The room for price increase of China's home appliances from the crazy rise of Moutai

In recent times, the skyrocketing prices of a number of high-end liquors, represented by Moutai, indicate that the spending power of Chinese families is rising strongly. Will this trend be replicated in the home appliance industry next, leading to the expansion of a large number of high-end home appliance markets and price increases across the entire Chinese home appliance industry?

The price of 53-proof Feitian Moutai is generally over 1,500 yuan per bottle, and the highest price has exceeded 1,800 yuan per bottle; the retail price of the new 52-proof Wuliangye is 969 yuan per bottle, an increase of 70 yuan compared with the previous price; the price of the 500ml Guojiao 1573 classic package has increased from 680 yuan per bottle to 740 yuan per bottle...

Correspondingly, the market value of these high-end liquor companies has continued to rise. As of July 20, the total market value of Kweichow Moutai was US$86.5 billion, more than double that of five years ago. Wuliangye has stabilized at a market value of 200 billion yuan, and on the trading day of July 31, it also created a record high price after the stock was adjusted for rights.

The increase in spending power does not mean that the high-priced market will have no worries about business prospects, but in the context of rising incomes and consumption upgrades, it is absolutely right for all consumer goods companies to take the path of high-end transformation. From the perspective of the capital market, companies involved in high-end products such as liquor and home appliances have performed strongly, while companies that produce and sell low-priced goods are caught in a price war and have difficulty protecting themselves and developing.

one

Among many consumer goods industries, the recovery of the liquor industry is riding on the fast ship of consumption upgrading. In 2012, the country began to restrict the three public consumptions, which had a great impact on high-end liquor companies such as Moutai and Wuliangye that mainly rely on government consumption. The prices of mid-to-high-end liquors have dropped significantly, channel inventories have been squeezed, and corporate financial statements have deteriorated.

Moutai's sales and net profit stagnated for two consecutive years in 2014-2015. Fortunately, business and personal consumption replaced official consumption, and Moutai changed its strategy in time, focusing on personal consumption and expanding its low- and medium-priced products of several hundred yuan. Wuliangye also seized personal demand, and Yanghe also firmly grasped the mid- and high-end market with its Blue Classic series.

The average price of the entire liquor industry has been growing continuously since 2014. In addition to the direct relationship with the increase in packaging materials, labor costs, etc., the main driving force behind this is actually consumption upgrading. In Nielsen's 2016 alcohol consumer survey report, the average price index of alcohol purchased by consumers with an income of more than 7,000 yuan is 114, and the liquor purchase rate in the past three months is 73%. This means that consumers not only buy more, but also buy more expensive.

In the context of consumption upgrading, liquor companies can only survive in the competition by finding the right strategy to increase product prices. In addition to expanding low- and medium-priced products of several hundred yuan, Moutai also raises prices by releasing the appeal of scarcity, thereby increasing brand premium. No matter how many low-priced liquors Moutai has, in the minds of consumers, it is still a high-end brand because there are liquors above 1,500 yuan supporting it.

two

At present, Moutai's high-end strategy is worth studying by the Chinese home appliance industry, because consumption upgrades will inevitably lead to a readjustment of the industry's brand structure.

The beverage industry used to be one of the industries with a relatively stable brand structure, but the mainstream brands and products declined across the board in 2016. However, there are two products that are particularly dazzling: "Xiao Ming Tongxue" and "Cha Pi". In order to adapt to the consumption upgrade, Uni-President and Nongfu Spring fully responded to the consumption needs of the post-90s and post-00s in terms of taste, packaging and price, and launched a 5-yuan small fresh tea beverage, which quickly swept the market, quickly increased the market of tea beverages above 5 yuan, and to a certain extent stopped the downward trend of the tea beverage category.

Xiao Ming went public in March 2015 and generated 1.5 billion yuan in revenue for Uni-President that year. Similarly, after Cha Pi went public in early 2016, its revenue quickly exceeded 1 billion yuan. Xiao Ming and Cha Pi became the largest single product and best-selling item in the beverage industry within just one year of their launch.

Next, we can see that the trend and trend of China's consumption upgrade will not change, and the polarization of enterprises may become more obvious. Those enterprises that move towards high-end may not necessarily succeed, but if they continue to follow the low-price path without a strategy to cope with high-end upgrades, they may really fall behind.

Hongtashan was once popular all over the country. It was an iconic brand of cigarettes. Compared with the average cigarette price at that time, its price was very high and its quality was good. Then Yunnan Yunnan, which retailed at around 35 yuan, became a synonym for high-end cigarettes in the 1990s. But now, the price of each pack of Yunnan Yunnan is less than 20 yuan, which lacks the ability to support the image of Hongtashan. Not to mention that Hongtashan is only 8 yuan and is becoming a low-priced product.

In fact, once a brand plants the impression of low price in the minds of consumers, then this brand can only be a "stopgap measure" for their consumption and will be quickly abandoned by them.

III

More and more consumer companies are aware of the gold mine behind consumption upgrades. They need to continuously upgrade the value of their products and the premium power of their brands so that consumers are willing to pay for high-value products, rather than simply raising prices.

Luo Zhixian, chairman of Uni-President, said that the market positioning of "noodles" will be redefined, and it will gradually fade out of the low-priced instant noodles market in the future. In order to cooperate with China's consumption upgrade, it will produce products such as Tang Daren and Man Han Banquet. Now, "Tang Daren", which sells for more than 5 yuan, has become the main brand of instant noodles under Uni-President. From 2 yuan to 5 yuan, the price has increased by more than 2 times, but the taste has been fully upgraded. It is within the current consumer's ability, and this is the value point.

Whether it is the liquor, food, beverage industry or the home appliance industry, they are all facing the same group of consumers. This group of consumers is called the rapidly rising middle class, and is showing great consumer enthusiasm and consumption behavior that is very different from the past. They are no longer happy about products with free shipping for 9.9 yuan, and are willing to buy expensive and good products as long as they can improve their quality of life and physical and mental health.

In fact, the market performance of enterprises that insist on high-end home appliance industry in recent years is obvious to all. Judging from the prospects of neighboring industries, the prospects of high-end market are unlimited. Of course, the premise is that the brand, products, services, experience and impression left by the enterprise on consumers are all high-end and high-value.

IV

At present, the Chinese home appliance industry and related enterprises urgently need to raise prices and obtain lucrative profits so as to invest in technological innovation and conduct global mergers and acquisitions. However, many home appliance companies lack the means and ability to raise prices.

The increase in raw material prices since the second half of last year has ushered in a round of general price increases in the home appliance industry. However, this is not a unilateral drive by home appliance companies, and it is not enough to win more lucrative profits. Most of the price increase profits are eaten up by raw material costs. On the contrary, once the raw material prices fall, a large number of home appliance companies are subject to the competitive pressure of product homogeneity and have cut prices to promote sales and grab market share.

It can be said that the home appliance products lack the external conditions and internal motivation for the industry-wide price increase. The key is that many home appliance companies' products are highly homogenized, and the products become "twins" after being covered with trademarks. And most home appliance companies' brands have not established a sufficiently loyal fan base.

However, in the high-end market, some home appliance companies have the motivation to continue to raise prices. On the one hand, the sense of technology and fashion of high-end products have been significantly improved, and they have entered a benign track of continuous iteration; on the other hand, many families are becoming more and more aware of high-end products, paying more attention to brand, quality and service, and are less sensitive to price.

It can be said that there is room for price increases in China's home appliance industry, but it will not be a full-line increase, but only a "exclusive feast" for a few companies and brands!

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.