Image source @ Visual China
Wen | Xinyan, author | Ye Jing, editor | Sang Mingqiang
The Yuanqi Forest, which had always been high-profile, had now slowed down.
Before 2016, although sparkling water has been developed in China for nearly 20 years, it accounts for less than one in ten thousand in the bottled water market, which is such a subdivision track, in three years, sugar-free sparkling water has shaped the growth myth of Yuanqi Forest, and the revenue has changed from 200 million yuan to 2.7 billion yuan, correspondingly, the domestic sparkling water market size has also increased from 3.1 billion to about 12 billion.
Huge interests have attracted wolves around, with veteran players of Coca-Cola and Nongfu Spring in the front, and new power brands in the back. For a time, "0 sugar" became the wealth code, from Coca-Cola's small universe AHHA, Wahaha angry, to a variety of fruity sparkling water in Nongfu Spring, the track fell into a homogeneous inner roll, which made the Yuanqi Forest feel pressure, from 0 sugar and 0 fat to emphasize Yuanqi, Tang Binsen also wanted to play more emotional cards.
But the status quo is that the giant siege, single product, organizational turmoil, internal and external difficulties, the past Yuanqi Forest "Internet + explosion" gameplay is gradually weak. According to the estimated growth rate released this time, the revenue in 2021 is just over 7 billion yuan, which has not reached Tang Binsen's expectations, combined with the past Yuanqi Forest's sales collection doubling its annual rate, the newly formulated 2022 sales collection target growth rate is only 37%.
The old road is not easy to walk
In an interview last year, Tang Binsen said that Yuanqi Forest should change its course and take the route of traditional consumer goods.
Traditional retail focuses on factory building, channels, supply chains and product diversification, which means that Yuanqi Forest will shift from "lightweight" to heavy layout. However, as an instant consumption, beverage sales mostly rely on the scattered channels of small street shops and restaurants, and once the large-scale entry into the offline mode, the problem of channel control will follow, such as the phenomenon of discounting and clearing of some channels that occurred in Beijing in the first quarter.
As of the first quarter of 2021, the number of yuanqi forest offline terminals (including stores, freezers, shelves, etc.) exceeded 1 million, vice president Li Guoxun said that the construction of offline channel system has been initially completed, but compared with the number of terminals of other traditional consumer enterprises in China, yuanqi forest is 5-6 times worse, in addition to the gap in quantity, the process of opening up channels itself is also more difficult.
Taking the freezer as an example, in addition to refrigerated storage drinks, the freezer also has a certain marketing effect on a full range of cold drinks and beverages. Zhong Shui once played the "God of Wealth descended from heaven" and told the store that as long as the products of Nongfu Spring were placed in the freezer of the Yuanqi Forest, they could get the same amount of long white snow mineral water, and even get cash display subsidies. As for Coca-Cola, their awareness of offline freezers and self-vending machines predates domestic brands, and they laid out about 1.3 million units in 2019.
Relevant data show that Master Kong including Pepsi Cola, Star Ice Cream freezer has 800,000 units, Nongfu Spring Ice Cabinet about 650,000 units, unified enterprises also have 400,000 units, if in Zhejiang Securities, the goal of Yuanqi Forest, is planned to enter the top three of the freezer market in 2022, the intermediate difficulty of the release can be imagined, the freezer as additional support, does not occupy the dealer's terminal costs, but the electricity subsidies, labor costs, display transportation costs and maintenance, etc. must be counted, for enterprises, it is not only negative assets, It will also be depreciated over the duration of use.
In the market, most of the freezers placed in Yuanqi Forest are five-story single-door doors, with a maximum of 12 bottles of drinks in a row, which is wider than the same size of freezers as Coca-Cola and Nongfu Spring. To the average price of 3000 on the 1688 website, if the depreciation is 600 per year, and according to the amount of 400,000 units, it means that it will be folded into 240 million a year, you know, the life of a freezer is normal in 4-5 years, even if the terminal has to pay a small amount of deposit, it is inevitable that there will be a freezer loss directly affecting sales, which is also the main reason why many brands are reluctant to put refrigerators.
For now, yuanqi forest's channel capabilities are difficult to compete with big brands, the former arranged in a province when the number of business personnel reaches dozens, the latter has exceeded a thousand. Nongfu Spring can throw 2 billion yuan as a procurement cost, promote 3 doors, 4 doors of freezer terminal upgrades, the future increase will be no less than 100,000 units.
However, under the hardware competition of rich, channeled, and quantitative opponents, yuanqi forest is not helpless. In terms of deposit cashback, compared with the 5-year repayment of Nongfu Spring, the Yuanqi Forest reached the standard in the first four months, and 90% was returned within one year, and the rest was paid off successively. As mentioned earlier, most of the freezers in Yuanqi Forest are single-door, small in size, low in cost, and the corresponding deposit for the terminal is lower, which is less risky for merchants.
However, all this assumption is based on the fact that the product can be sold.
As we all know, as a new player, Yuanqi Forest is not as good as Wahaha, Unity, Coca-Cola in terms of seniority, and even the latest Nongfu Spring is 20 years more than it, so in terms of brand impression, domestic consumers have long been strengthened by these old brands. It can even be said that even if it does not consider the price and category, a supermarket of any size will have consumers who need the products of Master Kong and Nongfu Spring, but the Yuanqi Forest is not necessarily.
The new law is fraught with difficulties
From the official website, Yuanqi Forest currently focuses on nine sub-brands, and the corresponding product categories are: sparkling water, milk tea, lactic acid bacteria drink, functional drink, sugar-free tea, plant fiber tea, mineral water, badan wood milk and yogurt. Almost every one can be found in the market benchmark, sparkling water, sugar-free tea in the price range of 5-6 yuan, the average price of other types of drinks at about 10 yuan, the same category ratio, the price of Yuanqi Forest is generally at least 0.5 yuan higher than competitors,
At the price of 10 yuan and above, the opponents of Yuanqi Forest have become more and more, in addition to competing with bottled drinks, but also with fresh tea drinks. Moreover, the normal state of competition in the beverage industry is that from time to time, new "explosive models" will run out in a certain subdivision category, such as the past Master Kong Jasmine Clear Tea, nongfu Spring water soluble, tea π, unified Xiao Ming classmates, etc., but the peak period of these products is generally difficult to exceed 3 years.
Chart: Yuanqi Forest vs. Competitor Price Comparison (Drawn by New Eyes)
Previously, Yuanqi Forest had pushed a priced full score micro-sparkling juice, priced at more than 10 yuan, but this concentrated reduced fruit juice that claimed that the juice content reached 99% did not splash in the market, and later, Yuanqi chose to give up the investment in this product, and the full score series was also erased from the official website introduction, only placed in the official store of Yuanqi full of online sales, in a sense, this actually reflects the growth dilemma of Yuanqi Forest.
At the beginning, the positioning of healthy products with 0 sugar and 0 fat quickly broke the circle, but then the blue ocean turned red because there was no technical barrier to the beverage itself. Since 2020, there are more than 30 sugar-free sparkling water products on the market, including new tea brands such as Heytea and Nesher's tea, and at the two national sugar and wine conferences in 2021, although the main concepts of sparkling water brands are diverse, the packaging and ingredients are almost the same, and there is not much novelty.
Yuanqi Forest users are positioned among young people around the age of 20, but this wave of people is often the most fickle in the face of new brands. Today's fire of this brand, tomorrow's new brand out of the circle, not to mention a few years later, the need to maintain the human design, coupled with the high cost of raw materials that has been advertised, to a certain extent, limiting the innovation and expansion of Yuanqi Forest products, this year's sales return, the old net red sparkling water contributed more than half of the share, did not create the third explosive model after sparkling water, burning tea, is the most headache of Yuanqi Forest at present.
In November 2021, the valuation of Yuanqi Forest reached 15 billion US dollars, corresponding to 7 billion yuan in sales in 2021, which is estimated to be about 13 times PS. Compared with the PS of Coca-Cola, PepsiCo and Nongfu Spring, which is about 7 times, 3 times and 14 times respectively, the valuation multiple of Yuanqi Forest is very close to that of Nongfu Spring in the secondary market. But in fact, the gross profit margin of Yuanqi Forest is about 30%, while brands such as Nongfu Spring are as high as 60%, which means that yuanqi forest's valuation in the primary market is high.
In the long run, once the growth rate slows down, there will be a risk of killing valuations.
In the past, many investors regretted that they missed investing in the Yuanqi Forest in 2020, but this also brought new ideas, because new things always enter the center from the edge, and whether the track will produce the next Yuanqi Forest is the most important point for this year's investors. For example, founded in 2018, Oriental Honghu, the products include Nezha sparkling water of "National Tide Wind" and sugar-free health "black herbal tea" cooperated with Wang Laoji, which received hundreds of millions of yuan of angel round investment from ByteDance in January this year, and harvested tens of millions of dollars of A round financing from source code capital in February.
Turbulent 2022
At the beginning of this year, many Internet manufacturers were on the hot search due to the layoff storm, and the organizational structure adjustment of Yuanqi Forest was also closely watched by the outside world.
In the face of market pressure, Yuanqi Forest took the initiative to reduce the growth rate, Li Guoxun said that in 2022, Yuanqi Forest will slow down or even "suspend" organizational expansion, "In the past, Yuanqi Forest had its own product development, e-commerce and growth team for each product, and the efficiency of these overlapping cross-departmental teams was not high." "Yuanqi Forest has now built 6 factories on its own, broadening channels and developing new products requires a large amount of money, in this case, it is not difficult to understand the reduction of growth rate, in order to make up for the cost of expansion, as well as the pressure of the follow-up heavy model."
Yuanqi Forest had hoped to go to sea, but Liu Zhen, who parachuted in from Byte last year, stayed in Yuanqi for only 15 months as one of the four core executives, even if Yuanqi responded to the outside world and "led the team to open up overseas markets and achieved unexpected results", but the real situation is still unknown. However, according to the query of relevant data, we found that e-commerce accounted for a relatively low proportion of total foreign retail sales, only about 15%, and the penetration of foreign brands in sparkling water was much earlier than that in China.
Chart: Global sparkling water market share (Source: Dongxing Securities)
Last year, Yuanqi Forest did marketing on the "top ten of amazon sparkling water best-selling list", not to mention that this list is real-time change, even if it is real sales, the overall volume will not be so high. Bottled water is a heavy object, the way of offline purchase is much more convenient than online, coupled with the impact of the epidemic, cross-border e-commerce customs are limited, in recent years, many new consumer brands have taken going to sea as a grasping point and a second growth curve, but it is not surprising that the phenomenon of cutting a stubble in the business every year is not surprising.
Although the product is the media, the media is the information, but now the innovation of consumer subjects, the reconstruction of the scene, gradually the relationship between the brand and the consumer has become more changeable and complex. The orientation of the consumer side has also changed from "function" to "value", and the supply side has also been upgraded from the original "cost-oriented" and "product-oriented" to "brand-oriented". What is certain is that from function to emotion, from 0 to Yuanqi, from category to brand, the current Yuanqi Forest urgently needs to build consumer connections that are detached from products.