Erie Sample Observation: Channel Downlink Products Upmarket Dairy Consumption Escalation

Five years ago, the dairy industry in China was still in the recovery stage, and Erie dairy entered the world's top ten dairy industry for the first time. Similarly, in this year, Pan Gang, chairman of Yili Group, put forward the goal of "five strong billion". By 2020, it ranked the top five in the world, and its revenue exceeded 100 billion.

According to the third quarter 2019 earnings, Erie has achieved revenue of 68 billion 517 million yuan, up 12.61% over the same period last year, and profits 5 billion 630 million yuan, an increase of 11.55% over the same period last year. This achievement not only creates a new high level of Asian dairy industry, but also replaces Asia's first core indicators such as comprehensive market share and consumer penetration. Net asset yield continues to lead the global dairy industry.

According to the current growth rate, Erie's rate will reach 100 billion yuan per year next year, and will enter the top five of the world.

In the past 5 years, Erie has gradually increased from a dairy company with an annual income of less than 50 billion yuan, so that it has basically coincided with the path of dairy consumption upgrading in China as a whole. The dairy industry as a healthy food industry is still in a period of rapid development, and the market will continue to grow in the future.

In December 2019, Erie 2020 global partnership conference was held in Sanya, Hainan. Its five major businesses announced the latest performance and released dozens of new products to store future market growth.

Product line upwards expansion

In recent years, the upgrading of dairy consumption has shown a trend of accelerated development.

According to the dairy products consumption trend report released by Yili Group, Chang Wenru products, which occupy the largest volume of dairy products sales in China, tend to be more high-end, rapid expansion of products and steady growth of basic products. The development of dairy products is showing an hourglass structure.

The average price is 22 yuan / liter of high-end products, including high-end white milk and ambient temperature yogurt, sales growth rate is 8.2%, penetration rate is 86.5%, higher than the previous period 2.2%; the average price of 10.7 yuan / liter of low-end products include basic functional milk and basic white milk, sales growth rate is 6.3%, permeability is 77.1%, up 1.1% over the previous period.

The average price is 15.3 yuan / liter of mid end products, sales growth rate is negative, penetration rate is 56.1%, down 0.3% compared with the previous period. It can be seen that high-end products, whether in terms of sales growth rate, permeability and permeability changes are higher than those of low and medium end products, the trend of high-end dairy products at ambient temperature has been continuously strengthened.

According to the sales data disclosed above, Erie in recent years for consumption upgrading trend layout products, has shown the trend of market harvest.

Taking its liquid milk product division as an example, only a single product has achieved an annual sales of 20 billion, not only far higher than other types of yogurt products on the market, but also surpassed the total revenue of many dairy companies in the market.

In 2014, the yogurt brand had just entered the market, with sales of 4 billion yuan, up to 20 billion yuan in 2019, and a 500% increase in 5 years. "One or two years after the product has just entered the market, the demand is mainly based on gift giving." Erie told reporters on twenty-first Century economic report, "and from the following data, consumers' demand for self drinking is increasing, which has become the main driving force for the growth of the company."

"Through the global trend of yogurt market insight, combined with domestic consumer demand research and big data integration analysis continues to upgrade, only today's results." Yili told reporters.

From Erie's upgrading path to this product, we can clearly see the current growth point of dairy products at normal temperature: adding more ingredients to meet the needs of consumers' taste and health upgrade, and the social value of packaging design.

The advantages of this are obvious: a large number of products with different packaging and flavors are put on the market, which can satisfy consumers' preferences for yogurt products at different points, and the social value brought by better looks can promote consumers' spontaneous sharing.

An Muxi's development path also gives the dairy enterprises a good path to demonstrate: first, cut into the growing market before the needs of consumers, and then continue to expand and upgrade product categories and images through continuous research and big data analysis.

In addition to Andrew, he also tried to cut into different growth markets through the launch of new products. In December, the formula of Erie sheep milk powder was passed through the audit, and its first sheep milk powder product was launched. The cross boundary mineral water industry launched the high-end water brand "inikin Iraq carved spring" to open up new beverage fields.

Channel downward penetration

In recent years, the consumption of dairy products, especially liquid dairy products, has become more apparent.

With the change of consumption environment, great changes have taken place in people's consumption concept, consumption culture and consumption mode. In terms of channels, under the B2C dominated market environment, B2B channels continue to improve, the efficiency and cost of channels are undergoing fundamental changes, new channels such as new retail and micro stores are emerging, and the future terminal development form presents a composite structure.

Besides online channels, more and more dairy enterprises are beginning to realize that China's dairy industry is showing the trend of development from centralized consumption to decentralized consumption, and the demand of dairy industry is mainly driven by consumption of three or four line cities and rural dairy products.

From the perspective of the characteristics of the sinking market, first of all, the rapid growth of the market and the enhancement of the brand concept. The retail sales of liquid dairy products in the three or four tier cities and rural markets were significantly higher than those in the second tier cities, and consumers in rural areas began to focus on brand consumption.

Secondly, the low line cities have strong consumption ability and strong market competition. The consumption capacity of the three or four tier cities is improved. However, because of the formation of dairy products consumption habits, foreign brands have the advantage of "quality first" and "consumer first". Domestic brands will also face the challenge of cruel competition in the market, which is centered on "concentrating on eating, eating and eating".

As a leading enterprise, Erie has strong financial advantages, channel advantages, product advantages and brand advantages, and it takes the lead in competition in the new market. In 2006, Erie has begun to study and break through the vicious circle of competition in big cities, force the three or four line market, and continuously sink the channels to towns and townships.

It is reported that Erie has completed the establishment of the direct sales system of the National Central City branch, and based on this, subdivides the whole city according to the population economy and other indicators, divides the city into super large cities, central cities, all the top 100 cities, key prefectural cities and townships and villages, and carries out the purpose of deep distribution with specific sales modes.

At the end of 2018, Yili direct control village level network has reached 60.8, and is in the leading position in the industry. According to kaydo data, as of June 2019, the market penetration rate of the dairy products at Yili room temperature was 83.9%, and its penetration rate in three or four line cities was 86.2%, which was the first in the industry.

At the same time, Erie is also using various innovative ways and black technologies to consolidate the moat under the line. Erie's "celestial globe" system, which was formally launched in September 28, 2018, is one of them. The "celestial globe" system can rely on the digital system to analyze, evaluate and accurately predict the market development trend, and assist the layout planning and landing of terminal nodes.

At present, the system has covered 367 cities and 28 formats. In sales stores, the celestial globe system can real-time monitor, intelligent analysis, use big data analysis to accurately grasp consumer demand, and make product innovation.