Internet celebrity ice cream for winter

Do you remember the "Ice Cream Assassin" phenomenon that went viral last year? It seems to have disappeared from our daily lives. With the disappearance of the Ice Cream Assassin, where will China's high-end ice cream brands go?

What's the way forward for high-priced ice cream?

Zhong Xue Gao, the internet-famous ice cream brand, is undergoing a major test recently.

Not long ago, on platforms such as Xiaohongshu, several users posted that Zhong Xuegao owed wages, and some users commented that Zhong Xuegao's July salary had not yet been paid. In response, Zhong Xuegao said, "The company is actively resolving the relevant disputes and operations are currently normal."

The topic of Zhong Xuegao’s unpaid wages once topped the hot search list.

As a representative of high-end domestic ice cream, Zhong Xue Gao was highly sought after by investors and consumers in its early years. Its success lies in its keen grasp of the new consumer group's pursuit of health and taste, upgrading and iterating traditional ice cream, and successfully catching the express train of new consumer investment, quickly becoming popular.

At the same time, Zhong Xuegao has had a catfish effect on the domestic ice cream industry, stimulating many domestic brands to actively engage in product innovation.

However, in recent years, with the fermentation of the Zhong Xue Gao ice cream "not melting in the sun" and "not melting in the oven", consumers have been arguing about the high price and quality of its products. Internet celebrity ice cream has also been dubbed the "ice cream assassin". Combined with the current wage arrears controversy, Zhong Xue Gao's situation has become even more embarrassing.

Taking advantage of this wave of discussion, this article attempts to explain what are the subjective and objective factors behind Zhong Xue Gao's experience? What is the existence of high-priced ice cream in the Chinese market? Does Zhong Xue Gao's setback in development mean that the market does not need high-priced ice cream?

1. Internet celebrity ice cream goes from "hot" to "cool"

Zhong Xue Gao can be regarded as an explorer and pioneer of domestic mid-to-high-end ice cream.

In the first three years of its establishment, Zhong Xue Gao's approach has been effective. After all, it took only a few months for Zhong Xue Gao to become an Internet celebrity brand from its birth, and it took only two or three years from its emergence to the peak of sales.

Founded in 2018, Zhong Xue Gao’s name means Chinese people’s own ice cream. The shape of the product draws on the shape of Chinese tiles. The price is set at more than ten yuan per stick, and it once became the "Hermes" of domestic ice cream.

Lin Sheng, the founder of Zhong Xue Gao, is a senior advertising professional who is good at brand marketing. Zhong Xue Gao has been popular almost all the time since its debut. During the "Double 11" period in 2018, it became popular with an "Ecuadorian Pink Diamond" ice cream that was sold for only one day and sold for 66 yuan per stick. However, most of Zhong Xue Gao's ice creams are priced at around 15 yuan.

At the beginning of its establishment, Zhong Xue Gao took the path of online sales. Public data shows that in 2019, Zhong Xue Gao's sales exceeded 100 million yuan. From May 2021 to May 2022, Zhong Xue Gao's revenue reached 800 million yuan, with a total of 150 million units sold, a year-on-year increase of 176%. It has repeatedly ranked first in the 618 and "Double 11" ice sales lists of major e-commerce platforms.

Around 2020, Zhong Xue Gao made a big push into offline sales. Many users accidentally chose this beautifully packaged brand of ice cream, only to find out at checkout that the price was very high. At this time, the impression that Zhong Xue Gao was "expensive" began to spread widely.

What caused Zhong Xuegao's reputation to plummet was the "ice cream that doesn't melt" incident in June 2022. At that time, some netizens found that Zhong Xuegao "didn't melt" or "didn't melt" in the sun. Some people questioned whether it was because it contained too many additives. Zhong Xuegao responded that the product used a very small amount of food emulsifiers and thickeners, which were added in strict accordance with relevant national standards and could be eaten with confidence. It was not scientific to judge the quality of ice cream by baking, drying or heating it.

Although Zhong Xue Gao's response and the interpretation of industry insiders all believe that there is no problem with the product, netizens still do not buy it. The high price and questionable quality have made Zhong Xue Gao completely bear the title of "Ice Cream Assassin".

Source/ Visual China

After that, Zhong Xue Gao's sales volume declined. In 2022, Zhong Xue Gao's compound annual growth rate dropped to 50%, while this figure was above 100% in the previous three years.

In the first half of this year, Zhong Xuegao's mid-to-high-end path seemed to be shaken.

In March 2023, Zhong Xue Gao launched a new product, "Sa'Saa" ice cream, which was priced at 3.5 yuan, and was only sold offline. The gimmick was that the product was designed and developed by AI. But at this time, the brand had been damaged, and the affordable ice cream did not help Zhong Xue Gao bring much performance recovery.

During the Tmall 6.18 event this year, Zhong Xuegao failed to make it into the top 10 of the fresh food store sales and popularity lists. Prior to this, Zhong Xuegao had been ranked first in the Tmall ice cream category on 6.18 for three consecutive years.

According to Douyin's second quarter 2023 brand best-selling list (ice cream TOP10), Zhong Xue Gao's market share is 3.99%, far behind brands such as Cornetto, Yili, and Chocolatier. During last year's 6.18 promotion, Zhong Xue Gao was the number one ice cream brand in Douyin's self-broadcast sales. It took only a little over a year for the brand to go from being very popular to fading.

In addition, this summer, many people found that Zhong Xue Gao's high-priced products were also quietly reduced in price. The supermarket's Zhong Xue Gao, which was originally 15 yuan per piece, launched a buy-one-get-one-free promotion, and some supermarkets directly promoted it at 6.6 yuan per piece or 4.9 yuan per piece. Many offline supermarket convenience store owners also reported that Zhong Xue Gao was "not selling well."

With its damaged reputation and sluggish sales, and recently an incident of unpaid wages, Zhong Xue Gao is now in a turbulent period.

It seems that new ice cream consumer brands represented by Zhong Xue Gao have a loud voice. However, the pattern of China's ice cream/ice cream market has not changed for many years.

According to the "China Ice Cream/Snow Cream Industry Trend Report (2022 Edition)", the offline ice cream market share of Yili, Wall's, Mengniu, and Nestle reached 19%, 15%, 9%, and 8%, respectively, totaling 51%. In addition, companies such as Deshi, Hongbaolai, Tianqi, Baxi, and Guangming have used their respective regional advantages to form strong regional brands. New brands such as Zhong Xuegao, Zhongjie 1946, Madiel, and Northeast Daban are considered representative brands of online consumption.

There is no accurate data on Zhong Xue Gao's market share at present, but according to statistics from Apex Consulting, during the peak season of ice cream sales in 2022, the top three brands in terms of sales volume, Wall's, Yili, and Mengniu, accounted for more than 40% of the market share, and Zhong Xue Gao's sales volume accounted for 5.24%. This data can reflect the market situation of Zhong Xue Gao to a certain extent.

Although the marketing is booming, the actual market share is still limited. Once reputation and image problems arise, it may even directly trigger a crisis. This is Zhong Xuegao’s current dilemma.

2. Why did high-end ice cream suffer setbacks?

Is it that high-end ice cream is no longer selling well in the country, or is there something wrong with Zhong Xue Gao’s own business strategy?

Yang Jin, a senior ice cream industry practitioner, believes that the "emotional problems" faced by Zhong Xue Gao are greater than "product problems" . Netizens are more likely to vent their emotions and not evaluate them based on food safety standards, cost conditions, etc. This is not objective. "Of course, this brand itself is a product of the Internet era. The Internet is a double-edged sword. It enjoys the advantages of the Internet, but also suffers from its disadvantages."

Ye Meng, an investor who has been paying attention to consumption for a long time, analyzed to "Focus" that the price issue of Zhong Xue Gao has some contradictions between the brand and users. In her opinion, on the brand side, although Zhong Xue Gao focuses on online, its cost structure includes marketing investment costs and cold chain logistics costs. A lot of costs are spent on letting people know about it and get the products quickly, so it must be sold at a higher price. However, the only cost visible to consumers is the raw materials, and many people are unwilling and unaware that they should pay for the brand's operating costs.

"I think it may not be a mature time to sell ice cream online. Companies need to incur high costs, but after passing the costs on to consumers, they may not be willing to pay for them. In fact, a cup of milk tea is also priced at this price. When users talk about whether it is expensive or not, they are actually talking about whether it is worth it. The taste of many ice creams is not inferior to that of Zhong Xue Gao. After comparison, consumers will think it is not worth it." Ye Meng said.

So in her opinion, if a brand wants to do something that subverts the industry, it needs to optimize its supply chain and management, rather than letting consumers accept high costs. It is still difficult for a new brand to dare to challenge the industry with price.

Entering the offline market is also a major approach for Zhong Xue Gao, but Ye Meng believes that due to pricing issues, Zhong Xue Gao has very limited effective offline channels. Even if it enters the terminal, it may only have decent sales in convenience stores. Most consumers may not choose to buy from some small mom-and-pop stores and supermarkets in the sinking market.

In recent years, consumers have been pursuing cost-effectiveness, which has also had a certain impact on the sales of mid-to-high-end products. While Ice Cream Assassin and 79-yuan eyebrow pencils were criticized, the trend of affordable products is rising. Heytea and Nayuki's Tea have launched affordable products, Luckin Coffee and Kudi Coffee's 9.9-yuan coffee has gained a large number of supporters, and old affordable domestic products such as Vitality 28 have attracted attention.

Nowadays, the concept of super-high consumption and excessive consumption is becoming less and less popular. Consumers who were willing to pay for fun and innovative things in previous years have become more savvy and calm now, and are more inclined to buy happiness at a lower cost rather than paying excessive brand premiums.

Source/ Visual China

This summer, the ice cream assassin has almost disappeared. According to Food Talks data, the best-selling list of ice cream/ice cream in central China in the second quarter of 2023 shows that the products with better sales this year are all concentrated in the price range of 3-5 yuan. Even on major social platforms, a new term called "ice cream Bodhisattva" has appeared, referring to some cheap and delicious affordable ice creams, such as small puddings and Want Want crushed ice.

In addition, the ice cream category itself has limitations, with obvious seasonality, regionality, and substitutability. Many traditional ice cream companies also have beverages or other consumer product lines, which can achieve business complementarity. Zhong Xuegao has also tried quick-frozen dumplings, but the response was average. At the same time, because ice cream has a short delivery radius and high delivery costs, many regional brands can survive well by cultivating one or two provinces. They are obviously regional, and it is not easy to enter such regions. In terms of substitutes, milk tea, coffee, cones, etc. may replace ice cream.

In addition, Zhong Xue Gao's several crisis public relations were not handled well, which had a certain impact on the brand image. "The last thing a high-end brand should have is an arrogant image. A brand is not defined by itself, nor by high prices, but by consumers' recognition through repeated products and years of hard work . If consumers do not recognize the value of a brand, it will become invalid," said Ye Meng.

The last factor is that capital can make or break a brand. Ye Meng mentioned that many new consumer brands have had a lack of stamina in recent years. One reason on the capital side is that when investing in Internet companies in 2014-2015, capital quickly earned excess returns, and then institutions began to use similar logic to invest in new consumption.

She recalled: "When consumer investment was particularly hot, some institutions offered high prices and increased valuations in order to grab projects. Few founders could calmly think about whether their growth and valuation matched. After accepting capital, growth became a sword hanging over their heads, and they had to pay a greater price for it, such as the pressure of scale and income. Under this premise, many brand actions would be distorted."

In fact, Ye Meng believes that consumer brands should not pursue explosive power like Internet companies, but need the endurance of continuous rolling growth. Therefore, the problems of many consumer brands today are also caused by the excessive capital bubble in the past. Many brands grab traffic at all costs, but then there is no repurchase, and the performance can only gradually decline.

3. Does the market still need high-priced ice cream?

Not only is the popularity of internet-famous ice cream declining, the entire mid-to-high-end ice cream market is also facing challenges.

The net profit of Allergy, the company that owns the ice cream brand "Baxi", has been lower than expected in the past three years. In 2022, Allergy's revenue and net profit were 1.481 billion yuan and 125 million yuan respectively. The sales revenue has basically not increased compared with three years ago, and the net profit has not increased significantly.

Unilever, which owns brands such as Wall's, Cornetto, and Magnum, has not performed very well in the ice cream business. In 2022, Unilever's ice cream business sales were 7.9 billion euros, a year-on-year increase of 9%, but sales fell by 0.7%. In the first half of this year, Unilever's ice cream business basic sales increased by 5.7% and sales fell by 5.2%. Unilever explained that home ice cream sales continued to decline in the first half of the year because the non-essential attributes of the ice cream category led to lower consumption in an inflationary environment.

Objectively speaking, for many years, relatively high-priced products in the ice cream industry have been mainly in the hands of foreign brands such as Magnum and Cornetto. The emergence of Zhong Xue Gao has brought some positive impacts to Chinese ice cream brands.

Yang Jin pointed out that the greatest value of Zhong Xue Gao to the industry is that it has made more people understand and know about mid- to high-end ice cream, and has set the price of individual products. At the same time, it has stimulated innovation and competition among relatively aging and traditional domestic brands, bringing about the rapid growth of the entire Chinese ice cream industry in recent years.

"In the past, an ice cream brand might only launch three or four new products a year, but now they launch more than ten. As market acceptance increases, companies are willing to take the initiative and invest in raw materials and creativity, because costs and prices support people to try. Now the ice cream market has more and more variety," he said.

Today, Zhong Xuegao’s exploration has encountered some difficulties. Does this mean that the path of domestic high-end ice cream is no longer feasible?

Many practitioners believe that the market still needs high-end ice cream. In recent years, the direction of Chinese manufacturing has not changed, and it has been developing in the direction of high prices, high quality, high services, and high emotional value. Chinese products have gone from low prices to a stage where product creativity, design, and quality have been comprehensively improved. The ice cream industry may have some problems for the time being, but the overall direction will not change.

Consumption itself is stratified. When the domestic mid-to-high-end ice cream market was relatively blank, some companies actively explored it. However, due to industry reasons, the company's own business deviations, and capital reasons, some difficulties temporarily occurred. However, this does not mean that the exploration of domestic high-end ice cream has failed, nor does it mean that high-end ice cream has no market in China.

Although the emotional value brought by some Internet celebrity ice creams in the past few years has been hyped up too much and everyone is tired of it, it is normal for there to be normal fluctuations and declines now, but there are always consumers whose needs are not met. Since there is room for high-end foreign brands such as Haagen-Dazs to survive in the market, there is also room for domestic high-end brands to play a role.

In Yang Jin's view, the virtuous cycle of the ice cream industry should be that everyone recognizes that there are affordable, mid-range and high-end products on the market, which meet the needs of different groups of people. If the price range no longer exists, the industry will return to the era of low prices, which will be a big blow to companies and consumers will also be hurt, because practitioners will have no motivation to make products that are more suitable for different groups of people.

Zhu Danpeng, a food industry expert, mentioned that the overall consumption dividend of mid-to-high-end ice cream in China is constantly expanding. In the past, people only ate ice cream in the summer, but now it is almost eaten all year round. As consumption upgrades and the dividends of the growing young groups continue to accumulate, the entire ice cream market has entered a stage of rapid growth and expansion.

However, starting a business in an industry with relatively low barriers to entry is not easy. Although the market is large enough, practitioners should also know that the middle and high-end may be a niche group. To earn money from the middle and high-end group, on the one hand, they have to pay high costs, and on the other hand, they have to accept that the scale of the high-end market may be smaller than the affordable market.

In this situation, what should companies do?

According to practitioners, the core competitiveness of the ice cream industry is still product innovation. At the same time, in today's era, we must consciously make products that are easy to spread. Product strength is the foundation of everything. In addition, for consumer products, the Internet is a great advantage. For example, if you make ice cream fun and suitable for checking in, and make good use of platforms such as Douyin and Xiaohongshu, you can get twice the result with half the effort in terms of dissemination.

For example, in the past two years, the cultural and creative ice creams in many scenic spots did not provide more flavor value themselves, but they provided communication value, emotional value and social value, and should also be recognized.

Ye Meng believes that new consumer brands and traditional brands should learn from each other. Some traditional enterprises and regional consumer brands have solid product and channel capabilities, but they can neither explain concepts nor do marketing. They should learn how to interact with consumers and understand their demands. At the same time, entrepreneurs in new consumption, because of the traffic dividend, it is too easy to become famous. They need to learn how to calm down and study the supply chain and organizational management to bring the greatest value at the lowest cost.

Author: Tang Yahua

WeChat public account: Dingjiao (ID: dingjiaoone)