The ambition of Yuanqi forest is growing.
At the end of last year, Tang Bingsen, its founder, announced at the dealer conference that the sales target of 2021 would double and a half from 2020 to reach 7.5 billion.
Roughly estimated, in order to achieve the annual sales target of 7.5 billion yuan, the average monthly sales of Yuanqi forest needs to reach 625 million yuan, equivalent to its total sales in the first five months of 2020.
With this grand goal, Yuanqi forest has once again attracted the attention of the capital market.
On January 25, according to the news released by Bloomberg, Yuanqi forest is considering a new round of financing, seeking to raise 500 million US dollars, and the valuation after financing will reach at least 4 billion US dollars. However, the news was quickly denied by Yuanqi forest.
Despite the rumors, the capital recognition gained by Yuanqi forest since its establishment is obvious to all: five rounds of financing have been completed in six years. The last two rounds are October 2019 and July 2020 (the latter is not disclosed). Only nine months apart, the valuation has risen from nearly 4 billion yuan to 14 billion yuan, an increase of 3.5 times.
Investors can give such a high valuation, largely in the belief that it can copy more successful cases.
Although the high valuation is gratifying, it is not easy for Yuanqi forest to achieve a 250% growth in sales within one year: the burst after bubble water has not yet appeared, the recognition of the sinking market is still being verified, and a large number of competitors begin to launch various similar products into the market fiercely.
There are many problems to face in front of Yuanqi forest. Capital is a sharp weapon to solve the problem, but it is obviously not enough to only have capital and past successful experience.
Sugar free racetrack c-position A631
Stepping on the sugar free high-quality track, the core competitiveness of Yuanqi forest is still shaping.
More and more people find that sugar brings people “addictive happiness”.
But at the same time, the global diabetes, cardiovascular disease, overweight, obesity and caries rates are also rising. With the concept of health and weight-loss deeply rooted in the hearts of the people, consumers who used to love sweets began to join the ranks of quitting sugar and breaking sugar.
The emerging demand of “good to drink but not fat” makes the sugar free market rise rapidly, and more and more beverage brands begin to study low sugar and sugar free drinks.
In 2014, the market scale of China’s sugar free beverage industry was only 1.66 billion yuan. By 2020, it has grown to 11.78 billion yuan, with a compound annual growth rate of 38.69%, far exceeding the overall demand growth of the beverage industry.
The success of Yuanqi forest is just stepping on the starting point of young people’s de saccharification consumption trend.
In 2018, Yuanqi forest bubble water, which strengthens the concept of “0 sugar, 0 fat, 0 card”, has opened a gap in the beverage industry with a stable pattern and become one of the most eye-catching products in recent two years.
In 2019, Yuanqi forest (general brand, including its many sub products) will reach nearly 1 billion sales;
In the first five months of 2020, the sales performance of Yuanqi forest reached 260 million yuan, exceeding the total annual sales in 2018, with an average daily sales of 4.4 million yuan. It is estimated that the sales in 2020 will exceed 2 billion yuan.
The rapid growth of Yuanqi forest has set off a sugar free storm in the whole beverage industry. Coca Cola（ NYSE:KO ）Nongfu mountain spring（ SEHK:09633 ）Traditional beverage giants such as Qingdao beer and Wahaha all launched a series of sugar free drinks in 2020. Even Tsingtao beer and Yili also added bubble water brands.
Xicha and Naixue have also entered the market to launch bottled drinks. Xicha has put forward the slogan of “drink like water”. The first batch of products mainly focus on soft drinks with 0 sugar, 0 fat, 0 calorie and dietary fiber. They have set foot in convenience stores such as Quanjia, 711, HEMA and supermarkets. It seems that they are fighting against Yuanqi forest.
It is worth mentioning that the sweet taste of sub brand xixiaocha soda also comes from erythritol, which is the key to the success of Yuanqi forest. The price of the product is 5.5 yuan, which is almost the same as that of Yuanqi forest bubble water.
All the information seems to convey a signal: like small tea soda is running to the vitality forest.
Today, no one can shake the dominant position of Nongfu Shanquan and Coca Cola in their respective fields. This is not only due to natural water and coke, but also due to the diversified product matrix and a number of popular products.
At present, Yuanqi forest can only rely on bubble water without sugar concept.
The concept and positioning of “sugar free” represents the future of beverage industry. But Yuanqi forest needs to use more popular products to prove its dominance in this field, which is also the core competitiveness of Yuanqi forest.
The difficulty of money explosion
The success of popular products is almost impossible to copy.
The era of monopoly is over.
Today’s beverage giants are building leading products in different categories by building sub brands, such as Nongfu Shanquan’s tea π series and Coca Cola’s zero series.
In contrast, Yuanqi forest is still in the stage of relying on large single products.
Yuanqi forest, founded in 2016, has a number of products, but bubble water and burning tea account for less than 90% of the company’s sales. Among them, bubble water accounted for about 60%, and tea burning accounted for nearly 30%.
To achieve the sales target of 7.5 billion, it seems unrealistic to rely on only two single products.
In addition, it is uncertain how long the popularity cycle of wanghong products will be, which forces Yuanqi forest to jump out of the mode of single pop money as soon as possible and cultivate more profitable businesses.
Yuanqi forest has launched milk tea, pet muscle collagen water, functional drinks and other new products. Such as the first juice bubble water “full score microbubble”, and “alien” functional drinks, electrolyte water, etc.
In December last year, Yuanqi forest also entered the field of health food and launched a new light food health product “chicken breast sausage”.
According to Tang Binsen, there are still 95% of Yuanqi forest’s products that have not been launched, and the R & D cost and R & D personnel in 2021 will be three times of that in 2020.
Yuanqi forest drink matrix
But so far, these new products have not been able to replicate the success of bubble water.
According to the popular logic of popular products in the past, popular products mainly find a relative vacancy or a field with dividend attribute, while players rely on their keen perception to detect the future trend of the market, and they have the ability to extend the brand, so that they can quickly promote the products to consumers.
In the past, when making large single products, the information was asymmetric, the market did not change fast, and enterprises used a lot of resources to promote large single products. The life cycle of products would be very long, and they could continuously create profits for enterprises.
However, the new situation in the information age is that launching a single product requires more capital investment than before, and even after it is created, the dividend period becomes shorter.
In particular, new products that are not significantly different from other popular products have a shorter dividend period. After their launch, they enter the stock market, which is essentially different from the incremental market of popular products.
This phenomenon that new products are difficult to become explosive products has become the norm in the industry. After the large-scale launch, the repercussions are flat, and then the abandoned products are everywhere.
Take Nongfu spring as an example. Since its establishment 25 years ago, the most active products on the market are still pure water, water-soluble C, scream, etc., but these products have been available for some years: scream was launched in 2004, more than 16 years ago, and water-soluble C was launched in 2008, also 12 years ago.
In the past ten years, Nongfu Shanquan has always wanted to make another “surprise” attack on carbonated drinks, but none of the new products failed.
Coca Cola is no exception. Since 2019, Coca Cola has cut off more than 600 drinks with weak growth, including the more famous Zico coconut aquatic products.
It’s not that there are no new products without success. Wahaha’s nutrition express and Nongfu Shanquan’s tea π are typical cases.
To build a successful large single product requires long-term operation of the enterprise. Wahaha and Nongfu Shanquan have built a market foundation for many years. After the launch of the product, it can quickly penetrate from the first and second tier market to the low-end population. Only in this way can the scale of nutrition express reach 10 billion yuan and tea π 5 billion yuan.
For Yuanqi forest, the market foundation formed by the first boom is much weaker than that of Nongfu and Wahaha.
The slow speed of R & D and the difficult replication of popular funds require the promotion of capital. It’s not easy to increase the sales by 250% in one year. The founder Tang Bingsen has grasped the pace of investment layout.
Not long ago, Yuanqi forest became a shareholder of Baiyunguan liquor, and its Challenger Capital Territory gradually emerged.
In 2014, Tang Binsen, who has not yet established the vitality forest, set up Challenger capital. Up to now, there have been 76 Challenger capital public investment events, mainly in consumption and TMT. It has invested in more than 100 start-up companies, including tiger securities, hometown interactive, huoli28, ramen, panda brewing, shirenren, etc.
This is a clear look. Light food, coffee, energy drinks and liquor Baijiu are all paving the way for this year’s 7 billion 500 million sales.
It’s not easy to sink
In the offline market which is more sensitive to the price, Yuanqi forest does not have an advantage.
In the FMCG industry, the role of market and channel is very critical.
After Yuanqi forest started the trend of bubble water without sugar, Coca Cola, Nongfu Shanquan, Wahaha and other traditional fast-moving brands with powerful channels all launched their own bubble water products without sugar. Relying on their own dealer channels, these products soon penetrated into the sinking market.
The vitality forest, which has always been dominated by urban channels, will miss a large number of sinking markets.
Since its launch, the target consumer group of Yuanqi forest is young consumers in the first and second tier cities. Chain convenience stores favored by young people and with internet gene are the preferred channel of Yuanqi forest, such as 711, family, box horse, convenience bee, etc.
Convenience stores highly fit the consumption habits and needs of young users. According to the statistics of 711, the proportion of 20-40-year-old consumers in the convenience store consumer group has reached 88%, which highly coincides with the user group of new consumer brands such as Yuanqi forest.
This group is concerned about health and willing to pay a high price for preferences. In the family convenience store, the price of ordinary drinks is mostly 3-3.5 yuan, but the price of Yuanqi forest is generally around 5 yuan.
At the same time, convenience stores are also an important propaganda position for new brands to obtain new users.
In Beijing, 711 has more advantages, opening nearly 300 stores in total; the whole family has an overwhelming advantage in Shanghai, opening more than 2000 stores, and Rosen has more than 1000 stores.
Once entering the counter of the chain convenience store, the new brand will get an excellent offline promotion position.
However, to expand the scale of the company, it is far from enough to rely on the laying of the first and second tier cities. The rule of the beverage industry is that if we want to expand the scale, we must face a larger market.
“City City City Kwai” is the logic of the expansion of common products. A typical example is that shaking the tiktok from the top down to the countryside from the city is easier than the rush from the countryside to the city of attack, and the popular elements are more easily accepted.
Most of the time, consumer brands can also meet this logic. Whether it is the communication image established by the brand or the product itself, the brand coming down from the city can be relatively quickly accepted by rural users.
In the second half of 2020, the channel of Yuanqi forest will be promoted to the third and fourth line market layout, and the first self owned production base will be established.
But in the sinking market, it is much more difficult for Yuanqi forest to be recognized by consumers than in cities.
Zong Hao, vice president of Yuanqi forest, once said: “young people don’t look at the price when they buy drinks in convenience stores. They just choose the products they want most and like most, and take them up and pay for them.”
But in the offline market which is more sensitive to price, this logic does not apply.
In the past, bubble water was regarded as high-end consumption, and the representative was Perrier mineral water, commonly known as Paris water. Nowadays, although bubble water, like coffee, is gradually changing from style consumption to daily consumption, the retail unit price of mainstream products of sugar free bubble water is still 5-7 yuan, or even higher.
In the huge sinking market, such a price is not easy to sell. If Yuanqi forest wants to open up the sinking market, it also needs to further develop the distribution channels in the third, fourth and even lower tier cities. This is the most difficult advantage for uni president, Master Kang, Wahaha and Nongfu Shanquan.
After occupying the excellent “sugar free” track, Yuanqi forest has a fantastic start. However, it is not easy to challenge the position of mature enterprises in the beverage market. Yuanqi forest still has a lot to do.
Read the original