; the rise of Taobao brought Three Squirrels. With the emergence of numerous traffic platforms like WeChat official accounts, WeChat business, community group buying, Pinduoduo, Douyin, Kuaishou, and Qutoutiao, is there an opportunity for national brands to build awareness?
When a brand completes nationwide consumer awareness through platform traffic and becomes an internet-famous brand online, it can then use B2B for further channel sinking, gradually moving from niche to mainstream. Representative brands here include Three Squirrels and Baicaowei. Of course, not only them—any company that can leverage innovative retail or traffic platforms has the potential to become a widely known product and leap to become a 10-billion-yuan national brand.
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China FMCG + Internet Professional New Media
Dedicated to FMCG manufacturer and distributor transformation and channel digitalization solutions