The consumer demand for functional foods and health products has been verified in developed markets such as the United States and Japan, but China is still an incremental market with extremely high growth potential.
Although new players do not have major differences in products, there are clear boundaries in development planning. In the long run, the success or failure of competition between brands depends on the understanding of consumer needs and the transformation of this understanding. For the ability to sell products to consumers, new brands with product definition and channel operation capabilities will achieve breakthroughs.
Although the politically correct concept of "aesthetic intolerance is an intellectual defect" still exists, it cannot conceal the fact that "white and thin beauty" has become the mainstream aesthetic trend of contemporary young people. Under this atmosphere, a large number of post-90s have fallen into Anxious about appearance.
In addition, as long-term sitting in the office, staying up late to play with mobile phones, and frequent ordering of takeaways have become daily routines, problems such as sub-health and sleep anxiety are also plagued by young people.
Faced with these problems, after the outbreak of the epidemic, the post-90s generation accelerated their health preservation on the agenda, and a group of functional food companies dedicated to meeting corresponding needs have also lined up to go online to fight sugar, help sleep, and improve the intestinal environment. , Products supplemented with multivitamins have become a new type of social currency for young people.
"2021 is definitely a new year for functional foods and health products." From April last year to now, Liu Saige, investment manager of Panda Capital, has been paying attention to this track. In addition to Panda Capital, Sequoia China, GGV Jiyuan Capital, BAI Capital, IDG, Black Ant Capital, Meihua Venture Capital, and Jiayu Fund have all identified the betting targets.
Although the market is lively, there is still no clear definition of functional foods in the industry. So what exactly do investors invest in this track? In addition to the emergence of new demands from young people, what opportunities are there for the functional food industry to become popular? Under the seemingly homogeneous product types, what are the specific differences between the products of different players, and what are the differences in strategic planning?
make health-care snacks or snack-type health products?
Functional foods provide users with emotional value in addition to their efficacy, making their attributes similar to skin care products. However, as far as the current market development is concerned, they are similar to the low-alcohol wine industry in 2020. Some entrepreneurs are starting from innovative products based on the changes in social needs; on the other hand, the establishment of new players is relatively short, and there is an influx of large quantities into the market.
Wang Tianfan believes that the traditional elements are currently in a state of complete competition, while the main scenarios and solutions players are still in the early stages.
But even in the early days, serious homogeneity problems have appeared in the industry.
1. Resolving the demand itself determines that the products of each brand will have a certain degree of homogeneity
Speaking of scenarios and solutions, you can start from WonderLab. The company that will make meal replacement milkshakes on the market in 2020 has successfully broken the circle and entered the field of functional foods, and WonderLab provides women. "White, thin and beautiful" solution.
On January 7 this year, the National Health Commission issued the "Three New Foods" announcement on its official website, announcing that sodium hyaluronate (a common form of hyaluronic acid) has become a new food ingredient. On February 3, WonderLab launched the first oral hyaluronic acid gum, becoming the first domestic brand to market oral hyaluronic acid food.
"I can foresee that there will be a large number of hyaluronic acid foods on the market in the future." As the No. 1 employee of Netease Koala, Hu Ran participated in the whole process of Koala from zero to one. After Koala was acquired, It founded its own brand minayo. At present, minayo and WonderLab have similar needs, and both are the pain points of women's "white, thin and beautiful".
Minayo produces both food and health products. Food products are mainly sold in flagship stores of domestic e-commerce platforms, while health products are sold in overseas flagship stores through cross-border forms. At present, minayo's thermal control film has become the industry's first.
“At first looking at Ali’s data, I found that a large number of young people were buying health care products and functional foods, but I didn’t feel the body at the time.” Until Hu Ran read the topics of core concern of female users on Douyin and Xiaohongshu, she It is found that “white, thin and beautiful” has become a rigid need of women’s attention. The first thing to meet should be the “slim” demand, but the promotion of weight-loss related products has the risk of prohibition, so he finally chose the concept of thermal control.
At present, the main products of Minayo's overseas flagship store include heat control tablets, plant enzymes, anti-sugar drinks, Xueji pills, collagen jelly bars, etc. The main products of the Tmall flagship store are multi-vitamin jelly, probiotic yogurt tablets, and dietary fiber tablets. Wait.
In addition to white and thin, another scene with a larger market is the sleep scene. The former head of Douyin BrandStudio Department, Kang Le, found through the data of both Douyin and Taobao that in the data of active search for functional vocabulary, the proportion of sleep is ranked in the top three among men and women. This allowed Kangle to launch sleep gums first after establishing the functional food brand BUFX.
In addition to sleep products, BUFX's extension logic is to launch products from large to small according to demand based on statistical data. At present, it has launched products such as calorie blocking tablets, refreshing lozenges, hangover gums, eye protection gums, and multi-vitamin gums.
The reason why sleep is worth the layout is that in addition to the market growth, there is also a core factor that the previous products did not fully meet the demand. The founder of Goodnight Technology, Han Xizi, has been doing sleep product research with the team since 2015. Before that, he worked for Dream Water, a sleep aid company in the United States. His years of experience made him realize that melatonin is not the best for sleep problems. solution.
First, as one of the hormones that promote sleep, melatonin not only aids sleep, but also helps the body to recognize day and night and regulate endocrine. Because melatonin generally has a 48-hour metabolic cycle, the melatonin that has not been metabolized Vitamins can cause the brain to fail to distinguish between day and night, so that the human body will be in a drowsy state even during the day; second, long-term use of melatonin will produce drug resistance.
Moreover, Han Xizi believes that the current sleep problem faced by the public is not just not being able to sleep, but not being able to sleep well. "We have found that it is difficult for modern people to meet the two cycles of sleep duration in sleep."
According to Han Xizi, two sleep cycles are generally about 8 hours, of which deep sleep time is 3 hours. Another raw material GABA can solve the discomfort after getting up by extending the deep sleep time.
The reason why the industry presents the problem of product homogeneity is largely because the market demand is relatively uniform, and for a specific demand, the solutions given by the players are also relatively consistent. For example, for the sleep scene, each new Almost all brands use GABA extract, and the core raw materials for calorie blocking are white kidney bean extract or white kidney bean powder.
Consumers and even some brands' own awareness of this track is limited to this, and it has not yet risen to the origin of raw materials, extraction processes, ingredient ratios and dosage forms. These are the real differences between products of different brands.
Industry insiders revealed to the small dining table reporter that functional food itself has a relatively high threshold, but the current demand dividend has caused more and more teams with no R&D capabilities to flood into the market. Most of its products are manufactured by OEMs, and some factories themselves do not. No research and development capabilities.
Therefore, it is easy to make a product, but being effective and delicious is the core test of the new brand.
The effectiveness of the product mainly depends on the quality of the core raw materials and the proper blending. According to Kang Le, the current research and development of core raw materials is the hardest work in the entire food. Generally, brands do not have the ability to make changes in this area, so they can only work hard on procurement. At present, BUFFX has very high requirements for the source of raw materials. For example, its GABA is purchased from Huaxi Biotechnology. The ingredients of white kidney beans use white kidney bean extract, which is dozens of times higher than the cost of white kidney bean powder. In the compound BUFX, the existing raw materials are used to search for a lot of information. Repeat formulation adjustments and R&D tests.
The taste of the product is related to the formulation and the combination of other raw materials. BUFFX divides deliciousness into two levels: taste and taste. The taste is determined by consumer testing, and the taste is determined by what kind of experience should be provided to consumers in a specific scene. For example, it does not provide soft candies for refreshing products. , But a bubbling lozenge. In order to make probiotics delicious, minayo abandoned the powdered capsule dosage form, and finally chose freeze-drying technology to compress the probiotics and milk powder together to make yogurt tablets.
The competition has just begun and the industry has already had a head effect
Changes in sales channels, marketing methods, and user needs have enabled traditional brands such as By-Health to stand on the same starting line as new brands such as BUFX, and the real competition has just begun.
But currently in the new brand camp, the head effect has begun to gradually appear. Buff X, which officially launched its product in October 2020, has now completed three rounds of financing. Investment institutions include Sequoia China, GGV Jiyuan Capital, Black Ant Capital, Meihua Venture Capital and other well-known funds; all are also established in 2020 Minayo, Nelo and other companies have also completed two rounds of financing.
Although some investors still have concerns about the industry due to the issue of whether health products are "IQ tax", the institutions that recognize the track have acted decisively. The core behind this is that investment institutions invest in the field of functional foods, and the founding team considered Occupies a more important position in the entire investment process.
This can be seen from the background of the founders of the above-mentioned star companies. Zhu Yiling used to be the marketing director of P&G, the strategic marketing director of Uni-President, the CMO of Didi Hekuai, and the general manager of Hema Fresh Marketing. He created Guohaizhiyan and Xiaoming classmates. And other innovative product lines, and the background of Kang Le and Hu Ran has been introduced accordingly.
The reason why investment institutions are more concerned about the background of the founding team is that compared with other consumer products, functional food has a higher threshold and requires a higher professional ability of the team.
For example, in marketing, platforms such as Douyin are very strict in the management of functional products, which sets a corresponding threshold for the team, how to cooperate with the operation through the product itself and content; and in terms of products, it is not difficult to make food itself. , And it is difficult to balance delicious and effective. To make health care products, we must play cross-border. However, how to find top factories and establish cooperative relations with them in cross-border, and ultimately bring in freight is a problem. , If there is no deep accumulation, it is difficult to complete.
All investors interviewed by Xiaobantable told reporters that when investing, they attach great importance to whether the path the brand has to take matches the team's capabilities. For example, Wang Tianfan’s investment logic in Nelo is: The Nelo team chose to focus on helping users find valuable supply chains and solutions around the world, while the three co-founders of the Nelo team used to work in FMCG, e-commerce, and healthcare. The comprehensive accumulation of products and other aspects enables it to make a high-quality product that integrates the integrated supply chain in a short time.
In addition to this kind of matching, it depends on which "story" investors agree with. Choosing food is a stock iterative opportunity. Choosing health care products is betting that new brands can get a share of the incremental market.
Zhang Guangyao believes that it is now in a stage where food and health products are rushing in both directions. Going both directions together can allow brands to gain greater potential in the early stages. On the one hand, cutting into the mass market in the form of food can increase the brand’s penetration rate in the target population and promote sales growth; on the other hand, cutting into the vertical market with specific needs with innovative health products can enable the brand to accumulate core users And establish a professional and reliable image.
However, Liu Saige thinks that a game like BUFFX that quickly circled a wave of users by expanding multiple scenes is also a good direction.
With the continuous rise of these brands, the most upstream food technology companies that develop raw materials and formulas represented by Goodnight Technology will also usher in huge development opportunities.
According to industry insiders, since many practitioners in the industry are of market origin, most of the products are produced by OEMs, and the OEMs actually entrust the research and development of products to some professional laboratories, but these laboratories only do raw materials. For example, they can develop a new type of raw material, but they cannot determine the range of the molecular size extracted from the raw material to achieve the best effect when it is well combined with other substances.
All in all, trends such as population aging, urbanization and digitalization have normalized sub-health, and the increase in public attention to their own health has increased their matching budget, and the penetration rate of health care products in China is at the level of developed countries in all age groups. Factors such as the lower limit of the market, and the information gap in the industry, which makes the sales model more restrictive, have brought innovative opportunities for new brands.
Although new players do not have major differences in products, there are clear boundaries in development planning. In the long run, the success or failure of competition between brands depends on the understanding of consumer needs and the transformation of this understanding. For the ability to sell products to consumers, new brands with product definition and channel operation capabilities will achieve breakthroughs.