This is an English adaptation of a FoodBud historical article originally published on January 19, 2022.
Zhang Gouzi’s January 2022 article reflected on a turbulent year for consumer markets and consumer investing in China. The core argument: after a rush of capital into “new consumer” brands, many category-reinvention stories ran into reality, and investors quickly shifted attention toward areas such as the metaverse and hard technology.
For international foodservice and chain operators, the piece reads less like a market recap and more like a set of operating cautions: consumer businesses are difficult to predict, fundamentals matter more than fashionable labels, and channel execution usually matters before brand storytelling can compound.
The article argues that consumer markets behave like social experiments. Before enough product feedback is collected from real customers, many apparently logical theses are only self-consistent narratives.
Examples raised in the piece include:
The author’s point is that post-event explanations often sound convincing, but many supply-side solutions succeed simply because someone finally tried them, copied models multiplied, and the market expanded.
The practical discipline for consumer founders and investors is to observe what happens, analyze customer feedback, explain causes carefully, and make reasonable hypotheses without pretending to know the final industry structure.
Consumer businesses rarely have a durable “only we have it” technology advantage, especially compared with hard-tech sectors. Even when a consumer company has a unique edge, the article argues that it may last only months before competition catches up.
In practice, consumer companies compete on basics that are widely taught but often poorly executed: positioning, proof points, product, packaging, market selection, channels, pricing, communication, and organization.
The article quotes a consumer entrepreneur’s critique of 2021 financing activity: much of it was “people who did not understand consumer goods investing in other people who did not understand consumer goods.”
Understanding the theory is only the first layer. Making every element fit in market execution is much harder.
The article notes that schools of brand thinking differ, citing figures such as Kotler, Ogilvy, and Trout. But it emphasizes one shared premise: consumers forget quickly when they do not see a brand.
For mature brands, repeated exposure across channels is basic work. But if channel penetration is weak, marketing cannot fund itself through sales. Heavy spending eventually becomes unsustainable.
The article frames channel penetration as a core capability in the early stage of consumer goods:
Only after consumers repeatedly encounter and try the product can top-down brand building reinforce memory. Before channel traction appears, the article advises companies to spend less energy on flashy brand upgrades. Product quality remains the starting point.
Because consumption is everyday behavior and is strongly shaped by income, age, and social context, investors and operators inevitably carry subjective bias.
The article gives several examples:
The author argues that it is almost impossible to fully eliminate these biases. The realistic standard is empathy: understand behavior that is not one’s own, but avoid making investment decisions based on unfamiliar consumption habits and scenarios.
For operators, the equivalent lesson is to define the customer context precisely before judging whether a format, product, price point, or brand language is “good.”
The article uses ready-to-drink tea as its clearest example.
Nongfu Spring launched Oriental Leaf in May 2011. At the time, the product did not match mainstream consumer demand perception and was labeled by many as an extremely unpleasant drink. According to the article, the product lost money for around 10 years, while other unsweetened or original tea products from brands such as Uni-President’s Chaliwang, Tenwow, and Master Kong also struggled.
Only in the previous two years before the article, after broad market education around healthier tea drinks, did mainstream consumers begin to accept the demand. Oriental Leaf then saw a sales surge, and other companies followed by relaunching healthier tea beverages.
The lesson is not that early bets are always wrong. It is that customer perception can be expensive to educate. Few companies can absorb years of losses at Nongfu Spring’s scale.
The author also notes that consumer attitudes can be inconsistent. Tobacco, alcohol, and betel nut are all discussed as addictive products and carcinogenic concerns, yet public criticism often focuses on betel nut itself while criticism of tobacco and alcohol more often focuses on the consumers who smoke or drink. The article does not try to resolve the inconsistency; it argues that consumer perception should be treated as a market reality.
The article rejects labels such as “new consumer” and “second half of consumer.” Consumer markets continuously renew themselves: new consumers arrive every year, demand trends change through many small forces, and validated categories keep evolving at different speeds.
Borrowing from Gaorong Capital’s retail investment model, the article summarizes consumer demand with the familiar Chinese phrase “more, faster, better, cheaper.”
In this framing:
The long-term evolution of consumer markets is therefore a cycle of brand and channel replacement, iteration, and upward movement.
The article cites Warren Buffett’s snowball metaphor and argues that consumer goods can be a long-slope, thick-snow compounding category.
Once a consumer company reaches meaningful scale, it may have several reinforcing advantages:
If these conditions hold, the article argues that a consumer goods company can keep growing until it approaches the ceiling of its category.
A second growth curve becomes possible if the company avoids large-company rigidity, remains open to new categories, and gives internal support to incubated products. Consumer goods companies can also hedge cycles because demand for food, clothing, housing, and transportation persists even in weaker economic environments, provided the company matches income, demand, and supply correctly.
The final section argues that China’s consumer market may have been approaching a major capital-market shift.
The article compares this with the United States after 2000, where the number of listed companies continued to decline and the public market’s capacity for new listings became more saturated. In that environment, M&A became the main exit route for investment institutions, accounting for more than 70% of exits according to the article.
The author then points to 2021, when many consumer goods companies in China began forming corporate venture capital teams and using LP-plus-GP structures to prepare for sector investment. The interpretation is that leading market players had sensed a deeper structural change.
The article’s forecast: future capital activity in consumer markets would shift from IPO expectations toward M&A orientation. Companies with acquisition and integration capability would be industrial investors rather than purely financial investors. The author suggests that China may eventually see the birth of a Nestle-like consumer group.
For chain operators, the operating implication is straightforward: category expertise, channel control, supply-chain depth, and integration capability may become more valuable than short-term narrative momentum.
Note: IPO, M&A, exit-share, and forward-looking capital-market comments above are historical views from the January 19, 2022 source article.