Produced | Tiger Sniff Commercial, Consumer and Mobile Group
The author | Miao Zhengqing
The title image | Visual China
New domestic goods are falling into anxiety, and international big names are waiting.
On February 9, some media broke the news that Heytea carried out large-scale layoffs, involving 30% of employees, and some departments were completely laid off. In response to this, Xicha responded at the first time, saying that the rumors were untrue. Just a day ago, Nesher's tea issued a profit warning, although the revenue pre-increase of more than 40% year-on-year, but it is expected to adjust the net loss of 135 million yuan to 165 million yuan in 2021, the fourth consecutive year of loss.
At a time when new local brands are experiencing growth troubles, international big names have found another opportunity to expand the territory: during the Spring Festival, Starbucks released its first quarter financial report for fiscal 2022 (October 4, 2021 - January 2, 2022) data shows that this is the fastest quarter since Starbucks entered the Chinese market - 197 new stores were added in a single quarter.
While expanding the soil, Starbucks also re-extended its tentacles to the hinterland of local tea drinking. In 2021, Starbucks has readjusted the proportion of tea product lines in some key cities, and some stores have adopted the model of one-layer coffee and two-layer tea drinks, and from 2020, Starbucks will re-launch tea stores in the market. Some insiders believe that in 2022, international "meals and drinks" such as Starbucks will bring greater pressure to local tea brands.
It's like a microcosm, after a few years of rapid development, local brands have encountered tougher opponents at a young age. And the hot money that has underpinned their rise over the past few years is quietly exiting. According to the "2021 New Tea Beverage Research Report", the growth rate of the new tea market in 2021 will slow down from 26.1% in 2020 to 19%. Under the impact of the epidemic, more than 70% of new tea brands cannot support for more than 20 months.
The same anxiety also occurs in other new domestic product categories.
"It was the hardest moment I've had in my 18 years of entrepreneurship." Lin Qingxuan founder Sun Laichun told Tiger Sniff that when he heard Chanel release a red camellia product on January 3 this year, he felt that a fierce battle was about to begin.
Coincidentally. The founder of a local beauty brand suddenly burst into tears after drinking two glasses of warm wine before the Spring Festival and his friends in the circle, saying that he "has never felt such a sense of powerlessness since he started his business." Just a few months ago, the world-renowned cosmetics giant created a new sub-brand and officially entered the Chinese market, and the main product of the sub-brand and the founder's project "coincided".
Statistics from Tmall and JD.com show that in 2021, international brands such as L'Oréal, Procter & Gamble, and Nestle not only increased the launch of new products in the Chinese market, but also accelerated the iteration speed of SKUs. Some sub-categories that were not of much interest to big names before have also been quickly targeted by big names and "occupied the pit" with new products.
The "crazy output" of international big names is seen as a round of dive offensive: with stronger brand potential, financial strength, supply chain system, and talent reserves, they are like lions that suddenly rush into the wolf pack - catching local brands by surprise and increasing anxiety sharply.
This anxiety is not unfounded. In 2021, in the online channels and offline channels, international big brands occupy an absolute advantage, taking the live broadcast room as an example, nearly 80% of the high-quality pits are taken down by international big names; with the price reduction strategy, some international big names have surged in sales of two double elevens from 2020 to 2021, so that local brands have completely lost the space to raise prices; on the talent side, international big names have opened a round of local talent expansion after the epidemic, and "being poached" has become the common experience of many local head new brands...
Many investors and industry insiders believe that starting in 2022, new local brands will face a more "cruel" jungle world: more expensive traffic, more picky users, and more eager international big names. And capital is also more and more cautious about "investing in new consumption", some investors told Tiger Sniff that some tracks that are easy to get money in 2018-2019 have been "hot money retreating" from 2020 to the second half of 2021.
"There's not much time left for new local brands." Some entrepreneurs and investors have predicted the line of life and death: the next three years will be a big test for new local brands, and those new brands that cannot withstand the dive offensive of international big names can only be swept away by the big waves.
Three wars
International big names are putting pressure on new local brands from three dimensions, the first of which is the brand mentality.
An industry insider familiar with The Perfect Diary founder Huang Jinfeng told Tiger Sniff that Huang Jinfeng once told one of his confusions: if a consumer breaks a YSL lipstick, the consumer's first reaction is often "There is a problem with my use method"; but if the consumer breaks a perfect diary lipstick, the consumer's first reaction is often "there is a problem with the quality".
"It's not just the perfect diary that's confused, almost every new local brand is facing this problem, the international big names have spent decades or even more than a century to build brand power and deeply affect the user's mind, and our new brands have generally just risen in the past 3 to 6 years, and there is not enough time to slowly build the brand mind." Liu Bin, a U.S. stock analyst, told Tiger Sniff that what is hidden in the longer "mental construction period" is the intergenerational dividend: when grandmothers and mothers are using a certain brand, the younger generation will naturally enter the brand's "potential user pool", "Although there is intergenerational rebellion, this rebelliousness sometimes deepens recognition." ”
Sun Laichun felt very deeply about this: "We have spent 10 years doing a moat at the mental level, but now it seems that this moat is not deep enough. I think for the brand, the biggest difficulty is not the raw materials, not the super large items, but what does the brand represent in the minds of consumers? Sun Laichun told Tiger Sniff that when Chanel entered the red camellia series products in a high profile, he felt like a small character with a "millet plus rifle trembling" and the opposite was "like a giant with cannons, aircraft carriers, nuclear weapons, a century-old history, and a wealth."
The detail that impressed him was that on weibo and other traffic platforms, Chanel has a large number of fans, and some Lin Qingxuan users are also deep fans of Chanel - when several Microblogs related to Chanel's layout of red camellia products were released, some users even "anti-water" and took the initiative to take chanel. "It feels like the enemy is on the back, the consumer is our baby, we can only hurry to appease."
In 2021, international big names will further exert the "brand mental advantage" to the fullest. A person in charge of a head e-commerce platform who did not want to be named told Tiger Sniff that some promotion and delivery models that were previously "unwatched by big brands" have begun to be adopted by high-level people. ”
A typical case is Estée Lauder's budget for the first time in its history in 2021 for "Taobao". The person told Tiger Sniff that before Estée Lauder and other head big names almost "did not touch the Taobao", or even did not prepare for this fee at all.
In addition to skin care and beauty, the same thing also happens in coffee, shoes and clothing, pets, tide play and other fields. Taking coffee as an example, an international leading coffee brand not only increased its marketing budget in the Chinese market in 2021, but also almost reorganized its marketing team. In Douyin, Xiaohongshu and Station B, the brand cooperated heavily with talents and MCN agencies, and began to form its own live broadcast system. Just two years ago, the brand's executives were still "cautiously hesitant" about these new traffic delivery models.
This change of the big name is summarized by insiders as "grounded gas". The grounded marketing model has multiplied their brand mental dividends. The head of a marketing agency located in Beijing that specializes in serving consumer goods companies told Tiger Sniff that MCN, UP owners, and KOL themselves also hope to get the blessing of big names, "Under the same price, everyone will often give priority to cooperation with international big names, because this will be beneficial to future orders." The more real situation is that the money paid by international big names is generally slightly higher; as Party A, it is generally more professional. ”
Outside of the mind, channels have become another main battlefield for local brands and international brands.
A local sparkling water brand has encountered strong channel pressure in 2021. In the CS channel and the KA channel, big names such as Coca-Cola are almost "firing across the board". (CS channel: mainly convenience stores; KA channel: mainly hypermarkets)
Some insiders told Tiger Sniff that these big brands have increased their layout in channels such as CS in 2021, and CS channels are precisely the key ports for the rise of new local beverage brands after 2018.
The same thing is happening in the skincare and beauty world. In 2021, local beauty collection stores will open a boom in entrepreneurship, and brands such as plums, black holes, and colorists will enter a period of expansion. But it is worth playing that the entrepreneurial wave of beauty collection stores has not brought real dividends to local brands, but has tasted dividends from international big brands, sub-brands incubated by big brands, and foreign niche head brands.
A founder of a beauty collection store brand who did not want to be named told Tiger Sniff that in 2021, some international big brands have increased their efforts to "door-to-door sales", which makes her feel "unexpected". "From 2018 to 2019, we still have to find a way to contact these big names to try to form cooperation, and from the second half of 2020 to 2021, the big names have lowered their posture and have an unprecedented open attitude towards these local channels."
At 10 p.m., she received a strange phone call, claiming to be the head of the Chinese market of a european second-tier brand, who said that she wanted to give away some of the new products of its sub-brands for free and "try to sell" them in its stores. The founder bluntly said that her first reaction at the time was "encountering a liar." Unexpectedly, after a few days, the marketing leader contacted her again through a friend, and the two sides eventually formed a cooperation.
"In 2021, why can't many new local brands find offline ports? Because the products of international brands are flooded here, the big names are not aimed at targeting anyone, but the indirect result is that it has brought huge channel pressure to local new products. ”
The battle for channels is also happening in the online world. In 2021, pits in high-quality live streaming rooms will become scarcer. A person familiar with Tmall told Tiger Sniff that in the field of cosmetics, in 2021, international big names have increased their efforts to put investment in online live broadcast rooms, especially mid-waist anchors and head anchors (head anchors with strong cargo power outside of several super anchors), and these anchors often give priority to cooperation with international big names in order to improve their "sense of premium and influence", and 80% of the pits in the live broadcast season and even some live broadcast rooms are "seized" by international big names or sub-brands of big brands. "Statistically, the total number of online pits obtained by new local brands in 2021 is relatively small in these years."
The "war" also extends to the level of raw materials and supply chains.
At the coffee track, due to the high price of shipping and the impact of drought and frost in Brazil, high-quality coffee beans began to be scarce and prices continued to rise. International brands such as Nestlé have completed their coffee bean reserves early by virtue of their own resource advantages.
Some people familiar with Nestlé told Tiger Sniff in 2021 that brands such as Nestlé have sufficient raw materials in their warehouses in China and have already completed orders for the coming year. "The uncertainty of upstream raw materials has a relatively small impact on nestlé's super big names, and has a greater impact on some new local brands – especially those that are highly dependent on overseas coffee bean resources."
The person said that because Nestlé has the world's top purchase volume, when the global coffee beans enter the scarcity cycle, suppliers will also give priority to Nestlé's orders, and even because of the consideration of future long-term cooperation, the appropriate "maintenance price" will not be too much sitting on the starting price.
But for local brands, it is not so easy to solve the problem of coffee ingredients. A distributor who did not want to be named told Tiger Sniff that on the one hand, local brands need to increase the price to obtain overseas high-quality coffee beans, which increases the cost pressure; on the other hand, due to the reduction of some coffee beans, some small and medium-sized local brands can not get beans and can only retreat to change varieties - which leads to changes in taste, so that brands face more C-end uncertainty.
In areas such as cosmetics and toys, the pressure on the supply chain side is most pronounced at the foundry end. Taking toys as an example, Guangdong has the world's largest toy foundry base, and at the worst of the epidemic in 2020, some overseas orders were shelved, which allowed local tide play brands to obtain a rare "foundry capacity blank opportunity". In 2021, with the recovery of some overseas orders and the increased penetration of several major international toy giants in the Asia-Pacific market, Guangdong's production capacity began to tilt towards international brands.
Ma Ming, who owns a medium-sized toy foundry in Dongguan, told Tiger Sniff that in 2021, some local tide play brands will repeatedly have the problem of "out of stock", precisely because of "insufficient FOUNDry capacity". "Because toy foundry is a thing that requires long-term running-in between the brand side and the foundry side, most foundries are willing to continue to deeply bind with the international big brands that have cooperated for many years, and the production capacity obtained by local brands during the epidemic is an accidental phenomenon, but it is inevitable that this accidental transformation into continuation will be difficult."
In the face of the challenge launched by international big names in three dimensions, many local brands have begun to think, and everyone wants to understand the underlying logic behind the "big name offensive tide". There is no shortage of prophets and foresights, who had anticipated this scene a few years ago, but the reality came more rapidly.
There are traces to follow and unexpected
Wu Jun, the founder of Santo and a Half, told friends in 2020 that it is sooner or later for big brands to contain local brands. At that time, Wu Jun's judgment was that the big names still needed "2 years" or so to "react".
It all came sooner than expected.
In October 2021, Nestlé and Starbucks partnered to launch the first specialty instant coffee, the new Starbucks Super Premium Instant Coffee with Starbucks Cup. It is an instant, recyclable exterior, freeze-dried product made with Arabica coffee beans. (Tiger sniffing note: In 2018, Nestlé permanently bought out Starbucks' worldwide "right to sell coffee and other food and beverage products outside the store" for $715 million, and revenue from such products was included in Nestlé's financial reports.) ）
It is worth noting that in the coffee "online world" in 2021, the competition between Nestlé Starbucks and three and a half meals has been "white-hot". Taking the retail sales ranking of e-commerce channels as an example, although Nestlé is firmly in the first place, the gap between the second place and the three and a half meals is gradually narrowing. During the Singles' Day period, Santo and Nestlé ranked first and second on the Tmall platform, respectively.
The launch of high-quality instant coffee products is regarded as "Nestlé's entry into the hinterland of new local brands such as Santo and a half". A coffee industry analyst who did not want to be named told Tiger Sniff that the three local brands of Sando-Han, Yongpu and Sumidagawa have "shared food" from international big names to a considerable coffee market share in recent years. "Their strategy is to carve out a whole new category and become its head. The current strategy of big names such as Nestlé is to go directly into this category, in other words: to start a frontal war. ”
I feel that the big names came early, and there is also the cosmetics circle.
Sun Laichun said that his earliest prediction was that a year or two after the epidemic passed, the big names would completely recover their vitality before they launched a "dive offensive". Since south Korea and Japan have camellia producing areas, Lin Qingxuan has always been "worried" that Japanese and Korean big names will take the lead in entering the camellia category, but their investigators have not seen the actions of Japanese and Korean big names for a long time, and when they are "slightly relieved", Chanel comes first.
"During the epidemic, we were seriously injured, just like we just finished a vicious battle, and without a complete rest and recovery, we ushered in a super opponent."
Li Feng, founding partner of Fengrui Capital, told Tiger Sniff that the epidemic has seriously affected the sales budget and inventory of large companies around the world, in order to clear inventory and solve the problem of high penetration rate of Chinese e-commerce, some big brands have provided special "price lines" for the Chinese market since 2020. In the past, these brands are not allowed to "break the price" under any circumstances, on the basis of the price break, these brands have seen a sharp increase in sales from the beginning of Double Eleven in 2020, and the same thing has continued to 2021.
A person in charge of an e-commerce platform, who did not want to be named, pointed out another reason for the "dive offensive" of big names: in the Chinese market, some international big names have already experienced growth fatigue in 2019. On the one hand, the newly emerging local Z generation has begun to have a stronger interest in new brands, and on the other hand, local new brands have strongly eaten part of the market with the posture of "low price and flat replacement".
A key detail is that in 2020 and 2021, after some coffee and cosmetics giants adopted a low-price strategy, their growth rate barely maintained at the level before 2018, in other words, if there is no price reduction dividend, these brands are likely to continue to face "growth fatigue".
"From 2020 to 2021, a number of international big names have replaced the senior management team in the Chinese market, two factors are very critical, first of all, the Chinese market has become an indispensable growth and vitality market for big names during the epidemic, on the other hand, the headquarters is not satisfied with the growth trend of brands in the Chinese market in recent years." The above-mentioned person told Tiger Sniff that due to the "normalization" trend of the epidemic on a global scale, international big names changed their strategies in advance and began to drastically strengthen the transformation of the Chinese market from 2020 - which led to local brands facing strong competition in advance.
The early emergence of strong competition has caused local brands to lose part of their market share: under the price-breaking strategy, international big brands have shown strength on e-commerce platforms since 2020, taking skin care products as an example, in the annual sales of the top ten list, an average of 8 places per year in the two-year period from 2020 to 2021 are occupied by international big brands and their sub-brands.
Implicit stress cannot be ignored. Due to high sea freight prices and oil prices, most brands are facing higher cost pressures in 2021 – which has led to the erosion of local brands' profit margins. The resource network formed by the international big brand with a larger volume and historical advantage has a stronger ability to resist pressure, which means that when the international big names fight the price reduction war and the gift war, the local brand can only maintain the original price conservative defense.
"And local brands are worried that price reductions will affect brand power, and the brand image formed after 3 to 5 years of painstaking management may be extinguished because of price reductions."
Or you can glimpse the direction of the entire plot from history: according to Li Feng's analysis, around 2000, there was a wave of "big names and flat replacements" in China, and some local brands also appeared, which were mostly distributed in the fields of Daily Chemical and Nissin. But the good times did not last long, from 2003 to 2004, the daily chemical giant Procter & Gamble began to reduce prices in the Chinese market, and the price reduction strategy continued until 2006. As a result, many of the local brands that appeared around 2000 in the market in 2007 have disappeared. It is worth playing that in recent years, oil prices have continued to rise, and even tripled, in such a situation, local brands have encountered two major challenges affecting the lifeline: the cost of raw materials continues to rise + the price reduction space is suppressed by big brands.
The same thing is happening in the Japanese and Korean markets. Sun Laichun told Tiger Sniff that in the 1970s, a number of local brands appeared in the Japanese and Korean markets, and they rose rapidly and snatched a part of the market from international brands at a higher cost-effective price. At that time, international big names also began to "dive attack" in the Japanese and Korean markets, but brands like Snowflake Show survived and eventually survived, gradually developing into local big names. "The story we're facing now is pretty much the same. If we local brands can't hold on, then this market will be reoccupied by international big names, and if we can survive, then China will gradually give birth to a number of international big names from the local area. ”
Three years of life and death?
An investor who focused on investing in new consumer projects from 2017 to 2021 told Tiger Sniff that 2022-2025 will be a "life and death test period" for local brands, but he is not optimistic, he believes that more than 80% of the local brands born in the past few years will eventually die.
"Those brands that blindly rely on marketing will die quickly, because the capital circle will no longer throw money." The investor said that the heat of the capital circle for new consumer fast-moving consumer goods projects from 2021 has cooled down. The consumer investment boom in 2019-2020 is a "short cycle" brought about by accidental factors: on the one hand, on the traffic side, the tao system reform and the rise of vibrato in 2018-2019 have made traffic dividends appear in the market; on the other hand, under the epidemic factor, basic daily consumption has become a greater certainty in uncertainty, attracting hot money.
"This boom is actually cooling down in the second half of 2020, and the capital circle is also returning to rationality." The investor believes that a key point of returning to rationality is that everyone realizes that the "boundary" of this wave of investment - you will not invest in the next L'Oréal, you can only find the head of a new category, "let L'Oréal be born not only capital, but also time." ”
"In the 19th and 20th centuries, there were several big cycles in the field of consumer goods. There are some common laws that new local brands should experience and learn. Liu Bin believes that in 2022, local new brands should first stick to the basic disk - to maintain the dominant position in the subdivision category, and strengthen the category mentality, "whether it is three and a half meals, Huaxizi or Bubble Mart, they need to temporarily put aside their greater diversification expansion ambitions and return to the basic plate steadily." ”
This is also the historical development law of Procter & Gamble, Nestlé and L'Oréal. P&G, for example, has been producing soaps (and candles) since its founding in 1837 and has made itself the "king of soap" for nearly 100 years – when people think of soap, they think of P&G for the first time. From today's perspective, P&G has created and maintained its own category. It is worth noting that in the nearly 120 years since its establishment, P&G has begun to gradually diversify and expand, and in the process of expansion, P&G has always adhered to the "close relative radius" of the basic disk and almost no departure from the basic disk.
The same story can be seen from the history of the development of the Korean Snowflake Show, and the Snowflake Show may be of greater significance to local brands - in the history of its rise, it has also encountered the subduction of international big names. In the nearly 10 years since its inception, Snowflake Show has been adhering to the basic plate of "ginseng-based skin care products", in fact, this development strategy of adhering to the subdivision category has allowed it to survive the fierce competition: when international brands entered the Korean market and launched the same category, Snowflake Show has formed a strong user mental moat in the field of "ginseng-based skin care products".
"In the next three years, it is not a competition to expand, but a competition to succeed, and what can grow steadily while keeping success is success." The above-mentioned investors said that the first problem encountered by many brands in 2022 will be a shortage of money.
An entrepreneur who started a capsule drink in 2019 told Tiger Sniff that his project is already difficult to finance in 2021. "Investors are required to show their liquidity first, and they are more willing to support projects with hematopoietic capabilities."
Hematopoietic ability has become a "high-frequency vocabulary" in the consumer venture capital circle since 2021. But making money is becoming more difficult, and some people mentioned the key lifeline problem to Tiger Sniff - since 2021, the growth rate of consumers' consumption power has generally slowed down, and even some consumers have declined their consumption power. Under such a premise, the price-breaking strategy of international big brands has quickly divided the consumption power of consumers, and from a fundamental point of view, the market faced by local brands in 2022 is already a market with "limited consumption power".
In the past few years, the development model of many local brands has been highly homogeneous – which will make local brands more fierce and cruel in their competition for limited spending power.
It is worth noting that the vast majority of local new brands have not yet completely recovered from the "big injury" caused by the epidemic, which will make the new brand continue to be under pressure: taking Perfect Diary and Huaxizi as an example, due to the mask effect caused by the epidemic - the entire beauty circle is deep in the cold winter, and in the short term, it is difficult for the beauty industry to fundamentally solve the "key pain points" caused by masks.
In the more intense jianghu, talent has become more scarce.
More than one local brand founder told Tiger Sniff that its middle-level or key employees will be recruited by international big names in 2021. "In the fields of cosmetics, beverages, shoes and clothing, international brands will expand the recruitment of local Chinese talents in 2021."
A senior HR who did not want to be named told Tiger Sniff that three factors have led to this situation: First, international big names are aware of the need to let people who know the Chinese market better grasp real power - which is why in 2021, among the Management of the Chinese Region of many international big names, the weight of Local Managers in China has been increased, and the ensuing change is that the proportion of local talents in middle-level positions and key positions continues to rise. Secondly, under the influence of the epidemic, international big names regard deep ploughing in the Chinese market as the key to their development, and with the improvement of the priority of the Chinese market, talent expansion and training reserves have become the only way. As well, international brands urgently need to recruit a group of young talents to facilitate themselves to better understand Chinese Z generation and even post-00 consumers.
"For local brands, Gen Z and post-00s are a glimmer of life, and for international brands, this is a huge incremental market that needs to be developed." Liu Bin analysis believes that Chinese Gen Z consumers and the young generation of the same age in the United States have a clear consumption difference: China's Z generation has become more interested in domestic products and is more willing to taste new brands; while the young generation in the United States is full of interest in overseas explosives, cross-cultural products, and European light luxury brands.
Some entrepreneurs said that in the next 3 to 5 years, it will also be a competition between local brands and international big names for China's young generation.
"The good news is that this generation of young people is more tolerant of local brands." Sun Laichun believes that when such competition occurred ten years ago, it was difficult for local brands to fight back, and today local brands at least did not "lose at the starting line".
But the younger generation is by no means a "fool-in-cheek" generation.
On the Douyin and Xiaohongshu platforms, a large number of post-95 consumers will be "blunt" to unsatisfactory brands, and under the social logic of the circle, they have a "qualitative change" influence on the people around them, which means that those local brands that want to survive can only return to the product itself and seek vitality through the product.
"Every generation has a mission for every generation. We have said for so many years the heart of craftsmanship, productism, and user first, and now it has become a life and death line in front of us - the person who does it, lives; the gimmick, dies. This may be the fate of our generation of consumer entrepreneurs. A consumer track serial entrepreneur said.
