Industry depression and market prosperity, the mystery behind the two days of ice and fire

A few days ago I went to Huizhou, Guangdong Province, and visited a TV company head. After the chill, the old friend almost praised me with particular vision and chose the food industry for more than 20 years.

Friends said that people eat food for the day, food is not falling into the industry, high-frequency consumption, and television is low-frequency consumption, and has been repeatedly challenged by new technology in the past decade. In the early years, television was hit by home computers. In recent years, mobile phones have hit computers and televisions, and many young people have not bought TV.

He finally said that the TV industry is difficult to survive, and the development of enterprises can only rely on hard work. First, technology upgrades provide consumers with more product value, such as cloud TV and curved TV, from the perspective of technology research and development. The second is to discover potential growth markets, such as shifting from home to commercial, and capturing potential markets such as vehicles and ships, hospitals, hotels, and hotels.

Coincidentally, a few days ago I received a customer who just entered the health food industry, which was once the largest stainless steel door and window enterprise in Jiangbei. They believe that the door and window industry has begun to fall off the cliff. The food industry, especially the “medical and food homologous” foods based on health and wellness, is a sunrise industry and is in the “blowout period” of development.

We replied unceremoniously. This is a typical “only thief eats meat, no thieves beat” mentality. China’s door and window industry is in the midst of a smart and digital upgrade. Traditional products are in a state of homogenization and vicious competition. If they cannot be upgraded, they will be eliminated. However, enterprises that can carry out strategic reconstruction will become intelligent. The leader in the digital door and window era.

Behind the industry’s depression is the overcapacity, the industry leaders are in a strategic dilemma, and the leader is being challenged by the challenger to take a shift on the beach.
After 40 years of rapid development, China’s economic aggregate is relatively high, and scale-based growth has entered a bottleneck period. Therefore, the state has proposed “supply-side reform” and launched a strategy of scale-oriented development toward quality.

Many enterprises, especially the large-scale leading enterprises, are caught in a dilemma.

From the perspective of “into”, the stock market shrinks and continues to push the scale, and it will fall into the predicament of “uneconomical scale”. Taking the beer industry as an example, China’s beer production in 2014 was 51 million kiloliters, while in 2017 it was less than 42 million kiloliters, down more than 20%. At the same time, imported beer and craft beer showed a spurt growth.

From the perspective of “retreating”, due to the large scale of relative stocks of enterprises, the phenomenon of “difficult to turn around” is emerging. Many industry leaders are also aware that the shrinking stock market is inevitable, as consumer demand shifts to higher value, more personalized products. However, this kind of product has not formed a large-scale market at present, and the individualized demand has formed an “absolute contradiction” with the scale and standardized production of the enterprise. Enterprises are entangled in the contradiction between “preservation” and “grasping increment”.

Taking tea drinks as an example, in recent years, the traditional red green tea market has changed greatly. The leading enterprises of traditional red green tea are Wahaha, Uniform and Master Kong, which occupy more than 80% of the market for tea drinks. With the upgrade of consumption, tea drinks gradually shifted from hot filling to cold filling with better taste and flavor. Nongfu Spring took the lead in launching tea π, which catered to the needs of consumers, and unified the introduction of Xiaoyan students, and formed with Nongfu Spring. The impact of traditional hot-filled tea drinks has become a mainstream product in just three years, making hot-filled tea drinks a “memories”.

Many people in the industry have criticized Master Kong and Wahaha, saying that this is their “disregard” status of “promotion and prejudice” in the consumption upgrade.

In fact, we believe that Master Kong and Wahaha must have seen the general trend of beverage upgrades, and even when tea π and Xiao Yan students grew up rapidly, they were very entangled. However, because they are caught in the mindset of “preservation” and “difficult to turn around”, they did not enter the incremental market quickly, which led to the current passive situation.

Behind the market boom is the individualized demand, which is the strategic opportunity for the challenger to overtake the car.
Through the industry’s depression, we look at the performance of the market boom. On the one hand, China’s huge middle class, they not only have purchasing power, but also enjoy the characteristics of consumption, especially the young middle class of “post-80s” and “post-90s.” On the other hand, China has more than 100 million people traveling abroad each year. Not only the middle class but also the wealthy class. If the consumption of the new middle class is described by the “hands-on party”, then these wealthy groups are “shopaholics”. Not only did they stage the “toilet cover phenomenon” in Japan, but they also staged “crazy purchases” in many countries.

A set of data indicates that the annual growth rate of foreign prepackaged foods in the Chinese market is above 25%. In 2017, China imported nearly one trillion yuan of pre-packaged food. Behind this is not only the performance of consumption upgrades, but also the improvement of purchasing power, because the price of imported pre-packaged food is much higher than that of domestic similar foods.

“Overweight, lack of personality” is the overall characteristics of the current market. Overcapacity leads to homogenization vicious competition, stock-type enterprises survive the fittest, lack of personality is the essential performance of consumption upgrade, and incremental enterprises have the opportunity to challenge success.

During this period, we will see the “ice and fire” of the industry’s differentiated competition. On the one hand, based on the competition in the stock market, leading enterprises will eliminate a group of peers without scale, brand and capital advantages with their inherent advantages, and at the same time, they will slowly die out. On the other hand, some of the challenge-oriented enterprises with consumer insights have changed their competitive strategies, and they have set a new foothold to cater to the trend of consumption upgrades and achieve “overtaking”. This is not only the basic law of evolution in nature, but also the basic logic of market and enterprise evolution.

As a leader in the stock market, how to solve the “dead hole” in the consumption upgrade period and avoid being photographed on the beach? At this stage, the leading enterprise must rebuild through system reconstruction. It is to reconstruct the organizational system of the new business unit and implement the incremental market strategy. During this period, stocks and increments are both grasped, and the hands of incremental strategy are not only hard, but also give enough investment and growth time, and do not kill the future of the enterprise in the cradle.