[JD Says] Consumption Upgrade redefining Chinese New Year

2017-01-18

Within ten days, the bell will sound for the Year of Rooster. Young people far away from home have packed up everything, eager to go back to a lavish family reunion dinner amongst bustling firecrackers. This is the Chinese New Year, a time for us to be happy as can be.

Decades ago, a new year means new clothes and a big dinner which brings all family members together. But today, it means a lot more – health, leisure, and quality. These are redefining the festival consumption pattern, and creating a huge impact on the mass consumption market.

A healthy new year: not just food safety

“Don’t drool, kid. It’s laba  now and new year’s around the corner.” Around this time, mothers are usually eagerly counting down to the day when their children will be home for the big occasion, as they busy preparing the New Year’s Eve dinner. Supermarkets are filled with buyers of expensive vegetables labeled “green” or “organic”. A few years back, illegal cooking oil and melamine used to make consumers start at the mere mentioning of processed food. Those incidents have directed food producers onto a healthier and greener path.

Today, “healthy food” has become order of the day. In 2016, Ding Lei  began to sell black pig on Netease at as high as RMB 100,000, and they were thus nicknamed “pigs riding the tide”. Actually, pigs weren’t the only one riding this big tide. As a domestic bellwether in fresh food, Beiwang Agro-Pastoral sells its high-end green pork at a price of RMB 30-180/kg. Statistics show that when consumption upgrade wasn’t so obvious a few years ago, only around 1% of consumers were willing to pay the high price. Yet now the percentage has tripled to 3%.

In 2013, Beiwang made the decision of joining hands with PE capital. With JD Capital’s investment, Beiwang further upgraded by going public on the NEEQ in 2015. Given the fact that fresh food industry has always been fragmented, some good SMEs and innovative models stood out from the crowd pushed by consumption upgrade. Under the traditional distribution system, Beiwang tries to establish a supply chain system over which it has full control from the very begining, so as to provide quality food and thus meet consumer demands in a timely manner.

As Beiwang upgrades itself, products of other JD Capital-invested enterprises such as Zhongxing Junye and Zilin Cuye can also be found in most supermarkets. With a better quality and taste, these green, healthy and fresh products become a new favorite during the Chinese New Year holidays.

It is worth mentioning that, in this round of consumption upgrade, aside from the new demands for food, consumers’ understanding of health has extended to “big health”. Products that embody the concept of big health are among the best-sellers. This reflects consumers’ new demands for exercise and health maintenance. Under such circumstances, Rongtai, another JD Capital-invested company, is exploring its way towards big health following the principle of “technology makes life healthier”. For example, it launched a wearable device to protect consumers from haze.

A leisurely new year: bon appétit

Consumption upgrade is pushed by changes in consumers’ lifestyle, consumption environment, contents of supply, as well as the idea of consumption and the strengthening of purchasing power.

Spring Festival is a leisurely time for us to just relax after a busy year. Aside from the New Year’s Eve dinner, duck neck, chocolate, soda, and other snack food are also necessary for family get-together. As such, snack food brands such as Juewei, Guoyuan Laonong and 3songshu are grabbing their market shares with more diversified marketing channels and approaches.

As the Internet soon spreads and people’s consumption habit evolves, the competitive landscape is changing in the snack food sector. Given that the distribution networks are very well recognized in recent years, many local consumer goods enterprises have fast thrived. Among them, Juewei, with JD Capital as a shareholder, is a typical example.

Juewei was already a very strong competitor in the snack food market in central China when JD Capital made its investment. Its business model and operation capacity were well recognized by the market. Yet at the time Juewei was mostly engaged in direct sales, and was faced with great challenges in accessing the capital market.

JD Capital helped Juewei in shifting from direct sales to franchising, and plans to help it to expand cross-region and enrich the product profile in the future. Hopefully, Juewei won’t be just about spicy snack food then. You will be able to find whatever taste you like there.

A quality new year: both on the outside and inside

One needs to wear decently to visit friends and relatives. This is about the “outside”. At home, they need to feel comfortable. This is about the “inside”. These are what people really want as consumption upgrades.

As for the outside, in recent years, international brands including Dior, Gucci, LV, Swarovski and Armani have launched specially designed products featuring the 12 Chinese zodiac signs, in a way to cater to Chinese customers’ special demands during the Chinese New Year. Meanwhile, domestic jewelry producers are not to be outdone. For example, ADEL deviated from tradition. It accurately calculated the relation between a diamond’s force bearing point and gravity, and was able to make diamonds shine every 10 seconds while remaining solid as usual.

ADEL is the first jewelry company in Shenzhen that has gone public, and is the only listed company amongst its peers to focus on diamond-inlaid accessories. The fund ran by JD Capital bought shares of ADEL in 2010. Besides pushing it onboard the capital market, JD Capital also helped the company grow faster and further improve product quality. 

Consumers now have much more refined demands for the “inside”. In 2015 when overseas purchasing agents swept through the Chinese mainland, the new year was basically occupied by “intelligent toilet seats brought back from Japan by Chinese visitors”. In fact, many domestic brands have already aimed at these areas. JD Capital-invested Monarch and Idear Hanyu are providing better quality bathroom ware for Chinese consumers by organizing their own R&D and production teams, in an attempt to draw the attention of Chinese consumers back to China.

Meanwhile, many quality Chinese enterprises are taking advantage of China’s well-improved industrial system, rich engineer resources, low cost and huge market to consolidate industries at the international level.

One example is Luolai Home invested by JD Capital. In April 2016, JD Capital reached a systematic strategic cooperation plan featuring “constant increase plus continuous cooperation”. With years of experience in industry investment and research, JD Capital will help Luolai Home achieve its core development strategy in M&A following the idea of “big home textiles, small home furnishing, and complete home furnishing”. Currently the company is busy arranging its layout in home furnishing, and has provided investment proposal to Uchino, Ujipin, Taihuoniao, and Istarlife, some of which have already agreed. Meanwhile, Luolai is establishing cooperation with vertical home e-commerce platforms, smart home platforms and content marketing fan economy.

Whether spending hours on a sofa at home, or attending family and friend get-together wearing glamorously, we can now feel strongly how consumption upgrade is driving new commercial prosperity from various aspects of life.

The Chinese New Year is not just about going home now. It also carries new hope for the capital-fueled consumption upgrade.