Research on Current Situation and Development Trend of Dairy Industry in China (V)

Part III: Opportunities and Challenges under the Trends So, in the face of the above-mentioned problems and trends, what are the opportunities for our enterprises to develop themselves? What difficulties and challenges will you face in grasping opportunities? The author continues to talk about personal opinions. However, it should be stated that the following content is for reference only and cannot be used as a basis for corporate investment.

First, we should talk about history before the opportunities for lurking in the dairy industry. Twelve years ago, the China Dairy Industry Association clearly stated that China's per capita milk consumption is less than 7 kilograms, which is a far cry from the per capita milk consumption of 106 kilograms in the world, and China's dairy industry will have huge room for development.

Twelve years have passed. What will happen to China's dairy industry today? It goes without saying that this prediction is correct. The total size of the Chinese dairy industry has grown at least 4-5 times compared to 12 years ago. It has become the third largest dairy country in the world and it is very likely that it will surpass Japan in the near future.

So, what is the current per capita milk consumption in China? In fact, it is still very low, about 29 kilograms, which is still far behind the current average world milk consumption of 118 kilograms. Therefore, we can once again boldly predict that the future growth potential of China's dairy industry is still large, and there are still many hidden opportunities.

1. Opportunities for Leading New Categories Although China's dairy industry has experienced rapid growth over the past many years, it is still in a period of growth. Although the first and second tier cities seem to be saturated, the overall development trend has yet to enter the saturation period. So, what are the typical characteristics of an industry in its growth period? While ensuring rapid development, the categories began to differentiate. It is like a tree. From the time the sapling grows to the towering trees, numerous branches and treetops grow.

From a marketing point of view, then, every differentiation of a category is a good opportunity. Whoever seizes this opportunity will have the opportunity to create sales, win profits, and even create a brand. For the Chinese dairy industry, this opportunity still exists.

In the dairy industry, milk tea has never been the mainstream product of any company. At first, Yili made Mongolian milk tea, but only as a sideline. Later, Mengniu also started milk tea, but it only stayed in Mongolian milk tea. Later, a small private company suddenly launched a "cup milk tea", which brought differentiation to this category. That's what we just knew soon.

I think this is a good attempt, and it is a very good way out. Our enterprises, especially our small and medium-sized enterprises, should learn from others, explore boldly in the creation of categories, and boldly innovate for their own development. Finding a way out. Now, people's "cup milk tea" has "around the earth two laps", what are we waiting for?

2. Opportunities for high-end products High-end products are the obvious trend in China's dairy industry. Whether it is normal-temperature milk or low-temperature milk, high-end products can be said to be ubiquitous, whether it is milk powder or milk drinks.

So, what are the opportunities for this trend? The author's point of view is: There is no high-end product category, there is the opportunity to develop high-end products. Because, from a marketing perspective, any product has the opportunity to make high-end products. The high-end explorations of brands such as Mengniu's "Telun Su", Yili "Golden Collar" and Guangming "Yuebei" can prove this.

If it is not possible to do high-end categories, it is a milk beverage. However, Mengniu’s “real fruit grains” and “milk specialties” have just been explored in this seemingly “impossible” area.

Therefore, the author can completely conclude that the category of high-end products has not yet emerged as the opportunity for the next company to seize it.

However, unfortunately, most of our companies do not think so, and everyone is staking out high-end infant formula. High-end baby milk in the end how much chance? The author can tell you responsibly that there are not many opportunities, and the opportunities you see may be traps. Because we must study consumers, we must study how many brands their minds can accommodate. From the point of view of consumer behavior, in a market segment, the limit of the number of brands that consumers can accommodate is 7, but usually it is 3. So, you look again, how many brands does China's high-end infant milk powder market have? Do not say three, and even seven have already been filled. Where is your chance? Even if the "Mengniu Allah" cannot squeeze into the market, why should you survive and why should you make a profit?

3. Opportunity to be a "second child" For companies that are willing to follow, this opportunity seems to be a "gospel." This is because this is the only benefit of "following strategy." That is to work hard to become a substitute for the "big boss."

If you can't really do a "new class leader" and you don't have the ability to do a "new high-end product," then you might as well try to be the "second child", and chances are that you may survive.

However, one point to be made is that the “second child” here is not the industry’s “second child” but the “second child” of a subcategory or market segment. Just like Yili “Golden Classics” became the second child of high-end milk, Mengniu’s “New Yangdao” became the second child of low-lactose milk and became a sub-category. There are still many successful cases of this kind of strategy. For example, the case that everyone could not think of is Erie adult milk powder.

Due to the rapid development of liquid milk, adult milk powder suffered serious challenges and the market scale has been declining year by year. Few companies are willing to do this category. Just at this point of view turning to the key momentum of infant milk powder, Yili Milk Powder Division made Meiji's move: continue to be adult milk powder and become the “second child” of this subcategory. Therefore, they continue to launch high-quality “high-calcium milk powder”, “student milk powder”, “milk powder for the elderly” and other functions to strengthen milk powder. Within a short period of 3 years, they can easily surpass Dutch cows and directly approach Nestlé’s milk powder. Even more than Nestlé milk powder sales, this sub-category is truly "second child."

Do not need advertising, do not need to do promotions, do not need too much product innovation and channel coverage, as long as the guarantee of good quality and middleman profits, you can easily make money, why not?

Therefore, the author wants to tell everyone that market opportunities will always favor the companies that use their brains. As long as you use your brains, as long as you understand "contrary" thinking, as long as you follow the rules of marketing, you can completely turn "difficulty" into "easy", turn "scrap" into "treasure", and you can Find a place.

4. Vertical Infiltration Opportunities If you cannot catch the above three opportunities, then I suggest that you take this measure: vertical penetration. In other words, your current level of production equipment, technology and equipment does not move at all. It is still the original product, original equipment and technology. It is only copied down to the third and fourth-tier cities and even the rural market.

This may be the last chance. If you can't even catch this opportunity, there is really no way. At present, with the increase in income levels in the third and fourth tier cities and the central and western regions and the acceleration of urbanization, dairy product consumption and consumption structure in the third, fourth tier cities, central and western regions, and rural markets are expected to increase rapidly. The entire dairy industry has experienced strong growth.

However, most of our companies are afraid to extend. Fear of extension, no profit. Therefore, most companies other than Yili and Mengniu stick to the “Lao Lao Shi” and try to survive by how far they are without moving. This is a terrible strategy. 5. Opportunities for reshuffling the market If you do nothing in the above four opportunities, then there are only two options for your reference: one is to “jump” immediately, and the other is to wait for “turmoil” and seek development.

It sounds like ridicule and irony, but what I said was serious. The meaning of “jumping” means that you may not be good at dairy products. You may abandon the dairy industry and do something that you are good at. Waiting for “turmoil” means that it is like waiting for events like “melamine” to use the incident to develop against the trend.

As early as 1999, in China's milk powder industry, Yili milk powder was far from ranking, with high-end foreign brands represented by Wyeth and Nestle occupying, and low-end local brands represented by Sanlu and Wandashan. However, the outbreak of a "dioxin" incident provided Yili milk powder with an opportunity for growth. Yili milk powder grows at a rate of doubling every year and has now developed into a leader in this industry.

As early as around 2003, Shengyuan milk powder was once in trouble and it was difficult to extricate itself. There was no chance of breakthrough. However, the outbreak of the “Fanyang milk powder” incident provided an opportunity for the Holy Spirit. With its strong channel control capability, Shengyuan quickly moved toward the country once again and still grew at a speed of doubling. By 2007, the turnover exceeded 2.6 billion yuan, becoming a dark horse in the milk powder industry.

There are two other companies that use similar opportunities: Feihe and Sanyuan. The melamine incident in 2008 caused Sanlu to fall, causing Yili and Mengniu to suffer huge losses. However, because the cranes and ternary products have not yet found out melamine, their sales have risen against the trend. In particular, Feihe Dairy has achieved sales of more than RMB 1 billion in 2009, and has turned from sparrows to Phoenix.

Therefore, industrial turmoil is also a good opportunity to use. However, this opportunity is more of a sense of luck than something that can wait. We hope that our company must not place its dream on such an opportunity. Otherwise, it will be no different from "keeping it alive." However, once you have this opportunity, you should do your best.

Second, the challenges faced by the dairy industry Faced with China's dairy industry and a variety of opportunities, I believe that whether large or small businesses, there will be at least the following four challenges:

1. The Challenge of Product Development Capability We mentioned earlier that the development of new products and the development of high-end products are opportunities. Indeed, this kind of opportunity does exist, but it requires our company must have strong product development capabilities.

From a technical standpoint, this is not a problem for large companies. But for SMEs, it is a huge challenge. They may have very good ideas, but their current level of technical equipment may be difficult to achieve this idea, so they have to give up or use external forces.

From a marketing perspective, then, excellent product development capabilities have become a challenge for any business. Because some products do not have the skills to get it, but need professional consumer demand research. At this point, big companies have not seen much excellence. As for Mengniu, which is famous for its product innovation, it also made many mistakes here. For example, its early "mood quadratic" and "good night milk" were failures of the lack of demand research. Therefore, the R&D capability of a complete product will surely become a challenge that all dairy companies must face.

2. Challenges of channel management and control capabilities Channel management, usually with 12 characters, is called: vertical penetration, intensive cultivation, and decisive termination. It looks like 12 words, but I don't know how many people are tired of it and I don't know how much resources there are to empty it. For the Chinese dairy industry, in particular for room temperature milk, yogurt and milk powder categories, good channel expansion and effective management is really inseparable from this 12-character policy.

We take the first-tier cities that everyone thinks are more mature. The penetration rate of the channels may be almost the same. There is no room for improvement. However, there is a lot to be done in terms of “intensive farming”. Many cities have a lot of space to promote sales. Expense utilization and consumer shopping efficiency.

If you say second- and third-tier cities, the challenge will be even greater. Not only will the downward-performing dealer team be well-established, but it will also need to get the “value distribution ratio” and “weighted distribution ratio” at the terminal level, and it must be Do your promotional activities in a mixed environment. This requires manpower and more financial resources. General enterprises will be weak.

Normal temperature milk and milk powder are also relatively good, and even more troublesome is low temperature milk and yogurt. Because, it must be supported by the cold chain to lay down, and the need for double protection of the production base and logistics and distribution. Because this product has a short shelf life and needs to be refrigerated, the ability to radiate from the production base generally does not exceed 300 kilometers, and due to the need for full refrigeration, it not only brings challenges to the production sector, but also brings challenges to the logistics department.

Therefore, the more downward-infiltrating markets, the greater the challenges in channel control and control capabilities, but the current development situation will likely pull the company's human-sea tactics into the countryside, leaving enterprises to pay a huge price.

3, the challenge of brand communication ability In contrast, brand communication seems to be easy and comfortable. Because, at least it does not require too much technology, not to mention human-sea tactics. However, an excellent brand communication capability will still be the challenge for all companies.

Because we must make it clear that the current market is not the market 10 years ago. It is not as simple as "developing products, pricing reasonably, fixing channels, and doing advertisements." Most of the categories have completely shifted from product-driven to channel-driven. Even some categories have entered consumer-driven (for example, high-end milk and baby milk powder) and require more specialized communication capabilities.

The mission of a professional brand communication is: how to strengthen brand positioning, how to establish consumer emotional connection, and how to effectively conduct brand transformation and foster consumer loyalty. If you are unprofessional, just fling in these few words, hundreds of millions of dollars will vanish, and you won't see the slightest echo.

In this era of “cost increase and price increase,” all of our companies’ marketing costs are limited, and transmission costs are even more limited. Is it not a challenge to complete the annual goals of the entire company with a limited fee?

At this point, the challenge for SMEs will be even greater. Because they not only do not have enough transmission costs, but also lack professional marketing staff. In this era of "high-end release of goods and indiscriminate bombing", the era of how to find or train a group of "artists" capable of "carving" on the "rice grain" will surely be their most troublesome thing.

4, the challenge of milk source protection ability The author believes that this challenge must include at least three major contents, namely: milk source layout construction, milk source safety construction and milk source cost control.

The construction of a milk source base is the most typical enclosure movement. Once it is controlled by which enterprise, it will have a huge exclusivity. This will limit the development of many companies. In terms of strategy, we can find great ideas, but we will encounter bottlenecks in implementation that are difficult to overcome. Therefore, finding a milk source that can support the strategy is a huge challenge.

Moreover, China's dairy industry has just experienced so many crisis incidents and the safety construction has to be further strengthened. Because, China's dairy industry really can not afford to toss again. However, the milk business model of most dairy companies in China has huge hidden dangers. The safety construction of the milk source base has become the most difficult problem for all dairy companies. Especially for large companies such as Yili and Mengniu, “large scale, difficult management, large investment, and difficult to change” have also become their heart disease.

In addition, what has added to the problem is that the constant increase in the price of raw milk has exerted enormous pressure on production costs. We also analyzed this problem in the past. If the price control of raw milk is not good, it will lead to a series of corporate problems, even social problems, and the consequences would be disastrous. Although companies represented by Yili and Mengniu are relatively relieved of this pressure in the conversion of product structure, the problem of milk prices will not be controlled and will escalate to the competition between countries. This can be a big problem.

Therefore, ensuring the rational distribution of milk sources, safe production, and cost control has become a difficult problem that all dairy companies must study, and it is a challenge that is difficult to overcome in a short time.

Third, the relevant recommendations for dairy companies through such a large description and analysis of the situation, we will China's dairy industry status, trends, problems, opportunities and challenges, and everyone did share. Although not all of the opinions and conclusions can match the facts, the overall situation of the Chinese dairy industry is like this. I believe everyone shares the same feeling.

Under such a big background, then, in such a large environment, how will our company seize opportunities, meet challenges, and become the winners of the new era? Due to space limitations, the author hereby makes only four suggestions for your reference:

1, forget "follow", keep in mind "difference"

When a company does not do self-analysis, does not do self-orientation, blindly imitates other people's strategies, and follows others, no matter what kind of market environment, it cannot be truly successful.

Let's analyze Sanyuan milk, why it will lose money. The author believes that the reason lies in the "follow" strategy. They did not continue intensively cultivating the pasteurized milk that they are good at, followed the pattern of large enterprises, and entered the fields of their unprincipled Tetra Pak, Tetra Pak, milk powder, soymilk powder, walnut sauce and rice pudding. Become a huge "food brand." As a result, people make money products, it does not make money; people open the market, it can not open; loss is a matter of course.

So what should ternary do? The author believes that we should focus our firepower on one point and be the first brand of "Chinese pasteurized milk" instead of trying to be "the Beijing people's own milk", and we shouldn't bloom on the categories that we are not good at. If I let the author say that Sanyuan would rather develop the "Pakistan high-end milk", it would not be able to develop the "Tetra Pak high-end milk."

Sanyuan should adopt the “small-scale milk source, small-scale factory, small-scale market, and large-scale copying” model, standing opposite to the Yili and Mengniu model, just like digging potatoes, taking Beijing as the center, and circling one circle outward. Enclosure expands the market, captures the market one by one, adheres to the positioning of “Pakistan and New Zealand” in a “small cell, big breed” approach, and must become “a ranch around the urban population”.

They can fully target Yili and Mengniu to “Tetra Lian Milk”, “Normal Temperature Milk” and “Stick Milk”, and then create an atmosphere of “urban ranch” through public relations activities, event marketing activities, and word-of-mouth communication. . It can also be strategically alliance with Guangming to further strengthen “freshness is value”, “small ranch, great security”, “when farmers drink normal milk, people drink milk from Pakistan”, “Pap milk, there is bright south, and there are three yuan in the north” Such as recognition, the two companies go hand in hand, "double horse carts", I believe that at least better than the current situation. However, unfortunately, they may have been so far back 10 years ago. It is now somewhat too late.

Therefore, the author urges everyone to forget to “follow” and keep in mind “differences” and to form their own unique development strategies and business models as soon as possible, and not to waste good times on the road to imitation.

2, forget "expand", keep in mind "focus"

The courage of Chinese entrepreneurs has impressed people all over the world. Each of them has a spirit of not fearing death. Therefore, in their conference room, only one of the most popular words is "expansion." However, how much benefit does the expansion bring to the enterprise? Let us take a look at the most urgent flying cranes in the dairy industry.

With the melamine incident, a slogan of “one consistent, good milk powder” appeared in various media. The name “flying crane” seemed to enter the eyes of the people at one night and became another dark horse in the Chinese dairy industry.

However, in the first half of 2010, Feihe’s turnover was nearly 10 billion yuan, and it actually sounded unbelievable. So, where is its profit going? The author believes that they all go to "expansion".

Their first mistake is that they have not yet established a strong position in the field of baby milk powder and they have started a full-scale attack, trying to form a series of brands and developing “flying cranes,” “flying sails,” “flying yokes,” and “flying hui.” There are five major milk powder brands such as “Star Feifan”, from infants to children, from students to pregnant women, from ladies to old age, from full fat to high calcium, and to develop in virtually all categories of milk powder. This rapid expansion had to engulf their profits.

Their second mistake is not only to fight in the field of milk powder, but also to soy milk powder, walnut powder, health products, cream, butter, industrial powder and many other areas of expansion, trying to become "all-powerful" super hero. This is an irrational expansion and it is impossible to bring profits in a short time. Therefore, the losses of Feihe are obvious, and the future troubles are also obvious.

So, what should fly cranes do? Its primary task is to further consolidate and enhance its position in the field of infant milk powder, focus on a clear functional appeal and emotional appeal, and thus become the first brand of this appeal. Instead of eager to develop horizontally. If the money is too much to spend, it will also learn from the "beautiful" of the home appliance field and expand into those areas where there is no "second child". Just like “beautiful” extensions to microwave ovens, soya-bean milk makers, humidifiers, etc., one can easily enter the “second child” of this market, and it is definitely not blooming everywhere.

Therefore, the author's second suggestion is that when you become a "first brand" in a market segment, you better forget the word "expansion", honestly focus on one area, and strive to become the "grey" in this field first. "(Long-term focus on air-conditioning, China's household electrical appliances become the best profitable company), and then seek to become the "beautiful" in other areas.

3, forget "hype", keep in mind "value"

In the foregoing, we also mentioned many opportunities. The opportunities for “new products” and “high-end products” are believed to be of interest to all companies. Because these two opportunities mean high profit margins, and all dairy companies in China need profits.

So, how do new products or high-end products come out? It is a result of careful study of consumer motivations and needs, rather than speculating on certain concepts.

There have been a lot of "hype" turmoil in China's dairy industry, the most typical of which is the "no anti-milk" storm in Bright Dairy. They once attempted to resist the attacks of Yili and Mengniu through “no resistance”. As a result, they not only failed to resist, but caused their encumbrances. People said one sentence and turned this concept into a bubble. That is, “All milk is now resistant. ". Is this really the case? Not necessarily, but both companies say so, consumers definitely believe.

Later, Yili milk powder was also hyped as so-called “milk powder.” A manager at the time also claimed that this was the best innovation in the Chinese milk powder industry and ordered the marketing department to do some outreach activities. "Sun milk powder" umbrella inserted into the security guard box at the gate of Erie headquarters. It means to show off to Erie’s executives what they have done. However, what happened later? Industry associations banned expressly, Yili "fresh milk powder" ended in failure, resulting in a huge waste of packaging materials, promotional items and advertising.

Therefore, I suggest that we can develop new products, but we can also develop high-end products. However, all measures are based on genuine consumer “values” rather than “flicker” and “hype”. As long as your product development really meets a certain kind of consumer demand, it really brings the value that consumers can't substitute, plus your strategic science and tactics are appropriate. I believe that your product can gradually be sold without hype. Mengniu's "Breakfast Milk", Yili "Big Fruit" and Bright "Good Times" are all sold in the "unknown" category. They have no hype at all. They are also very successful.

4, forget the "lucky", keep in mind "points"

Since the Milk Powder incident in Shenyang, the Chinese dairy industry has not been eliminated. The waves of crisis have scared our business and we are not sure if the next crisis will come.

What is even more frightening is that those foreign brands are immersed in vain, and all of them dress up as “safety days”, conquering consumers with “high-quality, high-price” attitudes, presenting a monopolistic market for foreign brands.

This is a dilemma between two-way attack, trust and competition. It seems that China's dairy companies, especially small and medium-sized enterprises, should be forced to a dead end.

However, the author feels that all this is not caused overnight. It is like a freezing cold. This is the side-effect of our "lucky" mentality. Perhaps due to the national conditions, our companies are too impetuous, not enough duty, always "intimidating water" in the "fish." As a result, the accumulation of "lucky" and "trimming balls" again and again will become a crisis.

If our company honestly remembers lessons, sums up experience, respects rules, stresses integrity, and works within its own boundaries, in fact, many crises can be easily solved. Even if the industry crisis is caused by uncontrollable factors, consumers will not give up on you.

I often ask my clients what brands are truly strong, and often tell the story of companies such as Mercedes-Benz, BMW, Coca Cola, KFC, Colgate, Procter & Gamble, and Hewlett-Packard. These companies or brands have all experienced crisis events, and the negative impact of some events is no less than the "melamine" incident. So why did these companies stand still in the face of a crisis and stood proudly? The reason is that they have a group of highly loyal customers, and in the minds of these customers they deeply embed their brand value and corporate culture, and even become their pride. Therefore, even if there are mistakes, consumers will be forgiven and are willing to give them a chance to “reform”. For example, the return to the market of the Sino-American "New Contac" and today's glory is the most favorable proof.

Therefore, the author suggests that our company should not have to worry or fear, as long as it is like “being a human” and “doing a brand”. This book points out every thing, earnestly “every day is tomorrow” and believes that our company will With more brilliant achievements, I believe that China's dairy industry will have a better future.