Li Chao seasoner
Condiments belong to the food and beverage category, the common pricing logic of FMCG is the pursuit of cost performance, referring to the quality of the speed of improvement is greater than the rate of price rise, that is, low quality low price, medium quality price, high quality high price or high quality medium price, medium quality low price.
But the relationship between price and value is not as simple as logical reasoning in practice, what is value? How should the value lead to future discounted free cash flow? For example, leisure food, according to the unit price of grams, the channel brand of the head e-commerce of leisure food is a medium-quality and high-price strategy. For example, the potato flour products of three squirrels are squirrels and fat house fresh cut feed, and the unit price of grams is 0.12 to 0.18 yuan per gram, exceeding PepsiCo's high-quality mid-price strategy of 0.06-0.09 yuan per gram.
So how are condiments priced?
The condiment market where the volume and price are rising
Condiments belong to demand-driven growth, non-competitive squeeze growth, correct pricing can enjoy the dividends of the golden age of volume and price rise.
The outbreak of the epidemic in the first half of 2020, because of the differentiation of category attributes and consumption characteristics, caused different sub-categories in the large food industry to show completely different performance trends in the performance reports of the first half of the year - beverage companies generally declined significantly, and more than 60% of leisure food enterprises increased their income without increasing profits.
However, the consumption characteristics of condiment enterprises have become the biggest "anti-risk umbrella" during the epidemic period, and by combing the semi-annual reports of fourteen listed companies such as Haitian Flavor Industry, Tianwei Food, ST Jiajia, etc., it is found that only four companies have revenue and gross profits, one has increased revenue without increasing profits, while the rest of the listed companies have maintained a high growth momentum.
Among them, Haitian Flavor Industry currently ranks first in the market value of the A-share food and beverage sector, with a market value of more than 500 billion yuan, ranking first in the list of listed food and beverage companies in 2019.
The capital market is so fond of the condiment section, indicating that condiments are really still in the golden age (volume and price rise), compared to the concept value of snack food in the silver age (price rise, quantity and trade-off), the financial value of high-end liquor in the Bronze Age (price increase and decrease), and condiments have just needed use value.
In fact, this kind of just need should be related to the national character of Chinese, The first in the world of Chinese food, which is the only undisputed foreigner to recognize the world first, "the beauty of the dish lies in the taste, the beauty of the taste lies in the tone", seasoning is the eternal topic of cooking, if the condiment can also constitute a new way of life of Chinese at the moment, then of course it can also show value.
For example, our ABC baking class here has to send each student Tortoise Shell Wan soy sauce every time they go to class, eat seafood with pickled official vinegar in Hema Fresh, and one hour of daily excellent fresh Chaoshan beef balls with Shi Yunsheng soup, which is the carrier to realize this value.
We compare several data, in the decade from 2001 to 2010, the sales of the condiment industry soared from 27.723 billion yuan to 151.622 billion yuan, and doubled from 2011 to 2018, and it is expected that the compound annual growth rate of condiment retail sales in the next five years will be about 7.08%. Based on the proportion of household consumption in 32% of the total scale of the condiment industry, it is expected that the total scale of the condiment industry will exceed the 500 billion mark by 2023.
According to data, the annual turnover of condiments in the world can account for about 10% of the sales of the food industry, and the total output value of China's food industry in 2017 is 10,520.45 billion yuan, of which the sales revenue of the condiment industry accounts for only 3.3%, if the sales volume of the food industry can be reached, the market for condiments will reach 1 trillion yuan, which is about 300% of the current condiment market capacity.
It can also be calculated in a way, assuming that each person per meal is calculated according to 10 yuan, a person eats more than 10,000 yuan a year, and the domestic total is more than 14 trillion yuan, which includes eating at home, in-store catering and takeaway, and calculated by the factory price of condiment enterprises, condiments account for 2.5%-4% of the revenue of the catering industry, and the consumption structure upgrade trend is obvious, so the future growth space of the condiment market is huge. In the golden age of rising quantity and price, we must grasp the relationship between quality and price, and fully enjoy the dividends of the times.
Pricing should be combined with industry changes
Condiments do not exist in the plight of prisoners, so enterprises will not maintain low-price competition, and the optimal solution to the game is low-quality and low-priced, medium-quality high-price, and high-quality super-premium.
Compared with other consumer goods industries, the value of condiments, catering consumption and food processing are determined by chefs or purchasers, household consumption is priced by the leading or head enterprises, and the pricing power is basically not in the hands of consumers, such as Master Kong's braised beef noodles, the pricing power is in the hands of consumers, Master Kong can only block competitors in this price band, and the price increase will lose market share.
First of all, from the perspective of product attributes, condiments are just too strong, the consumption frequency is high, the scene is many, the shelf life is long, the shelf life of Haitian soy sauce is two years, and the Wujiang squeezed vegetables are 16 months, which is conducive to the orderly turnover of production, distribution, consumption and other links.
Second, there are many condiment product categories, the unit price is relatively low, such as Wujiang brand squeezed vegetables 80 grams of price 2.5 yuan per bag, consumers are not sensitive to price increases, industry leaders actively promote product structure upgrades, such as Xinhe zero addition follows natural soy sauce and Xinhe organic soy sauce, Kitchen Bang launched the "pure brewing" series, Sichuan Qianhe flavor owners play "head road original incense" zero addition, are 20 yuan -35 yuan / 500ml, enterprises can smoothly transmit cost pressure to consumers.
We can see from this that the relationship between price and value in the pricing strategy is essentially a change - the price changes with the overall market environment, changes with the company's operation, changes with the development of the industry, and changes with national policies! The first is to find out what the company does not change, seize the opportunity of change, and the probability of achieving excess returns in the condiment market may be much greater than that of other FMCG markets.
In addition, in the future, the upgrading of the low-line market will continue to evolve at the two levels of volume and price - volume increase, that is, the excessive non-brand-brand, and the demand generated by innovative products; price increase, that is, the upgrading of volkswagen-high-end products, and the drive of direct price increase.
Therefore, the leading condiment company will not be like Pepsico and Master Kong, in the set low price band to block the opponent, the optimal solution of the condiment game is low quality low price, medium quality high price, high quality super premium.
How to grasp the dividends of the times?
The business scale of condiment enterprises is not directly determined by consumers, which causes the effort in channels to be greater than that of general consumer goods, and the price elasticity is not obvious, and the pricing rules can consider the value of space and the value of time.
Condiments belong to a high-profit industry, and the general consumer goods need to invest a lot of money to advertise to attract consumers, condiment industry because a large part of the sales revenue comes from special channels, that is, catering channels. This channel is less affected by advertising, so from the perspective of channel cost, it will be much less than the channel cost required for general consumer goods.
This industry is a very strong dependence on channels, in the distribution of the current dependence on e-commerce sales proportion is relatively small, mainly rely on catering channels and large distribution models for sales to form barriers.
For example, Haitian, there is more than one dealer in the same market, the dual-track system makes the dealer compete, and the secondary distribution of Haitian in the regional market is covered and then covered in a wide range of channels and regions. Haitian's business focus has long been moved from the prefectural and municipal level down to the county level, and the factory recruits local industry representatives to assist dealers in developing the Waifu market and allowing them to develop urban business to expand the urban market.
The value of the space
The environmental dividend brings the scene dividend in space, which makes the product structure continue to upgrade. For example, the rise of Master Kong and the rise of the store at that time are closely related, the rise of yogurt and the rise of the cold chain of convenience stores are related, and the bulk and small bulk brand categories of bulk food are also determined by the dividends of the new supermarket scattered area traffic in recent years, for example, if time is compared to a river, then this space is the floating object on the river, or the scenery on both sides of the river. Time and space complement each other and add value.
For example, now in first-tier and second-tier cities, there is basically no need to go to the vegetable market to buy vegetables, all of which are one-hour up in the front warehouse or store, and the ingredients are healthier, so that many people who did not cook originally faced the temptation of high-quality ingredients, and the combination of ingredients and condiments made the price of condiments seem insignificant.
The value of time
At a certain stage, the pattern of the industry will be clearer. The value of time can accumulate the first-mover advantage to bring better stability and predictability, for example, cooking wine is an emerging category in the condiment industry. In the past, this category was still a small category that was not valued in some traditional soy sauce and vinegar production enterprises, but the cooking wine category began in 2013, and the volume and price rose together.
The kitchen wine market data shows that more than 50 billion yuan, the main use of these kitchen wine in the kitchen is cooking, salting, cleaning. The cooking wine market grows by about 20% per year, and the market for high-end cooking wine grows by about 40% per year.
In the cooking wine market, consumer usage habits have been educated. The past use of cooking wine, basically in the East China market, southwest market, Beijing market mostly, now after the vigorous education of first-line condiment brands, has been widely recognized by families and restaurants across the country, in the past did not use the habit of consumers hope to buy cooking wine. For example, Lao Henghe's 5-year Chen 1.9L is extremely widely distributed in supermarkets in Shanghai.
In the past, making cooking wine did not have much technical content, and the old companies that made cooking wine were Hengshun, Wang Zhihe, Lao Caichen, Julong, etc., and their brand influence and sales network were also very strong. Nowadays, making high-quality cooking wine has become the consensus of various condiment companies.
Not only that, Lao Henghe and other enterprises have begun to raise the threshold for cooking wine, increase technical content and brand publicity, and affect consumers from many aspects such as raw materials, vintage, place of origin, wine quality, and mentality. There are also those enterprises that produce rice wine, and they also pin their expectations on cooking wines across borders, such as Guyue Longshan and Jinfeng Wine.
The growth of the cooking wine market will surely replicate the growth path of white vinegar, that is, pure brewing replaces the preparation and inferior products of the existing market. In the past 5 years of development history, the product upgrade of white vinegar has an average speed of more than 25%, and many regions have grown at a rate of more than 50%.
In summary, the trend of category expansion and total consumption expansion in the condiment industry is continuing, so the price band brought about by consumption upgrading and product price increases, that is, low quality and low price, medium quality high price, and high quality super premium are also worth considering and trying.
About the Author
Li Chao
General Manager and Chief Consultant of Shanghai Daomin Brand Marketing Planning Co., Ltd
27 years of experience in practical combat, management and corporate consulting of well-known enterprises in the FMCG industry. He has worked in Want Want, Master Kong, Lucky Noodles, Sinar Mas Group China Agri-Food Department, Suntory and other companies.
Focusing on the food industry for 26 years, he has rich practical experience in corporate strategic positioning, marketing strategy planning, multi-channel business model design, marketing organization and system construction.