"Ice Cream Assassin", "Disappeared" This Summer

Speaking of "ice cream assassins", the first thing that comes to mind is "Zhong Xue Gao". As the "luxury" of the ice cream industry in the past, this summer is not going to be easy. So in order to change the status quo, what measures has the brand taken in terms of operations? In this article, the author analyzes the current situation of Zhong Xue Gao and summarizes its current operating methodology. Let's take a look.

The once "arrogant" "Hermes of the ice cream world" is not having a good time this summer.

On the one hand, the media found that 21 branches of Zhong Xuegao Food (Shanghai) Co., Ltd. have been cancelled. In terms of foreign investment, 5 of the 13 companies held by Zhong Xuegao head office have also been cancelled. On the other hand, there have been news reports recently that 5.5 million yuan of property of Zhong Xuegao-related companies was frozen or sealed by the court. More importantly, Zhong Xuegao ice cream, which once filled the freezers of convenience stores last year, is now "no longer in its glory" and its market share is declining.

Considering the recent strategy of abandoning the "Ice Cream Assassin" positioning and launching large-scale low-price promotions, Zhong Xuegao is experiencing its own "hurdle".

1. The collapse of the Internet celebrity brand

According to public information, Zhong Xue Gao started on the Tmall platform in 2018 and began to try to enter offline channels at the end of 2019. Among them, Zhong Xue Gao became famous overnight with the record of selling 20,000 "Ecuadorian Pink Diamond" ice cream at 66 yuan per stick in 15 hours on Double 11 in 2018. Since then, Zhong Xue Gao has successively launched "Xing Yu Nian" and "Li Hua Luo" products with prices ranging from 60 to more than 80 yuan, once again refreshing people's perception of the upper limit of ice cream prices.

At that time, Zhong Xuegao was just a new consumer brand that had been established for less than a year. The reason why it became popular so quickly was inseparable from its fit with the external environment and the effectiveness of its marketing strategy.

In terms of the external environment, the rise of the new consumerism wave has enabled Zhong Xue Gao to raise money and have the confidence to carry out large-scale marketing. The iiMedia Research "2018 China New Consumption Special Research Report" pointed out that China has entered a new consumption era, and users are pursuing cost-effective quality life and personalized consumption, and no longer blindly pay attention to famous brands. With the pursuit of VC, Zhong Xue Gao has won the favor of capital since its establishment, and completed a round A financing of 200 million yuan in 2021, with a valuation of 120 million US dollars.

In terms of marketing strategy, Zhong Xuegao uses the appearance of Chinese tiles, focuses on a variety of flavors with high-quality ingredients, and then invites celebrities such as Tong Liya and Zhou Yiwei to endorse the product, and conducts extensive marketing and word-of-mouth spread on platforms such as Xiaohongshu and Douyin, turning a small daily cooling drink into a high-end internet celebrity ice cream with social value.

But a public opinion crisis in 2022 caused Zhong Xue Gao to suffer a "serious loss of vitality". In June last year, a netizen tore open the plastic bag of a Zhong Xue Gao sea salt flavored ice cream and left it at room temperature of 31 degrees Celsius for an hour without melting. This note not only triggered heated discussions on the Internet, but also prompted netizens to create more "burned ice cream" content, which spread on social media platforms such as Weibo, Douyin, and Xiaohongshu, causing Zhong Xue Gao to encounter a "cold winter" during the peak sales season.

Image source: Xiaohongshu

In an interview, Lin Sheng, the founder of Zhong Xue Gao, described the defeat as "being beaten to our knees": "We were hit hard, bent over, and beaten to our knees. At the worst moment, I thought this brand might be completely killed. But at least it didn't kill you, you still survived, but surviving is equivalent to being injured, and the wound is still swelling."

Indeed, on the one hand, there were doubts about the ingredients of the product, and on the other hand, the price was far higher than the market price. In addition, the founder once said, "66 yuan ice cream, do you want it or not?", which made Zhong Xue Gao, once a top brand, experience its own "Waterloo".

2. Transforming to low prices, can 3.5 yuan ice cream solve Zhong Xue Gao’s dilemma?

In order to recover its declining performance and reputation, Zhong Xuegao began a transformation towards low prices. At the end of March this year, Zhong Xuegao held a new product launch conference in Shanghai and officially announced a new product priced at 3.5 yuan, named "Sa'saa".

Image source: Internet

According to the official introduction, the first batch of Sa'Saa products include four flavors: red bean, cocoa, milk and mung bean. They are mainly sold offline and only serve as gifts online. It is worth mentioning that after the new product was released, Zhong Xue Gao's founder Lin Sheng personally came out to promote it, which shows how much the company's senior management attaches importance to Sa'Saa.

According to Lin Sheng, the low price is not the main selling point of Sa'Saa - the integration with AI technology is. When ChatGPT became popular, Zhong Xuegao announced early that it would join Baidu's "Wenxin Yiyan" cooperation ecosystem, taking advantage of this latest hot spot. Sa'Saa is the first result of the cooperation between the two parties. From flavor research and development to the design of brand name and slogan, all are participated or led by AI.

The brand name Sa'Saa is an abbreviation of "Satisfy And Surprise Any Adventure", which roughly means "all adventures can bring surprises and satisfaction". In Lin Sheng's words, it is close to the attitude of young people who are unrestrained and bravely pursue themselves.

Obviously, this is a "precision hunt" by Zhong Xue Gao targeting young people and cost-effectiveness. Founder Lin Sheng also publicly admitted that the company had plans to explore the price range downward as early as 2019, but because "almost all ice cream factories in China have these four (flavors) signature products, which is a standard red ocean in the red ocean", more time is needed for product research and development.

However, it should be pointed out that the launch of this new product has directly joined the fierce competition in the offline market of affordable ice cream. From taste to price, Sa'Saa faces multiple challenges from affordable ice cream and established players. Looking at the entire affordable ice cream market, Wall's, Yili, Mengniu and other brands will be the main competitors of Zhong Xue Gao's new product.

According to statistics from Apex Consulting, during the peak season for ice cream sales in 2022, the top three brands in terms of sales volume, Wall's, Yili, and Mengniu, together accounted for more than 40% of the market share. However, Zhong Xue Gao's sales volume accounted for only 5.24%, which is still a big gap.

In addition, compared with these traditional brands, Zhong Xue Gao still has many deficiencies in details such as supply chain management and distribution link control. The most typical example is the supply of raw materials. Zhong Xue Gao is still blank in upstream milk resources and its own production lines. Taking Yili and Mengniu as examples, the former has nearly 1,500 self-built, under-construction and cooperative ranches, while the latter has continuously increased investment and has just invested 1.5 billion in 2022 to build 8 new ice cream production lines in Sichuan.

The disadvantages of the supply chain will further increase product costs, resulting in a decline in channel control, and ultimately leading to the weakening of Zhong Xue Gao’s cost control and risk resistance capabilities.

In fact, Zhong Xue Gao is not the only new consumer brand that wants to reshape its brand image and please consumers with low prices. Heytea, another new consumer brand, announced a price cut as early as February last year, bidding farewell to the 30 yuan beverage era. Although the cup capacity was reduced from 650ml to 500ml after the price cut, the average price reduction of about 30% still made consumers buy it.

Following Heytea, Nayuki also launched the "Relaxation" series of drinks in March last year. The entire series is priced at 9-19 yuan, but it retained some popular SKUs priced between 25-30 yuan.

Luckin Coffee, which has always been pursuing a low-price route, has become more radical in its approach. The 9.9 yuan coffee shop anniversary event launched on April 1 this year was revealed to last at least until the end of next year.

But the road to low prices is not as easy as imagined. Nayuki's "Easy" series has been online for more than a year, and the financial report has not become better. Financial report data shows that Nayuki's net loss in 2022 was 461 million yuan, nearly three times the 145 million yuan in 2021. Luckin's full-year operating profit margin was only 8.7%, while Starbucks' global operating profit margin reached 14.3% during the same period. There is no doubt that price cuts will erode profits, which is an eternal industry law.

For Zhong Xuegao, when the high-price strategy is frustrated and the low-price route is not easy to follow, what it needs to think about most is perhaps where its core competitiveness lies.

3. In a crowded ice cream market, high-priced brands need to return to their roots

In recent years, new ice cream brands have emerged one after another. Zhong Xue Gao is no longer unique and there are more and more competitors.

On the one hand, the rise of new tea drink brands has divided more consumers' attention , and there are many powerful competitors such as Mixue Ice City, which takes "freshly made ice cream" as one of its main businesses. As one grows, the other shrinks, and the ice cream brands are naturally having a hard time.

On the other hand, wine and dairy companies have also embraced ice cream and started cross-border marketing attempts .

For example, this year Wuliangye launched a wine bottle-shaped cultural and creative ice cream, which was widely circulated on social platforms. Moutai launched its own ice cream products as early as last year, and announced this year that Moutai ice cream has sold nearly 10 million cups in total.

Image source: Screenshot from social media

For these new players, the main goal is to attract more young consumer groups and their attention through high-value ice cream with multiple flavors, thereby promoting brand rejuvenation.

The entry of numerous competitors has undoubtedly made the ice cream market more and more competitive. The primary challenge facing companies like Zhong Xue Gao is how to occupy a place in the hearts of consumers and "live longer."

In fact, there has always been a view in the industry that Zhong Xue Gao’s outstanding feature is not that it dares to set high prices, but that it is so good at telling stories that can make consumers believe the rationality of high-priced ice cream.

It not only makes use of raw materials, but also relies on co-branding, joint research and development, and taking advantage of current hot topics to build itself into a high-end brand.

But now, facing the overall cooling of new consumption and the return of consumers to rationality, it is difficult to tell new stories about high-priced products. Only by returning to the essence and grasping the ever-changing user needs can the vitality of the brand be sustained. For Zhong Xuegao, the next step must be to find its core competitiveness. Marketing is ultimately just a "technique", and the "Tao" of the product is the core of the brand.

Author: Ji Nan, Source: WeChat public account: "TopKlout"