Time-honored brands trying new ideas
Traditional firms using retail outlets to compete in more sophisticated market
China’s time-honored brands, known as laozihao, are adopting fresh operation modes to catch the eyes of the country’s increasingly sophisticated consumers.
Recently, traditional Chinese herbal tea producer Guangzhou Wanglaoji Pharmaceutical Co Ltd launched four outlets, called 1828 Wanglaoji, in Guangzhou, Guangdong province, bringing handmade herbal tea to physical stores.
Unlike conventional herbal tea, which is usually sold in cans in supermarkets, the handmade teas are now being served in physical stores, where clerks offer customized herbal drinks for the consumers.
“I ordered a classical one. Customers can choose herbs to add to their drinks, such as orange peel, goji berry and licorice. Compared with Wanglaoji’s herbal tea sold in cans, I think the handmade one has a heavier taste of Chinese medicine,” said Jackie Chen, 25, a Guangzhou resident.
Three of the new 1828 Wanglaoji outlets are in shopping malls, and consumers find them a great combination with adjacent restaurants.
“I feel great to have a herbal tea after having a spicy meal in the Sichuan restaurant nearby,” Chen said.
“Because the climate in Guangdong is usually damp and hot, we often suffer from excessive internal heat. In order to repel internal humidity and heat, we are fond of drinking herbal tea,” he added.
Industry insiders said that currently, the two leading Chinese herbal tea makers, Guangzhou-based Wanglaoji and Hong Kong-based JDB Group, take up more than 80 percent of the market share. Both the density and the scope of the distribution channels have reached a saturated level, and all categories of the products of the timehonored brands have reached maturity, making it difficult to find new market growth points.
As a result, they said, it is reasonable for those timehonored brands to extend their product categories and establish their own distribution channels.
Recent years have witnessed earthshaking changes in China’s catering market. Consumers are aware of an increasing number of diversified food and drinks, and those time-honored brands that mainly rely on traditional operation modes face severe challenges.
Meanwhile, the market for instant food and beverages is continuously growing. Official statistics show that by the end of 2017, the marsumers’ ket volume of instant drinks had reached more than 50 billion yuan ($7.94 billion) per year, and the figure is still rising.
“People’s taste is randomly changing. In the market where competition is so fierce, physical stores with no distinguishing features are doomed to be knocked out,” researcher He Liting of Zero Power Intelligence Group, a research institution headquartered in Shenzhen, told China Industrial and Economic News.
Huo Liren, deputy manager of Wanglaoji, said in a media conference that the company opened four physical stores simultaneously to meet con- rising consumption demands for herbal teas.
“In 2018, we will continue to explore the market in Guangdong, and we plan to enter East China in the fourth quarter of the year,” Huo added.
Other time-honored brands are taking similar steps. Recently, Chinese snack and candy maker Hsu Fu Chi International Ltd opened its exclusive offline shop in Dongguan, Guangdong province.
The traditional pineapple cake maker is trying its hand at what’s called “experiential consumption”, or consumption driven by the desire for memorable experiences, by offering hand-made pastries.
The well-decorated shop, opened in a shopping mall in Dongguan, offers handmade pineapple cakes in a variety of flavors, including original taste, Japanese-style matcha and cranberry. It provides both eat-in and take-away services, and all the pineapple cakes it sells are beautifully packaged.
Zhao Yue, an analyst at Beijing-based market research firm Analysys, said “against the backdrop of ‘new retail’, more and more conventional enterprises are attempting to open offline experience stores, where they can have the closest encounter with the consumers, bringing brand values to them.”
“However, the difficulties lie in how to cater to consumers’ personalized and diversified consumption demands in the new era. They need to figure out more crossover marketing strategies, based on the brands’ own advantages and conditions,” Zhao said.
At present, there are 1,128 time-honored brands registered at the Ministry of Commerce, with the brands enjoying an average history of 160 years. Among them, more than 60 percent are in the catering and medicine sector.
Last year, the MOC, together with 15 government authorities, jointly issued a guideline to protect these time-honored brands, by promoting online and offline integration, calling for stronger intellectual property protection and offering additional favorable governmental policies.
Against the backdrop of ‘new retail’, more and more conventional enterprises are attempting to open offline experience stores.”
Zhao Yue, analyst at Beijing-based market research firm Analysys