China Food

From 60% to 1%, on the birth logic and growth dilemma of new consumer brands


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a series of paradoxical important propositions about new consumption.
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New consumption is the hottest business concept and the hottest investment track in the past two years. Behind this is the carnival and competition between countless entrepreneurs and capital. A number of brands such as happy tea, vitality forest, perfect diary and bubble Mart stand out and become the object of everyone’s competition to buy and imitate. However, since the second half of 2021, the new consumption track has suddenly cooled down, as if the heat had stopped overnight. The representative brand of new consumption has also been revealed to have many problems. Although it has experienced a gorgeous birth, it has fallen into the dilemma of growth.
At the beginning of 2022, we sorted out the small cycle experienced by the new consumption track in the past two years. Objectively speaking, new consumption is still the general trend of entrepreneurship and investment in the future. But under the trend, what is new consumption? What kind of brand can be called a new consumer brand? Why did these brands come into being? What is the logic and way behind its growth? More importantly, how to break the growth dilemma? These questions seem to be vague, but they must be carefully considered by all entrants who want to survive.
Background of the rise of new consumer brands:
Consumption upgrading and industrial chain dividend
   
At the macro level, in 2019, China’s per capita GDP was converted according to the annual average exchange rate, reaching US $10276, breaking the US $10000 mark. This means that China has entered the upper middle income countries ¹, At the same time, the national per capita consumption power has increased significantly. According to the data, compared with 2016, the population of middle class and above in China will reach 603 million in 2021, an increase of 89%; Personal consumption reached $5.19 trillion, an increase of 68%. ² At the same time, from the urban level, since 2010, the proportion of the third and fourth tier middle class has reached the level of the first and second tier five years ago, the proportion of well-off and mass affluent families is 34%, and the compound annual growth rate has reached 38%. ³ These data correspond to the general trend of consumption upgrading. Under this trend, the rise of new consumer brands is also inseparable from the dividend of China’s industrial chain.
After more than 40 years of reform and opening up, China is the only country in the world with a full industrial chain. Generally speaking, it means that China has the infrastructure and corresponding core competence in every industrial link from raw material production to semi-finished / finished product production, and finally to product sales. In terms of new consumer goods, behind the whole industrial chain is a perfect supply chain and warehousing and logistics system, rich sales channels and media, and high-quality marketing and operation service institutions. This means that the entry threshold for starting a business or creating a consumer brand has been greatly reduced. It is no exaggeration to say that in most consumer goods industries today, as long as you register a company and a brand, you can hire professional service institutions to complete the rest on your behalf.
how to define new consumer brands: from 60% rule to 1% rule

New consumption, there are many statements and definitions. Some say “Xiao Hong Shu is sensible grass, knows grass, grass, tiktok live with goods, and finally Tmall traffic harvest” seems to have long as long as this mastery of this routine can be counted as a new consumer brand. But this is still the representation, you still can not say what is the essence between the fresh and the old.
Until we found some clues in an exchange with President Rong, the founder of Taile brand, we refined it into the rule of “60% and 1%”. When discussing the topic of consumption with President Rong, he said that nestle strictly followed a “60% Rule” when launching new products in the past. In other words, in the new product test, it is possible to launch the new product to the market only after it is recognized by at least 60% of testers. In those days, Tai Tai Le did the same, but today it is found that under the “60% Rule”, the new products can no longer keep up with this era. On the contrary, if you do the new product test again today, 1% of the testers recognize you, like you and are willing to try you, then you can launch the market.
Today, let’s understand the opposition between new consumer brands and traditional consumer brands, that is, from “60% era” to “1% era”, which is a conceptual subversion. Most of the products born in the 60% era are categories and brands that meet the needs of most people. These also support the international giants in the consumption field we see, such as Coca Cola, Nestle, Procter & Gamble, COFCO, golden dragon fish and so on. But in today’s 1% era, these new consumer brands emphasize “some people are keen” more than the public likes, which also means that they pay more attention to personalization rather than universality.
In the field of condiments, Lao Ganma and Hubang are typical cases under the rule of 60% and 1%. In the past 20 years, the old godmother has existed like a God in the industry, not only on the consumer side, but also on the channel side. Mom: if you don’t know how to price your products in the supermarket, you can’t say it at all. Because as long as you sell more expensive than it, you can’t sell it; As long as you sell cheaper than it, you can’t live. Lao Ganma’s success actually stems from a basic public demand for chili sauce. For a long time, brands that imitate godmother didn’t survive.
Today, the prosperity of Hubang originates from the differentiation strategy under the 1% rule. Compared with the tradition, Hubang has created the meat chili sauce category and adopted the aluminum box small packaging design, which is suitable for one person to eat, which is in opposition to the glass bottle suitable for the whole family. On this basis, in order to avoid the strong pressure of the old godmother at the channel level, Hubang opened up the takeout channel, and the takeout was strongly bound with the scene of one person eating. In terms of crowd, Hubang chose E-sports practitioners as the origin crowd. These people are highly dependent on takeout and form a close relationship with channels. Small packaging, takeout channels and E-sports crowd, each point is 1% that big brands or big enterprises don’t look up to, but it has become the soil for Hubang to survive at first.
▲ stand on the opposite side of the old godmother and look for “1%” that the strong opponent doesn’t look up to
Lin Qingxuan is another typical case of the 1% rule. In the competition of skin care products, water, milk and cream have been dominated by Europe, America, Japan and Korea, and it is difficult for new brands to enter the market. Against this background, Lin Qingxuan created a new category of Camellia moisturizing oil, and took the lead in putting forward the concept of “nourishing skin with oil”. The core of its brand success does not lie in xiaohongshu marketing, but in the extreme focus under the 1% Rule: focus on Camellia with Chinese characteristics, and focus on minority skin care products moisturizing oil. Through category education, Lin Qingxuan artificially added oil between milk and cream as a skin care step. For most people, adding steps means cumbersome. It is difficult for you to pry the purchase of most people at first, but for 1% of them, that is, people whose skin needs special repair, this product is extremely effective. Therefore, relying on 1% of the crowd, Lin Qingxuan broke through the traditional blockbuster and became a star brand in the whole skin care competition.
Today, the differentiation of media and channels has also accelerated the rise of new consumer brands under the 1% rule. From TV to the Internet, and then to the mobile Internet, the corresponding media from CCTV to the portal, and then to today’s “double micro one shake”, xiaohongshu, Zhihu, focus and so on. The extreme differentiation of media leads to the fragmentation of information transmission. Similarly, for channels, from the original department stores to chain supermarkets, to today’s offline specialty stores, member stores, chain convenience stores and all kinds of online e-commerce, live broadcast, community group purchase and so on. In this context, it is difficult for new brands to reach most people, let alone please most people. Therefore, following the 1% rule is the basis for the survival and breakthrough of new consumer brands.
how new consumer brands grow correctly: will
expand 1% to 60% or do more 1%?
Being able to successfully tap and select 1% represents the smooth birth of a brand, but it does not mean that the brand will successfully break through the life and death line and grow into a strong brand. After the number of happy tea stores expanded to 800 +, internal management problems broke out one after another; Yuanqi forest has created one or two “hot models” in “After falling into dystocia; the perfect diary has a revenue of more than 5 billion a year, but it is still unable to make a profit; bubble Mart has created a blind box economy, but it has also fallen into the blind box of its own IP expansion. The current situation of this series of new consumer head brands shows a problem: the new consumer brands do not know their own growth path, and do not know how to become bigger and stronger.
Powerful is actually a result of the comprehensive dimension, including brand, supply chain, management, finance and so on. Here we only focus on the brand dimension, because it is the most serious problem faced by new consumer brands.
There are two ways to expand the brand: one is to expand 1% to 60%, and the other is to do more 1%.
Today we see that many new consumer brands have chosen the latter. For example, Xumei took the lead in creating the category of turbine shavers. Less than three years since its establishment in 2018, its product line covers hair dryers, beauty instruments, facial cleansers, and even floor sweeping robots. Another example is the leading brand of vegetable meat in China. On Saturday, tmall stores have four irrelevant product series: steamed stuffed bun, shredded vegetable meat, protein stick and Le shake cup. Of course, for such enterprises or founders, their experience and methods make them more accustomed to making new brands or products and feel more comfortable to expand more 1%. But can 60 1% add up to 60%? Before answering this question, we need to understand an objective business law.
The first 1%, that is, the growth potential of the main category, greatly determines the future development scale of the enterprise. This is because the backbone category will directly determine the infrastructure of an enterprise’s business system: from supply chain to channel, and then from product R & D to media communication. The building process of the backbone category is the shaping process of the whole business system. When we review the business history, there are not many enterprises in the second category that can surpass the first category, and they are basically industry-leading enterprises. For example, Nike started with running shoes, but the second category of basketball shoes has become a brand leader. In addition, in today’s coffee track with the hottest new consumption, Starbucks, the absolute leader in the category of freshly ground coffee, started from traditional coffee, while the subsequent expansion of globalization relies on the coffee beverage – xingbingle. Today, Starbucks sells far more coffee drinks than freshly ground coffee. There are very few similar cases, and most enterprises show a decreasing trend in the revenue or scale of the second or third category. This means:
The vast majority of enterprises or founders must focus on the creation of main categories, expanding the focus from 1% to 60%, rather than doing more. Expanding multiple 1% brands at the same time will only drag brands into different category battlefields. On the one hand, it is difficult to establish a clear and unified brand awareness in the minds of consumers, on the other hand, it will face the competition of several expert brands at the same time.
Today, the vast majority of new consumer brands are still in the stage of 0 to 1. Although the current entrepreneurial environment is relatively loose, in the end, only a few brands can survive. No matter Hubang, Lin Qingxuan, Yuanqi forest and yongpu coffee mentioned above, their 1% is the opportunity to explore in stage 0 to 1, but it is also the passive competitive choice of giant Lin Li. The growth of each brand can’t just stay that only 1% of people like me. When 1% of the people verify, you need to go all out to expand channels, strive to expand the category, that is, expand 1% to 60%, break through the cracks, and finally stand on the opposite side of the giant. Therefore, today we see that the phenomenal vitality forest is difficult to expand from online to offline. However, it must do so. It must roll up its trouser legs, personally expand channels and markets, and expand its base plate, which is extremely important. However, when you become bigger one day, you will sacrifice the identity of new consumption, you will no longer be sexy, and you will become the target of new brand attack. This is the law of business and the fate of big brands.
So when can we expand the next 1%? Before making a decision, you might as well answer two questions: is the main category dug deep enough? Is the brand representative of the category? In other words, if you are already the leader of the category, you can timely find the second and third categories for layout from the perspective of enterprise development.
conclusion

the birth logic of new consumer brands is actually the competition logic of the market under the development of the times. From 60% to 1%, there are unlimited market opportunities behind this, but at the same time, there is also a helpless choice for the fierce attack of traditional brands. Today, the cooling of the new consumption track brings calm and thinking. More people begin to stop and turn around and care about the core issue of brand growth.
1% not only means the expansion of the methodology of building new categories, but also the expansion of the methodology of building leading brands. Even if you seize such an opportunity, you still haven’t got rid of the dilemma of life and death. Only by grasping the category trend, having strong enough strategic determination and making the best of one thing, can we truly become the representative of a category and survive under the jungle law of business.

reference material:
[1] The world bank divides the world’s economies into four groups according to per capita gross national income: low-income countries, lower middle-income countries, upper middle-income countries and high-income countries.
[2] Middle class characteristics, August 16, 2021
[3] According to the data compiled by McKinsey and Zhongwei consulting and research department, “analysis of the scale of China’s middle class, characteristics and portraits of the middle class”, August 16, 2021
Authors: Xiao Yao, Hu Yanan; Source: Reese strategic positioning consulting (ID: positioning pianers), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246); Foodaily fbic & Expo 2022] foodaily daily food joined hands with the world’s top business and industrial partners to build fbic222 global food and beverage Innovation Conference & the first foodaily Expo “new food era – brand ecology” in Shanghai from May 31 to June 2, 2022. We invite you to witness it together. (click the picture to see the detailed introduction). related reading

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