China Food

Investor Huang Hai: capital is cold, but I am still optimistic about new consumption





This turning point was triggered by our publication “capital investment is immovable and new consumption” and signaled by the joint tightening of multiple capitals, which hit the brand side like a flood.
The new consumer market is undergoing an unprecedented reshuffle.
From the explosive growth of the whole year in 2020, the middle waist and even the tail brands have been wildly pursued by capital. Now the brand side has no way to finance, and most funds are closed to online brands, which is only a year and a half.
Cold consumption has become an indisputable consensus in the industry.
When the industry overheated, the capital was dazzled by the growth rate, and the brand side also tasted the benefits of capital assistance. The two sides hit it off immediately. Even if they were not married, they should forcibly obtain the certificate and rush to improve their performance; When the industry cools down, the capital takes the lead in calming down, and the brand side also changes its mind from the flow burning money and settles down to truly create products and value.
Capital has never been optimistic about new consumption. Capital just wants to find brands that can create incremental consumer value and founders who really love products. Consumer brands have never had a chance, but some brands temporarily take the flow as all, ignoring the underlying growth logic of consumer goods.
When consumption was cold, fat whale botf’s future brand specially invited Huang Hai, a well-known consumer industry investor, to do an in-depth interview. The Yellow Sea is not only the pioneer of new consumption investment, but also the researcher of consumption industry. He is the first round investor of the top 1 packaged coffee brand in China, three and a half tons, and the financing valuation of three and a half tons at the beginning of 2021 is 4.5 billion yuan.
In the interview, we deeply discussed the essential reasons for the cold consumption, how the brand should grow when the flow dividend is no longer, new channel opportunities, the commonalities between good brands and potential founders, and the playing method of new consumption in the second half. The following is the interview record. Let’s have a look!
Consumer industry investor Huang Hai
Jingyi: as a famous investor in new consumption, what specific consumption categories do you mainly look at now?
Yellow Sea consumer industry investor
I think 30-50% of consumption focuses on eating and drinking. Eating and drinking is the largest consumption category. The whole industry can be seen from two perspectives: food industrialization and catering standardization.
China lags behind other countries in the degree of food industrialization. If the brand can achieve co creation with the supply chain and turn the just needed categories verified in the catering market into industrial food solutions that can be standardized and scaled, it can create huge commercial value.
Catering is also a good direction. There are dozens of catering brands in the United States with a market value of more than $10 billion, but there is only one in China. The main reason why there were no giants before is standardization and standardization. There is no invoice at the upstream of the catering chain. If there is no invoice for buying vegetables in the vegetable market, it is difficult to explain the financial problems when listing. Now many catering brands have their own food supply chain, so it is easier for brands downstream of the industry to regulate their behavior. In addition, with the popularity of electronic payment, the proportion of cash payment is gradually reduced, and the consumer is gradually standardized.
The rest are various industries such as beauty, daily chemicals and sports fashion. For VC, the biggest opportunity is in the incremental category, which refers to the consumption habits stimulated by consumers, and incremental can bring new innovation opportunities.
For example, young people’s chaopai Sankeng (JK, Lolita, HanFu), middle-aged and elderly people’s favorite consumer goods, etc. Young people’s consumption is well understood. As for middle-aged and elderly consumer goods, it was difficult to do before because people’s consumption habits were not formed. However, the emergence of pinduoduo has greatly educated the online payment and e-commerce purchase habits of the middle-aged and elderly. Although the middle-aged and elderly consumer goods are still in the early stage, they have a better development soil.
Jingyi: now there is a trend called “consumption is cold”. Do you think consumption is really cold?
Yellow Sea consumer industry investor
There are four dimensions of consumption: category, crowd, channel (online and offline) and consumption scene. Now it is said that consumption is cold, mainly because two major events occurred at the channel end and scene end in 2021.
1、 The disappearance of traffic dividends on large platforms has become an industry consensus. In fact, the flow dividend has gradually disappeared since 2020, but the industry has inertia, and both capital and enterprises continue to move forward in inertia. As for why the flow dividend is no longer, the capital is still crazy to invest in companies that burn money? Because investors still like to listen to stories, “although I’m not profitable now, I can use other means to make up for it”, “I do a first, and then I can use BCD to make money”, these are typical story bodies, and whether the story can be established depends on whether the investors believe it. Once the investors no longer believe it, the story can’t make sense, This naturally leads to many business models that are difficult to run without traffic dividends.
2、 Last year, the outbreak of one-time consumption caused by the epidemic gradually returned to normal. The epidemic in 2020 has brought a lot of consumption dividends. The epidemic dividend category refers to the surge in people’s demand for some home consumption categories due to the increase of home time. If a category benefits from this consumption scenario to a large extent, it will fall back to its natural state after life returns to normal. With the normalization of the epidemic in 2021, those brands benefiting from the dividend of the epidemic will naturally be revised. The data shows that the growth rate is no longer or even declining.
Therefore, in 2021, the channel and scenario dimensions will focus on releasing bad data, resulting in the cold data of some consumer brands and the mentality of the capital market.
Jingyi: do you still think consumption will be the general trend in the future? Why?
Yellow Sea consumer industry investor
Previously, the mobile Internet platform that generated huge commercial value was connected with the “connection” problem, such as the connection between people (WeChat), the connection between merchants and users (Tmall), the connection between content creators and users, tiktok, the connection between people and drivers, the connection between people and restaurants, and so on.
China has the most efficient connection in the world, and the connection has two ends. One end is demand and the other end is supply. The essence of consumption is to solve the problem of supply. The platform solves the connection problem, which has been well solved by large companies in the past decade, but now we need to solve the problem of demand and supply in the connection process.
The essence of consumption is to solve the supply problem. To solve the supply problem, we need to do product innovation, not just Internet-based innovation. For example, happy tea is a better milk tea, and Yuanqi forest is a healthier carbonated beverage, all of which are solving the supply problem.
Supply upgrading is a general trend in five or ten years. The supply side reform of consumption can occur in various categories, and any industry can solve and upgrade the supply problem. Therefore, I think the disappearance of this year’s flow dividend and epidemic dividend has no long-term impact.
Happy tea source: Official microblog
Jingyi: when the flow bonus is no longer, how should the brand deal with it? How to obtain positive cash flow in flow play?
Yellow Sea consumer industry investor
We should distinguish between two concepts: one is called bonus and the other is strength. Dividends are universal benefits. For example, enterprises with ordinary products can succeed simply by putting in traffic because of channel dividends; Strength is that now the brand first creates a differentiated product, and still has the opportunity to achieve a low-cost cold start through grass planting on content platforms such as xiaohongshu.
On the whole, I admit that the current situation is much harder than it was two or three years ago, and there is no standardized formula that can be copied. But the flow is only the grasp, not the essence. If the brand wants to stand out, it needs to be more refined and make truly differentiated products. Now it is a competition of comprehensive strength. Although there is no dividend, there are still a few enterprises that can win by strength.
Jingyi: where will the new channel bonus appear?
Yellow Sea consumer industry investor
To tell the truth, the channel is ugly for investors, and most projects are stuck in the channel. However, channel dividends are constantly changing. The previous big bonus is the new content platform represented by short video, but now the content bonus is over. The price of jitter in tiktok in 2018 and 2019 is very cheap, but now it is very expensive.
At present, the new clue of dividend is the connection of three huge ecosystems. Although it is not known to what extent it will be implemented, people sensitive to the industry are already paying attention to it. The three tiktok features are different. Jitter is the best choice for customers to pull, but it is not an electronic business platform. Although it may also want to be an APP, it has not been able to buy and retain its products before. Ali’s pain point is also very clear. Tmall is the position of collection re purchase and brand management, but its innovation lacks a good grasp. Wechat is the place of choice for operators and users. It is the only platform that can realize real DTC with users, and can have in-depth face-to-face communication with users, such as sending preferential activities, collecting feedback, etc.
A tiktok, a buy, a chat, three platforms have their own characteristics but separate each other, which will inevitably cause some brands to shake loudly, and some brands are Tmall. If the interconnection is implemented, can the company’s operation on each platform become a whole in the future? If the platform operation can be integrated, the company’s efficiency will be greatly improved, which will exceed the scope of traffic dividend and become the efficiency dividend brought by interconnection.
Jingyi: what changes have taken place in your current and previous investment logic? What do potential brands and founders have in common?
Yellow Sea consumer industry investor
There is no change in the investment logic. We are all looking at the problems around those four dimensions.
Consumption solves the supply problem, and the first principle of the supply problem is the product problem. Therefore, good consumer companies need to differentiate their products and increase the consumer value that did not exist in the industry before.
As for good entrepreneurs, they need to really love their careers, such as jobs to apple, Zhang Xiaolong to wechat, Nie Yunchen to tea, Wu Jun to coffee, etc. They are very immersed in their own business, and the external “brakes”, hot and cold and ups and downs will not disturb their original intention. They are very satisfied with the exploration of products. Such entrepreneurs are likely to succeed.
Jingyi: is there still a chance for the new brand in the track with obvious head, such as the coffee track where three and a half meals are located? What should the brand do if it wants to overtake in a corner?
Yellow Sea consumer industry investor
For me, the three and a half ton track is over. I define this track as packaged coffee products, that is, industrialized coffee. Coffee track mainly depends on two categories: stores and industrialized products. There are still some opportunities offline, but this is another track. Investors are very concerned about whether the invested brand has the opportunity to become the head, because the exit probability outside the top three is very slim.
What investors want most is that there is no track head, which may become the first brand; Or the track has a head, but has a differentiated innovation brand. If the brand can differentiate a new battlefield, such as new scenes and new user minds, it will have the opportunity to create the head of subdivided minds and become the first in its own definition. The most typical example is Jiang Xiaobai, who made a difference in the Baijiu field. The Baijiu, which is the main young liquor, has become a local head. So there is an opportunity.
Slide around , , to see more three and a half coffee source: Official microblog
Jingyi: now many brands don’t want to burn money and invest in traffic. They want to play slowly according to their own rhythm, but the capital doesn’t recognize it. They think the return efficiency is too low. What do you think is the correct growth mode of the brand?
Yellow Sea consumer industry investor
The answer is simple and difficult: make money while growing. When the industry is very prosperous, it is unhealthy for start-ups to burn money in exchange for growth. This unhealthy growth model has now been corrected. This “cold” is healthy for the industry. In fact, entrepreneurs can have many choices, such as not relying on capital, slow growth and maintaining healthy profits, so there will not be too much pressure.
The essence of enterprise loss is that consumer value is not strong enough. Traffic delivery capability is only a way for brands to better contact consumers after supply. It is plus, not base.
For example, three and a half meals, the data in the past few months nearly doubled year-on-year. Its growth is based on the general trend of the rise of the whole coffee category and the value created by products for consumers. Last year’s epidemic was not a major event for it. For companies that made real innovation and user value in the big wave, short-term dividends were insignificant. For those companies greatly affected by traffic changes, the essence is that the increment of consumer value is not thick enough, and the data growth can only be attributed to the epidemic and traffic dividends.
Jingyi: now a lot of capital has invested in channels + brands, such as coffee, tea, etc. What do you think of the explosion of offline formats? Do you think capital is invested in products or space?
Yellow Sea consumer industry investor
Offline mainly depends on the adaptability of channels to categories and people, and whether the category has strong on-site delivery and strong experience attributes. For example, catering needs to be delivered on site, such as freshly ground coffee and freshly made drinks, so it is naturally suitable for offline. If it does not belong to these two attributes, enterprises need to answer, why is it better to do offline than on the Internet? This question is not easy to answer for most companies, because the Internet is obviously more efficient.
As for space, the first principle of space is social rather than products. In the final analysis, this business model is the ability of enterprises to talk about rent. Compared with products, space differentiation is more difficult to create. In some industries where it is difficult to create differentiation, the business competition is generally cost. Therefore, I personally think space supply is not suitable for start-ups.
Jingyi: now it is in the stage of intensive listing of DTC brands in North America. What do you think of this phenomenon?
Yellow Sea consumer industry investor
Today, most of the consumer giants in the United States were established before the emergence of the Internet. Therefore, the investment timeline of the United States is opposite to that of China. It is to invest in consumption first and then the Internet. Starbucks also raised VC money in the late 1980s. Even so, there are still so many DTC companies listed in the United States, which proves that consumption is a very large market.
So far this year, Chinese investors have focused on consumption for only a few years. In terms of long-term growth factors such as population consumption power and categories, China has more opportunities than the United States, so China’s consumer market opportunities are obviously greater. It’s an excellent track, which explains why I only look at consumption.
Jingyi: is this a good time for the brand to go to sea? What is the best way for Chinese consumer brands to go to sea?
Yellow Sea consumer industry investor
For good consumer companies, China’s consumer market is huge. They can finish China first and then make a brand to go to sea. Because brands go to sea not only by selling goods with supply chain dividends, but also by showing the image and potential energy of Chinese brands to the world, just like Starbucks, lululemon and Nike entering China.
therefore, I think the big wave of brand going to sea will come a little later. At that time, the domestic top brands, such as three and a half meals and happy tea, will tend to stabilize their market share in the domestic market. If enterprises want to pursue greater growth space, they must consider going to sea, just like what happened to American brands in the 1970s and 1980s.
Jingyi: you recently invested in the convenience food brand Huang Xiaozhu. Why do you think Huang Xiaozhu is worth investing?
Yellow Sea consumer industry investor
One of the largest categories in the takeout market is porridge. Among the four staple foods most commonly eaten by Chinese people – porridge and noodles, only porridge has not been well solved by industrial products. I hope Huang Xiaozhu can solve the problem of industrialization of basic ingredients. As a common example, up to now, no company in China can make preserved egg lean meat porridge into industrial products. The industrialization difficulty of preserved egg lean meat porridge objectively exists. If Huang Xiaozhu can solve this problem, it can create great value.
Jingyi: since the difficulty lies in the supply chain, is the investment value of the supply chain greater?
Yellow Sea consumer industry investor
It doesn’t make much sense to invest in the supply chain. The valuation of the supply chain is 10 times PE. We should invest in integration. The supply chain of three and a half meals is scarce, but we still have to invest three and a half meals. Because the brand side controls consumers and has consumer insight, the brand side can lead the co creation process with the supply chain. The brand has higher value in the capital market and can realize high market value, and then take 1 / 10 of the financing amount to upgrade the supply chain.
Jingyi: what changes have taken place in your mentality in the past few years of investment and consumption?
Yellow Sea consumer industry investor
When the consumer industry is hot, as an investor, I need to consider a lot of competition. Now it is a good time for me to turn cold in the industry. I enjoy doing things on the edge because I think all innovation takes place on the edge, not in the center of the stage and in the spotlight. When I first started watching consumption, this industry was not the mainstream of investors’ attention, so I was very comfortable. From the second half of last year to the first half of this year, when consumption was the hottest, I was actually very anxious. Everyone rushed in and robbed, and now I’m back on the edge.
Now the unnecessary and internal competition will gradually decrease. I have more time to settle down and have in-depth communication with entrepreneurs. I don’t talk about the outside, only the inside, without too much noise to interfere. When I first watched three and a half meals, no other investors paid attention to it, and no one robbed it. We can explore people, users and products in depth.


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