Mixue Ice City can't handle the 1.5 yuan issue

Mixue Ice City has developed in the fields of tea and coffee due to its cost-effectiveness, but it has difficulty moving forward in the mineral water industry. Let's take a look at the specific situation~

As a leader in new tea beverages, Mixue Bingcheng has always swept the market with its cost-effectiveness.

A relevant report from Frost & Sullivan shows that in terms of cup sales, the top three best-selling products of Mixue Ice City are lemonade at 4 yuan, ice cream at 2 yuan, and pearl milk tea at 6 yuan. From January to September 2023, approximately 913 million cups, 442 million sticks, and 326 million cups were sold, respectively.

Stepping out of the tea beverage track, in the coffee track, as a sub-brand of Mixue Bingcheng, Lucky Coffee’s American coffee at 5 yuan a cup also has sales that cannot be underestimated.

However, in the bottled water market, even though the price had been lowered to 1.5 yuan per bottle, "Snow King" still failed to increase sales and had to fail and cease operations.

Recently, there was news that Mixue Ice City implemented a strategic adjustment several months ago and "has basically stopped the bottling business." At the same time, the topic "Mi Xue Ice City responds to giving up the bottled water business" topped the Weibo hot search list, with 160 million views and over 65,000 interactions.

In this regard, relevant personnel in charge of the bottling business of Mixue Bingcheng confirmed that the current products are being adjusted and the agency of bottled beverage projects including "Snow King Loves to Drink Water" and "Snow King Ba Qi" have been suspended.

This also directly confirms the rumors that Mixue Bingcheng is gradually giving up its bottled water business - a business worth 1.5 yuan, "Snow King" really cannot handle it.

1. The Snow King becomes his younger brother

Why did Mixue Ice City, which gave up its bottled water business, become the number one trending search? The answer is obvious: Mixue Ice City is already a national brand with a strong brand reputation.

This is not difficult to understand. From the product perspective, lemonade, ice cream, and bubble milk tea sell hundreds of millions of cups, and behind them are consumers' choices and continued consumption.

In terms of the number of stores, Mixue Ice City has a large number of stores both at home and abroad. In January this year, the prospectus submitted by Mixue Ice City to the Hong Kong Stock Exchange showed that by the end of 2023, the number of franchise stores will reach 36,153, of which nearly 4,000 are overseas (as of September 30, 2023).

In the new tea beverage market, the name "Snow King" is well-deserved, but when it enters the bottled water market, "Snow King" becomes an absolute little brother.

According to Guanyan Tianxia data, the current concentration of my country's bottled water industry is relatively high. Nongfu Spring has a market share of 26.5%, ranking first; followed by China Resources Yilibao, with a market share of 21.3%; Master Kong and Wahaha have a market share of about 10% each, Baishuishan and Binglu have 7.4% and 5.3% respectively. The six major brands have a market share of up to 80.5%, taking over most of the bottled water market.

In such a highly concentrated market, the intensity of competition is predictable. As the public has seen, in order to capture more market share, major bottled water brands are accelerating their competition for scarce high-quality water sources, from natural waters to mountain springs, rock springs, snow mountain water, glacier water, etc.

In addition, in terms of functionality, "Zebra Consumption" sorted out that bottled water products correspond to a series of high-frequency used phrases, including "weak alkaline", "containing selenium", "containing strontium", "low sodium", "hydrogen-rich", "orthosilicic acid", etc., and in terms of drinking scenes, there are mainly water for babies, water for pregnant women, and water for making tea.

As a younger player in the bottled water market, Mixue Ice City did not make a big fuss about water sources, functionality, and drinking scenarios. Instead, it was quite "simple".

Simply put, Mixue Ice City simply stated that "the source water is taken from 220 meters underground", shouted the slogan "8 glasses of water a day, Snow King loves to drink water", and used the classic image of "Snow King" on the packaging.

As for the production, Mixue Ice City did not personally participate. The outer packaging of "Snow King Loves Drinking Water" shows that it was commissioned by Mixue Ice City's subsidiary Shangdao Smart Supply Chain Co., Ltd. to produce Jinmailang Beverage Co., Ltd. In other words, this is a private label product.

According to the above product creation logic, can the slogan "8 glasses of water a day, Snow King loves to drink water" be popularized, and bottled water can be sold continuously? This is of course not realistic, but it reflects the dullness and weakness of Mixue Ice City in the bottled water business.

In September 2022, Sina Technology launched a small survey, asking netizens "how would you choose when faced with a wide range of bottled water brands?" The results showed that about 58% of netizens said that they would choose the brand they are used to drinking.

Consumer choice and the high concentration of the bottled water industry are actually "two sides of the same coin." For Mixue Ice City, the problem is that the six major brands mentioned above have established a strong consumer mindset, but "Snow King Loves Drinking Water" is bland and weak. How can consumers give up the brands they are used to drinking and choose their own brands instead?

There is no other reason, Mixue Bingcheng still picked up the "weapon" that has been proven in the new tea beverage track - low price.

2. Low-price strategy doesn’t work

In the above-mentioned Sina Technology survey, in addition to choosing the brands they are accustomed to drinking, some netizens also prefer to "choose lower-priced ones", and low price is exactly the consistent strategy of Mixue Bingcheng.

Specifically, in December 2022, Mixue Bingcheng announced through its official public account the launch of the bottled water brand "Snow King Loves Drinking Water", which is positioned as drinking natural water. It comes in two specifications of 550ml and 380ml, with terminal retail prices of 2 yuan/bottle and 1.5 yuan/bottle respectively.

From the consumer's perspective, this price is a bit appealing: when many consumers "complained" that they would never see bottled water for 1 yuan again, the lowest price of "Xuewang Loves Drinking Water" was only 50 cents higher than 1 yuan.

Judging from the industry's competitive landscape, this price is also competitive to a certain extent.

According to the analysis of senior retail expert Wang Guoping, although there is market space in the price range above 3 yuan, it does not conform to the mental positioning of Mixue Ice City to the outside world; prices below 1 yuan do not meet the standards of Mixue Ice City's young customer base, and cannot leave profit space for the channel; it requires agents and channel dealers to have the motivation to help Mixue Ice City promote bottled water, but also to conform to its own mental positioning to the outside world. The price range of 1 to 2 yuan is adaptable.

The so-called "adaptability" means that it must adapt to both consumers' demand for low-priced bottled water and agents' and channel dealers' pursuit of certain profits.

Because of this, Mixue Bingcheng’s low-price strategy seems to make sense logically, but in real business wars, the problem lies precisely in the degree of adaptation.

From the consumer's perspective, "Snow King Loves Drinking Water" is indeed sold at a low price, but the 2 yuan price range is firmly occupied by brands such as Nongfu Spring, China Resources Everbright, and Ice Dew, and this is the result of the majority of consumers "voting" with their own choices.

Theoretically, consumers can also choose "Xuewang Loves to Drink Water", but Mixue Ice City did not take the approach of high-profile and quick capture of consumer minds, but instead "randomly dropped" in Henan, Sichuan and other places. According to the media, the places where it appeared were often display racks at the entrance of Mixue Ice City stores or convenience stores and small supermarkets. The scope was too small and due to geographical restrictions, it failed to stir up any waves.

What best illustrates the above problem is that in the comment section of the topic "Mi Xue Bing Cheng responds to giving up bottled water business", "But I have never seen this kind of water", "I didn't even know there was such a product", "I only knew about the hot search that Mi Xue Bing Cheng sells bottled water" and so on are all highly praised comments.

From the perspective of agents and distributors pursuing profits, unlike the rebate model of Nongfu Spring, China Resources Yilibao, and Yuanqi Forest, "Snow King Loves Drinking Water" adopts a profit-sharing model that allows distributors to buy goods at low prices. According to media reports, the price difference between the wholesale price and the terminal price of Snow King bottled water is about 50%.

It seems that there is a profit of about 50%. For this "tempting cake", Mixue Bingcheng only opens the distributor agency qualification in the area to its own store franchisees. Convenience stores, supermarkets and other terminal agents can purchase goods from regional distributors.

The embarrassing thing is that not many consumers know that "Snow King loves to drink water", and even fewer buy it. The purchase volume is limited, and it is difficult for agents and channel dealers to realize their pursuit of profits.

In Wang Guoping's words, when consumers buy bottled drinks out of curiosity and no longer repurchase, Mixue Bingcheng's inventory will increase, costs cannot be spread out, distributors will not make money, and naturally they will not be able to survive in the long run.

In this regard, many analysts believe that whether it is entering the bottled water market where giants abound, or using the profit-sharing model, it has failed to usher in strong sales, making the development of "Snow King Loves Water" even more difficult.

This indirectly shows that Mixue Bingcheng's low-price strategy may be successful in the new tea and coffee market, but it will not work in the bottled water market.

3. Need a new story?

From product creation and packaging design, to opening up regional distributor agency qualifications only to its own store franchisees, and then to "random drops" in a few regions, "Snow King Loves to Drink Water" shows a strong intention to test the waters.

In fact, as early as 2022, analysts wrote an article predicting that "Mixue Bingcheng's testing mentality determines that there is almost no possibility of bottled water becoming successful."

It's not just bottled water. The aforementioned "Snow King Bubble" also had a similar approach and the same ending. The retail price of the 480ml "Snow King Bubble" sparkling water is 4 yuan, which is cheaper than the 5-6 yuan in the mainstream price range. Mixue Ice City also launched three flavors: white peach cherry, orange, and salted plum. However, after a period of tossing, it was suspended from agency like "Snow King Loves to Drink Water".

Looking back, Mixue Bingcheng’s attempt to develop bottled water and sparkling water was intended to tell a new story and draw a new growth curve beyond new tea and coffee drinks.

In this regard, Lin Yue, chief analyst of Lingyan Consulting Management, previously analyzed to the media that "Mishe Bingcheng's entry into the bottled water business is, on the one hand, to pave the way for listing, and on the other hand, to expand its revenue source."

Both goals are very attractive, but they also require continuous investment. Moreover, the investment and business logic of the bottled water track are different from those of the new tea and coffee tracks. The relevant experience cannot be transferred horizontally, and it needs to be operated and built step by step.

Lin Yue said frankly: "The customer groups that buy bottled products are different from those that consume in stores, and their consumption purposes are also different; secondly, the systems from product manufacturing to the entire supply chain are also very different, and they require completely different people and investment to operate."

Obviously, after about a year of investment, the development of "Snow King Loves to Drink Water" did not meet expectations, and Mixue Bingcheng had to give up the bottled water business and focus on its main business.

The industry and media generally believe that the withdrawal of "Snow King" is a good thing and is conducive to the long-term development of Mixue Ice City. Among them, Jiang Han, a senior researcher at Pangu Think Tank, believes that Mixue Ice City's cessation of bottled water business will enable it to focus more on the development of its main business and improve its operating efficiency and profitability.

In the current consumer environment, focusing on the main business is of course a rational choice, and it does help Mixue Ice City to maintain its long-term development. However, the charm and terror of the market is precisely the interweaving of rationality and emotion. In particular, Mixue Ice City is rushing for an IPO. If the listing is successful, according to the logic of the capital market, new growth and new stories will become its pursuit.

Will the restrained "Snow King" make another crazy attempt? What will be the result? Let's wait and see!

Author: Xiangma WeChat Official Account: New Retail Business Review