With the power of a province, Wahaha single product sales exceed 6 billion, Henan is a valuable place for FMCG

This is the first installment of the new consumer think tank1787issue article

New consumption guide

The most important thing we should know is that there are many things we need in our daily lives that cannot be separated from Henan. At the same time, some well-known fast-moving consumer goods brands that we can come into contact with, see, and use every day have also risen in Henan. There is also a saying that if we win the Henan market and become a national market, half of the success will be achieved.

Author:Lyy

Source:New Consumer Intelligence Tank

Henan, a magical place!

The population ranks third in the country.

China’s largest labor export province;

A major grain-producing province and a powerhouse for the food processing industry, known as the "Chinese kitchen";

Shangqiu, the birthplace of Chinese commerce and commercial culture;

Wang Hai, China’s first businessperson known as the "ancestor of Chinese merchants," was from Shangqiu, Henan;

One of the top ten famous villages in the country that year, "Red Billion Dollar Village" Nanjie Village;

In the 1980s, a "Central Plains Commercial War" that shook the whole country and South East Asia broke out in Zhengzhou, triggering a revolution in the national commercial market;

So…

The most important thing we should know is that there are many things we need in our daily lives that cannot be separated from Henan. At the same time, some well-known fast-moving consumer goods brands that we can come into contact with, see, and use every day have also risen in Henan. There is also a saying that if we win the Henan market and become a national market, half of the success will be achieved.

This sentence may be a bit exaggerated, but being able to gain a firm foothold in the Henan market does offer a greater opportunity to go national.

For the consumer market, Henan is an important cradle of domestic FMCG brands. On this land in Henan, many well-known FMCG brands have been born, giving birth to some market leaders in the new consumer era, and it is still a treasure for many brands.

Regarding this topic, it can be expanded from three dimensions.

Historical genes, a must for businesses

Henan, located in the Central Plains, has been an important area for commercial development since ancient times. Although the word "Henan merchants" is far from as prominent as Jinshang, Huizhou merchants, Zhejiang merchants, and Cantonese merchants, Henan also has pure commercial genes. In history, not only "merchants" originated in Henan, but many ancient merchants and celebrities were also from Henan.

Not to mention ancient times, but only modern commerce. After the founding of New China, commerce in Henan once led a wave across the country, which must be started from the "Central Plains Commercial War" in the 1980s.

According to the data, in 1987, an Asia shopping mall was built on Dehua Street in Zhengzhou. At that time, there were already 5 state-owned stores in Zhengzhou: Zhengzhou general merchandise building, Bauhinia mountain general merchandise building, mall building, commercial building and Hualian commercial building. The cost of the Asia shopping mall at that time was 42.55 million yuan, most of the funds came from bank loans, and the pressure to repay principal and interest was very high. Based on these conditions, many people are not optimistic about the Asia shopping mall.

Hualian Commercial Building

However, as one of the earliest joint-stock commercial enterprises in our country, Asia Shopping Mall has created one after another in China’s commercial field. First, for example, the first to set up a shopping mall welcome lady and an elevator lady; the first to set up a piano platform; the first to create its own honor guard; the first to raise the national flag; the first to advertise on CCTV, and so on.

Guard of Honor in Asia

At that time, Asia took "keeping an eye on the pockets of women and children" as the theme. In addition to the special cosmetics department, women’s clothing department, and children’s clothing department, it often held children’s painting competitions and other activities that seemed to have nothing to do with business at that time. But these actions made Asia win the reputation of "coming to Asia if you want to follow the fashion". So at the gate of Asia at that time, queuing was very common. Many foreigners went to Zhengzhou and had to visit Asia before they could visit Zhengzhou.

But competition from five state-run stores is not small, and these shopping malls are distributed in an area of less than two square kilometers. In 1991, Asia challenged several others, waging a price war and introducing new services to attract customers, such as removing the old-fashioned three-foot counter, requiring waiters to smile, introducing a rule to return goods if they are not satisfied, and setting up a free shopping shuttle bus. For the first time in China, on May 6, 1992, Asia played a big game again, hitting 10,000 lottery tickets from the ground into the air and spreading them all over Zhengzhou by helicopter. Others also took countermeasures, such as shopping to draw 10,000 yuan prizes and traveling abroad.

Asia in 1991

It took half a year for Henan TV and CCTV to jointly shoot a 6-episode series of feature films "Commercial War", which caused a strong response in China and even South East Asia after the broadcast.

In the end, the famous "Central Plains Commercial War" not only dragged down Asia itself step by step, but also made the five state-owned shopping malls no longer look good. But in terms of management and service, it had a huge impact on domestic commerce at that time.

With the development of the retail industry, the market soon entered the next stage, foreign investment, chain entry, well-known general merchandise, electrical appliances, catering industry chain enterprises to enter Zhengzhou, the capital of Henan Province, KFC, Gome, Zhengda Bumping Lotus, Metro, Carrefour, RT-Mart, Walmart, Yonghui Supermarket… have set up stores in Zhengzhou, chain enterprises quickly entered the competition period, mature period,

This strong business atmosphere, once at the forefront of the country’s business model and philosophy, is also constantly cultivating and stimulating people’s consumption concepts and awareness, and constantly transmitting new consumption concepts and urban fashion to the vast number of consumers.

With the application of technologies such as the Internet and cloud computing in the retail industry, consumption patterns and business models have undergone earth-shaking changes. However, some businesses in Henan have found a way to get along with online Internet platforms in offline formats. Although some companies have not gone out of Henan, they have been regarded as the benchmark of the whole industry.

For example, Fat Donglai is a well-known and reputable commercial retail enterprise giant in Henan’s business community, and it is also a benchmark for domestic retail enterprises. It uses abnormal extreme services to make consumers only recognize it, which makes it difficult for foreign merchants to get a share of its coverage even though Fat Donglai has never left Henan.

In 2016, the opening of Fat Donglai Xinxiang Store was grand.

Created a miracle that the first day of opening was closed because there were too many people

Ma Yun once publicly praised Fat Donglai as a banner of China’s retail industry, and Lei Jun, the founder of Xiaomi, once personally visited Fat Donglai to learn how to create the ultimate experience for consumers, calling Fat Donglai a god-like existence in China’s retail industry.

This also allows us to explain from the first dimension why to make FMCG products, winning the Henan market is equivalent to winning the national market.Due to the history of business development in Henan, Henan people have received sufficient consumer education, enabling them to accept new things and require more stimulation from new things. The development of the local retail industry has also given consumers a more mature understanding and higher pursuit of products, services, and consumer experience.

The cradle of China’s FMCG.

The profound accumulation of modern business

There is a saying that Henan has contracted the Chinese table, which is not an exaggeration. Henan is an important cradle of China’s fast-moving consumer goods market, and it is also an important food processing center in China. It is the rear of many well-known fast-moving consumer goods brands. At the same time, there are not many well-known fast-moving consumer goods brands going out of Henan.

1. In Henan, there is Shuanghui Group, the largest meat processing enterprise in China, and Shuanghui ham sausage is sold well across the country. Henan also has meat processing industries such as Zhongpin and Huaying, with a total processing scale of about 70% of the country.

2, China’s largest instant noodle production province, is the only domestic instant noodle production of more than 4 million tons of provinces, accounting for about 40% of the country, Henan Province has white elephant, Nanjie Village, Cody, Yuzhu, Siyuan, Guohua and other Chinese instant noodle manufacturers.

3. The capital of quick-frozen food, the output of quick-frozen food accounts for about 60% of the country, and there are well-known quick-frozen food manufacturers in China such as Sanquan, Missing, and Cody.

4. The capital of office snacks, spicy strips. Although spicy strips originated in Hunan, Henan’s local wheat production can account for a quarter of the country’s total, and the flour quality is high and labor costs are low. A large number of enterprises producing "spicy strips" have appeared in Zhengzhou, Luohe and other places in Henan. The most representative Weilong spicy strips were founded in Luohe, making spicy strips almost a "specialty" in Henan.

5. China’s important seasoning production area, Wang Shouyi, Nande seasoning, lotus monosodium glutamate and many other seasoning enterprises are Henan enterprises. In China, almost every household uses condiments produced in Henan, and many products are exported overseas.

6. Beverages, there are many well-known beverage brands produced in Henan, such as Unity, Coca-Cola, and Physique Energy, which are all produced in Henan. The most representative enterprise is Zhengzhou Swire Coca-Cola Company, established in 1996, which takes into account production and distribution. The brands involved include Coca-Cola, Sprite, Fanta, eye-catching brand carbonated drinks, Queer, Minute Maid brand juice drinks, Minute Maid brand fruit milk drinks; Nestle, Original Leaf Tea brand tea drinks; Ice Dew mineral water, Ice Dew purified water and other products.

7. Henan has the largest biscuit and snack food production and processing base in the country, Linying Huanglong Food Industrial Park. Taiwan’s Wangwang, Master Kong, Fujian’s Dali, etc. are produced in Henan, and there are also biscuit companies such as Jianfeng and Dream in Henan.

8. Henan also has many well-known Baijiu brands, such as Yangshao, Zhanggong, Dukang, Xudian old wine, Songhe, etc. Among them, Dukang wine was used for diplomatic wine and state banquet wine in 1988, alongside Moutai. And, Baijiu consumption in Henan market once exceeded Shandong and Sichuan and Chongqing, ranking first in the country, with a market size of more than 40 billion yuan. It is the largest market outside the origin of Fenjiu, Yanghe, Luzhou Laojiao, Jiannanchun and other brands.

9. Among the new consumer brands, cutting-edge unicorn enterprises have also been born, and they are also representatives of new domestic consumer brands. Mixue Bingcheng, one of the most popular Internet celebrity brands in the past two years, was founded in Zhengzhou. Today, the number of stores in the country exceeds 10,000, covering 31 provinces (cities and autonomous regions). The pot circle food exchange, which focuses on hot pot barbecue ingredients and convenient supermarket chains, has also opened 8,000 stores across the country. There is also the family tea of the tea drinking track, which has quickly become the standard family tea in the mall, and the single store has directly surpassed the first-line high-end tea brands. Answers Tea and CoCo are also popular Internet celebrity tea brands that have been bred in Henan and have entered the national market.

(Mixue Bingcheng can be seen everywhere in Zhengzhou)

In terms of catering, there are also new brands emerging in the national market. In recent years, Haidilao has been very afraid of the Banu hairy belly hot pot, which started in Anyang, Henan and has opened more than 100 stores across the country. In the market it can cover, the attendance rate, customer unit price, turnover rate, and praise can all compete with Haidilao, and the customer unit price and praise once exceeded Haidilao.

It can be said that Henan has a unique upstream supply capacity for many industries, especially the food industry. It also has a strong manufacturing strength at the industrial end and a strong soil for nurturing fast-moving consumer goods brands. Coupled with Henan’s advantages in population, it has also attracted many enterprises and brands to enter the Henan market, making Henan an important development position.

For example, in November 2020, Antlers Lane, Nayuki Tea, HEYTEA and other first-line Internet celebrity tea groups opened the road of "enclosure" in Zhengzhou, of which Nayuki opened three stores at the same time, and Antlers Lane also settled in two shopping malls in Zhengzhou in about a month, and launched a head-to-head confrontation with Henan’s local Internet celebrity tea brands Answers Tea, CoCo, and Family Tea.

(Nayuki opened a store in Zhengzhou)

As the capital of Henan Province, Zhengzhou has also begun to increase its efforts to support new consumer brands, as an important measure to further promote the development of Zhengzhou and even the entire Henan consumer market.

Old brands sit firmly in the market, proving that Henan’s commercial soil is fertile. The influx of new brands means that the opportunities and potential of Henan’s consumer market have been re-faced. At the same time, it also means that Henan is one of the most competitive markets for fast-moving consumer goods in the country.

Henan has many people, many festivals, and many gifts!

Strong rigid demand has great consumption potential

Of course, in the final analysis, Henan’s consumption potential still comes from people.Although scholars predict that China’s demographic dividend will disappear around 2030, and Henan’s demographic dividend will close in 2034, the consumption potential of Henan Province still has great potential to be tapped.

Zhengzhou, the capital of Henan province, ranks ninth among new tier-one cities, according to the 2021 city business charm rankings. In addition, Henan has seven tier-three cities, six tier-four cities, and one tier-five city, with 83 county towns. In terms of the concentration of commercial resources, Zhengzhou has risen from 15th in 2020 to 11th, and from 11th to 7th among new tier-one cities, surpassing Changsha, the popular Internet celebrity city in recent years.

The degree of concentration of commercial resources measures the commercial prosperity of a city from three aspects: the favor of big brands in the city, the strength of the business district and the development of basic businesses. In recent years, Zhengzhou has introduced about 100 brands every year.

How so?

First of all, Henan Province has a large population base and still has huge consumption potential.The number of permanent residents in Henan Province is 99.36 million the third largest in the country, and the actual number of household registrations is as high as 120 million. This huge demographic dividend has promoted the rapid development of Henan. Although the number of births in Henan Province has been declining every year in the past ten years, it cannot be denied that Henan is in the forefront of the country as a whole. Consumption power.

In the past 20 years, Henan’s GDP has been ranked fifth in the country, second only to Guangdong, Jiangsu, Shandong and Zhejiang. The total retail sales of social consumer goods, because Henan is a populous province with active population mobility, has a total advantage. In the first half of this year, the total retail sales of social consumer goods in Henan Province reached 1.18484 trillion yuan, an increase of 0.3%, higher than the national average of minus 0.7%.

The demographic dividend has brought huge opportunities to the market, and it can indeed easily support a brand to achieve sales of 100 million yuan or even billion yuan. Nanjie Village, White Elephant, Siyuan, and other brands were all good examples back then. During the Spring Festival peak season, sales were basically hundreds of millions.

Second, Henan people have many festivals, and gift-giving consumption is a rigid demand.Henan Province not only has a large number of people, but also a heavy gift, that is, gift-giving. In addition to traditional festivals, there are also various local festivals, such as the wheat bar in southern Henan, which is the first time the wheat is mature. People have the custom of visiting relatives. When visiting, they must bring gifts, such as Baijiu, which is a more traditional gift.

In some places, the celebrations were even more lively than the Spring Festival, called "after the meeting", which refers to the day when a village is established. People who do not necessarily return to the village during the Spring Festival must go back every day. In Henan, there are more than 40,000 large and small villages. Although not all places have the same festivals, Henan has many festivals and many rituals.

A study has found that in Henan, the average annual consumption during the Spring Festival costs about three months’ salary, because not only do each gift have to be repeated, but the quantity must be even, and the number of gifts will increase according to the degree of affection. In the township market, even instant noodles used to be the choice for gift giving.

Festive gift-giving is the main focus of FMCG’s sales in Henan, allowing many FMCG brands to create brilliant sales results. Wahaha Nutrition Express was once also sold as a gift. At its peak, sales in Henan reached more than 6 billion yuan.

During the Spring Festival in 2016, Jiaduobao created excellent results in 600,000 boxes and 1 million boxes sold throughout the year in Gushi County, Henan Province, becoming the only county seat in the country where Jiaduobao sold more than 1 million boxes.

A corner of Gushi County

However, in recent years, these more traditional gift-giving products, including Jiaduobao, Wanglaoji, Bright Mosley Ann, Wangwang, Six Walnuts, Shuanghui, Hawthorn Tree, and other products that once occupied the first echelon of gift-giving in Henan, have all experienced a decline in sales. Sales of some brands have even declined by 50% compared to their peak periods.

For example, Jiaduobao’s sales in Gushi County have fallen to 200,000 boxes by the Spring Festival in 2019. The sales volume in Henan was once at the bottom of the country, and the end point inventory also rose sharply.

Gradually, many traditional brands such as Nutrition Express have also been removed from the gift list by Henan people. Those old brands that once relied on a well-known advertising slogan to become popular all over the country can no longer meet the current consumer demand, such as "afraid of getting angry and drinking", "only Naobaijin is accepted for gifts" and so on.

Because consumers love the new and hate the old, there are more and more brands and products to choose from in the market. Many new consumer brands have become the choice when people give gifts, especially for young consumers. And new consumer brands that pay more attention to establishing more links with consumers pay more attention to the hot spots of festivals in marketing. Undoubtedly, gift-giving consumption will be an excellent opportunity for new consumer brands to enjoy the demographic dividend of Henan.

Third, the layout of shopping malls is sinking, and the soil for the growth of new consumer brands is becoming increasingly fertile.

The per capita area of a local shopping center can reflect the level of local economic development to a certain extent. The size of a shopping center and whether it can survive in a city requires the support of local economic development and consumption levels.

Statistics show that in 2018, the per capita shopping center area in Henan Province was 600 square meters per 10,000 people, far lower than the national 3,600 square meters per 10,000 people. The number of shopping centers in Henan Province is also less than that in surrounding provinces. In 2019, the number of shopping centers over 30,000 square meters in Henan was only 320. There are 622 in Hubei, 347 in Hunan, and 435 in Shaanxi. As a province with a large population and a large economy, Henan shopping centers have a lot of room for growth, and shopping centers are an important business form to undertake new consumer brands.

In recent years, the number of shopping centers in Henan Province has been increasing rapidly and showing a sinking trend. Shopping centers have been opened into the county seat.

In a county with less than 80,000 population in western Henan, there have been 5 commercial projects in just a few years, with a cumulative volume of more than 130,000 square meters. According to this data, the per capita commercial area of the county exceeds 1.6 square meters, far exceeding the data of 1 square meter per capita in Zhengzhou, and approaching the level of 2 square meters per capita in Beijing, Shanghai and Guangzhou.

Driven by the trend of channel sinking and the rapid iteration of small city commerce, some retail brands that originally only laid out first- and second-tier cities have accelerated the speed of lower- tier market layout by joining or licensing, especially retail and light catering, fast catering formats.

Different from the traditional general merchandise malls in the past, the new shopping center format is more in line with the consumption preferences and pursuit of consumption experience of young consumers in terms of format and functional attributes that can be carried, and the positioning of new consumer brands is also more matched. Undoubtedly, the number of shopping centers in Henan Province up the ante and the layout to the lower-tier market will provide very fertile soil for new consumer brands to take root in Henan.

This form of business will also make up for the lack of business forms in Henan’s business environment.

Conclusion

Hebei is a big consumer province, but it is not a big brand province. There are many well-known consumer brands in Henan, such as Mingren Soda, whose status in Henan cannot be shaken, including beverage brands that have rapidly become popular in recent years. But in fact, a considerable number of Henan brands have not left Henan.

In the 2021 list of the world’s top 500, none of the dozens of Chinese brands are from Henan; only 12 of the top 500 brands in China are from Henan; there are 22 Henan companies in the top 500 manufacturing industries, but only Weilong is a consumer goods company; the influence of new consumer brands is TOP 50, but the only Henan brands on the list are Banu and Guoquan Shihui.

This is not in line with the huge market potential and brand breeding ability of Henan Province. This largely depends on the limitations of inherent thinking and relatively conservative business philosophy. For example, Fat Donglai is regarded as a benchmark in the retail industry, and no one in Henan Province can match it, but it is not out of Henan. In addition to considering whether consumers in other provinces and cities can recognize Fat Donglai, more importantly, the boss Yu Donglai is worried that the model of Fat Donglai will be difficult to replicate after leaving the province, so he has no intention of expanding at all.

Fat Donglai relies on the extreme service of the abnormal to develop a strong and extremely difficult to replace consumer stickiness, and for Henan’s local FMCG, if you don’t think about how to truly play and make use of Henan’s advantages in population, resources, manufacturing, etc., in the market environment where new brands continue to pour in, consumers choose to give up a brand is an instant decision.

New consumer brands entering the Henan market, whether it is product form, communication method or some market concept, have certain advantages in themselves. As long as they grasp the consumption preferences and behavioral habits of the local consumer population, they will have the opportunity to penetrate the fertile soil of the Henan market.