Chapter 36 Chapter 5 Boiling 2020, Analysis of China’s Growth Industry

Over the next decade, although this mature industry is unlikely to grow by leaps and bounds, and although its growth momentum will keep pace with the macro economy, in terms of consumers, food, beverages, daily necessities and tobacco The demand for products and other aspects will maintain a stable situation. Therefore, as long as enterprises in this field can enjoy a strong competitive advantage, it is enough to convert it into pricing power and profitability, so as to benefit in the next ten years.Although this industry may seem a bit dull and lacks sufficient risks and incentives, for growth, we need stability more than risks.

Topic introduction: There is also a crisis in oil, salt, soy sauce and vinegar - an irreplaceable trump card - the only way to become powerful Compared with other industries we have listed, the consumer goods industry is a very large concept. For example, it can be divided into food industry, beverage industry, household goods industry, personal goods industry, tobacco industry, etc. The reason why we combine them here is because in these industries, there are same nature. For this industry, stability is its only characteristic, and this stability is manifested in many ways. The first is the profit-making method of the consumer goods industry. Almost all consumer goods companies continue to use the oldest and most common method-manufacturing goods in factories, and then through channels such as supermarkets, convenience stores, shopping malls, and small vendors. Products are sold to consumers.

The second is the stable to almost constant market in this industry. For this industry, it is difficult to expect a large increase in the market for a certain commodity year after year. Therefore, for the consumer goods industry, the total sales of its products The volume is basically stable. It is precisely because of the existence of this situation that the consumer goods industry always presents a tepid scene, whether it is for those operators who have established a firm foothold in this industry or the capital that intends to enter the industry Owners, this industry is not too risky, because even in a recession, people still need toothpaste, and they can't do without toilet paper.

However, even in such an industry, there will also be crises. For example, in the current China, the retail industry presents a situation of strong competition. This situation will not change in the short term, but in the long run, if a large monopoly-level enterprise appears, the consumption of consumer goods will be greatly reduced. It means big bad news for the manufacturers. When a retail company monopolizes most of the market, it means that it has seized the pricing power of consumer goods manufacturers in its own hands, because every manufacturing company hopes that its products can be sold smoothly, and it is sold to this monopoly. Retail enterprises are the only option, so manufacturers have to face many harsh conditions.

The second crisis comes from quality litigation risks. In the past 2008, the most famous news in the consumer industry in China was the quality problem encountered by Sanlu milk powder. After it was determined that it might cause illness, Sanlu milk powder had to be declared bankrupt and put on the market. With the advancement of scientific testing technology, more and more products will face quality thresholds, and such risks are bound to emerge endlessly in the industry. Despite all these problems, in terms of the current industry structure in China, the consumer goods industry will still be one of the most profitable industries in the next ten years.

The reason for saying this is that this industry has three unique advantages. Due to the existence of these advantages, at least some large enterprises in this industry can still firmly grasp the pricing power in the next 10 years. in their own hands. These three advantages are embodied in the following three aspects: First: economies of scale. Second: a strong brand effect. Third: The nationwide distribution channels constitute a huge marketing network. As far as the first point is concerned, those large companies that have firmly occupied a dominant position in the consumer goods industry have all achieved unprecedented large-scale operations. Impossible to catch up.

For example, in the beer manufacturing industry, Tsingtao Brewery, the eighth largest manufacturer in the world, has more than 50 branch factories across the country. Sometimes, because of its wider range of applications, it also means that the development of this technology is more worthwhile. Secondly, large companies in this industry often invest a lot of money and time in brand building.Facts have proved that this behavior of winning the trust of consumers has long-term strategic value. Since the end of the nineteenth century, the brand building of enterprises has taken shape, and its purpose is to provide consumers with a stable and reliable quality assurance. Since then, the brand effect has been gradually endowed with rich connotations, which include both It expresses the demands of an enterprise, and also includes the proposition of its image. Through this process, many well-known large enterprises have developed deep feelings with them after obtaining a high level of recognition from consumers.

In October 2004, such an incident happened to Jianlibao, which was already terminally ill. Distributors from all over the country spontaneously sent delegations to Guangdong to negotiate with the local government to save Jianlibao. At the venue of that negotiation, the dealers representing consumers’ wishes put forward a ground-breaking plan—willing to raise 200 million yuan of their own funds to solve the shortage of funds in Jianlibao, and the dealers will prepay the goods to help the company Normal production resumed, and someone even shouted the slogan "Swear to live and die with Jianlibao" at the venue!

Undoubtedly, in the minds of these dealers, and even in the minds of consumers all over China, the Jianlibao brand is a representative of reputation and quality, from which we can see the importance of this factor. Looking back, in this industry, not all operators can create the same "brand" myth.When small businesses and latecomers simply create a trademark or launch a slogan for a product, it is absolutely impossible to create a brand with high quality, high value, and high market share at once, and a strong brand Construction, often requires successive years of cultivation among consumers.

Because of this, for new entrants and small businesses, branding is an extremely difficult threshold, which requires not only time, but also capital and insight into the market. Finally, the sales network owned by established manufacturers is a competitive advantage that is absolutely difficult to replicate compared to new entrants and small businesses.For example, take Mengniu Dairy Group as an example. The most important point of its success is that it has powerful wholesalers and bottlers. Each of them divides the land in China and controls A large geographical area, relying on this resource advantage, Mengniu has successfully established an incomparably close relationship with the final consumers.

It is precisely because the large producers have such an extensive distribution network that they have an unusual advantage over the competition. In other words, for small businesses and new entrants, building such a network is very expensive. , for this reason, they must establish an alliance with large manufacturers and use their mature distribution channels to sell their products. As we can see, the product portfolio of a large enterprise such as Huiyuan Juice also includes some small business products. Based on the existence of the above three factors, large enterprises in the consumer goods industry have an irreplaceable trump card. It is foreseeable that this killer trumpet will continue to be maintained for a long time in the future. For operators, it means an extremely difficult process to gain the same advantages in this industry. What we have to admit is that in this world, although there are some miracles that seem unbelievable, it does not mean that the king is eternal. With a correct path, latecomers and small businesses also have the opportunity to aspire to the throne. In the consumer goods industry, if a small business wants to become bigger and stronger, it must firmly grasp the following four points anyway: Among these four points, the most critical point is market share. Some people may have doubts about this - if it has a large enough market share, it means that it has already occupied a strong position in the industry, and there is no need to work hard for it. The truth is indeed like this, but we must remember such a reality: In the next 10 years, those brands or companies that have an advantage in market share are more likely to maintain their current position. The reason for saying this is that the change in market share will become smaller and smaller.Therefore, we can even say that if any company is the king now, it may still be the king in the industry in the next 10 years, unless there are great special events, such as product quality, property rights disputes, company scandals, etc. Wait. Therefore, the top priority for latecomers and small companies is to seize as much market share as possible and gradually accumulate their dominant position over time. The second key factor is to maintain a huge amount of liquidity. We must admit that in China, the consumer goods industry is a very mature industry. In such an industry, the key to winning or losing the game lies in having a large amount of free cash flow. The more circulating funds, the greater the room for turnover. You can develop new technologies and products at any time, and you can withdraw in time when the economic situation changes; The space for companies to make choices is also narrower. In a business era full of variables, a strong cash flow means a strong competitive advantage. The third key factor is that the decision-makers have the confidence and complete awareness of brand building. Only when the management builds its confidence in brand building will it start to reserve the strength for brand building, thus providing the foundation for cultivating a strong brand.From one aspect, this awareness also includes the protection of the brand. For example, when a company has a relatively mature brand, it always uses this brand to sell at a low price. Although doing so may increase sales in a short period of time and even obtain a higher market share, this kind of Continuous discounts will eventually endanger the brand itself, and its bad impact is tantamount to killing the chicken and picking the egg. The final key factor is innovation. For consumer goods companies, another key to maintaining growth momentum in the competition lies in the continuous development of a stable flow of new products. Therefore, for a company, the level of innovation is crucial. When this kind of innovation can just cater to consumption When meeting the needs of consumers, the stimulating effect it brings is extraordinary. When we understand these concepts, it means the arrival of a new era. In fact, this momentum is already reflected in the market.As early as October 2007, our domestic consumer price index had reached 6.5%, a figure that hit a new high in the past ten years, and between August and October 2007, the domestic consumer price index It has risen above 6% for four consecutive months. It is foreseeable that in the next ten years, although this mature industry will not grow by leaps and bounds, although its growth momentum will keep pace with the macro economy, as far as consumers are concerned, food, beverages , daily necessities and tobacco products, etc., will maintain a stable situation. Therefore, as long as enterprises in this field can enjoy a strong competitive advantage, it is enough to convert it into pricing power and profitability, so as to benefit in the next ten years.Although this industry may seem a bit dull and lacks sufficient risks and incentives, for growth, we need stability more than risks.