As 2019 draws to a close, the FMCG industry has been turbulent, with every company continuously iterating and transforming to adapt to the new market environment. New technologies, tools, channels, and models have emerged wave after wave, presenting both opportunities and pitfalls. This time, we have compiled a list of major industry events in 2019 that are worth reviewing. Some may inspire you, some may make you sigh, and some may feature you as the protagonist!
-01- Community Group Buying: Quick Rise, Quick Fall What was the landscape of community group buying, which was red-hot in 2018, by May 2019? It is no exaggeration to describe it as a tale of two extremes. The leading platform, Xingyou Xuan, has surged ahead, while Shihuituan has risen from sixth to second place through numerous acquisitions and mergers. The remaining platforms, such as Songshu Pinpin, Niwonin, and Shixianghui, have faced closures, scandals, or contractions, with a large number of small and medium-sized platforms going bankrupt. With the collapse of small and medium platforms, what happens to the numerous group leaders left behind? In fact, established e-commerce giants have been eyeing this space. JD.com has empowered small platforms and teams through a community group buying alliance, and it is said that Alibaba and other offline retail giants have also been eager to get involved.
New Distribution Commentary:
- Community group buying is not a business model; community e-commerce is. Many entrepreneurs mistakenly interpret a single tactic as the entire business model, entering a red ocean of competition, and practice has shown that it leads to chaos.
- Currently, the overall community e-commerce sector is only at halftime. After the head platforms have consolidated, at least three more groups of players are still to come: one from JD.com and Alibaba, one from offline retailers, and one from brand owners.
- How can small and medium platforms survive? Return to the essence of business and commerce: through community marketing, provide high-quality, word-of-mouth extreme products to consumer circles. In this field, platforms like Xiangtuan and Xiaobai Shenghuo have already carved out a profitable path.
-02- FMCG B2B: Two Camps, One Platform, One Self-Built In 2019, the overall FMCG B2B sector entered the "deep water zone" of rational development. After five years of development, B2B platforms represented by Alibaba Retail Link, JD New Channel, and Yijiupai have begun to show a head pattern, while other platforms have either been merged or integrated, or have focused on deep cultivation in a regional market. On the other hand, in the past two years, the voice of brand owners building their own B2B has been incessant. For example, Haitian launched Xiaokang Maimal, Budweiser launched Yingxiao+, COFCO Coca-Cola launched Cola Go, Uni-President launched e-Mall, and Master Kong launched Shifu Tong. Other brands are also planning to build their own B2B platforms. The main reason for brand owners to build their own B2B is that the trend of platform growth is unstoppable. When sales volume becomes too large, there is a phenomenon of the store bullying the customer, as seen in the exploitation of brand owners by hypermarkets. This is the last thing all brand owners want to see. On one side, B2B platforms are becoming more concentrated; on the other, brand owners are building their own B2B. On the surface, they are harmonious, but underneath, there is a hidden murderous intent.
New Distribution Commentary: At this stage, the existing operation and management model of traditional FMCG enterprises is an efficiency system, oriented towards maximizing production efficiency. Enterprises' current attitude towards B2B is mainly to patch things up. They supplement new members without destroying the original efficiency system. However, this supplementation is not aimed at restructuring and designing for future diverse consumer demands and fragmented retail scenarios. True restructuring requires enterprises to evolve from an efficiency system to a value system. An efficiency system is production-oriented; a customer value system is consumer demand-oriented. This requires brand owners to redesign products, marketing, and supply chain systems based on consumer needs and scenarios.
-03- The "Two Bulls" Battle The Red Bull trademark case, which had been making a fuss since the end of 2016, saw a major turning point and new situation in 2019. In June this year, Thailand's T.C. Pharmaceutical, the owner of the Red Bull brand, officially launched a new product in China, "Red Bull Anaji," officially going to war with the "Red Bull Vitamin Beverage" led by Huabin Group, which had been on sale all along. Previously, the two sides had been arguing over whether the Red Bull trademark license had expired, with lawsuits ongoing. However, the case involves internal disputes and multinational enterprises, with complex relationships, and there has been no clear legal conclusion. After several failed communications, there are now "two Red Bulls" in the market.
New Distribution Commentary: The Red Bull topic had a small decline from its mid-year peak to the end of the year, but the market is actually turbulent. Anaji's distributor network is basically stable, and there is still an opportunity to build the market. Moreover, the Thai side will not stop here; China's market is such a big piece of fat that no one will easily let go. Furthermore, there may still be a chance for the two sides to negotiate a settlement. In business, these two parties have intertwined equity, and the accounts cannot be settled in a day.
-04- Soda Water Category Revival, Market Still Needs Education This year, brand owners rushed into the soda water field. In May, Yuanqi Senlin launched sugar-free "Qi" soda sparkling water; in July, Tsingtao Brewery launched Prince Seaweed Soda Water; in October, Uni-President launched a new product, Qingbo Soda Water; in November, Nongfu Spring also launched a new soda water... However, the entire soda water field is currently in a state of chaos without a leader. There is no unified industry standard for the concept of soda water in the market. There are various types of soda water: natural, artificial, carbonated, non-carbonated, and alkaline. Consumers do not have a unified understanding of soda water; many still hold onto old concepts, and the market has not developed.
New Distribution Commentary: The niche brand Yuanqi Senlin's soda sparkling water is being sought after by young consumer groups, and brand owners seem to have discovered a new opportunity. Adding carbonation to soda water turns it into a healthy drink with a taste similar to carbonated beverages, balancing taste with the claim of 0 sugar and health, catering to the upgraded needs of the new generation of consumers. In reality, this is not the credit of soda water but more likely borrowing the tailwind of sparkling water. Abroad, sparkling water, with its growing market share, has become a staple on European and American dining tables or in daily life. This trend is bound to blow into China sooner or later. But currently, Chinese consumers' awareness of soda water or sparkling water is clearly insufficient. There needs to be one or some brands with good products to educate the market. However, after market education, it may trigger a chaotic industry battle, which would then be a new round of reshuffling.
-05- KA Hypermarket Giants Lose Their Glory, "Collectively" Fall Silent The wave of hypermarket closures that has lasted for several years continues, but this year it has been more intense. This once trendsetting retail format has ultimately been abandoned by the times. Since March this year, Walmart has had 8 stores with closure announcements; in the first four months of this year, China Resources Vanguard entrusted its 7 stores in Shandong to Jiajiayue, and closed or entrusted nearly 20 stores across the country. In addition, Auchan, a hypermarket under Sun Art Retail, was also reported on May 15 to be adjusting its stores and closing underperforming ones. On the evening of June 23, Suning.com announced that its wholly-owned subsidiary Suning International planned to acquire 80% of Carrefour China for 4.8 billion yuan in cash. Carrefour China was ultimately sold. Ten years east, ten years west. Although Huang Mingduan, CEO of Sun Art Retail, has clarified on multiple occasions that the quote "I defeated all my opponents but lost to this era" was not his own words, everyone still sees the direction of the times.
New Distribution Commentary: The hypermarket format cannot escape the quagmire of continuously diluted offline traffic. More vertical, more curated, more affordable, and closer-to-consumer offline stores have segmented essential consumption. Entertainment and dining complexes have segmented weekend crowds. Continuously iterating e-commerce has begun to deeply integrate with offline. Hypermarkets are struggling to embrace change and fight back, but unfortunately, the elephant's turn is slow. This is a downward trend, and from their own genes, the backend revenue model that hypermarkets have always relied on determines that in the face of fierce commercial competition, a model not oriented towards user thinking is destined to struggle. Not changing is difficult. Changing is even more difficult. Distributors cooperating with hypermarkets also face increasing difficulties. Do not look back at glorious moments; only by changing your mindset can you break through and be reborn!
-06- The "Spring" of Innovative Niche Consumer Brands This year, major brand owners have lamented that doing business in China is increasingly difficult. FMCG giants like P&G and Mondelez have seen consecutive revenue declines, and Coca-Cola is almost falling out of the Fortune 500. Meanwhile, local small brands like Yuanqi Senlin, Zhongxuegao, akoko, and Lamian Shuo have become popular nationwide within just a few years. Big brands can no longer arbitrarily suppress small brands as they once did, and small brands are rushing to the forefront, riding the wave to take off. It is understood that the ice cream brand "Zhongxuegao" has completed two rounds of financing, with the next round in progress. Within a year, Zhongxuegao has held over 20 pop-up events and opened 5 physical stores; it is regularly at the top of the ice cream category rankings on major e-commerce platforms. At the same time, its Tmall flagship store has achieved over 500,000 followers, a feat that many brands take years to accomplish. Not only that, Zhongxuegao founder Lin Sheng also stated that next year they will expand offline channels, hoping to open hundreds of stores, and will consider accepting franchisees.
New Distribution Commentary: This may be the winter of the economic cycle, but fortunately, it may also be the best entrepreneurial era for consumer goods. Under the trend of consumption upgrading and the rapid development of younger consumer groups, consumer brands are catering to changes in consumer demand faster and more accurately on a segmented basis. How can innovative brands run fast? Just being an internet celebrity is definitely not enough. Internet celebrities and hot topics are fleeting like meteors. In the internet age, new brands rise quickly and broadly, seizing periodic channel dividends and exploding rapidly, but these can all be replaced by faster, more cost-effective, and newer forms of brands. Find new audiences for products, give products new meaning, develop new product scenarios, create new product categories, apply new technologies... Innovative brands should think more about how to transform from "internet celebrity" to "everlasting celebrity."
-07- An Unexpected Challenger: Short Video/Live Streaming Becomes a New Channel In 2019, short video/live streaming flourished. Internet celebrities like Li Jiaqi and Viya made cold products more warm, and the 3-inch screen became a channel for communication between consumers and brands. With the endorsement of internet celebrities, 2019 saw a proliferation of hit products. In segments such as beauty, apparel, and food, top internet celebrities became the focus of attention for first-tier brand owners. At the same time, incidents of live streaming mishaps and counterfeit products have cast a shadow over the short video/live streaming industry, while claims of the lowest prices online and hidden "choose one of two" practices have unconsciously coerced brand owners. It is undeniable that with new communication tools, live streaming/short video has become a new scenario in the new retail era.
New Distribution Commentary: Short video/live streaming, as a new marketing tool, has enormous traffic, and traffic plus low prices is the basis for internet celebrities to survive. Brand owners exchange low prices for sales volume, satisfying consumers' psychology of "getting a bargain," and KOLs with internet celebrity traits have become leaders speaking for consumers. However, short video/live streaming is merely a new niche channel. As live streaming commerce matures, marketing teams will be stricter in product selection and quality control, and low-priced, low-quality products will become fewer. Consumers on the other side of the screen will also become more rational. Not all products are suitable for live streaming commerce, and not all brands can become internet celebrities. Do not be obsessed with internet celebrities; returning to the product itself is the correct choice for brand owners.
-08- Luckin Coffee Ignites the Coffee Category, FMCG Giants Enter the Fray The entry of Luckin Coffee in 2017 brought about earth-shaking changes to the original coffee market. Its wild internet-style approach changed the development path of the traditional coffee industry, transforming coffee from a not-yet-widespread cultural symbol into a popular, high-quality beverage for mass consumption. It played a role in consumer education and popularization, sparking a "new coffee wave" in China. "A large market with high profits; giants have no reason to ignore the coffee field, a 'cornucopia.'" Industry experts believe that China's coffee market is far from saturated, and its "money prospects" are vast. This has attracted giants like Coca-Cola, Yili, Mengniu, and Nongfu Spring to enter in droves.
In May, Nongfu Spring launched a coffee-flavored beverage - Tan Bing.
In July, Yili launched a coffee drink - Shengruisi, marking Yili's official entry into the coffee field.
In August, Coca-Cola launched a coffee-flavored Schweppes soda water on its Tmall flagship store.
In September, Mengniu's fresh milk brand "Daily Fresh" launched a new drink - Cold Brew Coffee Latte. Not only that, mineral water company 5100, snack food company Want Want China, and walnut milk company Yangyuan Beverage have all launched their own ready-to-drink coffee products.
New Distribution Commentary: Ready-to-drink coffee has unique form and channel advantages compared to instant and freshly ground coffee. With the rise of the coffee craze, ready-to-drink still has significant room for development. Brands need to gain consumer insights, grasp consumer demands, optimize and upgrade products, and better acquire users. The 10-billion-yuan track has begun, and we will see who can laugh last.
-09- E-cigarettes' "Lifespan" Suddenly Shortens, Traditional Offline Becomes the New Battlefield A ban issued by regulatory authorities on November 1 sent the domestic e-cigarette e-commerce business into the cold. The policy shift caught some internet players skilled in online marketing off guard. The complexity of offline channels is incomparable to online. "Many people who crossed over from the internet couldn't even find their way around offline at first," lamented an e-cigarette entrepreneur. In the past, two important variables for consumers choosing an e-cigarette brand were online sales volume and brand awareness, with head brands having an absolute advantage. When online channels were cut off, consumers' exposure to e-cigarette brands became very limited, and the advantages of those original head brands were instantly leveled. For the domestic market, it was as if the industry had reset to zero, and the reshuffling began anew. E-cigarettes moving offline has turned traditional FMCG offline channels into a new battlefield for brand manufacturers. Many manufacturers have directly defined e-cigarettes as FMCG products and chosen to intensively cultivate broader FMCG channels to drive incremental growth.
New Distribution Commentary: Tobacco is a trillion-level market. E-cigarettes are seen by the industry as a major trend worth pursuing. But this seemingly lucrative industry is still far from "lucrative." Unlike tobacco, the traditional cigarette market is monopolized, eliminating industry competition and leaving enormous profit margins for products. E-cigarettes, however, are in a fully competitive market. If FMCG distributors want to enter, they should first assess whether their channel control is strong enough and whether their cash flow is sufficient before making a move.
-10- 11.11 Year-End Exam: Price Wars Can Be So Brutal! Double 11 is a carnival for shopaholics. Every year at this time, brand owners offer the lowest prices on e-commerce platforms, making millions of consumers pay up. Price is the biggest highlight of 11.11 each year and the topic consumers care most about.
Lays Unlimited Potato Chips, 3-pack of 104g, original price 19.9 yuan, after discount only 15.9 yuan per order.
Red Bull Anaji, original price 169 yuan per case, buy 2 cases and get them for 119 yuan per case. Only 4.9 yuan per can.
Master Kong instant noodles, whole box original price 60 yuan, promotional price 44.9 yuan.
Uni-President Laotan Sauerkraut Beef Noodles, whole box original price 72 yuan, after 11.11 discount 46.9 yuan.
On 11.11, the first 300 customers who purchase Zhongxuegao will receive a 250ml bottle of Luzhou Laojiao.
Nongfu Spring drinking water, 550ml x 12 bottles, 14.4 yuan. On e-commerce platforms like Tmall and JD.com, there are many low-priced brands in the FMCG category, with many brand products priced below their usual selling prices. First-tier brands are not absent. It can be seen that in addition to competition among platforms, brands have also started a price-slashing mode. Brand owners, who are usually very sensitive to price, have shown no "bottom line" during Double 11, all playing the low-price trump card, with price wars burning fiercely and brutally.
New Distribution Commentary: The battle for traffic has triggered a price war. To defend their brands, they would rather sacrifice profits. On the Double 11 battlefield, price is the only "weapon" for competition among brand owners. Whoever has the lower price attracts traffic; whoever has the stronger promotion stimulates consumers to place orders; whoever has richer purchase gifts triggers consumers to spread the word. It can be said that the intensity of the Double 11 price war is a true reflection of the fierce competition in today's FMCG industry. 2019 is about to pass, and we deeply miss it. This year has not been the hardest for FMCG professionals, but it has certainly been the year with the most opportunities. In 2020, we hope every FMCG professional will surpass this year, discover more new opportunities, learn more, and go further.
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