Internet celebrity soda, pour it before the hot summer comes

Exploring the rise and fall of the internet-famous soda Hankou No. 2 Factory, this article analyzes how new consumer brands find ways to survive in the changing market and is suitable for marketing and brand strategy researchers.

"The past marketing success has become a knife that stabs us in the back."

As summer approaches, temperatures exceeding 30℃ have swept across most cities in China, including Wuhan, one of the "furnaces". A sip of cool iced drink can relieve the heat of many people, but for Hankou No. 2 Factory, a popular soda in recent years, there is no chance to be selected.

Last month, many Wuhan residents discovered that the Hankou No. 2 Factory brand experience store, located at the intersection of Poyang Street and Lihuangpi Road in Wuhan, which is also the Hankou No. 2 Factory Amusement Lele Factory, had closed down, and the interior decoration had been removed. The location of the store had also been cleared on the map. This was also the office of the company.

Interior and exterior views of Hankou No. 2 Factory Brand Experience Store, photo by Mr. Wang

How popular it was in the past, how bad its reputation is now. On social platforms, negative comments such as "cutting leeks" and "it's only a matter of time" accounted for the majority of content related to its closure, as if the explosive popularity and popularity on Douyin and Xiaohongshu a few years ago were all illusions.

Domestic old soda has been a hot topic in recent years. Represented by Beijing Beibingyang, Xi'an Bingfeng, Tianjin Shanhaiguan, Inner Mongolia Dayao and Shenyang Ba Wangsi, they are well-known brands that state-owned factories competed in the beverage track in the last century. Before the millennium, they were somewhat trapped by the impact and "cooperation" of the two foreign carbonated beverage giants Pepsi and Coca-Cola, and gradually faded out of the market until they regained vitality in recent years.

The special thing about Hankou No. 2 Factory is that, compared with the "restarts" of brands such as Beibingyang and Bingfeng, it is a brand-new company established in 2017, riding on the revival of old sodas, or the so-called "Internet celebrity brand". The success of past marketing has become a sharp blade that stabs itself in the back in today's hasty collapse.

Exploring Hankou No. 2 Factory, on the one hand, is a review of how a popular online brand fell from its peak to this point; on the other hand, it is a microcosm of the beverage track in the process of new consumer investment and financing from hot to almost dead. Yuanqi Forest, Haowang Water, and even the ice cream product Zhong Xuegao can all be seen from the current difficulties.

1. Why Internet Celebrities Rise

In addition to the closure, the negative news about this internet celebrity brand also included layoffs, salary cuts and other routine events. However, although the predicament of Hankou No. 2 Factory was only widely noticed by the outside world before the arrival of midsummer this year, it had already begun last year.

Information from Qichacha shows that Wuhan Hengrunshi Operation Management Co., Ltd. (hereinafter referred to as "Wuhan Hengrunshi"), to which Hankou No. 2 Factory belongs, is currently involved in 46 judicial cases as the defendant. Among them, the number has increased significantly after 2023, focusing on contract disputes in which cooperative enterprises require performance of contracts (mostly debts) and labor disputes in which company employees demand wages.

Image source: Qichacha

The company's legal representative, Li Ming, was listed as a subject subject to high-consumption restrictions as early as June 2023. By April this year, he had been sued for consumption restrictions by a total of seven companies/individuals, with the total amount involved reaching 736,700 yuan.

The founder and CEO of Wuhan Hengrunshi is Jin Yawen, a Wuhan native. She is a serial entrepreneur related to lifestyle. She officially founded this company in 2014 and has carried out projects such as design brand incubation, protection and renovation of old buildings, inheritance of intangible cultural heritage, and curation of cultural and art exhibitions (according to the iSEE Global Award).

In 2017, after a successful "resurrection" cultural event for Binjiang brand soda produced by the old state-owned Wuhan Beverage Factory No. 2, she smelled a business opportunity and immediately founded "Hankou No. 2 Factory", a new national retro soda brand. According to public reports, Li Ming is the research and development director of Hankou No. 2 Factory soda. Strictly speaking, the name "Hankou No. 2 Factory" is not a brand of old soda in Wuhan like Beibingyang and Bingfeng, but the factory that produces old soda is called "State-owned Wuhan Beverage Factory No. 2".

However, as a new returning internet celebrity brand, Hankou No. 2 Factory originally pursued the authentic reproduction of the original No. 2 Factory soda flavor. In other words, it was an old soda with a new brand. Later, after it was officially launched on the market, it made healthier formula adjustments such as reducing sugar based on market demand.

From the past sharing of its founding team and the activities on social platforms, the popularity of Hankou No. 2 Factory was greatly influenced by the consumption environment at that time. Specifically, it implemented its "Internet celebrity attributes" to the end and attracted a large number of investments and customers.

For example, its most popular product, "Sakura Peach Soda", is designed as a double-layer sticker. After peeling off the surface of the ingredient list, use a lighter to heat the inner sticker, and the words printed on it will become the confession of "love you". Overall, the 275ml glass bottle is small and exquisite, so that it looks good on camera. The stickers are mostly pink and cute. In addition to cherry blossom peach, other flavors such as salted pineapple, lychee, peach blossom, lemon and orange are also similar in design, retro and fresh. They were once used by many stores to display side by side as decoration. On platforms such as Xiaohongshu, it is also a prop for many female consumers to take photos and check in.

Image source: Taobao

In an interview with Caixin, R&D director Li Ming also introduced that the team often prepares for a new product half a year in advance. After internally determining the new product concept and elements related to current hot topics, the visual team and flavor R&D will design it at the same time in order to combine the color of the soda and the color of the bottle sticker to achieve an overall visual effect.

In terms of marketing, Hankou No. 2 Factory has been constantly crossing borders, such as cooperating with Xiaomi Youpin, Fisheye Coffee, Li Ning, etc. It goes without saying that it has been promoted by big Vs on platforms such as Xiaohongshu and Douyin. It has also been in the live broadcast rooms of top anchors such as Li Jiaqi, and was recommended by Papi Jiang and Guo Jingming in the variety show "Please Take Care of My Refrigerator". It can be said that it has done everything it can to gain exposure and traffic.

It is also worth mentioning that although the brand was created as a trace of old Wuhan, Hankou No. 2 Factory began to promote new products in other markets such as Beijing, Shanghai, Guangzhou and Shenzhen in 2018, the year after its establishment, and entered offline channels such as FamilyMart, China Resources Ole and Watsons.

It has enough vision and ambition, but still ended up in today's "dead end".

2. The Tragedy of New Consumption

Looking back at the two years when Hankou No. 2 Factory was the most popular, that is, 2019 and 2020, it was the most active period for new consumer investment and financing. The words of Diao Ye, the founder of Afu Essential Oil, "Every consumer product is worth redoing" spread almost everywhere in the streets and alleys.

Consumption upgrades and new products have not died out during the pandemic, but have allowed new consumer brands to tap into the wealth of online traffic. Hankou No. 2 Factory has reaped the benefits, as have Yuanqi Forest, Zhong Xue Gao, and Haowangshui.

Founded in 2016, Yuanqi Forest came into the public eye in 2018. In the following three years, relying on "0 sugar, 0 fat, 0 calories", it broke out of the carbonated beverage market dominated by Coca-Cola and Pepsi, promoted the concept of healthy sparkling water to the whole country, and led to the entry of traditional beverage giants such as Nongfu Spring and Wahaha. In the past few years, Yuanqi Forest has won a total of 7 rounds of financing.

Haowangshui, whose representative product is Wangshanzha, was founded in 2018. It started out by laying out its business in offline restaurants, but it really became popular through its entry into Li Jiaqi's live broadcast room and Gong Linna's magical song endorsement. The "bubble tea" category is also obviously a product that emerged from the new consumer food innovation trend in those years.

Recently, Zhong Xue Gao, which was founded in 2018 and won three rounds of financing from 2018 to 2021, has gone bankrupt and its founder’s livestreaming sales sparked controversy. The company has raised funds from Zhen Fund and Frees Capital, Tiantu Capital and Toutoushidao, and Yuansheng Capital. Of course, compared to Zhong Xue Gao’s bankruptcy, Yuanqi Forest and Haowangshui are not so “dismal” that they can be compared with it, but it is hard to deny that they are not as popular as they were at their peak.

After Hope Water launched Hope Hawthorn, it is difficult for it to have a new product that is comparable to its popularity. Yuanqi Forest, after being besieged by traditional beverages and slowing down its growth as early as 2022, abandoned its Internet genes and began to lay the foundation for supply chain, factory construction, and offline channels. They are lucky, while Hankou No. 2 Factory, which shares the same fate as Zhong Xuegao, is unfortunate.

The sales problems of Hankou No. 2 Factory had already emerged in 2022. In 2021, the mentality of consumers changed, and the external consumption environment changed from the "innovation and upgrading" that was advancing all the way to a new trend of "rationality and affordability". Spending more than 5 yuan or nearly 10 yuan to try a bottle of Internet celebrity soda is obviously not as comfortable and refreshing as the traditional cola at 3 yuan a bottle. More importantly, young people are fed up with the popularity of the so-called "national tide culture".

This wave of national trend culture was strong in 2018, allowing Hankou No. 2 Factory and Zhong Xuegao to seize the dividends. Until 2020, it helped to boost new consumer internet celebrity baking brands such as Momo Dim Sum Bureau and Hutou Bureau's Jardine Bakery. However, the national trend has been blowing for too many years, and the design elements have become increasingly similar, but they can be easily sold at high prices. Over time, young people have started to fall for it.

The supply chain and factory foundation that Yuanqi Forest has turned around and polished are too "heavy" for Hankou No. 2 Factory. In 2019, Hankou No. 2 Factory received tens of millions of RMB in financing from Qinqin Food. The following year, it received A and A+ rounds of financing in succession, with Qingliu Capital, Hillhouse Capital and Shunwei Capital entering the market respectively. However, the funds obtained are not enough to support it to become a down-to-earth traditional beverage company. More importantly, when we look at the background of the founding team of Hankou No. 2 Factory - lifestyle managers, marketing that caters to trends is indeed the direction they are better at.

After receiving financing, Hankou No. 2 Factory incubated a new low-alcohol wine brand "Parallel Universe" to make "girls' first bottle of wine", a sparkling water series "Fenglinhuoshan", which is "fragrant sparkling water", and oat milk tea, trying to go further through a diversified product strategy, but obviously, the market competition is too fierce, and the endless emergence of new products and new brands has drowned its innovation. The process of the tragedy of new consumer brands is simple and cruel.

Image source: Parallel Universe Trend Drinks Weibo

3. Conclusion

People in Wuhan or consumers who pay attention to Hankou No. 2 Factory will notice that in Hubei, the old soda with the name of "No. 2 Factory" has not only Hankou No. 2 Factory, but also "Wuhan No. 2 Factory". The latter was founded in 2023 by Lan Shili, the former richest man in Hubei Province and founder of East Star Airlines (now bankrupt). When the latter came out of nowhere, Hankou No. 2 Factory once issued a statement to declare its sovereignty.

The reason for mentioning this is that in the field of domestic old soda, at least in Wuhan, the "No. 2 Factory" obviously has brand value. The decline of the No. 2 Factory in Hankou does not mean the decline of retro old soda. Of course, whether the No. 2 Factory brand in Wuhan is a good brand remains to be verified. The only thing that can be confirmed is that brands that can survive for a long time are doomed to fail if they follow the path of new consumer Internet celebrities in previous years.

Consumers are becoming increasingly stingy with money and are really hard to please.

Author: Bei Hai; Editor: Ge Weiwei; Source public account: New Retail Business Review (ID: 1089053)