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Author: Liu Xiaoyu Editor: Bobo

During the Double Eleven event in 2019, new Chinese brand Santonban ranked first in coffee sales, and Wang Baobao ranked first in cereal sales. High-end ice cream brand Zhong Xuegao achieved sales of over 2 million in just 46 minutes during the off-season, setting a new sales record.

We can see that more and more new domestic brands are subverting the industry with a new mindset, and even forcing the entire industry to upgrade. For example, Luckin Coffee, through a new Internet-style operation, has driven the coffee industry into a new stage of development.

Today we will discuss how these emerging brands have developed rapidly and competed with traditional brands. (The traditional brands mentioned here refer to brands such as Yili, Quaker, and Nestle that have already gained national popularity in a certain category, such as Nestle Coffee, Quaker Oats, and Yili Ice Cream.)

01. Listen to consumers’ thoughts and reflect consumption upgrades in products

Consumption upgrading has been a very obvious trend in recent years, especially in the food sector.

Consumers are paying more attention to health, purity and no additives in the upgrading of food consumption. As a result, milk tea powder with traditional flavors and non-dairy creamer has begun to decline, and fried instant noodles are no longer popular; while Heytea, which sells real tea and real juice, and ramen noodles with large pieces of meat and vegetables are attracting more and more attention. The similarities of these new brands are: they pay attention to the needs of consumers' consumption upgrades, and their products are significantly different from traditional brands in terms of health, which subverts people's perception of the industry.

Traditional brands tend to focus more on the development of current products and pay relatively less attention to new products.

First, new development trends represent the future, but current sales are not satisfactory and require long-term cultivation. For this, we can refer to the counterattack of Nongfu Spring's Oriental Leaves. In 2011, Nongfu Spring launched Oriental Leaves, which has a future development trend, to enter the sugar-free tea market. Although the product has always had poor sales, due to Nongfu Spring's persistence, sugar-free tea products finally ushered in spring in 2019, with a category growth rate of more than 30%, and Oriental Leaves became the number one brand in this category [1].

Secondly, in a sense, there is internal market cannibalization between new upgraded products and current products. Performance pressure will cause brands to be highly dependent on the sales growth of existing categories, delaying the satisfaction of potential upgrade needs. Since entering China, the best-selling product of Nestlé Coffee is still the three-in-one instant coffee. In more than 20 years, per capita income has increased several times. Why is Nestlé still relying on its old capital? Because the sales volume of this part of the product is too large. Although there is demand for new upgraded instant products, the volume is too small compared to the existing instant coffee.

Thirdly, traditional brands are based on meeting the consumption needs of most people. Therefore, they have a large consumer base and relatively low prices for single products. The main consideration in pricing is the consumption level of most users. At the same time, many traditional brands have leveraged historical factors such as demographic dividends and channel dividends in their development. These factors have contributed to the current size of the brand, but have also shackled the development of the brand, making it difficult to completely break away from them and upgrade. The development of traditional brands is often incremental, with iterative optimization based on existing products. For example, Nestlé's new instant products focus on adjusting flavors and formulas, developing new flavors and new specifications, while the new Ruocu series still contains non-dairy creamer, edible flavors and other ingredients that users consider unhealthy. Compared with ordinary instant products, the new products have no obvious upgrades in production technology and still use high-temperature extraction methods, resulting in a large loss of flavor and taste.

For Santonban Coffee, the only way to succeed is to avoid traditional instant coffee and seek upgraded alternatives. Santonban's products focus on the new consumer group born after 1990, who are under great work pressure and have a strong dependence on coffee. Young people are knowledgeable and have requirements for quality, taste and even packaging, and Nestlé can no longer meet their needs. Although this user group is less sensitive to price and is willing to pay an appropriate premium in exchange for high quality, their consumption is also more rational, mainly based on the demand for coffee's refreshing function. What they need is not freshly ground coffee every day, but better and more convenient coffee products, and upgraded instant coffee is a good choice. Therefore, Santonban has opened up a new blue ocean market.

Santonban products focus on the concept of consumption upgrade. They use cold extraction to extract coffee powder, which better preserves the taste and flavor of coffee. They are soluble in cold water within three seconds and have a higher degree of restoration. The formula contains only coffee powder, without sucrose, non-dairy creamer, flavors and other ingredients, making them healthier than traditional instant coffee.

Image source: Sandunban official flagship store

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The directions of this upgrade include: (1) formula upgrade, introducing healthy ingredients, such as replacing white sugar with erythritol, and replacing artificial flavors with natural extracts, etc.; (2) packaging upgrade, upgrading from large packaging to scheduled and quantitative packaging; (3) processing technology upgrade, reducing the loss of nutrition and flavor during processing, such as replacing hot extraction with cold extraction in coffee processing, and replacing concentrated reconstituted juice with NFC, etc.

Only by providing users with more healthy and natural choices can product upgrades form differentiated competition with big brands.

02. Bypass big brands and create new tracks

Big brands often have heavy sales tasks. Under KPI assessment, product managers place more hope on developing products based on large user groups, thus sacrificing the pain points of relatively small markets.

The development background of new brands is based on a certain group's strong pain point needs. Therefore, although the current base of this group of product users is relatively small, because the pain points are painful enough, the urgent demand for new products is also stronger, and it is a market with large future space. New brands need to make a large share in such a small market, rather than fighting with big brands in the red ocean.

For example, the popular Jane Eyre yogurt in the past two years is targeted at educated mothers born after 1985. These users have strong spending power and higher requirements for products. They hope to give their families better care. Their pain point is that the complex additives in ordinary yogurt make users feel uneasy. However, conventional yogurt brands have not launched suitable products due to cost and price considerations.

Jane Eyre seized this insight and launched 0-additive yogurt. With "raw milk, sugar, lactic acid bacteria, nothing else", Jane Eyre established a moat in the zero-additive market segment. The products developed later strictly followed this rule, even removing sugar, but still maintaining a good taste, consolidating the brand's product barriers and establishing its own unique competitiveness.

Conventional yogurt focuses on traditional KA channels, with numerous brands, low product differentiation and fierce competition. Jane Eyre, on the other hand, expands in channels where the target population is concentrated, giving priority to high-end convenience stores, boutique supermarkets and e-commerce channels. If Jane Eyre competes with Yili, Mengniu and others for lower prices and better channels, I believe it will definitely be a bloody battle and return home empty-handed.

Image source: Jane Eyre Official Flagship Store

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Newcomer companies can grow bigger and stronger in small markets and seize the initiative, which is equivalent to opening a new track next to the original track, thereby realizing brand = category in the minds of users. Only by concentrating resources on a deep field can they open up blue ocean resources in the red ocean and grow rapidly.

The choice of a new track can be the choice of a new scenario, such as Zhong Xue Gao focusing on family consumption and Ramen Shuo focusing on kitchen noodle consumption; it can also be the choice of a new price segment, using higher quality prices to avoid price wars of conventional products and have greater control over prices.

03. Flexible product matrix arrangement, attack and defense

New brands can combine resources to develop products, reasonably arrange the number of evergreen products and popular products, and control the pace of product launches. However, large companies are constrained by cumbersome internal processes and still have a gap in flexible and maneuverable product adjustments.

Here, we use Zhong Xue Gao as an example. After more than a year of development, Zhong Xue Gao has made a name for itself in the high-end ice cream market. In the summer of 2019, Yili also launched a competing brand "Xu Jin Huan", which has many similarities in product positioning and channel layout. After about half a year of development, Zhong Xue Gao's voice has become increasingly louder, but Xu Jin Huan has not received much attention.

Admittedly, sales are affected by many factors such as marketing methods and cost investment, but from the product side, the gap between the two is also very obvious.

Zhong Xue Gao's products are the starting point of marketing. CEO Lin Sheng said: Zhong Xue Gao must restrain the number of new product development and will not blindly expand products. Therefore, each product of Zhong Xue Gao is given a specific function.

We carefully studied Zhong Xue Gao's product line, and found that its products are mainly divided into three types: regular volume products, seasonal products, and hot-selling products. Regular volume products guarantee basic sales, and these regular products give users a familiar feeling; seasonal products, such as the Jingui Red Bean series, have certain seasonal characteristics; and hot-selling products , with extremely novel or extremely high-end raw materials and concepts, provide the brand with topics for communication.

Zhong Xue Gao's evergreen products are kept at around 8 SKUs, which can not only give users more choices, but also avoid cost and inventory pressure caused by too many SKUs. Evergreen products are mainly used to establish the basic interest points of the brand. The raw materials are pure and additive-free. The flavors are mainly traditional top flavors of ice cream. The price is lower, which reduces the threshold for users to try.

Hot-selling products are mainly used to create topics. For example, the Ecuadorian Pink Diamond ice cream launched on November 11, 2018, with a price of up to 66 yuan per piece, refreshed users' perception of ice cream and helped Zhong Xue Gao become famous for its high-end ice cream. Due to the scarcity of raw materials, it is not suitable as a long-term fixed product. This product mainly plays the role of topic marketing and rapid brand dissemination.

In 2019, the brand crossovers with brands such as Three Squirrels, Luzhou Laojiao, and Xiaoxiandun, each of which has high recognition and extreme differentiation, creating enough topics for the brand and grabbing the attention of users. The big squid ice cream from Three Squirrels is a dark dish, but it can arouse the interest of young users; and the bird's nest ice cream from Xiaoxiandun can bring the concept of nourishment and high value to female users. Crossover products are not simply juxtaposition of LOGOs, but creative integration of products.

Image source: Zhong Xuegao official Weibo

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Therefore, you can find that Zhong Xue Gao has unchanging classics and frequently changing novel products. In the effective combination of change and constancy, it gives users a rich choice space and a sense of surprise, thus generating repeat purchases. How important is surprise? Surprise determines whether users have the desire to show off in their Moments, and whether they will recommend this product to their friends.

On the other hand, Xu Jin Huan launched 6 products at once without any new expansion, no flow, and no change. In addition, it is not as good as Zhong Xue Gao in marketing and freshness, so it is inevitable that there will be a gap in sales.

In addition, new brands either have their own factories or have in-depth cooperation with OEM factories, and can even arrange their own production lines in cooperative factories. Production scheduling is more flexible. During the peak season, large brands will be particularly affected by production capacity and focus on producing high-selling products, and cannot reserve sufficient production capacity for small batches and complex process products.

Therefore, people often think that the reason why online brands are successful is because of good marketing, but this is not entirely true. Good products are the foundation of marketing, and only marketing based on good products can get high scores. Otherwise, it will just be an online celebrity product that is short-lived.

04. Emphasize the power of new media and make good use of guerrilla warfare

In terms of communication means, we introduce two concepts: positional warfare and guerrilla warfare.

Positional warfare can be understood as defensive or offensive operations conducted on a fortified position or a field position. In marketing, it is reflected in the company's all-out attack, full-line expansion, nationwide investment promotion, omni-channel distribution and ground promotion, and online and offline integrated marketing, all in an all-round and high-profile manner.

Guerrilla warfare is a dispersed and mobile type of warfare that mainly relies on assaults. It has a high degree of initiative, flexibility and speed, and it uses the weak to defeat the strong. In marketing, it is reflected in the use of surprise attacks, quick decisions, building bases and accurate marksmanship.

Traditional brands are more accustomed to fighting a battle of position in the competition of new categories, such as Quaker Oats. Quaker Oats is affiliated with PepsiCo. With the development of oatmeal snacks, Quaker also launched a sub-brand, Maiguo Crisp, which focuses on fruit-flavored oatmeal. However, in the promotion, it still adopts traditional communication methods, signing spokespersons He Sui and Yang Zi, shooting commercials, doing offline activities, and distributing products nationwide. However, the main groups of fruit-flavored oats are mainly students and young white-collar workers, and the consumption and media contact habits of this group of people are more on the Internet.

Due to limited funds, new brands often use new media to promote their products with content as the main means of communication. They choose several key channels where users are concentrated, which is more in line with the guerrilla warfare. For example, Wang Baobao cereal mainly sells its products online and concentrates resources on the official flagship store. In terms of communication, it uses various grass-growing apps to conduct in-depth content marketing and dig deep into content communication strategies.

It is reported that Wang Baobao's content marketing is not simply to find big Vs to post recommendation articles, but to strategically guide different types of users to widely write recommendation articles and create fancy communication manuscripts. In this way, consumers can establish awareness of Wang Baobao cereals, guide the diversified scenarios of cereals, and strongly associate them with exquisite life and health and slimming.

The team initiated topics such as "101 Ways to Eat Cereals" and "Bao Bao Ambassador's Quick Breakfast Tutorial", printed small cards at the promotional points, and launched the slogan "Write notes and eat cereals for free", guiding pure amateurs to post notes. The advantage of this is that many amateurs can provide high-quality content materials. As the volume of communication increases, it can also attract more amateurs and even KOLs and celebrities to come to the site, achieving a surge in volume. Wang Bao Bao also successfully attracted the vlog star Ouyang Nana's tap water communication and successfully built his reputation.

Image source: Xiaohongshu

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In terms of communication points, Wang Baobao chose channels that young people like and enjoy watching, such as Xiaohongshu and Douyin, based on the media contact habits of the target group, and expressed them in the form of pictures + text, humorous videos, etc. rather than in the form of preaching.

05. Conclusion

Of course, the promotion of new brands cannot be separated from the support of the capital market, and the market that capital is optimistic about is likely to be the future development direction, bringing different upgrading thinking to traditional industries.

There is still a long way to go for current online brands to go from being an Internet celebrity to a long-term success. Traditional brands are also constantly improving. As new brands develop, they will inevitably expand from a niche group to a mass group. How to strike a balance between the personalization of niche brands and the universality of the masses is still a problem facing new brands. Otherwise, Internet celebrity brands will still be short-lived.

References:

[1] “In 2019, first-tier giants have entered the “sugar-free tea” market. Is its spring coming?”, Food Business, September 18, 2019

[2] “69 points, breaking 10 million sales, and becoming the top brand in the category in 18 months! This brand has a big trick to win over young people”, November 25, 2019, Jincuodao

[3] “With over 1 million household users and a doubling of growth for four consecutive years, how can Jane Eyre Yogurt carve out a niche in the dairy industry?”, Matrix Partners, November 25, 2019

[4] “Double 11 Mid-Term Battle: What Did Zhong Xue Gao, Santonban, Zhiguan, and Huasheng Haoche Do Right?”, November 22, 2019, Frees Capital

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