Produced by Huxiu Business, Consumption and Mobility Group

Author Miao Zhengqing

Titled Visual China

New domestic products are falling into anxiety , and international big names are waiting eagerly.

On February 9, some media broke the news that Heytea was conducting large-scale layoffs, involving 30% of its employees, and some departments were completely laid off. HeyTea responded immediately, stating that the rumors were untrue. Just one day ago, Naixue's Tea issued a profit warning. Although its revenue has increased by more than 40% year-on-year, it is expected to have an adjusted net loss of 135 million yuan to 165 million yuan in 2021, the fourth consecutive year of losses.

As new local brands encounter growing pains, big international brands have found a good opportunity to expand again: Starbucks released its first quarter financial report for fiscal year 2022 during the Spring Festival (October 4, 2021 - January 2, 2022 Japan) data shows that this is the fastest quarter for Starbucks to open stores since entering the Chinese market - 197 new stores were added in a single quarter.

While expanding its territory, Starbucks has also re-extended its tentacles into the local tea drinking hinterland. In 2021, Starbucks will re-adjust the proportion of tea product lines in some key cities. Some stores will adopt a model of one floor for coffee and two floors for tea. Starting from 2020, Starbucks will re-launch tea specialty stores on the market. Industry insiders believe that in 2022, international "catering and beverage" brands such as Starbucks will put greater pressure on local tea brands.

This is like a microcosm. After several years of rapid development, local brands have encountered stronger opponents at a still immature age. And the hot money that supported their rise in the past few years is quietly retreating. According to the "2021 New Tea Drinks Research Report", the growth rate of the new tea drinks market in 2021 has slowed down from 26.1% in 2020 to 19%. Under the impact of the epidemic, more than 70% of new tea brands cannot sustain for more than 20 months.

The same anxiety also occurs with other new domestic product categories.

“This is the most difficult moment since I started my business 18 years ago.” Lin Qingxuan founder Sun Laichun told Huxiu that when he heard that Chanel released red camellia products on January 3 this year, he felt that a fierce battle was about to begin. start.

No coincidence. The founder of a local beauty brand was getting together with friends in the industry before the Spring Festival. After drinking two glasses of warm wine, he burst into tears. He said that he had "never felt so powerless since he started his business." Just a few months ago, The world-renowned cosmetics giant has created a new sub-brand and officially entered the Chinese market, and the main product of the sub-brand "coincidentally" coincides with the founder's project.

Statistics from Tmall and JD.com show that in 2021, major international brands such as L'Oréal, Procter & Gamble, and Nestlé not only increased the launch of new products in the Chinese market, but also accelerated the speed of SKU iteration. Some sub-categories that previously had little interest in big brands have been quickly targeted by big brands and "occupied" with new products.

The "crazy output" of international big names is regarded as a dive offensive: with stronger brand potential, financial strength, supply chain system, and talent reserve, they are like lions suddenly rushing into a pack of wolves. ——Caught local brands off guard and increased their anxiety.

This anxiety is not unfounded. In 2021, international big brands have an absolute advantage in both online and offline channels. Taking the live broadcast room as an example, nearly 80% of the high-quality slots have been won by international big brands; relying on price reduction strategies, some international big brands have achieved great success in 2020 and 2021. Sales surged during Double Eleven, leaving local brands with no room to raise prices; on the talent side, major international brands launched a round of local talent recruitment after the epidemic, and "poaching" became the main target for many new local leading brands. Same experience...

Many investors and industry insiders believe that starting from 2022, new local brands will face a more "cruel" jungle world: more expensive traffic, more picky users , international big names who are more eager to compete. Capital is also becoming more cautious about "investing in new consumption". Some investors told Huxiu that some tracks where it was easy to get money in 2018~2019 have seen "hot money recede" starting in 2020. By 2021 In the second half of the year, we are on the verge of a "money shortage".

"There is not much time left for new local brands." Some entrepreneurs and investors have already predicted the life and death line: the next three years will be a big test for new local brands, and those who cannot withstand international New brands that are swooping in with big names can only be washed away by the big waves.

Three Wars

Big international brands are exerting pressure on new local brands from three dimensions, and the first one is brand mentality.

An industry insider familiar with Perfect Diary founder Huang Jinfeng told Huxiu that Huang Jinfeng once talked about a confusion he had: If a consumer uses up a YSL lipstick, the consumer’s first reaction is often "Is there something wrong with the way I use it?"; but if a consumer breaks a stick of Perfect Diary lipstick, their first reaction is often "There is something wrong with the quality."

“This is not just the confusion encountered by Perfect Diary. Almost every new local brand faces this problem. Big international brands have spent decades or even more than a century building their brand power and deeply affecting the minds of users. , and our new brands have generally just emerged in the past 3 to 6 years, and there is not enough time to slowly build the brand mind." US stock analyst Liu Bin told Huxiu that what is hidden in the longer "mind building period" is. Intergenerational dividend: When both grandmothers and mothers use a certain brand, the younger generation will naturally enter the brand’s “potential user pool.” “Although there is intergenerational rebelliousness, this rebelliousness sometimes deepens awareness. . ”

Sun Laichun felt deeply about this: “We have spent 10 years building a mental moat, but now it seems that this moat is not deep enough for the brand. The difficulty is not the raw materials or the super-large single product, but what does the brand represent in the minds of consumers?” Sun Laichun told Huxiu that when Chanel entered the red camellia series of products in a high-profile manner, he felt like he was holding on to it. A trembling little character with a millet and a rifle" and the opposite is "like a giant with cannons, aircraft carriers, nuclear weapons, a century-old history, and deep pockets."

The detail that impressed him was that on traffic platforms such as Weibo, Chanel has a large number of fans, and some Lin Qingxuan users are also deep fans of Chanel - when he posted several articles and "Chanel layout red camellia products "After the relevant Weibo posts, some users even "turned against the water" and took the initiative to side with Chanel. "We feel like we are being attacked from both sides. Consumers are our treasures, so we can only quickly appease them."

In 2021, major international brands will further give full play to their "brand mental advantage". An unnamed person in charge of a leading e-commerce platform told Huxiu that some previously “promotion and delivery models that were looked down upon by big brands have begun to be adopted by senior management.”

A typical case is Estee Lauder. For the first time in history, a budget has been arranged for "Taobao customers" in 2021. The person told Huxiu that before, leading brands such as Estee Lauder had almost "not touched Taobao customers" and would not even prepare for this fee at all.

In addition to skin care and beauty, the same thing also happens in coffee, shoes and clothing, pets, trendy toys and other fields. Take coffee as an example. A leading international coffee brand not only increased its marketing budget in the Chinese market in 2021, but also almost reorganized its marketing team. In Douyin, Xiaohongshu and Bilibili, the brand has cooperated with a large number of experts and MCN organizations, and has begun to establish its own live broadcast system. Just two years ago, the brand's top executives were still taking a "cautious and hesitant" attitude towards these new traffic delivery models.

This change of big names is summed up by insiders as "down to earth". And the down-to-earth marketing model has doubled their brand’s mental dividends. The person in charge of a marketing agency in Beijing that specializes in serving consumer goods companies told Huxiu that MCNs, UP owners, and KOLs themselves also hope to gain support from big names. “At the same price, people tend to give priority to cooperation with international big names because this will have an impact on the future. It’s beneficial to take orders. The more realistic situation is: the money paid by international big brands is generally slightly higher; as Party A, they are generally more professional.”

Outside of the mind, channels have become local brands and brands. Another main battlefield for international big names.

A local sparkling water brand will encounter strong channel pressure in 2021. In the CS channel and KA channel, big brands such as Coca-Cola are almost "firing on all fronts". (CS channel: mainly convenience stores; KA channel: mainly hypermarkets)

Industry insiders told Huxiu that these big brands will increase their presence in CS and other channels in 2021, and CS Channels are precisely the key port for the rise of new local beverage brands after 2018.

The same thing also happens in the field of skin care and beauty. In 2021, local beauty collection stores will start a business boom, and brands such as Huamei, Heidong, and Colorist have entered a period of expansion. But it is worth pondering that the wave of entrepreneurship in beauty collection stores has not brought real dividends to local brands. Instead, it has been international big names, sub-brands incubated by big names, and foreign niche leading brands that have tasted the dividends.

An anonymous beauty collection store brand founder told Huxiu that in 2021, some big international brands have increased their "door-to-door sales" efforts, which she felt was "unexpected." "From 2018 to 2019, we had to find ways to contact these big brands to try to form cooperation. From the second half of 2020 to 2021, the big brands lowered their posture and became more open to these local channels than ever before."

She once received a strange call at 10 o'clock in the evening, claiming to be the person in charge of the Chinese market of a second-tier European brand. The other party said that he wanted to give away some of the new products of his sub-brands for free and "test sell" them in his stores. The founder bluntly said that her first reaction at the time was that she had "encountered a scammer." Unexpectedly, a few days later, the marketing manager contacted her again through a friend, and the two parties finally formed a cooperation.

"In 2021, why can't many new local brands find offline outlets? Because the products of international big brands are flooded here. The big brands are not aiming to target anyone, but the indirect result is to bring new local products There is huge channel pressure.”

Channel battles are also taking place in the online world.

In 2021, high-quality live broadcast room slots will become even more scarce. A person familiar with Tmall told Huxiu that in the field of cosmetics, big international brands will increase their investment in online live broadcast rooms in 2021, especially mid-waist anchors and head anchors (except for several super anchors). Strong head anchors), and in order to improve their "sense of luxury and influence", these anchors often give priority to cooperation with international big names. During the peak live broadcast season, even 80% of the slots in some live broadcast rooms are occupied by international big names or their subsidiaries. Brand "seize". "Statistically, the total number of online sales received by new local brands in 2021 is relatively small in recent years."

The "war" has also expanded to the raw material and supply chain levels.

On the coffee track, due to high shipping prices and the impact of drought and frost in Brazil, high-quality coffee beans have become scarce and prices continue to rise. And international brands such as Nestlé have completed their coffee bean reserves early by virtue of their resource advantages.

Someone familiar with Nestlé told Huxiu in 2021 that Nestlé and other brands have sufficient raw materials in warehouses in China and have already completed orders for the coming year. "The uncertainty of upstream raw materials will have a relatively small impact on the super big brands such as Nestlé, but will have a greater impact on some new local brands - especially those new brands that are highly dependent on overseas coffee bean resources."

The person said that because Nestlé has the world's top purchasing volume, when global coffee beans enter a scarcity cycle, suppliers will also give priority to Nestlé's orders and even "maintain prices appropriately" because of long-term cooperation in the future. "We won't raise prices excessively.

But for local brands, it is not so easy to solve the problem of coffee raw materials. An anonymous dealer told Huxiu that on the one hand, local brands need to increase prices to obtain high-quality overseas coffee beans, which increases cost pressure; on the other hand, due to the reduction in production of some coffee beans, some small and medium-sized local brands have no choice but to obtain beans. The next best thing is to change varieties - this leads to changes in taste and makes brands face more uncertainty on the C-side.

In fields such as cosmetics and toys, the pressure on the supply chain is most obvious on the foundry side. Taking toys as an example, Guangdong has the world's largest toy OEM base. When the epidemic was at its worst in 2020, some overseas orders were shelved, which gave local fashionable toy brands a rare "good opportunity to blank OEM production capacity." In 2021, as some overseas orders recover and several international toy giants increase their penetration into the Asia-Pacific market, Guangdong's production capacity begins to tilt towards international brands.

Ma Ming owns a medium-sized toy foundry in Dongguan. He told Huxiu that some local trendy toy brands have repeatedly experienced "out of stock" problems in 2021 precisely because of "insufficient foundry production capacity." "Since toy OEM is a matter that requires long-term integration between the brand and the OEM, most OEMs are willing to continue to deeply bind with international brands that they have cooperated with for many years. The production capacity obtained by local brands during the epidemic is an accidental phenomenon. , but it is difficult to transform this kind of accident into sustainability."

Faced with the challenges launched by international brands in three dimensions, many local brands have begun to think about it, and everyone wants to understand the "big brand offensive wave". "The underlying logic behind. There are also some foresights. They had expected this scene a few years ago, but the reality came faster.

There are traces and unexpected ones

Wu Jun, the founder of Sandun and a Half, told his friends in 2020: It is only a matter of time before big brands encircle local brands. Wu Jun's judgment at that time was that it would take about "two years" for big names to "react".

Everything came earlier than expected.

In October 2021, Nestlé and Starbucks collaborated to launch the first premium instant coffee-the new Starbucks Super Premium Instant Coffee with Star Cup. This is an instant, recyclable, freeze-dried product made from Arabica coffee beans. (Huxiu Note: In 2018, Nestlé permanently bought out Starbucks’ global “sales rights for coffee and other catering products outside stores” for US$715 million, and the revenue from such products was included in Nestlé’s financial report.)

It is worth noting that in the "online world" of coffee in 2021, the competition between Nestlé, Starbucks and Three and a Half Meals has become "white-hot." Taking the retail sales ranking of e-commerce channels as an example, although Nestle is firmly in the first place, the gap between it and the second place is gradually narrowing. During the Double Eleven period, Santon and a Half and Nestlé ranked first and second on the Tmall platform respectively.

The launch of premium instant coffee products is regarded by the industry as "Nestle's entry into the hinterland of new local brands such as three and a half meals". An unnamed coffee industry analyst told Huxiu that three local brands, Sanden and a Half, Yongpu, and Sumidagawa, have gained a considerable share of the coffee market from international big names in recent years. "Their strategies are to open up a new category and become its leader. The current strategy of big brands such as Nestlé is to directly enter this category, in other words: to fight head-on."

It feels like big brands are coming For those who are early, there is also the cosmetics industry.

Sun Laichun said that his earliest prediction was that big brands would not launch a "dive offensive" until one or two years after the epidemic has passed and the brands have completely recovered.

Since both South Korea and Japan have camellia producing areas, Lin Qingxuan has been "worried" internally that big Japanese and Korean brands will take the lead in entering the camellia category. However, their investigators have not seen any action by the big Japanese and Korean brands. Just when they were "slightly relieved" , Chanel came first.

"During the epidemic, our vitality was severely damaged. It was like we had just finished a fierce battle without a complete rest and recovery, and then we faced a super opponent."

Founder of Fengrui Capital Partner Li Feng told Huxiu that the epidemic has seriously affected the sales budgets and inventories of large companies around the world. In order to clear inventory and solve the problem of high e-commerce penetration in China, some big brands have provided special "price lines" to the Chinese market since 2020. ". In the past, these brands were not allowed to "sell at broken prices" under any circumstances. On the basis of breaking prices, the sales of these brands have surged since Double Eleven in 2020, and the same thing has continued into 2021.

An unnamed person in charge of an e-commerce platform pointed out another reason for the "swooping offensive" of big brands: In the Chinese market, some big international brands have seen weak growth in 2019. On the one hand, the newly rising local Generation Z has begun to have a stronger interest in trying new brands. On the other hand, new local brands have taken a strong share of the market as "low-price substitutes".

A key detail is that in 2020 and 2021, after some coffee and cosmetics giants adopted low-price strategies, their growth rates were barely maintained at the level before 2018. In other words, without price reduction dividends, these brands It is likely to continue to face "weak growth."

“From 2020 to 2021, many international big brands have changed their senior management teams in the Chinese market. Two factors are very critical. First, the Chinese market has become an indispensable and dynamic market for big brands during the epidemic. On the other hand, the headquarters is dissatisfied with the brand’s growth trend in the Chinese market in recent years.” The above-mentioned person told Huxiu that due to the “normalization” trend of the epidemic around the world, major international brands have changed their strategies in advance and started to make drastic changes in 2020. Strengthening changes in the Chinese market - this has led to local brands facing strong competition early.

The strong competition that appeared early caused local brands to lose part of their market share: under the price-cutting strategy, major international brands began to show strength on e-commerce platforms in 2020. Taking skin care products as an example, in Among the top ten annual sales lists, an average of 8 spots per year are occupied by major international brands and their sub-brands during the two-year period from 2020 to 2021.

Hidden pressure cannot be ignored. Due to high shipping prices and oil prices, most brands will face higher cost pressure in 2021 - which has led to the continuous erosion of the profit margins of local brands. The resource network formed by international brands with their larger size and historical advantages has stronger ability to withstand pressure. This means that when international brands engage in price reduction and gift wars, local brands can only maintain conservative defense at the original price.

"Moreover, local brands are worried that price cuts will affect their brand power. The brand image formed after 3 to 5 years of hard work may be wiped out due to price cuts."

This may be revealed from history. The direction of the entire plot: According to Li Feng's analysis, around 2000, there was a wave of "big brand replacement" in China, and some local brands also appeared. These brands were mostly distributed in the fields of daily chemicals and Nissin. But the good times did not last long. From 2003 to 2004, the daily chemical giant Procter & Gamble began to cut prices in the Chinese market, and the price reduction strategy continued until 2006. As a result, in the market of 2007, many local brands that appeared around 2000 have disappeared. What is worth pondering is that in the past few years, oil prices have continued to rise, even tripled. Under such circumstances, local brands have encountered two major challenges that affect their lifeblood: raw material costs continue to rise + price reduction space is suppressed by big brands.

The same thing happened in the Japanese and Korean markets. Sun Laichun told Huxiu that in the 1970s, a number of local brands appeared in the Japanese and Korean markets. They rose rapidly and took away part of the market from international brands with higher cost performance. At that time, international big names also began to "swoop and attack" in the Japanese and Korean markets, but brands like Sulwhasoo held on and eventually survived, gradually developing into big local brands. "The story we are facing now is almost the same. If we local brands cannot hold on, then the market will be reoccupied by international big names. If we can survive, then China will gradually give birth to a number of local international big names. ”

Three years of life and death battle?

An investor who focused on investing in new consumer projects from 2017 to 2021 told Huxiu that 2022 to 2025 will be a "life and death test period" for local brands, but he is not optimistic. He believes that in the past Among local brands born within a few years, more than 80% of projects will eventually die.

"Those brands that rely solely on marketing will die quickly, because the capital circle will no longer spend money." The investor said that starting in 2021, the capital circle will become more enthusiastic about new consumer fast-moving projects. Has cooled down.

The consumer investment boom in 2019~2020 is a "short cycle" caused by accidental factors: on the one hand, on the traffic side, the reform of Taobao and the rise of Douyin in 2018~2019 brought traffic dividends to the market; on the other hand, due to the epidemic factors, Basic daily consumption has become the greater certainty amid uncertainty, attracting hot money.

"This craze has actually cooled down in the second half of 2020, and the capital circle is also returning to rationality." The investor believes that a key point in returning to rationality is: Everyone realizes that this wave of investment The "boundary" - you won't vote for the next L'Oreal, you can only find the head of a new category. "It is not only capital that makes L'Oreal born, but also time."

"In 19 ~In the 20th century, there have been several major cycles in the field of consumer goods. There are some fundamental laws that new local brands should understand and learn from. "Liu Bin believes that new local brands should first stick to their basic market in 2022. In order to maintain a dominant position in subdivided categories and strengthen category thinking, "Whether it is Sandun, Huaxizi or Bubble Mart, we need to temporarily put aside our ambitions for greater diversification and expansion and return to the basics."

This is also the development pattern of Procter & Gamble, Nestle, and L'Oreal in history. Take Procter & Gamble as an example. The company has been producing soap (and candles) since its founding in 1837, and has made itself the "King of Soap" for nearly 100 years - when people think of soap, the first thing they think of is For a moment I thought of Procter & Gamble. From today's perspective, P&G created and defended its own category. It is worth noting that P&G began to gradually diversify and expand nearly 120 years after its founding. During the expansion process, P&G has always adhered to the "close relative radius" of the basic market and has hardly left the basic market.

The same story can be seen from the development history of Sulwhasoo in South Korea, and Sulwhasoo may have greater reference significance for local brands - in the history of its rise, it has also encountered swooping offensives from international big names. In the nearly 10 years since its establishment, Sulwhasoo has always adhered to the basic concept of "ginseng-based skin care products". In fact, this development strategy of adhering to subdivided categories has allowed it to survive the fierce competition: international brands enter When the same category was launched in the Korean market, Sulwhasoo had already formed a strong user mental moat in the field of "ginseng-based skin care products".

"In the next three years, we will not be competing for expansion, but for maintaining success. Those who can grow steadily while maintaining success will be successful." The above-mentioned investor said that in 2022, many brands will encounter the first The problem will be a lack of money.

An entrepreneur who started a capsule drink business in 2019 told Huxiu that it would be difficult to raise funds for his project in 2021. "Investors require the ability to monetize first, and they are more willing to support projects with hematopoietic ability."

Hematopoietic ability has become a "high-frequency vocabulary" in the consumer venture capital circle since 2021. But making money is becoming more difficult. Someone mentioned a key lifeline issue to Huxiu-since 2021, the growth rate of consumers’ consumption power has generally slowed down, and some consumers have even experienced a decline in consumption power. Under such a premise, the price-cutting strategies of big international brands have quickly taken away consumers' spending power. From a fundamental point of view, the market faced by local brands in 2022 is already a market with "limited spending power".

In the past few years, the development models of many local brands have been highly homogeneous - this will make local brands more fiercely and cruelly compete for limited consumption power.

It is worth noting that the vast majority of new local brands have not fully recovered from the "severe damage" caused by the epidemic, which will continue to put new brands under pressure: take Perfect Diary and Huaxizi as examples. Due to the mask effect caused by the epidemic, the entire beauty industry is in the depths of winter, and it will be difficult for the beauty industry to fundamentally solve the "key pain points" caused by masks in the short term.

In a more fierce world, talents have become even more scarce.

More than one local brand founder told Huxiu that his middle-level or key employees will be recruited by big international brands in 2021. "In the fields of cosmetics, beverages, shoes and clothing, major international brands will aggressively recruit local Chinese talents in 2021."

A senior HR who did not want to be named told Huxiu that three factors have led to this situation: First of all, major international brands have realized that they need to let people who understand the Chinese market better take real power. This is why in 2021, among the Chinese management of many major international brands, the weight of local Chinese managers will be increased. The biggest change is that the proportion of local talents in mid-level positions and key positions continues to increase. Secondly, under the influence of the epidemic, major international brands regard deepening the Chinese market as the key to their development. As the priority of the Chinese market increases, talent expansion and training reserves have become the only way to go. In addition, international brands urgently need to recruit a group of young talents to better understand China’s Generation Z and even post-00s consumers.

"For local brands, Generation Z and the post-00 generation are a ray of hope. For international brands, this is a huge incremental market that needs to be developed." Liu Bin analyzed that China's Generation Z consumers There are obvious consumption differences with the younger generations of the same age in the United States: China's Generation Z has become more interested in domestic products and more willing to try new brands; while the younger generation in the United States is full of interest in overseas hot products, cross-cultural products, and European affordable luxury brands.

Some entrepreneurs said that in the next 3 to 5 years, there will also be a competition between local brands and international brands to compete for China’s younger generation.

"The good news is that this generation of young people is more tolerant of local brands." Sun Laichun believes that when such competition occurred ten years ago, it was difficult for local brands to fight back, but today local brands at least have no " Lost at the starting line."

But the younger generation is by no means an “easy to fool” generation.

On Douyin and Xiaohongshu platforms, a large number of consumers born after 1995 will "speak out" about brands they are dissatisfied with. Under the logic of social circles, they have a "qualitative" influence on the people around them. This means that those local brands that want to survive can only return to the products themselves and seek survival through the products.

"Every generation has its mission. We have talked about craftsmanship, productism, and user first for so many years, but now it has become a life and death line in front of us - those who do it , live; those who play gimmicks, die. This may be the fate of our generation of consumer entrepreneurs," said a serial entrepreneur in the consumer field.

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