This article is from WeChat official account:Growthbox (ID: growthbox2) , author: yolo, John, Dan Ting, Research consultant: cooked sheep, from the title figure: vision China

The Past and Present of Yuanqi Forest

I believe everyone has heard about it: Tang Binsen, the founder of Yuanqi Forest, has been engaged in the Internet & gaming industry, and his resources and experience are completely unmatched. Why is he able to start a beverage brand from zero?

We found that before founding Yuanqi Forest, Tang Binsen had a deep understanding of the consumer and retail industry, and even had experience in the operation of soft drink companies, which can be said to be well prepared.

In 2014, after selling his game company, he immediately established a VC: Challenger Capital. The capital scale has reached 8 billion in operation to this day. Looking closely at the bids, we can see that Tang Binsen will not only support his old employees to start a game, but also focus on consumer retail tracks, such as Ramen, Panda Brewing, and Challenger Capital. -It also includes many brands of alcoholic beverages, such as the Guanyun Baijiu that was on fire recently.

To invest in a company, it is necessary to study the industry and hundreds of targets, as well as the opportunity to deeply participate in the operation of the invested company. This is an excellent way to accumulate experience.

Digging down this line, we found even more amazing information: Tang Binsen actually invested in a company similar to Yuanqi Forest, as early as 2015Started operations.

In the Challenger Capital’s portfolio, you can see that this beverage company named “Optimal Renewal” has the same business model and positioning for the post-90s to 95s as Genki Forest.

(Picture source: corporate business card, public information management)

Look at its main product “add a little bit”. The three-no idea of ​​”rejecting high sugar content, rejecting high calories, and refusing to increase fat” is also highly similar to the selling point positioning of the “0 sugar, 0 calories, and 0 fat” of the vitality forest. .

If the above two points are just coincidences, then the following information can be fully confirmed: From the shareholding structure, we can see that Tang Binsen’s wife Xu Xiao was arranged to become a shareholder of this company, holding 6%. . Judging from the historical record of Challenger Capital, this is an unprecedented phenomenon. And when this brand disappeared from the market, it was when Genki Forest was established.

(Information Source: Enterprise Business Card)

In other words, Tang Binsen is very serious about making beverages, and he actually understands the industry.

Of course, in addition to experience, another major requirement is money.

Different from other fast-moving consumer goods, the market concentration of the beverage industry is very high, with major giants occupying the mountain as king. Therefore, it takes a lot of marketing investment to build a well-known brand, such as:

Carbonated beverages are the world’s two international brands of Coke and Pepsi, accounting for 59.5% and 32.7% respectively.

In tea beverages, Master Kong and Tongyi account for 60%.

In addition, the beverage industry is essentially a To B business, which relies heavily on the dealer system. This kind of instant consumption and impulsive consumption products are mainly purchased offline, and the online proportion generally accounts for 4% of the market. Therefore, it is necessary to pay a large amount of channel fees to put it on various retail terminals. In convenience stores like Family Mart, the shelf cost is even more ridiculously high.

Recruiting talents and building channels and sales systems from scratch cannot save money: Yuanqi Forest hired many top experts from giants in the early days.

Tang Binsen has made brilliant achievements long ago and has never been short of money. 13 years ago, he founded Zhixingtong after graduating from Beihang University, focusing on the game field, and with the support of the school intranet, he created the popular “Happy Farm” that year. Subsequently, he quickly logged on to Facebook with this game, which became popular all over the world for a while. Following the pace of the first pot of gold, Zhixingtong has successively developed navigation websites, anti-virus software, and the mobile game “Clash of Kings”, which all became popular overseas products that year. After selling the company for 2.6 billion in 2014, he achieved complete financial freedom at the age of 32.

Although the conditions are fully met, it is difficult to speculate as to why Boss Tang came up with the idea of ​​making drinks.

Anecdotal rumors, he sawThe work intensity of these colleagues around me is very high, so they drink drinks every day, like Coke and Red Bull, and they also have a high demand for sugar-free drinks. Therefore, he had the idea of ​​”cross-border” and immediately began to recruit the team to do it.

Explore the “arbitrage thinking” of explosive styles

We have asked many experts a question: What is the core driving force for the growth of the vitality forest?

And the answer is always highly similar: the product is well done.

Our research conclusions may disappoint everyone: Yuanqi Forest does not have any “one trick” strategy to create explosive models.

Because in the beverage industry, the emergence of a hot product is a collection of many factors such as marketing, channels, pricing, timing, etc. There is no fixed “hot formula”, everyone is trying it out slowly-whether it is a giant It is still a new brand, which is relatively equal. Vital Energy Forest speeds up the process of “testing” through process optimization and innovation, and greatly increases the probability of explosions.

From the birth of product ideas, to market feedback testing, to investment in product quality, Yuanqi Forest has brought a strong Internet mindset.

Start analysis from the product idea: We believe that the most critical product strategy of Yuanqi Forest is geographical arbitrage(geographical arbitrage)[1].

“The world has never been and will never be able to achieve the so-called’flat state’, and the so-called successful businessman compares to who can take advantage of the information gap to make profits.”

The first to put forward this theory was Alexander Tamas, a partner of DST Global, a well-known Russian investment institution. In the past decade or so, DST has used it to perfection. It first invested in Facebook in the United States, and then turned its attention to places where the Internet is underdeveloped to find alternatives. In the early days, it has heavily stocked Internet giants such as, Alibaba, and Xiaomi. Unicorns have been unearthed in Russia, Brazil and other places.

Interestingly, DST is the investor of Happy Farm’s old overseas rival Zynga.

In 2015, in an interview with Tang Binsen by the media person Lan Xi, he himself expressed great admiration for this theory: As long as a product can succeed in a market, then this also means that it has potential. The cultural and habitual differences that people usually worry about when introduced to other markets will not cause decisive obstacles. [2]

Looking back at Tang Binsen’s early experience as an Internet company, we can find that whether it is a successful navigation station, free anti-virus software or mobile games, they have brought China’s mature traffic model to areas with underdeveloped Internet. For a long time, half of Zhixingtong’s income came from countries such as Russia and Brazil. In these places, one in ten people uses Zhixingtong’s products.

Of course, this style of play from 13 years ago is still copied today. For example, Tang Binsen just established Challenger Capital in 2015, and his investment in Tiger Securities is to move the mature business model of the American company etoro to China. Now, Tiger Securities is also listed on the US stock market. [3]

Back to the Vitality Forest, this kind of arbitrage is to take the mature and well-developed FMCG concept in developed countries and do it again in China.

According to data records, the logic behind DST is to use GDP and Internet penetration to determine whether a mature Internet business model can be moved to another country, and what is the room for growth.

If it corresponds to the consumer goods track, the size of the beverage industry determines the potential, then the penetration rate of the category determines its growth space. In areas such as sugar-free tea and sugar-free carbonated beverages, Japan and other countries are clearly at the forefront. According to CICC’s estimation, the penetration rate of sugar-free tea in Japanese tea in 2019 can even reach more than 80%.

There is no doubt that the highly developed Japanese consumer market is full of arbitrage opportunities. Before Genki Forest’s sugar-free tea product-Rancha came on the market, there were already Suntory’s sugar-free oolong tea and Itoen’s sugar-free green tea in the Japanese market; and Genki Forest’s milk tea might also be a source of inspiration. Itoen milk milk tea from the Japanese market. One of the big factors is that many of the product concepts of foreign giants have not been listed in China, but they have sold well in their home countries, or have entered the Chinese market, but have not become popular.

As the American advertising master James Webb Young said: Creativity is a new combination of old elements.

Of course, to create a uniqueFor special brands, it’s not feasible to carry them alone. There is a second arbitrage theory based on brand positioning: in fact, the “pseudo-Japanese” style is intentional.

In 2017, Luo Zhenyu once invited Tang Binsen to get internal training. He strongly recommended the book “Positioning” and proposed his own “neural network” theory: Arbitrage with human minds. [4]

He himself gave an example: “When the word’Japan’ is mentioned, the neural network will remind us of’quality’ and also of’MUJI’, a Japanese brand known for its quality. MINISO deliberately establishes a connection with MUJI, so that you will subconsciously think that MINISO is related to MUJI, and it is also related to MUJI’s keyword “quality”.”

There are two key points here:

Find the blank spots in consumers’ minds and establish contact with them;

This blank spot must be valuable.

It can be found that all the current products of Yuanqi Forest are around 0 sugar, no sugar or no added sucrose. Under the brand positioning of “sugar-free specialist”, all product tonality fits with it. Such consistency also helps Yuanqi Forest focus on the sugar-free beverage category and focus on the core target population that cares about health. In the market at that time, this was not only “blank”, but also satisfied the “value” clause.

(Source: Kuiyan Brand Consulting, Growth Black Box)

data-driven new product testing

No matter how awesome the creativity is, if it is not validated by the market, it is just a bunch of waste products. The next product test is the most critical link.

Jiang Nanchun, the chairman of Focus Media, once publicly mentioned that Yuanqi Forest tested dozens of ideas in the early years before confirming the product of burning tea, and the bubble water tested more than 100 kinds, which took a total of 1 year. More time. [5]

Why is Yuanqi Forest able to test new products so efficiently? Let’s first take a look at the methods commonly used by traditional consumer goods companies: focus group discussion (FGD, focus group discussion).

It carefully selects 6~8 people from the target market to be studied to form a focus group. A well-trained moderator will naturally talk to the respondents in the group, fill in questionnaires, etc. to obtain Respondents’ views on products and brands. Group seminars are usually completed in a conference room equipped with a single lens and a monitoring device, and the participants do not know that they are being monitored.

It has been applied in the FMCG industry for decades, and it is naturally a proven scientific method. But there are two problems in this:

The price is expensive, and it will be done by head consulting companies such as Nielsen.

The cycle is long, and it is very time-consuming to recruit suitable target groups. It takes 2 to 3 months to implement a project.

So the traditional company set up, coupled with various cumbersome approval procedures, the development cycle of a new model may take one year.

But according to Ye Suping, the former R&D director of Yuanqi Forest, the research and development of Yuanqi Forest is a rapid trial and error. Take taste as an example. An average of one or two days for internal taste testing of beverages, and then rapid adjustments, the entire R & D cycle is controlled within 3 to 6 months, and soon it will be released in 3 months.Product. [6]

Because Vitality Forest once again used the Internet to carry out “dimensionality reduction strikes”, the game product set was moved to the beverage product test, and the first-hand data was used to speak, with low cost and high speed.

In the Internet industry, you must have heard the term “A/B test” or “multivariant test”: that is, to prepare N versions of the product interface or process, at the same time dimension, to target groups with similar components Randomly visit these versions, collect user experience data and business data of each group, and finally analyze and evaluate the best version, and formally adopt it.

In other words, you can design several versions of the advertising banner, first try with a small amount of budget to try which has the highest click-through rate, and finally decide which one to use; you can also choose a small group of users to test the color of the buttons in the app. Red is better or green is better. Whether at home or abroad, this is a very mature methodology. For example, Facebook has 10,000 tests running at all times, just to improve even 1% of product data.

Vitality Forest is actually following this idea to test packaging, selling points, concepts, etc. We understand that Yuanqi Forest has a “stock” reserve of hundreds of SKUs, which are constantly being tested and compared. Once verified, they can be put into large-scale production and promotion at any time. According to Tang Binsen’s own words, “95% of the products have not been launched this year.”

However, this data-driven testing method is not achieved overnight. In fact, it is slowly explored, and it has been iteratively changing. Currently, several sets will be run at the same time. From the perspective of time sequence, it can be roughly divided into several stages:

Taste test

At the very beginning, there seemed to be no rules, just for quickness. Packaging design and formulation research and development find experts to do (for example, burning tea is to find a Japanese research and development center), after the new beverage comes out, let the salesman drink it first. If everyone thinks it’s OK, take it out and shop the goods.

But later I found out that it was not reliable. After all, sales are still different from real consumers. So the first iteration was carried out, and the product was given to students on the university campus to drink (post-90s, 95s) for the first round of internal testing .

e-commerce test

Obviously, more accurate data can be provided online for testing. Yuanqi Forest will first sell the products that have been initially verified on e-commerce platforms, mainly Tmall flagship stores and, and use the back-end data indicators to determine whether a new product has reached the standard for scale, and then go to offline channels. Roll out.

This method is of course still in use today. For example, I believe you have never seen this product in the supermarket before, but the Tmall store has a monthly sales volume of close to 20,000 boxes. It is because it is still in the testing stage, but the data does not seem to meet the standard, so there is no offline distribution.

Convenience store test

Since offline is the main scene of beverage sales, the real behavior of consumers in the store should be tested.

In order to solve the problem of difficult access to offline data, Yuanqi Forest uses a very direct method: place the new models next to competing products, and then use manual tracking or camera video recording to record consumer purchases. Behavior at the time. byJudging data such as the rate of rise can clearly reflect whether a new product will be welcomed by consumers.

Of course, in order to make the product closer to its target population, convenience stores have become the best choice-for example, Yuanqi Forest was first tested in Bianlifeng.

Information flow delivery test

Our latest discovery is that Yuanqi Forest will test its product selling points by placing information flow advertisements on Toutiao today.

For example, in a soy milk that Yuanqi Forest may release in the future, multiple materials have been added to highlight the differences between “high protein and high calcium”, “double protein”, “no sucrose and low fat”, and “low sugar and low fat”. The selling point, after clicking it, it will jump to the homepage of the Tmall flagship store, and there are no real soymilk products on sale.

Under the condition that the circled users are basically the same, by counting the number of people who clicked on different selling points to enter the flagship store, we can see which description consumers are more interested in. To test in this way, it is obvious that the data dimension is richer and the cost is lower.

DTC channel test

Whether it is a questionnaire survey or a tasting, it is a commonly used test method. But according to the traditional method, a big problem is to recruit the right people to participate in the survey. So, yuanQi Forest will start operating WeChat private domains in 2020, and its main purpose is to conduct low-cost and efficient testing activities, and named the “experience officer” activity.

For example, Yuanqi Forest will release new product evaluation activities in the “Yuanqi Member Store” (previously named “Yuanqi Research Institute”) . Most of the loyal users who are often active in the Vitality Forest Mini Program will take the initiative to apply for a trial and get the goods after they are awarded the contract and only pay for the freight. After the user receives the product, in the special tasting exchange group, the product assistant of Yuanqi Forest will guide everyone to fill in the questionnaire.

According to observations, the currently evaluated products mainly include-“0 calories” made with erythritol that can replace sugar, low-fat “chicken breast sausage”, and Beihai Ranch’s new product “Gem Cup Yogurt”. Pop pearl bobo yogurt”, as well as alien energy drinks.

Recently, Yuanqi Forest is also trying to use big data tools to analyze the feedback content in order to dig deeper insights.

Then why can the Internet gene of Yuanqi Forest be continued, but it is difficult for traditional giants to do so?

The most important point is that this model is so new that it is difficult to form a consensus model or experience. Traditional companies have used decades of methods, which are undoubtedly time-tested.Certificate, and made effective results. To apply a completely different set of logic today, it is actually not that convincing-stable income is the highest priority.

For example, why it is difficult for people in finance to accept Bitcoin? It is because the market is so new that it is difficult to apply hundreds of years of experience in the stock market.

The second point is the flexibility of the organizational structure. In the early days, the number of people in the Yuanqi Forest Products Department once reached 10% of the company’s total. By 2020, the company’s product research and development personnel will still have more than 50 people. They are exploring and designing various product concepts and testing them every day, and the resources that can be mobilized are also very high. Moreover, product development is based on a team, following the common “horse racing mechanism” of game companies to continuously stimulate creativity through competition.

In contrast to traditional companies, most of the R&D work is actually outsourced. From product packaging to brand planning, it must be handed over to professional agencies, and product managers often act as commanders. The advantage of this is that a small number of people can operate a large market, and the company grasps the top of the value chain and pursues the ultimate scale effect. Obviously, if mercenaries are used in battles, it may improve the winning rate, but it is difficult to own a special forces unit.

user-centered “subsidy model”

If a beverage product is well-made, it will inevitably not circumvent an essential problem: taste. Take Genki Forest’s flagship product, sparkling water, for example, it seems to solve the problem of the entire industry. why?

Sugar-free health drinks are not unusual at all. Coca-Cola launched a sugar-free version in 1982, and Pepsi is 18 years ahead of it. But until today, almost all the sugar-free carbonated beverages of major factories use artificial synthetic sugar substitutes such as aspartame and acesulfame K. The problem that this brings is that it is difficult to meet consumer demand for taste.

Because in principle, the closer the sweetness of sugar substitutes is to sucrose, the more natural it feels, and the better the so-called “taste”. But aspartame is 150 to 250 times sweeter than sucrose, which makes it difficult to make a natural taste, and it also contains calories. (non-zero calorie).

However, Genki Forest has successfully solved the taste problem with erythritol: because its sweetness is onlyWith 60%~80% of sucrose, it is very easy to reduce natural sucrose. More importantly, erythritol also contains almost no calories.

From the point of view of the sparkling water patent description, Yuanqi Forest first found a 7%-8% sucrose concentration beverage as the best taste through testing, and then reduced it through the ratio of erythritol + sucralose.

(Source: Tianyancha)

So, erythritol was invented in the 19th century and was industrially produced in China 15 years ago. Why don’t beverage giants use it?

The answer may be simple: the question of cost. We can know from the public data of the market that the cost of using erythritol is 100 times higher than that of aspartame. This leads to the inertia and stock burden of the traditional beverage industry: profit and scale are the center, not the user.

Beverages are actually a profitable business. The biggest moat is not the product itself, but the high gross profit brought by the business model. For example, Coca-Cola has an annual gross profit margin of more than 60%. Nongfu Spring, which has just been listed, has a gross profit margin of 55%, while Dongpeng Special Drink, which has recently submitted its prospectus, has a gross profit margin of close to 50%. The unlimited expansion of this high-margin business is what many giants care about most.

Even if consumers prefer the taste formula of erythritol, it is impossible for the company to suddenly change raw materials and reduce profit margins. It also bears the risk that the audience for the new taste is too small. From another point of view, listed companies are responsible for profits and shareholders. I am afraid that no one wants to make the financial report ugly.

In many speeches in his early years, Binsen Tang repeatedly emphasized one thing: In this era, products are king, not channels. This is because he has handed in a lot of learning on his productIt is speculated that the vitality forest should be in a state of loss at present.

It seems that Yuanqi Forest has indeed seized this opportunity: putting user needs first, burning money as subsidies, and implementing the idea that products are king.

flat channel management

After analyzing the product, let’s take a look at the channels: In any case, Vitality Forest has to rely on offline sales and giants to head-to-head.

According to our understanding, Yuanqi Forest’s omni-channel terminal sales will exceed 2.5 billion in 2020, exceeding its target. From the perspective of channel characteristics, Yuanqi Forest’s e-commerce sales accounted for 25%, convenience stores 35%, pure KA accounted for 1%, and traditional channels such as restaurants and schools accounted for about 40%.(different across the country, only average estimate).

We estimate that Yuanqi Forest has already installed more than 700,000 retail terminals nationwide by mid-2020, and more than 2,000 sales personnel are maintaining distributors.

After research, it is found that there is not much difference between Yuanqi Forest and other traditional companies in the offline sales model. The key to achieving breakthroughs in channels is to continuously achieve flat management through technical means and greatly improve efficiency. The management method is very characteristic of Internet companies.

Tang Binsen mentioned in his public speech in the early years that the reason why small companies can survive under the siege of giants depends on efficiency to win. He summarized it as the power law: if one person has 300 million yuan and the daily growth coefficient is 1.1, another person has 100,000 yuan, and the daily growth coefficient is 1.2, then the latter will naturally be richer after a period of time. So this “coefficient” is more important than the foundation.

For large companies, resources are almost unlimited, so all problems depend on money to solve them. Most of the staff’s time is also spent on “upward management”. Every day thinking about how to do ppt reports, how to get the budget, and help the boss complete KPIs, the “growth factor” is naturally greatly restricted.

However, a small company that maintains efficient operations under extremely tight resources can greatly increase this coefficient and become the basis for victory. Back then, Zhixingtong’s YAC anti-virus software was based on this principle and defeated giants with hundreds of times their budget.

Let’s give a few examples to see how Yuanqi Forest improves the “growth coefficient” from management:

digital office

Since 2018, the entire Yuanqi Forest has been a paperless office, including production, approval, filing and so on. Initially, DingTalk was used. A variety of management tools were developed based on Ali’s framework. For example, front-line sales staff can use DingTalk’s back-end shop patrol system, including the functions of achieving profit and sales. You can see the business through your mobile phone. There are also tools such as weekly and daily reports on personnel visits.

Later, the company started to use Feishu produced by ByteDance as an OA system. In addition, an independent shop patrol app has been developed, with functions including a list of outlets, route planning, expense receipt slips, business data, etc., so that front-line business personnel can reasonably divide the maintained sales points when patrolling the shop, forming a reasonable The itinerary.

What impact do these seemingly fancy tools have on efficiency? For example, when a sales representative goes to a large area, he has to go through five levels. For each level, for example, if one hour is not approved, money will be deducted. Therefore, documents are approved and problems are handled quickly. An activity application can be approved in 3 hours, while a traditional enterprise takes 3 to 5 days.

Of course, in addition to the company, Yuanqi Forest also uses digital methods to strengthen dealer management. The following figure shows the small program “Vitality Goods” for dealers to order with one click. The price in the backstage is naturally “thousands of people”.

OKR management system

In the past two years, Internet companies represented by Bytedance have set off a wave of “OKR”. Yuanqi Forest introduced this mechanism very early to replace traditional KPIs. The advantage is that the goal is more focused and the self-drive of employees is improved.

For example, the regional manager can set the final goal O as a sales of XX billion yuan, and the execution means KR can be divided into the number of outlets, the number of cities to open up, the number of displays, the number of freezers, and so on. The other two common Os are team building training and the improvement of management quality.

In addition, the formulation of this O is to be dismantled from layer to layer across the country to individuals, and ultimately to the performance appraisal. This is more complicated, so I won’t go into it.

Amoeba mode

Friends who are familiar with management must be familiar with it. Kazuo Inamori invented this breakthrough model in the 1960s: splitting the company into small groups, all employees participating in the management, and allowing employees to achieve real “Work for yourself”.

For the entire sales team of Yuanqi Forest, this model is adopted. Each district is split into different smallAlthough it is a lot worse, it is also indispensable to test the waters.

Next, we summarized the two major characteristics of the Yuanqi Forest channel: Emphasis on convenience store channels and high proportion of e-commerce channels.

People who have worked in the beverage industry know that convenience store goods are basically impossible to make money, because the commission is very high, including logistics fees, ice road fees, marketing fees, etc., and the total can even reach 30%~40 %. Yuanqi Forest chose to start distributing goods from the convenience bee and 7-11, the main purpose is to take a fancy to the growth space of the convenience store and the overlap with the target population.

As can be seen from the figure below, apart from e-commerce, convenience stores are the fastest-growing channel, with an overall scale of more than 250 billion yuan in 2020.

On the other hand, taking 7-11 as an example, its customer base is mainly young people aged 20-29, and the two largest groups are white-collar workers and students.

Due to the high barriers to entry for convenience stores, this process has not been smooth sailing. Before 2020, Yuanqi Forest will completely entrust this work to the dealers. The company still supplies goods to dealers, and the dealers then negotiate cooperation with local convenience stores, which greatly improves efficiency.

But after all, there is a layer of dealers in the middle, and the channel fees are not transparent. Yuanqi Forest is also bearing the risk of the decline in business quality and the closure of convenience stores. Therefore, starting from 2020, the company will begin to recover large-scale CVS channels directly under the company.

Let’s finally look at the operation status of Yuanqi Forest’s e-commerce channels.

Data shows that the proportion of online sales of Yuanqi Forest is much higher than that of traditional companies. For example, Nongfu Spring’s e-commerce sales only account for 5% of total revenue. In 2018, Yuanqi Forest’s online sales accounted for more than 30%. Among them, Tmall and JD are the most important sales channels.

It can be seen that 2020 will undoubtedly be the time when the vitality forest breaks out. Tmall’s sales alone have more than quadrupled, reaching up to 450 million yuan! Our analysis found that this is mainly due to the substantial increase in marketing investment.

From the e-commerce data, it is obvious that Yuanqi Forest is driven by explosive single products, of which bubble water accounts for nearly 50%. On the other hand, other products, except for the milk tea launched in 2020, seem to have some gaps.

We originally thought that since e-commerce is a direct channel, it should have a high gross profit. Relative to offline, it will definitely become a profit channel. However, it was later discovered that although the company is responsible for operating activities, the goods still go through the distributor channel.

In other words, Vitality Forest itself still earns the difference between dealers, which is not much different from offline. Then, the online retail price is originally lower than the offline, plus the various advertising costs and the various reserve price promotions that Li Jiaqi brings the goods, the online gross profit is even lower than the offline.

We speculate that Yuanqi Forest is to control operating costs while expanding the scale of channels.

Build DTC channels with private domains

Marketing is not the whole of Yuanqi Forest, but it is undeniable that strong omni-channel marketing capabilities are a necessary condition for the success of Yuanqi Forest. According to our calculations, the online + offline marketing expenses of Yuanqi Forest in 2020 may exceed 600 million yuan. In terms of revenue share, it is also very high in the beverage industry.

Many emerging FMCG brands used the strategy of “rural surrounding the city” to break through the blockade of giants. For example, Feihe milk powder started to build high-end milk powder brands from 3rd and 4th tier cities, and finally counterattacked the first and second tiers. However, Yuanqi Forest adopts the opposite strategy, encircling the countryside from the city, and focusing on the young people of Generation Z for marketing.

This kind of “holding high and playing high” actually followed Tang Binsen’s thinking of playing games back then. In 2015, Tang Binsen said in an interview: “We dare to spend 1.8 billion on advertising when we create 2 billion in revenue, and to expose brands in central cities such as New York, London, and Moscow. Not the other way around, let “Clash of Kings” become the most successful export game in Chinese history.” [2]

For example, in 2020, Yuanqi Forest will release 6 variety shows and 1 TV series; and focus on the female users of Mango TV, Hunan Satellite TV and other media and satellite TV; at the end of 2020, Yuanqi Forest spent 150 million to win the 2021 bilibili Spring Festival Gala The sponsorship rights of station B have directly increased from 0 to 1.5 million.

There are already many articles on the market that analyze the marketing strategy of Yuanqi Forest, so I won’t repeat them here. But we really want to talk about vitalityOne point of the forest’s recent rapid deployment: private domain traffic.

Yuanqi Forest has started to deploy private domains since 2020. It not only established its own mini program mall and service account system, but also used corporate WeChat to add followers and continued to operate WeChat groups. According to our data monitoring, the number of users of Yuanqi Forest in the WeChat private domain (enterprise WeChat + service account) has exceeded 200,000. The total revenue of 5 months is close to 10 million.

Although this does not contribute much to the company’s revenue, as mentioned earlier, this DTC(direct to consumer) Channels are great traffic pools for collecting user feedback and testing product concepts. For the vitality forest, which wants to be close to users all the time, it should have great strategic value.

Next, we will disassemble the private domain system of Yuanqi Forest according to the private domain engineering model of “drainage-incubation-transformation”.

The first stage is the drainage stage. The mainstream method is to use Moments ads to guide users to landing pages, and then guide users to follow the service account. The bait for activities is usually the sale of new products, or large-scale preferential promotions. To receive coupons, users must add corporate WeChat customer service to truly enter the private domain, and finally go to the mini program to place an order.

What’s more interesting is that the customer service person of Yuanqi Forest is called “Xiao Yuanzi”. I don’t know if this is a tribute to “Xiao Wanzi” of Perfect Diary?

According to our previous experience, the cost of operating on this link is more than 10 yuan per fan. It is estimated that the Yuanqi Forest may have spent millions on drainage in private domains.

Look at the operational phase again. The forms here are more diverse:

Push a lot of product information in the group at a frequency of 2~3 times a day, or preferential treatment;

With a frequency of 1-2 weeks, corporate WeChat private chats will push promotions;

Initiate a series of “Experience Officer” activities on the Mini Program, invite users to participate in the evaluation of new products, and write reviews to form a content community.

The last step is the conversion process. In fact, we believe that the key indicator of Yuanqi Forest should not be the GMV of the private domain, but the amount of user data collected. Therefore, the private domain team should not have heavy sales KPIs.

Different from e-commerce channels such as Tmall, Mini Programs sell a wide range of product SKUs. In addition to Yuanqi Forest’s own products, other brands of oral care products, gift boxes, etc. are also on the shelves. In addition, we also found that Yuanqi Forest is selling membership cards at a price of 98 yuan per year. The main function is to save money. According to data monitoring, there are currently almost 10,000 people paying, and I feel that there is still a lot of iron powder.

Finally, in order to let everyone have a global concept, here is a summary of the latest private domain operation activity link, starting from the fission sending bubble water, to the final order or entering the membership system:

Summary: From limited game to unlimited game

Let’s summarize, Yuanqi Forest brings the efficient operation mode of Internet companies to the fast-moving consumer goods industry through three innovations in product R&D, channel management, and marketing promotion. The foundation was laid:

Arbitrage thinking: Bringing mature concepts from abroad to China, and labeling “high-quality” Japanese labels through positioning and packaging.

Quick test: Drawing lessons from the Internet industry’s AB test, collect data through a variety of online and offline methods, and test the most selling products.

User subsidies: Focus on user needs, reduce gross profit and improve taste, instead of one-sided pursuit of scale and profit.

Flat management: Create digital management tools and apply Internet-based management methods to improve the operational efficiency of the organization.

Layout of private domains: While holding high to do brand marketing, use the DTC model to get close to users and accelerate demand development and product testing.

However, the price of pursuing innovation is risk. No matter how vigorous forest respects the needs of users, it is impossible to continue to lose money. This model must run properly. Therefore, the vitality forest must:

Control production costs;

Increase the shipping price to distributors.

Because Yuanqi Forest has always relied on foundries in the past, production costs will naturally be high. On the other hand, this model has also led to the problem of mismatch between the production cycle and the terminal sales-that is, the off-season sells the goods and the peak seasons are out of stock. In the past, the situation of selling last September goods in March of this year often occurred.

As a result, the dealer’s opinion is naturally very big. The solution is to send an extra batch when picking up the goods, which will cause the shipment price to be apportioned and lowered.

Therefore, Yuanqi Forest has invested heavily in self-built factories. At present, the annual output of the self-built factory in Chuzhou Phase I is 30 million, and the annual output value is about 850 million. It can produce beverages such as combustible tea, sparkling water, milk tea, and functional beverages. The second-phase production base in Chuzhou and the new factory in Zhaoqing, Guangzhou have started construction in August 2020, and factories in North China are also in preparation. With the help of the optimization work of the data team, production costs can also be greatly reduced.

Another problem with Yuanqi Forest is its over-reliance on a single explosive product. Judging from the data in 2020, the sales of sparkling water accounted for 60%, burning tea 30%, and milk tea and others together accounted for 10%. In the sparkling water, a few SKUs such as white peach flavor account for the majority. The entire bubble water market is estimated to be only 10 billion to 20 billion. It may be difficult to achieve the 7.5 billion sales target of 2021 by a single category. This requires Yuanqi Forest to further accelerate the process of explosive product development and expand its product line.

But from a global perspective, the vitality forest never seems to walk on one leg. According to Tang Binsen, he wants to be “China’s Coca-Cola” and even build “a consumer goods empire”, so expanding the product line is what Yuanqi Forest has been doing all the time.

Yuanqi Forest is currently divided into multiple business divisions, including beverages, functional drinks, dairy products, etc., and has been laying out the sub-brands of Yuanqi Forest. For example, since 2018, Yuanqi Forest has been selling yogurt (Beihai Ranch). In addition, the way that Yuanqi Forest and Challenger Capital use investment has already laid out more tracks. For example, we found that 51% of Guanyun Baijiu’s shares are actuallyAll are controlled by Yuanqi Forest, and in 2020, Yuanqi Forest has also launched a number of internal sales channels exclusively for liquor.

Can Vitality Forest turn a limited game into an infinite game? let us wait and see!

Reference material:

[1]The Emerging Online Giants

[2] Interview with Tang Binsen: Only in the business of smoothing the world

[3] A new domestic foreign exchange power, Tang Binsen first talks about “tiger finance”

[4] Luo Ji thought to get colored notes

[5] Jiangnanchun: The essence of business is to win people’s hearts, not traffic

[6]Interview|Ye Suping, the former R&D director of “Vitality Forest”: The most difficult time to replicate the popular model

[7]Can you really eat the “sugar substitute” which is sweeter than sugar?

[8]The son of the new richest man is American! Nongfu Spring “Prince Zhongshuzi” 550 billion

This article is from WeChat official account: increase black box Growthbox (ID: growthbox2) , Author: yolo, John, Dan Ting