Behind the Cola Wars: Yuanqi Forest has reached a crossroads

During the May Day holiday this year, I, who had not been back to my hometown for a long time, saw the domestic soda Dayao for the first time in a restaurant in a town in a third-tier city. The diners present may not have any brand awareness of Dayao, but they still invited it to the table. Behind this is the power of channels.

For beverages, the importance of channels is self-evident. After all, no matter how good the advertising is, it still has to be converted into real sales through channels. Yuanqi Forest, which was once regarded as a fast-moving consumer product with an Internet mindset, must also be well aware of this truth.

On April 26, Yuanqi Forest held a launch conference for "Yuanqi Cola" (Yuanqi Forest cola-flavored sparkling water) in Xianning, Hubei. In addition to the official launch of this annual new product, Yuanqi Forest also expressed its determination to expand its distribution: in the next quarter, "Yuanqi Cola" will be rolled out to more than 115 cities across the country and enter more than 700,000 terminal outlets.

Two days later, Hey Tea held the largest offline dealer conference since the epidemic in Chengdu, emphasizing its "partnership" with dealers. This became another feat after Tang Binsen, the founder of Hey Tea, politely admitted his mistakes to dealers and "turned over a new leaf" at the end of 2022.

If "Yuanqi Cola" is Yuanqi Forest's reserve hit product, then channels are the top priority for Yuanqi Forest to realize its ambitions.

Coke is just a flavor

Before Yuanqi Forest officially entered the cola market, the media reported that the two giants, Coca-Cola and Pepsi, had threatened to "eliminate Yuanqi Forest sparkling water". Now it seems that the giants have not only failed in their siege of Yuanqi Forest, but also have to watch the enemy's tentacles penetrate deep into their hinterland.

On the other hand, it was not easy for Yuanqi Forest to create "Yuanqi Cola". After three years of preparation, Yuanqi Forest launched the 1.0 version of "Yuanqi Cola" on a small scale in July last year, but the market performance was mediocre, and many consumers complained that it "did not have enough gas" and "had a plum taste".

At that time, version 1.0 strictly followed Yuanqi Forest's "0" strategy. Compared with the cola on the market, it not only had "0 sugar, 0 fat, 0 calories", but also "0 potassium sorbate, 0 sodium benzoate", and did not contain preservatives. From 3 "0", it expanded to 5 "0", highlighting the simplicity of the ingredient list, and removed phosphoric acid, which is harmful to human bones and cardiovascular and cerebrovascular diseases. At the same time, the natural sweetener erythritol replaced the artificial sweetener aspartame, and natural citric acid replaced sodium citrate.

However, ideals are full and reality is skinny. A product that is extremely "healthy" but sacrifices taste will definitely not be favored by consumers.

Therefore, in the 2.0 version of "Yuanqi Cola", Yuanqi Forest adjusted its strategy, putting the importance of good taste before health, and focusing on "same good taste, but without sugar". On the one hand, the gas content was increased to highlight the "throat hit"; on the other hand, the flavor was adjusted to balance the sweet and sour flavors, and caffeine was removed and replaced with green tea extract.

At the press conference, Luo Yonghao, who has already quit the Internet, appeared as a "mysterious guest" in a video and said that making cola was like "seeking death", but Tang Binsen said "I hope cola is not a forbidden area, but a taste", making no secret of his ambition to expand the cola category. The heads of Tianfu Cola and Laoshan Cola also talked about the "Cola Dream" on the same stage at the press conference, which was interpreted by the outside world as a breakthrough for domestic colas.

Indeed, with Coca-Cola and Pepsi-Cola holding a combined market share of more than 90%, the resistance faced by Yuanqi Forest and others in their attempt to break through cannot be underestimated, but it is undeniable that domestic cola brands have also had their glorious moments. In the 1980s and 1990s, many domestic cola brands including Tianfu Cola, Laoshan Cola, and Feichang Cola were deeply rooted in the hearts of the people, until the "two colas" entered China and dominated the cola market.

Zooming out a little, behind the launch of "Yuanqi Cola" by Yuanqi Forest is its consistent diversification strategy. From burning tea, to sparkling water, to Youkuang, Alien Electrolyte Water, Beihai Ranch Yogurt and iced tea, Yuanqi Forest has never stopped on the road of diversification and innovation.

Tang Binsen himself comes from the gaming industry, and he has transferred his rapid iteration strategy based on Internet thinking to the beverage industry. The product update rhythm of 4 months or even shorter is very different from the approach of Coca-Cola and Nongfu Spring, which spend a lot of time on marketing and promotion to create classic products.

However, multi-category coverage is an irrefutable layout method for this industry. Even a strong company like Coca-Cola has as many as 160 beverage brands, covering multiple categories such as drinking water, carbonated drinks, juices, and functional drinks.

In addition, with the help and reshaping of capital, the life cycle of a single hit product is also shortening, and consumers' tastes are also unpredictable. At this time, it is necessary to constantly introduce new products to attract consumers' attention. More importantly, for Yuanqi Forest itself, the decline in the growth rate of operating performance is also a long-standing problem, and it is urgent to launch new "hot products" to boost sales.

According to data previously released by Yuanqi Forest, from 2018 to 2021, Yuanqi Forest's sales growth rates were 300%, 200%, 309% and 260% respectively. By 2022, Yuanqi Forest expects sales revenue to be 8-9 billion yuan, a year-on-year increase of only 10%-23% compared to the previous year's 7.3 billion yuan, a significant decline in growth rate.

In contrast, my country's cola market still has a lot of room for development. According to the data from the Prospective Industry Research Institute, in 2021, the scale of my country's carbonated beverage retail market has reached 98.953 billion yuan. At the same time, Curt Ferguson, former president of Coca-Cola Greater China, also stated at the press conference that my country's per capita consumption of cola is only 52 bottles, while the United States is 400 bottles and Mexico is about 640 bottles.

In addition to its yearning for the cola market, Yuanqi Forest has never given up its role as a "challenger" to traditional beverage giants.

Infinite game of challenging and being challenged

"At that time, many colleagues were worried that if we tried to make cola-flavored drinks, we would anger the major cola manufacturers. Because compared with the international giants, our size is equivalent to a little finger and it is easy to be slapped to death," said Lu Jiao, co-founder of Yuanqi Forest.

Three years later, at the launch event of "Yuanqi Cola", Luo Yonghao raised the same question: Are you not afraid of being crushed by beverage giants when making cola? Tang Binsen replied that they have been crushed every day, and it doesn't matter if they are crushed again.

Indeed, in addition to the two giants that "Yuanqi Cola" is benchmarked against, Tang Binsen has "offended" Nongfu Spring through Mineral Water Youkuang, and Alien Electrolyte Water is benchmarked against the Japanese brand Pocari Sweat, etc. In fact, if the competition in the beverage track is not fierce, Tang Binsen will not enter the market. After all, only the big red ocean track with a proven business model and full competition is an industry worth doing in Tang Binsen's eyes.

As one of the founders of Challenger Capital, Tang Binsen personally values ​​the "challenger" qualities of Yuanqi Forest. Fortunately, Yuanqi Forest itself is also very powerful. It took less than two years for sales to go from 0 to 1 billion. In 2020, it achieved revenue of 2.7 billion yuan. In the second year, sales soared from 2.7 billion to 7.5 billion, tearing a hole in the "iron curtain" constructed by the "two colas".

However, traditional beverage giants are not pushovers. In addition to competing to launch lower-priced sparkling water products, they are also "annihilating all" in the upstream supply chain and channel distribution.

For example, Coca-Cola launched the "AH! HA! Little Universe" sparkling water, Pepsi launched the "bubly Smile Fun Bubble" series, and Nongfu Spring launched soda sparkling water. Not only are they very close to Yuanqi Forest in terms of packaging style, marketing strategy, and taste, but their prices are generally 1-1.5 yuan cheaper than Yuanqi Forest, which has a unit price of 6 yuan.

In the upstream supply chain and distribution channels, the giants' pursuit and interception are more blatant. From the frequent supply cuts of key raw material erythritol to the rigid production materials of bottle blanks and bottle caps, to the "choose one of two" instructions of offline distributors, the giants' counterattacks are higher and higher, and Yuanqi Forest's market share has gradually shrunk from 85% before 2019 to less than 50% in the second half of 2021.

Building its own factories, consolidating channels, and creating a second growth curve besides sparkling water have become new issues for Yuanqi Forest. So far, Yuanqi Forest has built five "forest factories" across the country, with a total investment of 5.5 billion yuan and a total production capacity of more than 5 billion bottles; in terms of offline channels, Yuanqi Forest has developed more than 1 million offline terminals including unmanned retail cabinets, stores, refrigerators, etc., covering more than 800 cities across the country.

In the process of "solving the problem", challenges also follow like a shadow. For example, the lack of management has led to frequent cross-selling of dealers in different regions, the breeding of internal corruption, unsalable products and chaotic pricing system, and the loss of dealers, all of which have seriously damaged Yuanqi Forest's "vitality". Therefore, within Yuanqi Forest, "channels and dealers" are regarded as the most in need of reflection and review in 2022. Since 2023, in addition to "more actively showing goodwill to the dealer group" in public, Yuanqi Forest has also taken the initiative to learn from traditional consumer goods companies and changed the previous OKR management method to the "OKR+KPI dual-track system" to meet the company's pursuit of certainty and stability.

Although Tang Binsen tried to "learn more" from the traditional consumer goods world in terms of systems, processes, talent system, supply chain and other aspects; he tried to "stay true to himself" in terms of efficiency, company atmosphere, new product development and other aspects.

For example, Yuanqi Forest always develops new products: it is always in the process of developing new products, and randomly finds employees to "cup test" every day. After all, based on high standards, rapid testing and rapid iteration are the core product development ideas of Yuanqi Forest, and it is also an important manifestation of its introduction of Internet thinking into the food and beverage industry.

However, looking to the future, Yuanqi Forest’s greater challenge may lie in its wavering positioning.

Yuanqi Forest, stuck between "fat house" and health

Yuanqi Forest, which broke through the siege with "0 sugar, 0 fat, 0 calories", has also brought it a lot of doubts and troubles due to its "sugar-free" label.

On the one hand, zero sugar cannot be equated with health; on the other hand, some products under Yuanqi Forest, such as Yuanqi Forest Milk Tea, once contained crystalline fructose and lactose, which cannot be considered sugar-free products, and this is inconsistent with the brand image that Yuanqi Forest conveys to the outside world.

Sugar or no sugar, Yuanqi Forest has been going around in circles for 7 years, and now it seems to be back to square one. According to Zero State, since 2022, Yuanqi Forest has launched several sugary products, including the sugary version of electrolyte water "Alien PRO", the sugary version of lemon tea "Chaoke", and the sugary version of lemon sparkling water "Lang".

This makes people wonder, is it that sugar has finally won in Yuanqi Forest, just like Coca-Cola's sugar-free cola brands Diet Coke and Coke Zero have always been lukewarm?

So, in the cola market where sugar-free cola is crushed by sugar-sweetened cola, can "Yuanqi Cola" explore a completely new path?

Interestingly, at the launch of “Yuanqi Cola”, Tang Binsen, founder of Yuanqi Forest, Curt Ferguson, former president of Coca-Cola Greater China, and Hei Jiantao, known as “the first person in New China to drink Coca-Cola” and “Coke Boy”, participated in the “blind test session” - each guest tried two cups of cola that looked the same, one was Yuanqi’s new cola, and the other was “a certain cola”. After the tasting, they kept a cup of the one they liked.

In the final blind test, only Tang Binsen kept his own cola product, while the other two kept "another cup".

References:

1. Zero State LT: Yuanqi Forest’s decisive battle with Coke: perhaps preparing for listing

2. Tiger Sniff: Yuanqi Forest’s approach has changed

3. FunTalk: Two Tang Binsen

4. New Consumption Think Tank: Tang Binsen of Yuanqi Forest: Why do I have to make Coke?

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.