Recently, foodaily observed that plum garden successively launched two products: recovered coconut milk and electrolyte water within a week. Whether from the main concept, positioning scene and packaging style of the product, it seems to be different from the impression of Plum Garden – but we strongly feel that big brother sweet milk is trying to change.
Photo source: screenshot of Liziyuan tmall flagship store
On February 8, 2021, Liziyuan officially landed on the Shanghai Stock Exchange and soared by 44.01% on the opening day. So far, the market value of Liziyuan is 7.7 billion. Li Ziyuan spent 27 years from its establishment to its listing. This is not fast in the food and beverage industry. After all, Yili, a big brother, was founded in 1993 and successfully listed in only three years.
The slow growth of plum garden is limited by a single large single product of sweet milk, as well as the industry vision of the founding team.
The limitation of the industry vision has directly led to the long-term safety of Liziyuan. Even up to now, Liziyuan can not be regarded as a national brand, and its revenue contribution in the East China market accounts for more than 60% of the company’s total revenue. The main purpose of Li Ziyuan in raising funds through this listing is to expand the production capacity of southwest and central China, so as to start the market strategy of Li Ziyuan towards the whole country.
Source: Plum Garden prospectus
Reviewing the experience of Li Ziyuan and its founder Li Guoping, we can find that the slow growth of Li Ziyuan is also related to Li Guoping’s background. From the dairy farmer to the owner of dairy products workshop, and then to the leader of dairy enterprises, Li Guoping has personally experienced almost all links of the whole dairy industry chain. In this way, the bottom-up captain often has a hard to change persistence in his career, that is, sweet milk, which is reflected in the enterprise decision-making level, that is, adhering to sweet milk for a long time and facing the changes of the market, They often lack the courage and courage of reform and innovation.
From three cows to sweet milk faucet
Jinhua, Zhejiang Province is the “hometown of dairy cows in southern China”. 40% of the dairy cows in Zhejiang Province are concentrated in Jinhua. In the 1980s, raising dairy cows was one of the good choices for Jinhua people to get rich.
Li Guoping, 19, has a college degree. At that time, the college degree was enough to help Li Guoping find a good career and live a happy and stable life.
Perhaps because of his restless young heart, Li Guoping finally embarked on the road of entrepreneurship. Raising cows was his first entrepreneurial project. He spent nearly 10000 yuan to buy three cows. At that time, his cows could earn more than ten yuan a day and hundreds of yuan a month, which was a very good income in the local area at that time. You know, the workers were working hard at that time, and their monthly salary was only tens of yuan.
However, the good times did not last long. With more and more people raising cattle, Li Guoping’s life became more and more difficult. The surplus of dairy cows led to poor sales of milk and could not sell at a good price. So Li Guoping changed his direction and started the milk processing business. He and his three partners set up a condensed milk workshop, specializing in the processing of semi-finished milk products, and the products are supplied to milk sugar enterprises in Jiangsu, Zhejiang and Shanghai.
The condensed milk workshop has been open for ten years. Although Li Guoping is not very rich, his life is also moist. In these ten years, Li Guoping has accumulated rich experience in milk business. Ten years later, Li Guoping was in his thirties. His heart was restless again. He wanted to set up his own enterprise and brand.
Young people’s ideas are very good and full of ambition, but the first problem facing Li Guoping is what to call the brand. It was not until Li Guoping went on a business trip to Shanghai. When he saw the word “plum garden” on a road sign, he suddenly opened up and decided to take “plum garden” as the brand name. “Li” stands for his surname, “Zi” stands for his hope for his own brand, and “Yuan” stands for green, health and hope. It is really appropriate to use “plum garden” as the brand name of milk beverage.
In this way, plum garden was born. Due to the accumulation of resources, channels and management experience in the past ten years, Li Ziyuan has developed smoothly and steadily under the operation of Li Guoping.
Cheng also sweet milk, dangerous also sweet milk
Milk beverage is a special category. It not only has the nutritional properties of dairy products, but also has the pleasant flavor and taste of soft drinks.
In today’s consumer market, most consumers should not only be healthy and nutritious, but also enjoy themselves. Milk drinks meet this consumer demand to a certain extent. Compared with dairy products, the drinking scene of milk containing drinks is richer and can provide rich taste choices; Compared with ordinary soft drinks, milk containing drinks can bring certain efficacy attributes. Therefore, in China, milk containing drinks enjoy the market dividend of double category, which has maintained a good development momentum in recent years, and several large single products have been born in this track, such as Wahaha AD calcium milk, whose sales exceeded 3 billion in 2009, Wangzai milk’s revenue approached 6 billion in the first half of 2021, and Wahaha nutrition express’s annual sales exceeded 20 billion at one time, Create a sales myth in the beverage industry!
Photo source: Zhiyan consulting
In contrast, the sales volume of Liziyuan, whose main product is sweet milk containing milk beverage, reached only 1.088 billion yuan in 2020 (including 1.045 billion yuan of revenue of milk beverage, accounting for 96.05%), which still has a very large market imagination space.
But next, how much share can plum garden continue to win in the track of milk drinks? The answer is not optimistic.
First of all, there are great risks in the product structure of plum garden. According to the data disclosed in the prospectus of Liziyuan, from 2017 to the first half of 2020, the market share of milk containing drinks dominated by sweet milk drinks accounted for more than 95% of the total revenue of Liziyuan, and Liziyuan relied too much on the single product of sweet milk drinks.
Source: Plum Garden prospectus
Secondly, from the perspective of the whole beverage consumption trend, consumers’ demand for healthy sweetness (even sugar free) is increasing day by day, while the sweet milk beverage in plum garden mainly uses white granulated sugar with insufficient sense of health as sweetener, which runs counter to consumers’ sweet appeal. Although plum garden’s main market may not have so high requirements for sweetness, with the gradual sinking of soft drink brands such as Yuanqi forest, consumers in the third and fourth tier markets will wake up sooner or later. At that time, plum garden’s sweet milk drink may be in danger of being ruthlessly abandoned.
Source: Plum Garden prospectus
In addition to the lack of sweetness and health, there is a certain deviation between the sweet milk beverage of plum garden and its main concept of “new fresh plum garden”. In essence, although sweet milk beverage has some functional attributes of milk, it is not real milk after all, and it is far from the product feature of freshness. In its advertising and marketing, plum garden continues to strengthen the point of “freshness”. With the gradual improvement of consumers’ nutritional awareness of beverages and dairy products, I’m afraid whether the marketing concept of plum garden will continue to work in the future is not optimistic.
Photo source: screenshot of Liziyuan tmall flagship store
In fact, consumers have long complained about plum garden sweet milk drinks. Whether on social media or e-commerce platforms, there are some consumers’ feedback that plum garden products “smell like milk powder” and “blend like saccharin”. What’s more, some consumers feed back the expired products and quality problems in the comment area of the e-commerce platform. In this regard, Li Ziyuan did not make key mention, but responded that the company would communicate with consumers and relevant departments.
We will not judge Li Ziyuan’s attitude towards this matter, but at least it can be made clear that Li Ziyuan has been vigilant about this matter. It can also be seen from its prospectus that Li Ziyuan will increase efforts and resource investment in product innovation and R & D in the future.
Image source: screenshot of Jingdong e-commerce product review area
Li Ziyuan actively tried and tried new products and entered the live broadcasting room
If you want to walk fast, walk alone; If you want to go far, a group of people go.
In fact, there is nothing wrong with the big single product strategy. At the beginning of Yili’s listing, didn’t it also rely on the “bitter coffee” ice cream division to support 80% of its revenue? Even today, Yili still sits firmly on the “Diaoyutai” with the strategy of large single product matrix. Yili has an annual revenue of more than 80 billion yuan and sits on a super brand with an annual revenue of 20 billion yuan, two 10 billion yuan brands: Jindian and Yili milk, and two 5 billion yuan brands: QQ star and excellent sour milk.
Source: Yili official website
Often, the good market situation of large single products is easy to cover up the problems existing in the products or enterprises, so that enterprise operators fall into the trap of complacency. Business operators need to be vigilant in times of safety, tap potential problems from the appearance of prosperity and find solutions as soon as possible.
Li Ziyuan has been aware of the market problems that may be faced under the background of height growth. Therefore, the prospectus also specifically reminds investors to pay special attention to several investment risk factors, including:
Risk of food quality and safety control, high risk of single product dependence, risk of operation and management of off-site production bases, risks of fluctuations in prices of major raw materials, risks of more concentrated sales areas, and risk of adverse effects of COVID-19 pneumonia on company operations.
It is not difficult to see from these factors that Liziyuan has a comprehensive and clear understanding of its own situation, product dependence, channel dependence and regional concentration Although these problems are not fatal at present, if they are not properly solved and improved, the damage to plum orchard will be heavy and irreversible.
After realizing the risk, how did plum garden solve it? We can get some answers from its public prospectus, the 2021 semi annual report and the questionnaire of investors and research institutions.
1. Constantly enrich the product line and strive to get rid of sweet milk dependence
In fact, plum garden has been relying on sweet milk drinks to constantly explore new products. For example, 18 new products were launched at the dealer conference of plum garden in 2018, including coffee drinks, normal temperature yogurt and stinky milk. Just recently, plum garden has also added 0 sugar and 0 card electrolytic water and coconut milk.
Source: brand house
However, according to the interview of foodaily, these new products are mainly sold on e-commerce shelves, and offline channels are relatively rare. However, from the financial report data, the revenue of the other three items (milk flavor beverage, compound protein beverage and others) except milk beverage decreased to varying degrees. The decline of milk flavor beverage was the most obvious, with a year-on-year decrease of 49.43%.
This fully shows that the new products launched by plum garden in recent two years have not been successful. There are not only the reasons why the new products do not have sufficient competitiveness in the current beverage market, but also the problem of demand mismatch between the new products and the existing sinking channels and consumers of plum garden. Zhu danpeng once pointed out that Liziyuan is mainly in the third to fifth tier cities outside East China, and the retail price of its new stinky milk is close to 10 yuan, which is not easy to be accepted by consumers in the sinking market.
Source: Plum Garden 2020 annual report
As for the innovation of sweet milk products under the sugar free trend, the relevant person in charge of plum garden replied that for the taste of future products, considering that the protein content of milk containing drinks is only 1%, sweetness will be appropriately added to make the flavor better, but sugar will be studied with the R & D department.
It can be seen from the answer that sugar content is a problem that plum garden has paid attention to and started to solve. We will wait and see what changes the next generation of milk drinks will make in response to the sugar free trend.
2. Distribution + e-commerce, expanding from East China to southwest and central China
There is no doubt that Liziyuan does not want to be a regional brand. Going out of East China and expanding southwest and central China is its primary task after listing. According to the data disclosed in the prospectus, as the base camp of Liziyuan for many years, the growth of East China market has gradually shown fatigue. Southwest and central China have two populous provinces, Sichuan and Henan respectively. The future growth potential and predictable market share should not be underestimated.
In addition, the contribution proportion of e-commerce channel revenue is also increasing year by year. In the first half of 2020, the year-on-year growth rate of e-commerce revenue reached 117%, much higher than that of offline regions. Perhaps it is precisely because the double rapid growth of online and offline revenue gives Li Ziyuan confidence that Li Ziyuan dares to use the funds raised from the listing mainly to expand the production capacity of Hebi (Central China) in Henan and Qujing (southwest) in Yunnan.
Source: Liziyuan 2020 annual report & Liziyuan prospectus
Compared with distribution channels, the advantage of e-commerce channels is that brands can directly reach consumer groups and more intuitively perceive the characteristics and preferences of target consumers. At the same time, the flattening of e-commerce channels can also help Liziyuan break through the restrictions of urban level and reach the target groups outside the sinking market (people aged 14 ~ 35).
3. Try new channels to reach new people
In addition to the e-commerce platform, Li Ziyuan also continues to try new communication methods such as live delivery and short video to communicate with young people, which is also a big change it has made. However, judging from the comments of consumers in the live studio and short videos, the selling point of “new and fresh” plum garden does not seem to resonate among young people, and most consumers’ cognition of plum garden still stays on “childhood memory”.
Take the recent live broadcast cooperation between Li Ziyuan and Li Jiaqi as an example. In the short 40 second live broadcast, the anchor emphasized the history of the brand, the memory of childhood, the raw materials and technology of the product, while the “freshness” that best reflects the brand positioning was just a passing sentence. It is a marketing taboo to spend a lot of resources to enter the live broadcast room of top stream anchor for the first time, but not output the brand concept as much as possible.
Photo source: screenshot of Li Jiaqi’s live studio
In other words, whether it’s a new product or a live broadcast, everything is new for the 28 year old plum garden. From the prospectus, we can clearly feel that Li Ziyuan is very self-aware, and it is most important to take the first step of change. As for the effect, we won’t make a final decision first, and time will give the answer.
 Li Ziyuan, Li Guoping: it’s enough to do one thing well in a lifetime, Shanghai Securities News
 Backed by Maotai, can plum garden become “little Yili”? New consumption of weeds
 Sugar free trend prevails. What does plum garden plan to do with “the first share of sweet milk”? New dairy
 Dynamic sales, new product plan, profit space… Li Ziyuan answered these questions! New dairy
 Li Ziyuan stock prospectus
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