Recently, Dongpeng Beverage released its 2023 financial report, with the company's operating income of 11.263 billion yuan, a year-on-year increase of 32.42%, and the net profit attributable to shareholders of listed companies of 2.040 billion yuan, a year-on-year increase of 41.60%.
Dongpeng's large single product, Dongpeng Special Drink, will have an operating income of more than 10.3 billion yuan in 2023, a year-on-year increase of 26.48%. According to Nielsen data, the sales volume of "Dongpeng Special Drink" will account for 43.02% in 2023, an increase of 6.3 points year-on-year, and the total share is 12.2 points higher than that of the Red Bull system as a whole, ranking first in the market for the third consecutive year[1].
In China's beverage market, which has been turbulent for 30 years, there are 5 local beverage companies with revenues of more than 10 billion yuan, namely Nongfu Spring, Wahaha, Wanglaoji, China Resources C'estbon and Dongpeng Beverage, and Dongpeng Beverage's breaking of "double 10 billion" has also brought a new milestone to the beverage industry.
From 0 to 10 billion, not only the speed of Dongpeng's development and growth, but also behind it, under the in-depth construction of products, channels and digitalization, it has woven a precise and strong "giant net", under this "giant net", enterprises have a keener sense of market smell and response ability, so as to capture more market opportunities.
This article attempts to discuss how Dongpeng Beverage has built tens of billions of large single products, and weaved a network of enterprise operations through products, channels and digital layout, what are the strategic goals of the company, and what are the development plans?
1. "Weaving network thinking": Dongpeng Beverage's growth password of 20 billion yuan
Spiders are very intelligent animals, and they weave webs hundreds of times larger than themselves to help them perceive and catch their prey. For Dongpeng Beverage, the "weaving network" of enterprise operation has four key steps: product determination, fulcrum, channel-digital improvement. As the most critical first step in weaving the network, Dongpeng Beverage's product thinking is also an important step to determine the company's move towards the "10 billion club".
1. Slow work and meticulous work: polish tens of billions of large single products and shape the core product force
The weaving of the spider's web will first find a foothold, see it as a "beam", and then slowly expand. Dongpeng Beverage is the same, choosing to cut into and study the energy drink track is the origin and foothold of enterprise development. Nowadays, when it comes to energy drinks, many consumers will associate it with "tired and sleepy, drink Dongpeng special drink".
Dongpeng Beverage revealed to FBIF that this is the result of Dongpeng Special Drink's continuous efforts on the product side for more than 20 years. On the one hand, there are brands in the continuous optimization of product production, process improvement, cost control and other details to create the core product competitiveness of the focus, but before that, it is necessary to find the category to cut into the space and the differentiation of competition.
In fact, the growth of Dongpeng Special Drink is not smooth sailing, before the launch of bottled packaging, it has been in the energy drink track for more than 10 years, and has also tried "boxed", "canned" and other packaging forms.
On the other hand, at that time, the head effect of the energy drink market was obvious, Red Bull occupied a market share of 80%, and under the influence of the brand, it also created a consumption mentality that "energy drink" was about equal to "canned", and the 6 yuan unit price was aimed at more extreme sports enthusiasts and office white-collar workers.
However, at that time, China's urban construction and logistics industry were developing rapidly, and blue-collar workers such as construction workers, freight drivers, and couriers quickly gathered, creating an unmet market demand for energy drinks. As a result, Dongpeng Special Drink appeared with the keywords of "bottled" and "cost-effective".
In 2009, bottled Dongpeng Special Drink entered the Chinese energy drink market.
For price-sensitive blue-collar people such as workers and freight drivers, Dongpeng Special Drink proposed to "buy products of the same quality at half the price", and launched PET plastic bottles with dust caps, on the one hand, by controlling the cost of packaging to reduce product prices, and at the same time convenient storage, dust caps have also been "developed" by countless blue-collar people as ashtrays, sharing cups, etc., creating a cost-effective positioning.
Dongpeng Special Drink, Image source: Dongpeng Beverage
In the process of polishing the core competitiveness of products, by paying attention to the feedback of the consumer market in a timely manner, it has also brought valuable business opportunities to Dongpeng.
10 years ago, in China's energy drink market, a small size of 250ml was the most mainstream, but in other beverage tracks, 500ml was the more common specification.
Insight into such information, Dongpeng took the lead in launching a 500ml large bottle in the North China market in 2017, and the market feedback exceeded expectations. Therefore, from 2018 onwards, the 500ml Golden Bottle Special Drink has been gradually promoted in the national market, filling the blank market of large-capacity energy drinks at that time.
Today, this product born in response to market demand in a timely manner has also grown into Dongpeng's trump card product, Nielsen data shows that Dongpeng Special Drink 500ml bottled beverage has become the TOP3 beverage single SKU in the Chinese market according to the sales amount.
There may be an element of luck in the beginning of success, but it is a matter of systematic planning for the enterprise to determine whether it can go far and deep. After finding the entry point of the track, next, how can Dongpeng Beverage support the sustainable development of the enterprise through the layout of production capacity and channels?
2. Flexible builders: channel synergy production capacity leverages the "point-line-surface" growth of enterprises
After finding a foothold, the spider's next action is to spread out a large web in order to catch its prey.
Unlike other FMCG products, beverages are very dependent on offline channels. After Coca-Cola returned to China in 1979, it was not until 2000 that its channel layout and adjustment were completed, and it relied on the 101 model to directly control the terminal to achieve the supremacy of carbonated beverages.
According to the research report released by Huachuang Securities in December last year, the number of retail outlets in the country is about 6.1 million, and the number of outlets of comprehensive beverage leaders such as Master Kong, Nongfu Spring, Coca-Cola, and Wahaha is 300~4 million+ level, while according to Dongpeng Beverage's 2023 financial report, the number of its sales terminal outlets exceeds 3.4 million, the number of distributors has reached 2,981, and the coverage rate of prefecture-level cities has reached 100% [1].
It can be found that the real channel magnitude can build important industry barriers for beverage companies.
Generally speaking, the core of the layout of FMCG channels is two points, one is based on the expansion of new channels and new outlets, and the other is based on the increase in output of old outlets.
The more outlets a brand covers, the higher the sales volume, product exposure, and the higher the opportunity to engage with consumers. In the national channel layout, Dongpeng Beverage mainly does three things:
1. Focus on expanding target customer groups and consumption scenarios. From the development of traditional channels such as commissaries, street stores, mom-and-pop shops and newsstands, special channels such as high-speed gas stations and service areas, and modern channels such as chain supermarkets and convenience stores, according to the characteristics of products, such as sports venues, scenic spots, schools, etc.;
2. Expand emerging channels and innovate sales models. Cooperate with community group buying platforms such as Duoduo Food, Meituan Preferred, and Taocaicai, and use new products to explore catering channels and carry out cross-border cooperation;
3. Freeze and refine to create terminal display, pursue the idea of "freezing is the best display", creative terminal image construction, consumer activities, crowd promotion projects, promote consumer purchases, and enhance terminal sales.
If products and channels constitute the original "point" of business, then the supply chain system that determines production capacity pulls up the basic "line" of enterprise volume, and this "net" can be weaved.
According to the financial report, Dongpeng Beverage has been in Guangdong, Anhui, Hunan, Guangxi, Chongqing, Tianjin, Changsha has a total of ten production bases, of which, the Tianjin base, which started in March this year, is the tenth largest base of Dongpeng, which will become the group's future North China regional headquarters center, which is expected to be put into operation in 2025. In 2023, Dongpeng's design capacity will increase from 2.8 million tons in the previous year to 3.35 million tons, with the ability to produce more than 6.12 billion drinks. By 2026, it is expected to have more than 60 production lines and is expected to produce 12.7 billion drinks.
Dongpeng's production capacity layout is consistent with the pace and rhythm of its nationalization. From focusing on the solid foundation in South China, to laying out the high-growth market, and then to completely radiating the whole country, we will adjust the tension of the spider silk in time for the business network of the enterprise.
Zhejiang base, photo source: Dongpeng Beverage
In the fiercely competitive beverage market, the efficiency of the enterprise means the ability to survive, and the "point-line-surface" enterprise infrastructure layout has leveraged the upgrading of Dongpeng Beverage's production, supply and marketing coordination, and the improvement of the channel supply chain has also built a basic anti-risk ability for the enterprise.
Dongpeng Special Drink Production Line, Image source: Dongpeng Beverage
3. "Acoustic antenna": digital empowerment marketing and feedback on business efficiency
The beverage industry is an industry of in-depth distribution, and the intermediate chain of distributors, distributors to wholesalers, and second batches is difficult to clarify, and it is impossible to perceive the changes in terminal sales in real time, which has become a pain point for many enterprises.
Just as a spider weaves a fine web as an extended sense of hearing and keenly catches its prey through the vibration of the web, the key is to make "instant perception" a reality if the web of business management is to have a stronger ability to hunt.
Dongpeng Beverage has been carrying out digital transformation since 2015, and has built a digital network of enterprises from "one thing, one code" to "five code association" in 8 years.
"How many goods were actually sold in the market yesterday, and how much inventory is still in the market?" these important business problems that FMCG companies are still exploring, Dongpeng has found a digital solution.
After directly linking consumers through "scanning the code to win red envelopes", Dongpeng started the construction of the digitalization of the merchant system in 2017, started the transformation from the production line end, and built a two-dimensional code system of "five code association" of production batch code, bottle cap inner code, bottle cap outer code, carton inner code, and carton outer code, so as to realize the accurate tracking of each product in the whole process of commodity circulation, and the complex commodity circulation system is completely transparent.
For example, in a certain outlet in a county thousands of miles away, as long as the cap of a bottle of Dongpeng beverage is redeemed by the consumer, the enterprise can know in real time. At the same time, the sale of a bottle of beverage represents an unboxing data, which enables the digitization of beverage distribution channels.
Through this set of "five-code association" digital system, Dongpeng has linked 190 million consumers and more than 3 million terminal outlets, and its value lies in unifying the dimension of enterprise decision-making with real, objective and timely data, and providing an effective basis, so that the company's "business network" has the most sensitive sense of hearing.
"One thing, one code, five code associations";Image source: Dongpeng Beverage
2. Weave a larger and stronger network: "1+6" multi-category strategy to explore the second growth curve
After breaking through 10 billion, if you want to become China's leading beverage group, it is not enough to rely on a single fist product "Dongpeng Special Drink", the solidity of the spider web is supported by a number of thick "beams", under the long-term operation of the "weaving web thinking", it is understood that Dongpeng Beverage is also constantly accelerating the pace of innovation, and the "net" of the enterprise is woven bigger and stronger.
The consumer market is changing rapidly, and the growth in 5-10 years should start thinking about the layout from now. For the beverage industry, new consumer preferences such as healthy, sugar-free, low-sugar, compound tea, and fruity flavor innovation are emerging, and traditional beverage brands need to transform and upgrade in terms of diversity and diversification in product research and development.
Since 2021, Dongpeng has successively launched new products such as the coffee drink "Dongpeng Big Coffee", the electrolyte water "Hydration", the sugar-free tea drink "Pengyou Shangcha" and the cocktail "VIVI Cocktail", "Drink More and Moisturize" and "Mandarin Juice".
According to the 2023 financial report data, Dongpeng Beverage's other beverage revenue increased by 186.65% year-on-year, accounting for 8.13% from 3.76% in the previous year, of which the total revenue of "Dongpeng Hydration" and "Dongpeng Big Coffee" accounted for 5.11%.
It is worth mentioning that it is understood that in the implementation of the multi-category strategy, "Hydration" has achieved a key breakthrough in its second curve layout.
Hydration, photo source: Dongpeng Beverage
Thanks to Dongpeng Beverage's supply chain capacity and channel advantages, "Hydration" has quickly covered more than 1.33 million outlets across the country, and based on the increasing popularity of categories, consumer drinking scenarios have also expanded to more popular consumption scenarios such as sports, leisure, and commuting. The sales volume of the product exceeded 500 million yuan in the first year of listing, becoming the company's TOP2 product of new SKUs in the all-beverage category in 2023[3], and it is expected to become the company's second "fist product".
In 2024, Dongpeng Beverage also plans to expand its hydration products to 11 SKUs, bringing a variety of flavors and specifications to cover the whole scene. In terms of channels, the company plans to increase the number of outlets covering "water replenishment" to more than 2 million to further seize the terminal shelves.
Hydration, photo source: Dongpeng Beverage
It is obvious that Dongpeng Beverage's "weaving network thinking" has accelerated the speed of its layout of multi-category beverage groups, and through the mutual complementarity between different categories, it will also further complete the territory of this enterprise operation "network".
As Dongpeng Beverage said in its financial report, for the company, China's energy drink market has broad prospects, and there are still a large number of untapped consumer groups, consumption scenarios and regions. It is understood that in the future, Dongpeng Beverage will continue to meet the diversified and functional needs of consumers, and gradually develop from a single category to a multi-category comprehensive beverage group.
According to Euromonitor International, the retail sales of the soft drink industry in mainland China will reach 637.2 billion yuan in 2023, a year-on-year increase of 4.19%. In the context of the overall growth of the industry, more and more enterprises and brands have begun to try to enter the beverage track, and the corresponding challenges to the business ability of enterprises will also escalate, and the comprehensive strength of enterprises will be tested.
For China's beverage industry, the emergence of tens of billions of enterprises and tens of billions of single products, on the one hand, means that the industry is booming as a positive signal, on the other hand, it also represents that the market concentration is getting higher and higher, and the market pattern may experience a new round of reshuffle.
In Dongpeng Beverage's annual financial report, the basic business objectives for 2024 are also given: it plans to achieve an increase of no less than 20% in operating income and no less than 20% growth in net profit.
Behind the strong growth of the company's goal, it may also be another "weaving net" idea for the company to cope with the fierce market competition - by shaping the second 10 billion single products, weaving a multi-category beverage group's enterprise diversified operation network.
Reference Sources:
[1] Dongpeng Beverage's 2023 financial report
[2] Nielsen IQ data
[3] Win Now data: 2023 new products refer to SKUs that were monitored for sale for the first time from January 2023 to December 2023
This article is the original of FBIF Food & Beverage Innovation, please contact for authorization for reprinting.