After 20 years of marriage, Danone and Yakult finally broke up. For Yakult, the marriage was once called “swallow” and “Curse” by Japanese media. Will it always be happy if it can regain its freedom?
Adhere to “self”
Not long ago, Danone announced the sale of its remaining 6.61% stake in Yakult (Yakult, known as “Yakult” in South China) for nearly 500 million euros, which also means that Yakult is “free”.
In fact, the contradiction between them has already appeared. According to the Japanese media, Danone, a giant, once tried to swallow up Yakult and called it “farewell to Danone’s Curse” by selling two-thirds of its shares in Yakult in 2018.
However, the intersection between the two companies dates back to 2000. At that time, Danone bought 5% of Yakult. Danone’s target is Yakult’s Lactobacillus casei strain shirota. In order to strengthen the relationship, Danone once again purchased about 20% of the shares in 2003, and signed a business alliance agreement with Yakult in 2004, once becoming the largest shareholder of Yakult.
But Yakult, which wants to maintain management independence, is gradually moving away from Damon, which wants to strengthen the relationship. The two sides also signed a clause that Damon can not buy more shares of Yakult Company for a certain period of time. In 2013, the strategic cooperation contract between Danone and Yakult was terminated. Danone once negotiated with Yakult on increasing its shareholding, but yangleduo pursued business independence, and the two sides failed to reach an agreement.
At that time, hori Cheng, chairman of yangleduo, also stressed: “it has always been impossible to narrow down the differences with Danone in terms of corporate culture and market operation. Yakult will take this opportunity to further consolidate the independence of its operation. ” He said that he would rely on his own strength to promote the development strategy.
In 2016, Danone acquired white wave foods, an American organic food manufacturer, for nearly $10 billion. Debt increased as a result of large acquisitions. The US aggressive investment fund is said to have put pressure on Danone to break its relationship with Yakult. Therefore, Danone’s sale of Yakult shares is also in this trend.
More importantly, the performance of business cooperation between the two sides is not satisfactory. According to the Nikkei Asia report, Yakult’s profits in the self-employed market are much higher than those of the joint venture with Danone. Last year, the average daily sales of probiotic drinks in Indonesia and Mainland China reached 6.36 million bottles and 8.12 million bottles respectively. Its Indian joint venture with Danone sells only 238000 bottles a day.
After Danone announced the complete sale of Yakult shares, Japan’s Yakult Company also issued a notice saying that Danone would no longer have the right to recommend candidates for directors by amending the memorandum of understanding with Danone.
Analysts at Berkeley, the UK’s leading financial company, stressed that Danone would focus on expanding its botanical dairy brands “alpro” and “silk” in Europe and the Americas by selling its shares.
Yang Ledo, who took back the right of independence, said that Danone’s departure would not affect the company’s operation. As far as the Chinese market of Yakult is concerned, it belongs to the independent operation of Yakult and will not be greatly affected.
Yakult’s adherence to independence is understandable. As an old brand with a history of 85 years and sold in more than 40 countries worldwide, Yakult has a strong independence and unique culture.
Yoshida, the founder of Yakult, was born in a relatively poor rural area of Japan. He chose to practise medicine because of the difficulties of the local villagers. When daitani was alive, his business slogan was: “you can buy Yakult for the price of a postcard or a cigarette.”. Therefore, even if there were many big pharmaceutical companies at that time who wanted to buy the exclusive right of Yakult at a very high price, daiminori did not waver. This can also explain that in the cooperation with Danone, Yakult has made an agreement on whether it can continue to increase its shares in the company.
Kuaixiaojun also told a little story. In the Philippines, 68000 Filipinos petitioned on Facebook to ask Yakult to produce 1 liter. However, Yakult Company is very self willed, completely ignored. Later, the local radio and television stations in the Philippines couldn’t see it, so they went to yangleduo company for an explanation on behalf of the local people.
In response, Yakult said: “the purpose of producing small bottles is to drink them all at once, so as to prevent bacteria from breeding and secondary pollution if they can’t be drunk. At the same time, the number of active lactic acid bacteria will also decrease. For the average person, a small bottle a day is enough to have active lactic acid bacteria
It’s so willful that I want to buy more, but I still don’t sell it.
personal independence of conduct
It must be mentioned that the success of Yakult is related to its unique operation mode.
In the last century, Yakult expanded overseas and entered overseas markets such as China, Taiwan, Philippines and Korea. In 2002, it entered the Chinese mainland market.
As a foreign brand, Yakult has been steadily gaining ground in mainland China since it officially entered the mainland in 2002. It sells about 60000 bottles a day. At present, Yakult has occupied more than 60% of the market share of refrigerated lactic acid bacteria in the mainland of China, making it the first place in the market of refrigerated lactic acid bacteria drinks.
In the process of Yakult entering the Chinese market, there are also several obvious characteristics: first, its unique “Yakult Mom” direct sales model; second, the price and packaging control and persistence; third, adhere to single product sales, not to promote new products.
“Yakult sells well, but it often runs out of stock.” A boss of a commercial supermarket in the third tier city of Hunan told kuaixiaojun.
Out of stock is the main situation yangleduo faces in the third and fourth line sinking market. At a time when most FMCG products are crazy to occupy the channel, Yakult’s performance is very Buddhist. Some consumers said: “the family love to drink Yakult, but they can’t buy it in their hometown, so can we act as an agent?”
As a matter of fact, Yakult does not act as an agent. At present, it has branches in about 40 cities and regions in China. It also manages the local market directly and basically does not sell through distributors. In China, Yakult is mainly sold through home delivery and retail channels. Among them, household distribution sales accounted for 10% of the total sales, and sales from independent stores and hypermarkets / supermarkets accounted for 35% and 50% respectively.
In developing overseas markets, Yakult has not given up its adherence to the model of “Yakult mother” (called “miss Yiliduo” in Guangdong Province).
In 1963, Yakult initiated the “home delivery” service mode in Japan. These delivery workers are a group of very friendly housewives, they are known as “Yakult Mom”. There are more housewives in Japan, and Yakult provides them with a second employment opportunity. In Taiwan, the first overseas market in Japan, the “Yakult Mom” model has also been vigorously promoted, even encouraging middle-aged and elderly people to find jobs.
Compared with the supermarket, “Yakult Mom” not only sells products, but also provides nutrition guidance for the neighborhood, which also enhances the feelings of the neighborhood. Moreover, in the Yakult family model, the main buyer is also a housewife, which also brings a kind of “mother” power to the brand.
Yakult (China) Investment Limited has revealed that there are about 3000 mothers in China’s mainland, covering the Shanghai, Beijing, Tianjin, Xiamen, Fuzhou and Guangdong provinces.
In 2011, with the single product strategy, in a few 28 cities with less than 1% coverage of its competitors, the sales of Yakult exceeded 2 billion yuan in one fell swoop, making it the leader in the market of low-temperature lactic acid bacteria.
On the other hand, Yakult’s price control is very strict and persistent. It easily does not make price changes, and sometimes even seems too rigid. A supermarket operator disclosed that “before, the store made a discount on Lactobacillus categories and forgot to remove Yakult. After being found out by the manufacturer, he received a warning of out of stock.” In the market, Yakult basically does not promote sales.
Yangleduo’s insistence on price was once blocked in some supermarket channels. Especially in the fast consumer industry, which is used to Festival discounts and bundling sales activities, it brings a lot of constraints to offline terminals. However, yangleduo’s persistence also won a stable market share in the price war between Yili and Mengniu.
To a certain extent, Yakult culture, like the Japanese popular minimalist style, does a good job in a single product, even if it is innovative, it mostly maintains in the domestic market. Even in Japan, Yakult has launched several series. In the Chinese market, there are only two products launched by Yakult, one is the conventional red bottle Yakult, and the other is the low sugar Yakult launched in 2016.
Hidden danger of “sinking”
After nearly 20 years of deep cultivation in China’s market, yangleduo has established its foothold in the first and second tier cities. In recent years, the market has been spread that Yakult will enter the sinking market.
Hirano Shinya, chairman of Yakult (China) Investment Co., Ltd., in an interview with the media, pointed out that at present, Yakult (Yakult) has been developing and deepening the farming in mainland China, mainly by establishing branches and building factories. Among them, the establishment of branches is mainly concentrated in the third and fourth tier cities.
This year, Yakult opened three new sales offices in China, located in Hunan (Hengyang City), Anhui Province (Wuhu City) and Guangdong (Zhaoqing City), bringing the total number of branches of the company in China to 49.
In July, in Hengyang and Wuhu, yangleduo will be sold through local supermarket channels; in Zhaoqing, the products will be sold later and will be put on the shelves in August. Yakult hopes the move will increase the company’s sales of 100000 bottles a day in China.
However, it is not easy to enter the sinking market.
First of all, capacity is a big problem.
As mentioned above, the third and fourth tier cities often run out of stock. Yakult products need to be stored at low temperature. In order to ensure the quality of products, the whole process of logistics is controlled by ourselves to ensure the so-called “cold chain” in the real sense. However, cold chain preservation has high requirements for logistics and production base.
In order to meet the demand of the third and fourth tier cities, in September 2019, Yakult launched the capacity expansion mode in China, and the Yiliduo factory in Foshan, Guangdong Province was officially completed, with an estimated production capacity of 1.6 million bottles per day.
It is reported that Yakult also wants to expand its factory scale in Wuxi, Jiangsu Province. The new plant, the company’s second plant in Wuxi, is expected to be completed in April 2022. By then, the total production capacity of the two factories in Wuxi will reach 5.4 million bottles per day.
However, in order to sink, the management of the third and fourth tier cities is also a problem.
The owner of the supermarket told kuaixiaojun that the Yakult they sold in the store came from a boss who was “speculating” in the Guangzhou market, because Yakult had no local agent. In other words, the owner of the goods transfer is not a local employee of Yakult, which also implies the management hidden trouble of Yakult in the third and fourth tier cities.
Because Yakult needs cold chain transportation in the whole process, it doesn’t let dealers participate in sales. However, yangleduo’s direct sales channels are not well distributed to the third and fourth tier markets. If the transportation and distribution requirements are not qualified, it is easy to affect the brand.
However, yangleduo company is also very strict about the after-sale and inspection of products. Some consumers said, “I called the complaint phone of Yakult bottle, and the next day I drove from the provincial capital to investigate.”
Moreover, price is also a big problem that Yakult has to face when entering the sinking market.
At present, Yili, Mengniu and other head dairy enterprises, Weiquan, Junyao, Wahaha and other old brand beverage enterprises have their own probiotic drinks. In terms of unit price, the price of Yakult is relatively high, and the price of common red bottles is about 2.4 yuan per 100ml, while that of 330ml Yili Yitian is about 75% – 80% of that of Yakult.
Will Yakult accept the sinking market which values price?
“Yili’s meiyitian and Mengniu’s Youyi C are better than yangleduo because they are cheap,” a third tier city’s boss told kuaixiaojun
The key point is whether the “family distribution” mode of Yakult can be “copied” in the third and fourth tier cities where local brands dominate. Yili meiyitian marketing department told kuaixiaojun that the more local brands sinking into the market, the more likely they are to choose the “family distribution” mode. For big brands, this is an important problem to face when entering the sinking market.
Yakult’s model is very special, but for the market, can this model last?
Danone’s withdrawal also shows the “failure” of Yakult’s joint venture in India and Vietnam. However, there are still many challenges for Yakult with high sugar content.
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