Young people "eat" another hundred billion tracks? I am afraid it is a misunderstanding| 36 Kr new wind direction

Text | Yao Lan Edited by | Qiao Qian

Since the second half of last year, a super first-line fund has flowed out of the news of "no longer looking at consumption cases", and almost overnight, the once hot new consumer entrepreneurship has encountered an ice age. Under the nest, the functional food that some investors regard as "the last 100 billion track of new consumption" is also doomed.

According to 36Kr, a dietary supplement brand that shouted "to sell 1 billion yuan" in the first half of the year only completed 60% of the sales target by December last year, and because the valuation was too high, it was delayed in getting a new round of financing; and in order to cope with the decline in sales, a functional fudge brand issued a 40% commission share to Taoke during the Double Eleven period, and at the same time gave customers 30 yuan of vouchers, which means that a box of gummies with a price of tens of yuan is only about 5 yuan.

"It's equivalent of drinking and quenching thirst," a FA in the consumer goods sector told 36Kr, "In the future, this brand will only be worth 5 yuan in the minds of consumers, and it will be difficult for investors to invest again." ”

According to incomplete statistics of public information, there were 12 financing incidents that occurred in the track in 2021, behind which there were sequoia, GGV Jiyuan Capital, IDG Capital and other head institutions. According to the data provided by Baiguan Technology, in the TOP10 sales volume of Tmall functional food brands from January to October last year, there was not a new brand that was popular with capital from online.

Source/Baiguan Technology

New brands are struggling to support, and the upstream supply chain has not been affected by the cold wave for the time being.

20 kilometers north of the West Lake, the ancient city of Liangzhu, which is home to Hangzhou Hengmei Food – whether it is Tomson By-Health or many new consumer health products, today about 70% of China's meal replacement powders and protein bars are loaded from here and sent to all parts of the country.

Since 2019, Hangzhou Hengmei, which has keenly perceived the changes in the consumption outlet, began to adjust its business route, from OEM to ODM (to help customers design + production), providing full-process services including product planning, sample development, pilot production, market testing, mass production, logistics cloud warehouse, and nutritional support.

From 2019 to 2020, Hengmei Food's revenue increased by 3 times and 2 times respectively, reaching hundreds of millions of yuan, and received hundreds of millions of yuan of financing.

Yang Peng, co-founder of Hengmei, also said in an interview with a media outlet that what really brings rapid growth to the company is not a large customer in the traditional sense, but a new brand customer who has come to the fore.

To some extent, the highly developed and concentrated supply chain in the upstream often means a high degree of internal volume of downstream homogenization.

"After the functional snack fire this year, everyone rushed up, and soon formed a vicious competition," a founder lamented to 36Kr, "most of the new brands have no product power to speak of, they design a package to find a factory OEM, the life cycle is very short, need to keep doing delivery; consumers do not repurchase, eat a lonely, the brand itself is also very painful." ”

Also educated are institutional investors, "the original VC felt that 'monthly sales of tens of millions' is a threshold, crossing it means that it has obtained repurchase and brand potential, but after half a year of market education, everyone gradually realized that it is not so." An investor who has invested in a number of functional food brands admitted to 36Kr.

"The gold content after the monthly sales of tens of millions of dismantling is not high, relying on live broadcast + distribution + discount can be rushed, but if there is no repurchase, it is difficult to hold out until the next 20 million, 30 million, most of the new brands can only stop here abruptly."

However, on the other hand, the demand for health care of young people seems to exist objectively: from group bungee jumping to group health, the post-80s and post-90s people with high-intensity work rhythm have been deeply distressed by the lumbar spine, cervical spine, hair loss, and insomnia.

According to the "Online Business World" report, among the users who buy quality Chinese medicine online, 25-40 years old is the main group, and the proportion of users aged 25-30 is higher than that of users aged 50-59.

In 2021, only 5 minutes after the opening of Jingdong's "6 18", the turnover of sports nutrition and health care products increased by 65 times year-on-year, the turnover of enhanced immune health products increased by 42 times year-on-year, and the turnover of liver health care products increased by 39 times year-on-year; in the opening 1 hour, the turnover of cross-border imported health products increased by 240% year-on-year. In the first hour of Tmall's "Double 11" sale in 2021, the turnover of Traditional Chinese medicine-related products increased by 6 times year-on-year...

Stretching the timeline further, despite a series of historical problems such as public opinion and supervision, health care products have still developed a large market of more than 190 billion yuan in China, with a compound annual growth rate of more than 10%; in the 40 years of reform and opening up, at least 3 of the richest people (Zhong Sui, Zong Qinghou and Shi Yuzhu) have found "the first bucket of gold in life" in health care products.

So, what is the gap between the incredibly real consumer demand and the market that has not exploded? Where will functional food brands go? 36Kr will try to answer these questions in this article.

The truth and falsity of the 100 billion incremental market

This is an industry that has "eaten" a lot of Internet celebrity brands.

An example is that in the absence of capital support, only relying on a single SKU - a leisure candy with the main carb blocking function made of white kidney bean extract, the functional diet brand Infinite Chang achieved a single monthly sales of 50 million yuan in May 2021, ranking first in the Douyin food category.

In addition to the cutting-edge brands, the industry giants have also "eaten" the sweetness from it.

In 2018, Tomson By-Health, a health product giant with a market value of tens of billions, founded a sub-brand "Yep" to launch collagen oral liquid, mycolavin tablets, probiotic drinks and other products for young female consumers. It is understood that from January to August 2021, the sales of by-health functional foods in the Tomson by-health category on Tmall increased by 17% year-on-year.

The "2020 Functional Snack Innovation Trend" from Tmall shows that functional foods are expected to reach a market size of 500 billion yuan in the next few years, of which functional snacks are expected to account for 150 billion yuan.

So, what exactly is a "functional food"?

From the concept itself, functional foods have not yet been officially defined. In the Food Safety Law, China's food categories can be divided into two categories: ordinary food and special food, and special foods include health foods, but there is no term "functional food" in food classification.

Wang Yingyao, deputy secretary-general of the Chinese Nutrition Society, and Liang Xiaoqing, deputy secretary-general of the Health Products Market Working Committee of the China Health Care Association, told 36Kr that in most cases it refers to foods with specific nutritional health functions, that is, foods that are suitable for specific groups of people to eat, have the function of regulating the body, and are not for the purpose of treatment.

At present, the functional foods launched on the market are mainly in the form of gummies, protein bars, meal replacements, infusions, drinks, freeze-dried and so on, focusing more on weight management, improving sleep, whitening and beauty, intestinal regulation and other needs.

The addition of functional ingredients in health care products, but also with the taste of snacks, functional foods in the middle of both "useful" and "delicious", are aimed at such a group of extremely screwed young people - due to various factors of excessive consumption of their own body, health anxiety but lazy to exercise, or because of the fast pace of life and can not spend too much time on health.

Grasping consumers' anxiety about "uncertainty", from this point of view, this is also a "heart-piercing" industry. BuffX founder Kang Le frankly said that considering some factors, some new brands and upstream foundries are reluctant to say that they are functional foods, but call themselves healthy foods in the big health track.

The founder of a brand that emphasizes the emotional value of the product told 36Kr that adding chia seed ingredients to food is very common in Japan, but many consumers in China have not yet recognized this, "In fact, to put it bluntly, some ingredients that have been used in foreign countries are very mature and recognized by consumers, and they are used in domestic food, but we think it belongs to the category of healthy food, which can be seen as a classification of food, rather than a new track." ”

"Because of the concept of 'health', young people will try to choose 'healthy' products as much as possible when choosing the same type of products to reduce their psychological burden." The above founder said that the health food brand is the positioning of its own brand.

An important reason for the rise of functional food may be answered by a sentence once said by Li Haojun, a partner of GGV Jiyuan Capital: it is a good starting point to make this thing healthy while not erasing human nature.

Lin Lu, a partner at Northern Light Venture Capital, is firmly optimistic about the general trend of "healthy lifestyle", he believes that the consumer demand for health food and leisure food health has been verified in the developed markets such as the United States and Japan, and it still belongs to the incremental market with extremely high growth in China, and the rapid rise of the demand side will reversely accelerate the orderly liberalization of policies.

In Japanese drugstores, functional cosmetics, food and medicines are sold together, and functional foods have become important pillar products, and sales have reportedly continued to rise since the epidemic. Some founders and investors believe that China will develop similar formats to alleviate the government's health insurance pressure and promote the commercialization of health care products and functional foods.

The Prospective Industry Research Institute once did a survey, and the penetration rate of functional foods exceeded 50% in the United States, about 40% in Japan, and only 20% in China.

It's a market that looks full of opportunities and promising.

"Stigma" that is difficult to wash away

However, why do functional foods that hit people's underlying needs for "health" always face the controversy of "IQ tax"?

Lack of core technology is the first crime. Domestic functional food is still in the early stage of development, new players generally do not have their own R & D team, the perception of this track has not yet risen to raw material origin, extraction process, more detailed distribution ratio and other issues, almost all are looking for foundries to do OEM processing, and most of the foundries that shoulder the burden of research and development do not have the ability to develop user needs in depth, more is to adjust the ratio or recombine of raw materials, which leads to the homogenization of products.

Several new brand founders told 36Kr that the company will sign an exclusive agreement with the foundry, but this exclusivity is only limited, because the startup is already limited in strength, and the factory is also an OEM (the formula is basically public, "nothing more than a little higher and lower sweetness"), it is impossible to achieve complete exclusivity.

China's foundry is still in the stage where the OEM capability is much greater than the ODM capability, and if the capital does not burn this track, it will naturally die many brands.

According to 36Kr, the domestic functional food industry is relatively weak in basic research and applied research.

For example, when doing probiotic products, many foundries do not understand "water activity", let alone accurately monitor "water activity", which is a control indicator that is extremely critical to the activity of probiotic products. In addition, in probiotic products, there are more important interactions between different substances, nestlé experts and teams spend a lot of money together to screen and control the vitrification temperature of the material, which only those who really study the technology and products will study. "If I just use the idea of making snacks to do it, there is no barrier, I can spend money, then the foundry will not do it for me?" 」

A person in charge of product research and development in an upstream factory said bluntly: "We dare not buy domestic plant extracts, because the extraction process is not standard, and the extraction cost is not clear." "The elastin used in his factory is made by the Japanese, and it is also bought from Japan, and many foreign raw material suppliers are willing to invest decades to do in-depth basic research, and then form relevant clinical verification data and papers, and finally promote it to the world and do the commercialization of products." It's a long cycle, and it's not okay to be impatient. ”

Even if you don't start product innovation from 0 and just fine-tune it, the cost is not cheap.

Bear KoKo (a functional food brand owned by China Resources Sanjiu) told 36Kr that the white kidney bean blocking tablets have been proofed more than 70 times, and the first version of the proofing lasted for nearly half a year. The team did not change the raw material composition, but based on the Chinese dietary nutritional supplement standards to do targeted formula ingredients to block the ratio, while in the taste, the active ingredient is not missing and other dimensions to do the balance, and finally find a delicious and effective solution, and then do the user trial experience, so repeated polishing, each proof will cost a very high time and labor costs.

Domestic research on functional raw materials is not so in-depth, more is doing processing, "a start-up brand with a little financing to invest in research and development, certainly can not afford to burn, because the input and output is very slow." "As a result, new brands are generally afraid to innovate in products, and if the team lacks R&D professionals, it is easier to step into the regulatory red line of health food laws and regulations."

While product innovation is difficult, the "function" of functional foods often seems suspicious. Due to the distance between the allowable amount of addition and the amount that can actually achieve the effect, coupled with the influence of personal physique, there is "uncertainty" in the somatosensory effect of the product, which is difficult to be quickly perceived, and it is difficult for consumers to insist on taking it.

Worse still, it sells more expensively.

Taking the first hyaluronic acid drinking water "Shuimuquan" launched by Bloomage Biology, a leading hyaluronic acid company, as an example, the 420ml hyaluronic acid drinking water is priced at 8.9 yuan on the Tmall flagship store, and the promotional page shows that each bottle contains 83mg of food-grade Bloomage hyaluronic acid. According to the publicly available average selling price of 1258.36 yuan / kg of Hyaluronic Acid in 2018, the cost of hyaluronic acid in each bottle of "Water Muscle Spring" drinking water is only about 0.1 yuan.

An investor is quite puzzled: "Functional drinking water is said to have added very expensive raw materials, can sell more than 8 yuan, how many people can afford to drink all the time, Chinese consumption upgrade has not yet reached such a high stage." ”

Looking at the current hot functional sleep gummies, GABA raw materials in Buffx, Wonderlab, nelo and several products are purchased from biotechnology company Bloomage Biologics. Bloomage Biotech's financial report for the first half of 2021 shows that other bioactive raw material business (including hyaluronic acid derivatives, GABA, ekdoin, ergothionine and other revenues) increased significantly by about 106.10% over the same period of the previous year, and the gross profit margin was as high as 73.03%.

Efficacy is difficult to verify, the price is not "rational", the industrial chain from top to bottom profits are so high, it is difficult for this industry not to be criticized.

Marketing often becomes important when products aren't innovative and differentiated, but that path is also difficult.

"Innovation at the front end is already difficult, and we still need to make breakthroughs on the marketing side." This is the voice of a brand founder.

Since 2016, the supervision of health food has changed from a registration system to a dual-track system of registration and filing, the approval process has been shortened from 2-3 years to several months, and the document requirements have been simplified, but almost all brand founders have said that at the practical level, the production, sales and publicity channels of functional attribute foods are still strictly controlled by all parties.

The founder of a brand told 36Kr that the concept of "enzyme" was exaggerated by many unscrupulous vendors as a weight loss concept, misleading consumers, which led to the e-commerce platform to restrict such keywords, and those merchants who conscientiously do related products could not operate normally.

According to industry insiders, some dietary nutrition companies on Douyin do have the problem of "high advertising consumption, but not the amount", because the platform has not yet found an intermediate position that not only meets the regulatory standards, but also meets the demands of the brand side, so it is difficult to provide a very meticulous unified advertising standard, so that the brand side can clarify which materials are investable.

Li Zhongmin, an investment partner at Yuankun Venture Capital, told 36Kr that when you emphasize the category of "functionality" rather than the category of "food", you need to invest a large amount of money in the traffic acquisition and education market. "Young consumers are particularly distracted from new things, and once they stop delivering, or the product power does not give them the feeling they want, the brand will be immediately abandoned."

The return of common sense

Not as useful as health care products, not as good as ordinary food, where is the next stand for functional food?

Li Zhongmin shared one of his views: there is a progressive relationship between health care products, functional foods, and ordinary foods: if the body really has problems, the first thing to consider is the drug; when you don't need such a strong effect, you get to the health care product; further down, it is a functional food that adds some functional ingredients to the food. Regarding functional foods, whether there is an effect is not completely certain, Western countries may stay at this step, but China is influenced by traditional Chinese medicine ideas, functional foods will evolve to the perspective of medicinal and food homology, and develop corresponding products.

"For the functional food industry, what we are seeing between now and the next few years may be just a transitional phase." Li Zhongmin said. Against the Japanese market, user demand is real, but it is difficult to use capital to ripen in the short term.

At a time when capital is cooling, everyone needs to return to common sense. For example, the understanding of "repurchase rate". If the repurchase rate is high, it means that the product has met the user's expectations and solved its real needs.

But the "repurchase rate" can also be contaminated.

"Looking for Lao Luo live twice a month, the repurchase rate must reach more than 50%, but that is Lao Luo's repurchase rate, not the brand's repurchase rate." The founder of a brand said to 36Kr. His approach is to wait for all relevant models to stabilize before thinking about the actions at the live level.

Another brand founder also held the same view: large-scale live broadcasts and private domains will lead to a higher repurchase rate of products, but this is actually a false repurchase rate. In contrast, the "initial conversion rate" is a relatively easy to overlook, but also very critical metric.

"Initial conversion rate" refers to whether consumers agree with the concept of a product. If a product is exposed among 100 users and 17 users buy it, it means that these 17 users agree with the concept of the product.

"Taking Snickers as an example, I don't evaluate its taste, but its advertising has a deep scene thinking, and it really hits the hearts of many users." LemonBox founder Weng Binbin believes that the new brand is still more 25 to 35 years old people, this part of the group more emphasis on the form of the brand, so only "make their own convention on the product", and then appear in a reasonable channel at a reasonable price, it is possible to conquer the minds of young consumers.

Where to find traffic has obviously become the core proposition that new brands starting from online need to break through.

The founder of an oral beauty brand told 36Kr that the new brand still has a large room for growth on the Douyin platform, and the requirements of Douyin for the quality of materials are getting higher and higher, and only truly valuable materials can run relatively well in publicity, so pay attention to building a high-quality content team to eat the dividends of the Douyin platform.

One change that may not be obvious is that this wave of new brands has begun to move from the pursuit of "form correctness" to the stage of thinking about the real needs of users, whether this demand is physical or psychological.

Hu Ran, the founder of Minayo, shared an observation of his own: in the early years, when searching for nutritional products taken by children on the e-commerce platform, they might search for growth happiness, and adults would search for Shancun; but now consumers tend to search for embodied ingredients such as vitamin B and vitamin C. The signal released by this shift is that consumers' ingredient awareness is improving, and who can make the ingredients and brands correspond first, who can eat the opportunities in the current market first.

Compared with the fierce fighting in the functional food track, the new consumer health products in the serious category are not so crowded.

"China's health care product industry has existed for more than 20 years, and the health needs behind this have always been there, so what we do is also very simple, that is, the rejuvenation of traditional health care products." Unomi founder Xu Yuanheng told 36Kr. As an oral beauty brand positioning Z generation, unomi has sold nearly 1,000W per month since April last year, and its net profit has been positive.

"A lot of times the consumption is still related to intuition, you think this category is not too big on the first day, this category seems to be not too big in the end, just by a meal replacement powder, it will be made into a 10 billion US dollar company, you listen to it and think it is very strange." In many cases, investors should stand in the perspective of ordinary consumers and subjectively feel it. An investor said to 36Kr.

To make functional food well, perhaps you should start by accepting that it is a "not so big business".