China Food

“Drinking milk” and “drinking”, why does Coca Cola make frequent cross-border transformation?

there are few relaxed enterprises and many anxious enterprises.
On September 24, Coca Cola and Mengniu’s joint venture – keniulai dairy products Co., Ltd. (hereinafter referred to as “keniulai”) launched the “fairlife” brand and announced its entry into the domestic low-temperature milk market. Coca Cola said that this was an important measure for Coca Cola to accelerate its transformation to a “whole product beverage” company in China.
In 2017, Coca Cola announced the implementation of the “whole category beverage” strategy in an attempt to get out of the “comfort zone”. Since this year, Coca Cola has successively launched alcoholic beverages and high-end dairy products in the Chinese market. In the view of the industry, these moves are in line with the innovation norm of the beverage industry, but in the face of the increasing competitive pressure of Chinese local beverage enterprises, Coca Cola can not escape anxiety.
For “xianfeile”, the analysis shows that Coca Cola has cooperated with Mengniu to avoid the high investment risk of investing and building factories, laying sales networks and looking for milk sources in China, but the pricing of relevant products is too expensive and coincides with Mengniu’s low-temperature product line. “Whether people in Mengniu system are willing to actively promote xianfeile is a problem”.
“Keniu” product landing
At the new product press conference on September 24, “keniu” announced the launch of “fairlife” full fat white milk, low-fat white milk and chocolate milk, opening up a new track of “original high-power nutritional milk”.
According to its explanation, the so-called “primary high-powered nutritional milk” refers to the use of UF purification and ultrafiltration technology to retain more primary nutrients in milk and remove lactose and other components. It has the advantages of high-powered protein, calcium, zero lactose and relatively long shelf life. Corresponding to “high-powered nutrition”, it is “xianfeile” The price is not cheap. The price of 195ml is 11.9 yuan, and the price of 710ml is 34.9 yuan, which is about 30% more expensive than ordinary high-end white milk. “It is expected to be available in the offline market after the National Day”.
From the anti-monopoly investigation in May 2020 to the establishment of the company in Anhui in October 2020, and then to the appearance of new products in September this year, “keniu” can be described as an orderly progress. Lu Minfang, President of Mengniu, revealed in an interview with the media during the Expo last year that when the two sides initially talked about the “keniu” project, they held an innovative attitude. Coca Cola’s ultrafiltration milk brand fairlife in the United States will be held in Beijing Produced by “keniu” company.
According to the ownership structure, “keniule” was established in October 2020, with Coca Cola (China) Investment Co., Ltd. holding 51% and Inner Mongolia Mengniu Dairy (Group) The company holds 49% shares and its business scope includes the production, sales and marketing of low-temperature milk products. The legal representative and chairman of the company is venkata vamsi Mohan thatI, and Luo Yan, vice president of Mengniu Group, serves as the director and general manager. Lu Minfang, President of Mengniu Group, Edward Frederick burger and Timothy Peter Dolman are also included in the list of directors.
Mengniu previously responded to the reporter of the Beijing news that the joint venture (keniu) will produce and sell low-temperature milk products in China, and it is a brand-new brand.
At the new product launch, venkata vamsi Mohan thatI, President of Coca Cola Greater China and Mongolia, reiterated that the launch of “xianfeile” in China is another important measure for Coca Cola China to accelerate its transformation to a “full category beverage” company to meet the diversified needs of Chinese consumers.
Coca Cola “whole category transformation”
As early as 2016, Coca Cola proposed to be a “full category beverage company”. In May 2017, James Quincey, CEO of Coca Cola, announced the implementation of the “full category strategy” , and said it would lead Coca Cola out of the comfort zone. Judging from Coca Cola’s promotion and acquisition in the global market in recent years, alcohol, coffee and dairy products have become the three business segments to realize the whole category layout.
In 2017, Coca Cola announced its entry into the Chu hi sparkling wine market in Japan. In August 2018, Coca Cola acquired Costa Co., Ltd. for us $5.1 billion, pocketed Costa coffee and obtained coffee business platforms in Europe, Asia Pacific, Middle East and Africa. In January 2020, Coca Cola announced its acquisition of fairlife, an American dairy brand, from its joint venture partner select milk producers At that time, Coca Cola executives said that the acquisition of fairlife was an important step for Coca Cola to become a full range beverage company.
In the Chinese market, Coca Cola led the investment in netred yogurt brand “Lechun” as early as 2018, with a total investment of hundreds of millions of yuan. In 2019, Coca Cola took the lead in selling “sunshine everywhere” original soy milk in the Guangdong market. In June 2021, Coca Cola first launched the alcoholic beverage “TOPO Chico” hard Su sparkling wine in China, and lemonade “lemon Dou” in September Japanese lemon sparkling wine. With the launch of “xianfeile” new product by “keniu”, it is believed that Coca Cola’s “whole category strategy” layout in the Chinese market is basically in place.
It is worth noting that fairlife is a mature dairy brand in the United States. Why did Coca Cola not directly introduce the brand into China, but choose to operate in a joint venture with Mengniu? On September 26, a reporter from the Beijing news sent an interview outline to the relevant person in charge of Coca Cola China. A document sent by the person in charge showed that this is aimed at giving full play to the two sides’ cooperation in dairy product R & D, dairy processing technology and dairy products Brand influence and advantages in distribution channels bring new low-temperature milk products to Chinese consumers and promote the upgrading of Chinese dairy consumption.
Song Liang, a dairy expert, believes that Coca Cola’s own investment in building factories, laying sales networks and looking for milk sources in China has a high investment risk. Binding with Mengniu can avoid heavy asset investment, so as to invest more funds in brand and channel construction.
At present, Mengniu has established 41 production bases in China, holding milk source bases such as modern animal husbandry and China Shengmu. Among them, modern animal husbandry headquarters is located in Anhui with “keniule” company. In December 2020, Gao Lina, former president of modern animal husbandry, revealed at the celebration of the 15th anniversary of the company that “keniule” would invest new professional production equipment in modern animal husbandry Bengbu ranch to produce and sell high-end low-temperature milk, “which will be an innovative milk with high requirements for milk source quality”.
Lu Minfang, President of Mengniu Group, said in a speech at the “fresh Philippine” press conference that the two sides set up their own needs behind the “cow”. In the next five years, Mengniu is the consumer favorite Mengniu and the international Mengniu. The path is local innovation + overseas introduction. As for Coca Cola, “at present, no international large dairy group has achieved comprehensive success in the Chinese market, mainly because it does not grasp the local demand and does not control the local supply chain and product quality”.
Song Liang is worried that fairlife, as a prepared milk, is expensive in the Chinese market and coincides with Mengniu’s low-temperature product line. “Whether people in Mengniu system are willing to actively promote fairlife is a problem”.
“Drinking milk and drinking” can not hide anxiety
The prospect of “xianfeile” is unknown, but in the view of the industry, Coca Cola’s frequent cross-border promotion reflects its anxiety about the traditional beverage market to a certain extent.
A few years ago, the carbonated beverage market was in a downturn. In 2017, Coca Cola’s net profit fell by more than 80% year-on-year, which has become an important factor in its transformation into a “full category beverage company”. In 2018, Coca Cola’s revenue was US $31.9 billion, a year-on-year decrease of 10%, and a total of 1200 layoffs are planned in two years. In August 2020, Coca Cola again announced that it would provide voluntary resignation programs to 4000 employees in the United States, Canada, Puerto Rico and other places.
In the last two years’ financial reports, Coca Cola executives have repeatedly praised China’s business performance. In 2020, Coca Cola’s market value share in China will grow in both Hall Food and takeout channels. In the first half of 2021, the revenue of Swire Coca Cola, the beverage sector of Swire Group, reached HK $27.55 billion, a year-on-year increase of 28%; The net profit attributable to shareholders was HK $1.47 billion, a year-on-year increase of 55%. Over the same period, COFCO Coca Cola’s revenue increased by 19.3% year-on-year to 11.22 billion yuan.
Although the business in China has recovered from the impact of the epidemic, Coca Cola’s local competitors are also rising. Nongnongshan spring, which ranks first in domestic drinks, was listed on the Hong Kong Stock Exchange in September 2020. Bingfeng, an old beverage enterprise, has submitted a prospectus to plan for “the first share of domestic soda”, and the Arctic Ocean is also preparing to land in the capital market through DAHAO technology. Over the past two years, the “dark horse” vitality forest has driven the bubble drink boom. In 2020, the sales revenue reached 2.7 billion yuan, a year-on-year increase of 309%. Tang Binsen, founder of Yuanqi forest, has publicly said that 2021 will become the “product year” of Yuanqi forest, with a performance target of 7.5 billion yuan… Emerging brands and classic domestic products are quite likely to surround Coca Cola.
In April this year, Coca Cola launched ah-ha bubble water, which was involved in the competition for the bubble water market opened by Yuanqi forest. A former Pepsi executive disclosed to the media that at the important meetings between Coca Cola and Pepsi this year, Yuanqi forest will be named, and the topic often revolves around “why Yuanqi forest is successful”.
Wu Xiaopeng, a senior consumer goods investor, believes that domestic beverage brands have great room for development. They mainly drink feelings, habits, mood and social needs. “As long as domestic drinks adhere to the right path, any superstition can be broken”.
Eliminate 1300 SKUs
in two years
Facing the pressure of competition, Coca Cola began to cross borders frequently, trying to find a way to beat the vitality forests. In April this year, Costa announced the launch of a new flavor cold extract series of ready to drink coffee in China; In the second quarter, Coca Cola launched alcoholic beverages for the first time in the Chinese market; In September, “keniu” dairy products also met with Chinese consumers.
While pushing new products across borders, Coca Cola is constantly reducing SKUs. In 2018, Coca Cola cut 700 SKUs. In February 2020, Zhan kunjie, CEO of Coca Cola, revealed at the analysis summit that Coca Cola cut more than 600 products again in 2019. This means that 1300 of Coca Cola’s 2000 SKUs have been cut off since Zhan kunjie took office.
In October 2020, a Coca Cola Co spokesman said that in order to deal with the negative effects brought by COVID-19, the company would reduce its brand and retain those brands that could make a large scale. It is understood that the adjustment scope includes Coca Cola’s coconut water brand Zico, and diet coke, which is not popular in some areas, is also “considering canceling”.
For the potential benefits that new products can bring, Zhan kunjie publicly said a few months after the acquisition of Costa that the acquisition can help Coca Cola make a good product portfolio, but the brand can not become popular overnight, and the beverage industry will not change overnight, which takes time. Coca Cola needs to judge which are small brands with only single digit market share and which are products launched to reach the core consumer group, and gradually cultivate them to become one of the best leading brands. According to statistics, this process may take 7 to 10 years.
Wu Xiaopeng said that the innovation and development of beverage enterprises is normal. Most products have a life cycle, and new consumer groups and habits continue to iterate. Therefore, any enterprise needs to continue to push through the old and bring forth the new. On the other hand, there is a more severe competition pattern in China’s beverage market. New entrepreneurs, communication methods and the birth force of capital make enterprises feel more pressure. “There are few relaxed enterprises and many anxious enterprises. The only way to alleviate anxiety is to continuously improve the team’s ability to deal with the market through profound organizational changes.”
Authors: Guo tie, Wang Ziyang; Source: Beijing News, reprint authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
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