Hangzhou Wahaha Group is a brand leader in China’s food and beverage industry. Cheng Gong, Deputy Director of Branding and Public Relations, speaks to WARC’s Jenny Chan for the Marketer’s Toolkit 2021 about China's health wave and reflecting how Wahaha (which means “laughing children” in Chinese) is catering to the changing habits of younger consumers while maintaining brand growth.

How is the current socio-economic environment in China challenging the F&B industry? How did Wahaha deal with this new environment, and what opportunities did it present?

With the pandemic basically under control in China, the economy appears to be gradually recovering. The major challenges we face are also shifting to new ground. Rather than overstocking and other short-term difficulties, they now relate to changing consumer habits and needs.

Due to the unexpected COVID-19 outbreak, Chinese consumers have turned to online shopping, and seemingly overnight, China became one of the world's most wired and most developed e-commerce markets. China is embracing the rise of e-commerce at an extraordinary rate, and consumers now have higher expectations of online shopping and mobile commerce, especially of product safety and product function. This year, Wahaha invested 1 billion RMB ($140 million USD) to establish a China-based healthcare e-commerce platform. This was a practical idea, considering health-related products have lower logistics costs than beverages, and no equivalent platform currently exists.

On one hand, due to COVID-19, consumers are indeed paying more attention to daily health maintenance. On the other hand, the "Healthy China 2030" Planning Outline, issued in October 2016, estimates that the market for health services will reach 16 trillion RMB by end-2030, representing the huge growth potential of this space.

Since the COVID-19 outbreak, buying behaviour and the consumer psychology behind it is still being reshaped. What innovations should brands drive to meet new demands?

Key insights:

  • Wahaha enjoyed brand recognition but not brand resonance in China as a local beverage brand that was in fierce competition with both domestic and foreign brands.
  • It took 10 years of intensive marketing efforts to make Wahaha number one in the soda drink category, which was in a growth trajectory of its own in China, aside from water and milk.
  • A strategy of product personalization, a healthcare e-commerce venture, and multiple brand and IP partnerships with Chiccream, PopMart, and LPL rejuvenated the old-fashioned, family-owned conglomerate.

Actually, even without the pandemic, consumer behaviour has been constantly changing in China. The pandemic is just a catalyst. Confronted with new consumer demands, all brands have to innovate and upgrade themselves in order to get ahead of trends.

Since the pandemic, the public has been concerned about health issues such as boosting immune systems, improving respiratory health, having balanced diets, and getting better sleep. Wahaha established an e-commerce platform called 康有利 (Kang You Li in Chinese, roughly translated to 'health is advantageous') dedicated to healthcare products – an active response to these behavioural and psychological changes and a general pursuit of health.

As a thirty-year-old brand in China, how does Wahaha connect with young consumers in this new era of digitalisation?

We are a national brand in China that has witnessed the growth of several generations. Communicating with young people – including the generations born after 1995 and even 2010 – is our top priority.

China's Generation Z (those born after 2010) have benefited greatly from global interconnectivity, domestic scientific and technological development, and consumption upgrades in China. They also have a better appreciation of – and play a greater role in – cultural diversity. GenZers are willing to pay for what they are interested in and what they value, from products to experiences to content – especially if they have social significance. Actually, their opinions relating to consumption present many challenges to brands like us. Chinese-made products that are value-for-money, have an attractive appearance and enhance their social lives are crucial to their buying decisions.

These new requirements make brands improve and innovate. That is why Wahaha has been marketing to niche circles this year – this opens a door for our brand to launch community-based and interactive campaigns. Young consumers sharing the same interests and hobbies gather together and form 'tribes' or niche circles, so Wahaha has been integrating our marketing promotions with the culture of the 'tribes' in a bid to create value. Only when they appreciate our company, culture, and products can we build customer loyalty in the long term.

Young Chinese consumers are increasingly demanding more personalised beverages. Beverage enterprises must switch from standardised production in bulk to individualised and customised production, imposing more flexible yet strict conditions in terms of R&D, manufacturing, and product management.

Wahaha is working hard to transform ourselves too. In May 2020, we set up a co-branding campaign between our pH9.0 alkaline soda water with local designer toy retailer Pop Mart with the popular 'blind box' concept. This gave birth to what we call 'blind water': consumers buy a box of drinks but don’t find out what the flavours are until the box is opened, creating elements of mystery and surprise. One box included 14 bottles of 'blind water' containing at least 3 flavours + 1 DIMOO Space Travel series toy gifted at random.

This was a challenge to our R&D and production teams because irregular packages of this kind could not be produced on a large scale. In the end, we launched a limited assortment of 10,000 boxes in five batches to reward Wahaha fans.

Cheng Gong, Deputy Director of Branding and Public Relations, Wahaha Group

This is refreshing. In the decades before this, Wahaha hasn’t kept pace with changing tastes in China before this and mostly appealed to the previous generation of older consumers who grew up drinking Wahaha’s price-focused products such as bottled water and milk. What plans does Wahaha have to further capture the trading-up trend and preference for innovation?

We are constantly innovating in a variety of ways. For instance, we frequently made livestreaming a sales channel on Taobao Live and other e-commerce platforms. Chairman Zong Qinghou has even made his livestreaming debut in a three-hour live broadcast that attracted over a million viewers.

Wahaha also got involved in the e-sports industry by becoming an official partner of the 2020 League of Legends Professional League (LPL). Our soda product was the designated drink of that event.

We also never stop experimenting with creative packaging. Take the 'blind water' as an example. We sold out all five batches within seconds through our self-owned e-commerce platform, Habao Paradise. Due to their creative packaging design, the limited-edition products were even resold on second-hand trading platforms.

What is Wahaha’s core creative approach or brand positioning at the moment? Has it helped Wahaha weather China's economic downturns?

Our main aim is to target the young and health-conscious. We plan to make our product features attractive to these people: For example, after years of R&D, we launched the pH9.0 alkaline water in 2019 and have seen sales increase 235% in H1 2020.

As for media channels, Wahaha prefers channels that are suited for marketing to 'tribe cultures', co-branding with top IP holders, and even the creation of self-owned IPs. This year, as part of our sponsorship for LPL 2020, we opened an official brand account on Bilibili (the largest domestic website for ACGN fans), but set no KPIs other than to communicate effectively with younger followers with the internet slang they know. As a result, we built a fun, lively and 'web-sensitive' brand image for Wahaha.

Although China is facing greater economic pressure this year, people are likely to increase – not reduce – their spending on food and drinks. Wahaha believes that the best way to handle pressure is to face it, not to avoid it, so we have been making considerable investments in creative projects and product innovation, while insisting on targeting the young. We are convinced that only by constantly introducing new products for the young can we cope with economic and market stressors.

Do you think that the continuous expansion of SKU counts by FMCG brands is a response to current market stressors? How does Wahaha balance this?

In a fragmented media environment, consumers do expect products to be more personalised, so brands have to increase the number of SKUs and expand their product mixes to meet such expectations. Wahaha does not only add new products to our portfolio, but also intensify product innovation. 

Take congee as an example. In addition to our classic Longan and Lotus Seed Congee, we have launched Eight Treasure Congee with Almonds, Lily and Lotus Seed Congee, Red Dates and Millet Congee successively to respond to consumer demands. 

Over the past two years, in response to youngsters' growing concerns about health and dietary trends both in and outside China, we developed a brand new Quinoa and Milk Congee product. These new products and new market segments complement our traditional products, helping Wahaha woo a wider audience, answer calls for diverse flavours, and draw attention to our brand.

Will Wahaha consider using the C2M model as a basis for product innovation?

We have been deeply involved with customisation. KellyOne, our first customized brand of fruit and vegetable juice, was introduced in 2016. It allows consumers to choose any combination of five juices as juicer ingredients and we will mix them scientifically. The juice packaging and name can also be customised. However, KellyOne is priced at about 49 yuan (US$7) per bottle to cover costs for end-to-end cold-chain transportation, making it a somewhat high-end product. We then launched a cheaper product, an NFC (not-from-concentrate) juice based on consumer preference for flavourful juices as well as to address the problem of price sensitivity. 

In 2017, when we opened our Habao Paradise mini-program, many people did not know that it was also an early example of the C2M model. By inviting consumers to scan the QR Code in our mini-program, we built a self-owned channel: a pool of Wahaha fans with roughly 8 million members. The platform enables us to do market research during different phases, including the pre-launch phase, and understand market feedback (both positive and negative) on products, packaging, brands, and campaigns in a timely way. This community enabled us to stay closer with consumer wants. Direct and two-way communication allows us to improve our products and campaigns quickly.

Generally speaking, what have the biggest influences on your brand strategy in 2020, a year of change?

2020 has been a tough year. Though COVID-19 exerted a short-term negative impact on the beverage market, the industry is trending upwards, especially with emerging channels and consumption scenarios. Opportunities co-exist with challenges. Beverage enterprises can upgrade via cooperative innovation and product iterations, standardization of the industry's health claims, and integration of online with offline channels. We have been developing healthier products with public health and the special healthcare demands of varied groups in mind for this reason. 

In terms of brand building, we’ll keep developing subculture-related strategies for niche circles by putting ourselves in their shoes, evoking empathy, and satisfying the individualized needs of diverse segments.

Many rising ‘internet-first’ brands offer ideas and measure that we can learn from. They are creative in improving consumer stickiness and are adept at being quick, accurate and powerful in their marketing. As small businesses, these brands usually carry out small-scale and short-term marketing campaigns, such as livestreaming sales promotions on Tmall. They have more flexible models than big businesses. They can easily gain sales volume with a mix of spokespeople, leading streamers, and sufficient channel investments. Besides, e-commerce platforms have created a favourable environment for their success.

In other words, they have reach, they have 'brand volume' (or share of voice), and they have new-media savviness. These are factors making it easy for them to grow rapidly theoretically – and they do. For traditional Chinese brands like Wahaha, their methods and tactics are worth studying.