Be a Friend of Time, Not Always a Disruptor

This is an English adaptation of a FoodBud historical article originally published on September 13, 2021.

“Be a friend of time.”

This piece was originally intended to discuss beverage companies, but recent events prompted a broader reflection on risk, patience and the limits of “disruption.”

A friend of the author, who had worked steadily at Evergrande in Chengdu after graduation, was unexpectedly caught up in Evergrande’s P2P incident after putting several hundred thousand yuan into it. Her funds were locked up, and her job outlook also became uncertain.

In recent years, many P2P failures have hurt employees and their families, including HNA’s Juhuibao product. Returns that look abnormal deserve caution. The same applies to short-term thinking in start-up projects.

Consumer Start-Ups and Inflated Expectations

After the Covid-19 outbreak, many domestic markets in China became intensely competitive. As fewer internet projects looked investable, many entrepreneurs shifted toward consumer businesses. At the same time, a capital market with abundant funds and limited high-quality assets rushed into consumer categories, pushing up valuations and inflating expectations.

Convenience and instant-food projects are a clear example. During the pandemic, these products benefited from a temporary demand surge as consumers stocked up at home. Luosifen became especially popular in 2020, and Li Ziqi’s luosifen was one of the most sought-after products.

But by July 2021, Li Ziqi had fallen out of the top three. In the July 2021 Tmall/Taobao ranking for instant and frozen foods, luosifen brands occupied three spots. Haohuanluo generated RMB 46.4 million in sales, ranking behind only Master Kong, while Li Ziqi’s sales were RMB 34.12 million and no longer in the top three.

A widely circulated chart at the time suggested that GMV across the convenience-food category was weakening broadly.

When Online Traffic Hits a Ceiling

For internet-famous brands, the next step is usually one of two things: extend the product line, or seek traffic offline.

Zihaiguo tried both. Starting from self-heating hotpot, it expanded into compound seasonings and other convenient noodle products. It also opened more than ten offline stores in Shanghai and Hangzhou.

But searches on Meituan-Dianping no longer showed those offline stores, suggesting the effort started and ended quickly.

After multiple financing rounds, Zihaiguo placed a large amount of elevator advertising in 2020. Its 2020 revenue was estimated at around RMB 1.4 billion.

The Incumbents Still Matter

Traditional giants such as Master Kong and Uni-President still show their strength by comparison.

Master Kong’s instant-noodle revenue in the first half of 2021 was RMB 12.72 billion, down 14.67% year on year. At first glance, the instant-noodle business may look less attractive. But the more relevant comparison is not with internet-famous brands such as Zihaiguo; it is with Master Kong’s own beverage business. In the first half of 2021, Master Kong’s beverage revenue was RMB 22.276 billion, with net profit of RMB 1.554 billion.

Traditional brands do face aging issues, but giants that have survived for many years in the market usually have reasons for their durability.

Many emerging brands begin by saying they will disrupt this or that. Often, after some time passes, the brand itself disappears.

The industry now talks a lot about tracks and categories, but less about user complaints and pain points. The better path is to focus on core user pain points, improve or modestly innovate products, and build channels steadily, instead of playing a GMV game to attract capital. Otherwise, how can the business last?

Note: All financing, valuation, GMV and revenue figures are historical and refer to the article’s 2021 context.