Behind Wahaha’s diversification strategy is anxiety for innovation.
Production | Forefront of Entrepreneurship
Author | Tian Yanhong
Responsible Editor | Chief Egg
At the age of 75, Wahaha’s head Zong Qinghou decided to start his third entrepreneurial journey, 33 years after his first venture.
Recently, a “Wahaha Natural Nutrition Natural Good Tea Cooperation Manual” (hereinafter referred to as “Cooperation Manual”) on Wahaha’s offline tea shop will be circulated on the Internet. Wahaha set up a joint venture with an enterprise to lay out the tea shop market with an asset-light franchise, and has officially launched the investment promotion of the project in December 2019.
Zong Qinghou wrote a signed message in the appendix of the “Cooperation Manual”, stating “This is the third Wahaha venture.”
(Photo source / Wahaha official website)
Starting a business at the age of 42. Starting from a loan of 140,000 yuan, selling tributes and popsicles on a tricycle, to “pulling” Wahaha to a domestic beverage giant, Zong Qinghou has created his own industrial empire for more than 30 years. Why? Still have to decide on the “third startup” at the age of 75?
Investigating its roots, Wahaha’s operating conditions have been unsatisfactory in recent years, and it has not reached the 100 billion revenue target set by Zong Qinghou. Therefore, it has been seeking transformation, starting a diversification strategy, and has entered the commercial real estate and milk powder industries. , Liquor industry and luxury goods industry, but all ended in failure.
This time, the offline tea market may be doomed to be broken again.
1. The diversification strategy has been repeatedly defeated.
In the past two years, net black tea shops have sprung up like mushrooms, with hi tea and a little bit in front, and Nai Xue’s tea and tea color, etc. These new tea shops quickly “captured” young people. The taste buds gradually robbed the tea market share. Under the siege of new players, Wahaha inevitably became anxious and began to change.
A “Cooperation Manual” directly announced Wahaha’s determination to transform. According to the “Cooperation Manual”, tea shops will use “childhood memories” as the highlight and rely on the original products to create AD calcium milk series, milk tea series, lactic acid Shuangwei series, fruit tea series, cheese nutrition fast line series and other products , For the mainstream female tea consumer group of 16-35 years old, the single product priceThe grid interval is 10 ~ 30 yuan / cup.
In addition, Wahaha tea shops will be expanded by franchising. The franchise fee is 280,000 yuan, including store evaluation, store design, store decoration, equipment output, and technical training. The store form is divided into entrepreneurial stores and standards. Store and flagship store.
It is reported that the project will be operated by Guangzhou Wahaha Health Beverage Co., Ltd. The company’s investigation showed that the company was established on October 29, 2019. Guangdong Guanhua Health Industry Co., Ltd. invested 1.5 million and held 75% of the shares; Wahaha Commercial Co., Ltd. (corporate Zong Qinghou) invested 500,000, accounting for The share ratio is 25%.
However, Wahaha’s offline initiatives are not optimistic about the market.
First of all, the financing boom of the tea beverage market in 2019 has cooled, and product homogeneity is serious.
It is reported that among the well-known online black tea beverage brands, only Lele Tea and Chayan Yuese obtained financing in 2019. The tea brand’s survival rate is not as glamorous as the outside world sees. Serious homogeneity, low survival rate, and profitability are hardly common in the industry. Ai Media Consulting data shows that only 18.8% of milk tea shops have been in sustainable operation for more than a year.
Second, in addition to the common problems in the industry, Wahaha also faces the problem of brand aging during the transformation.
“The Wahaha tea market is handed over to third parties. From the perspective of the entire industry and the consumer side, I am not very optimistic about this project. Because the entire Wahaha brand is very aging and no longer has a new generation. The core needs and demands make this layout very difficult. “Chinese food industry analyst Zhu Danpeng said in an interview with the” front line of entrepreneurship. ”
Finally, Wahaha’s previous layout of other industries has not made a splash, and it can even be said that the implementation of the diversification strategy has been repeatedly frustrated, and the market has long been anticipating this.
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In 2002, Wahaha entered the children’s clothing market. Until 2015, its sales were less than 200 million yuan;
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In 2010, Wahaha joined the milk powder war and launched the high-end infant milk powder “Edison”, which has less than 1% market share in China’s milk powder so far;
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In 2012, Wahaha entered the city’s commercial complex and set up its first pilot Waou Mall in Hangzhou. Now Waou has closedDoor;
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In 2013, Wahaha invested 15 billion yuan to enter the liquor industry, and established a joint venture with Jintai Liquor Industry of Maotai Town to launch “Leading Liquor”, which disappeared in just six months …
(Photo source / Wahaha official website)
In addition, Wahaha has also sold seeds, beer, etc. Because of its vague positioning, niche market, or poor channel expansion, it has not formed a scale, but has dragged down the development of the main industry, making Wahaha look like a neither fish nor fowl”.
This time, Wahaha’s offline tea market seems to be marching into a new industry, but it is actually entering a colder industry with an aging brand. In view of the previous failure cases of Wahaha, the “third startup” may not be successful.
In Zhu Danpeng’s opinion, although Chinese companies like diversified development, not every company can succeed, and basically there are no successful companies with diversified development in China. “At the current stage of development in China, enterprises do not yet have the comprehensive strength of diversified layouts,” Zhu Danpeng said frankly.
2. The contraction of the camp exceeded 30 billion yuan, and the second venture was started.
As an established domestic beverage company, why did Wahaha embark on a diversified development path?
Wahaha was founded 33 years ago, from infinite scenery to a contraction of more than 30 billion yuan. This flip occurred only in the five years from 2014 to 2018, which is almost a microcosm of an old domestic beverage company.
In 1988, Wahaha successfully developed the first product, Wahaha Children’s Nutrition Solution, which filled the gap in the field of domestic nutrition and health products for children. In 1990, Wahaha’s sales revenue exceeded the 100 million yuan mark, and profits exceeded 20 million yuan. Economic indicators such as enterprise output value, sales, profits, taxes, and profits showed a linear growth, and soon became an industry giant.
(Photo source / Wahaha official website)
In addition, Zong Qinghou also aimed at the bottled water market-the birth of Wahaha purified water in 1996, laid an important cornerstone for Zong Qinghou’s business empire.
In 2010, Wahaha entered the “Sale 50 Billion Club”. At that time, Zong Qinghou released a grand saying “rebuild another Wahaha”, and it is expected to achieve an annual sales income of 100 billion yuan within 3 years. Zong Qinghou was also the throne of China’s richest man in 2012 and 2013.
However, Wahaha once again proved the rule that “the poles must reverse”.
In 2013, the company’s annual revenue reached a peak of 78.28 billion yuan, but it was far from the 100 billion target. In 2014-2018, Wahaha’s operating income showed a roller coaster-like decline, which was 72 billion yuan and 494 respectively. Billion yuan, 52.9 billion yuan, 45.6 billion yuan, 46.89 billion yuan, a reduction of more than 30 billion yuan in 2018 compared to 2013.
As performance declines, the problems of Wahaha brand aging and channel aging continue to be criticized by the industry. In response, Zong Qinghou started “Wahaha’s second venture”, this time he aimed at the field of dietetic health.
In 2017, Zong Qinghou pointed out at Wahaha’s 30th anniversary celebration that Wahaha should develop healthy products with high technology content and high added value. However, the competition in the domestic food therapy market is very fierce. Wahaha entering this new field is tantamount to starting to accumulate product and brand advantages.
In addition to trying to diversify development in the overall strategy, Wahaha insists on launching a variety of beverages every year in beverage development.
For example, in 2013, Wahaha launched “Qili” taurine functional beverage, which not only used the advantages of its own distribution system, but also named the then most popular variety show “China Good Voice”. Now Qili has Nowhere to be found; the same new products that are “without disease” are cat margin coffee and clear coconut water. Green tea, which once sold brilliantly, was also squeezed off the shelf by Master Kong and unified tea drinks …
It is not difficult to see that although there are many new products, Wahaha rarely breaks through, and the frequent launch of new products makes the company lack long-term products.
At the same time, the relatively well-known “Nutrition Express” started to decline after reaching the peak of 15.36 billion yuan in revenue in 2014, and its turnover was almost cut in 2017.
In the bottled water market, Wahaha’s market share is also declining. Oriental Securities Research report shows that between 2015 and 2018, the market share of medium-to-high-end bottled water such as Nongfu Spring and Yibao has steadily increased, while the share of low-end bottled water such as Master Kong, Binglu and Wahaha has gradually decreased.
