The seven major internet celebrity industries in 2022: Who wins and who fails?

2022 is a special year for many industries, especially the consumer industry. Tea, camping, beauty and other tracks will have major events in 2022. The author of this article combines popularity and scenarios, selects seven industries in the three major sections of "eating and drinking", "entertainment" and "self-pleasure", and outlines the new trends in the Chinese consumer market. Let's take a look.

The new year is coming, how is your industry?

2022 is a special year for too many industries, especially the consumer industry. In the third year of the epidemic, the turmoil, adjustments, and opportunities in the consumer market have led to more stories of struggle, exploration, and madness than in previous years.

Rich bosses and their counterparts have created more unicorns, while cautious capital is on the sidelines, waiting for the "bottom price", causing some consumer projects to be unaffordable and some valuations to hit rock bottom.

What the three-year epidemic cannot change is that consumption is still the eternal theme of the Chinese market. As an important branch of the new economy in recent years, new consumption has and is still producing the most Internet celebrity tracks. Tea, coffee, pre-prepared meals, frisbees, camping, home fitness and beauty products are all major events in 2022. Among them, some are evergreen tracks with enduring popularity, some have long been in the red ocean of competition and have been reheated, and some are still immature markets that have been pushed to the forefront before they are ready.

As 2023 is approaching, it is necessary for practitioners to take a look at what changes have taken place in the industry in the past year before embarking on a new journey. Combining popularity and scenarios, we selected seven industries in the three major sectors of "eating and drinking", "entertainment", and "self-pleasure", from which we roughly outlined the new trends in the Chinese consumer market.

01 “Eat and Drink”

1. Tea drinks: Direct sales become franchises, high-end products “take” the mid-range

In 2022, many major industry events occurred in the new tea beverage industry: Mixue Bingcheng attempted IPO, Heytea opened up for franchising, Nayuki acquired Lelecha, Shuyi Herbal Jelly and Ningji entered the ranks of unicorns.

Behind this is a microcosm of the tea beverage industry - the head effect is more prominent, the presence of mid-range market players is getting stronger, and high-end brands are "enclosing territory" through franchising or acquisitions.

The three-year-long epidemic has dealt a heavy blow to high-end tea drinks. In the first half of 2022, Nayuki's revenue declined for the first time since its listing, and its performance turned from profit to loss. According to the information in Jiuqian's mid-term minutes, Heytea's revenue in the first three quarters of 2022 fell by more than 20% year-on-year.

High-end brands began to lean over to grab market share in the mid- and low-end markets. Heytea took the lead in reducing prices by 5 to 7 yuan at the beginning of the year, followed by Nayuki and Lelecha. However, the benefits they gained were different. Ling Han, an investor close to Heytea, told Shenran that this led to a decline in Heytea's gross profit. Nayuki faced a slightly better situation because its supply chain capabilities and automation level improved after its listing, which did not affect its overall profitability.

Two more unicorns emerged in the industry. In the first quarter of 2022, Shuyi Shaoxiancao and Ningji received 600 million yuan and several hundred million yuan in financing respectively. The most eye-catching one is Mixue Bingcheng, which has only one round of financing in its 24 years of establishment: it does not rely on itself to expand but on 22,000 franchise stores, and makes money not by selling milk tea but by the supply chain. The prospectus shows that its net profit attributable to shareholders in 2021 reached 1.91 billion yuan, and its profit level is much better than that of catering companies.

Faced with an increasingly competitive market and pressure on investors for financial returns, Heytea and Nayuki have different approaches to dealing with the situation.

In December 2022, after 10 years of adhering to the direct sales model, Heytea opened up for franchising. Ling Han said that for Heytea, which is preparing for an IPO, this is a "quick-acting medicine" to seize markets outside high-tier cities and ease financial pressure.

Ji Yao from Liaoning was one of the first to apply to join Heytea and just passed the interview. She and many franchisees have a common question about Heytea: how much influence can it retain in second-tier and lower-tier markets compared to first-tier cities? Heytea is not as experienced as Guming and other franchise-based brands in franchise management, so will the first batch of franchisees mean that they will have to follow Heytea into pitfalls?

Nayuki chose to spend 525 million yuan to acquire 43.64% of Lelecha's shares, becoming its largest shareholder. According to the interview minutes of Jiuqian Zhongtai, Nayuki's primary goal is to obtain financial returns, and then expect Lelecha to go public independently or sell its shares; the secondary goal is to optimize the competitive environment and reduce the company's pressure on store expansion and operation.

Li Jiaming, an investor from Hangzhou Xindebao Venture Capital, summarized to Shenran that lowering unit prices and opening up franchising indicate that brands like Heytea are currently experiencing sluggish growth in high-end markets and are in urgent need of finding growth through lower-end markets. On the contrary, Mixue Bingcheng, which grew out of lower-end markets, is a good business expansion model. Nayuki's acquisition of Lelecha and Heytea's investment in coffee brand Minority are signs that tea brands are gradually starting to open up a matrix war, and industry competition will become more intense.

2. Coffee: Veterans "sink" to fight fiercely, and newcomers cross over to enter the market

From 2020 to 2021, the amount of hot money pouring into the coffee sector was less than that of tea drinks. In 2022, the chill conveyed to coffee brands by the primary market was even stronger than that of tea drinks.

Although instant coffee has been introduced to the market faster due to the onlineization of the epidemic, the latest round of financing for Santonban, Sumida River Coffee, etc. has also stagnated in 2021. Among the freshly ground coffee brands, Manner, M stand, and Nova Coffee's last round of financing is still in 2021. Only Seesaw announced in February that it had received hundreds of millions of yuan in new financing.

Chen Li, an investor who focuses on alcoholic beverages , no longer pays attention to early-stage projects of freshly ground coffee. He only considers investing in star projects . Even for star projects, large institutions are very cautious and are watching the price.

Compared with the tea drinkers who are becoming more and more similar, the coffee drinkers are becoming more and more competitive due to the differentiation of demand. Chen Li concluded that the three major demands of cost-effectiveness, scene and quality, from low to high price range, correspond to Luckin Coffee, Manner, Starbucks, Tims Coffee, Seesaw and % Coffee.

In the consumption environment of 2022, the "cost-effectiveness" of low unit price and fast consumption has won the "space scene" . The performance of Luckin Coffee and Starbucks, the representative players of the two models, is the most direct proof. Luckin Coffee began to make profits, with a net profit of 435 million yuan in the first three quarters of 2022. Starbucks China's revenue has plummeted for several consecutive quarters.

In essence, coffee is moving from scenes to products, and from business to daily life. In Li Jiaming's view, the scenes provided by foreign brands such as Starbucks used to have social and spatial premiums, but they have "failed" today when offline businesses are abundant. Luckin Coffee and Manner's "fast coffee" better meet the needs of consumers and achieve higher single-store efficiency.

Chen Li summarized Luckin's strategy as: coffee products are transformed into beverages, channels are penetrating downward from high-tier cities, communities are operated in a refined manner, and product research and development, store site selection, and marketing are all digitized.

However, after surviving the wave of store closures during the epidemic, Luckin's next challenge is to maintain sustained growth in revenue and users. New players continue to enter the Chinese coffee market, and coffee is a business of regional competition, so different strategies need to be adopted in different regions. In 2022, Luckin restarted franchising in early December, which was a means of accelerating store expansion after experiencing the pain of the epidemic; and Lucky Coffee, a brand under Mixue Ice City and priced at 7-10 yuan, opened 800 new stores using the franchise model.

Li Jiaming made a comparative analysis and found that the competition in the coffee market has just begun, and the competition stage is equivalent to that of new tea drinks 5-6 years ago. New coffee players have to face competition from overseas brands such as Tims and Peet's Coffee, as well as the eagerness of traditional industry giants such as China Post, Sinopec, Tong Ren Tang, and Li Ning, and the accelerated expansion of local new brands.

3. Pre-prepared meals: insufficient market education, waiting another three years before joining

Pre-prepared meals are considered to be the first "big meal" in the capital market in the past year. The landmark event was the advocacy of celebrating the Spring Festival in 2022. The New Year's Eve dinner scene and the development of cold chain logistics attracted more C-end users to try it.

Chang An, an investor who has had contact with multiple pre-prepared meal projects, recalled that in 2021, pre-prepared meals had a relatively high investment priority within institutions, and by 2022 it was on par with fields such as carbon neutrality and the metaverse.

The reason why capital is optimistic about pre-prepared meals is "mainly because of the efficiency improvement and cost optimization brought by pre-prepared meals under the trend of B-end restaurant chainization, as well as the natural consumer education completed during the epidemic, which has promoted the development of the C-end pre-prepared meal market three to five years earlier ," concluded He Wenjie, President of the Central China Region of Beijing Canglang Fund.

In the past, players only served the B-end, with profits being squeezed too low, and there were no national brands that truly served the C-end.

When Weizhixiang, the "first stock of professional pre-prepared food", was listed on the A-share market in April 2021, the investment and financing of pre-prepared food in the primary market also peaked. Entering 2022, many places have issued relevant industry standards, and the popularity of pre-prepared food, which had bid farewell to the barbaric growth, has re-emerged : Zhenwei Xiaomeiyuan and Xunweishi have both received a new round of financing, and Anjing Food, Guolian Aquatic Products, SF Express, and JD.com have increased their investment. At the same time, Anjing Food and Guolian Aquatic Products also represent Chinese pre-prepared food and seize the overseas market.

The biggest players are the two serial entrepreneurs Lu Zhengyao and Luo Min. However, the franchise model of their projects "A Bite of China" and "Qudian" pre-prepared meals has not convinced the market.

Changan is optimistic about the franchise model of pre-prepared meals in the long term, but the time to expand the franchise model has not yet arrived, and it will take another two to three years . He Wenjie also believes that there are many factors that affect the penetration of pre-prepared meals into the C-end. In addition to improving the taste restoration and penetrating more scenarios, pre-prepared meals must also be linked to health and safety.

This is also the reason why most C-end pre-prepared meals choose to "encircle" a single channel . One group focuses on online channels, while the other group seizes offline channels. Cautious capital prefers the former. Lin Zhiyong, a senior entrepreneur in the field of pre-prepared meals and chairman of Frozen Products Online & Sancan Youliao, analyzed that online brands make up for the lack of density with breadth, and they can start to grow faster and enter the capital field faster. However, online is limited by traffic and fulfillment costs, and the ceiling is low. Once mature, they will also expand to offline. Brands that focus on offline channels are usually still in the stage of "leading the way" with mature formats (supermarkets, vegetable markets, new retail channels, etc.), and will open their own offline stores one or two years later.

In the 2021 pre-prepared food market, which is close to 500 billion, the scale ratio of C-end to B-end is 2:8, and the top three companies, such as Anjing Food and Weizhixiang, have a market share of less than 2%. Who can capture a larger market in the "big industry, small company" pre-prepared food is what capital values ​​most. Changan is optimistic about C-end companies with B-end backgrounds, because in the field of food industry, companies that grasp the production profits or channel profits of the B-end have more development opportunities.

02 “Fun”

1. Frisbee: The industry is too immature and investors are not interested

Under the epidemic, more and more people are eager to leave the ceiling indoors for health and social needs, and new urban outdoor sports are emerging. In the summer of 2022, Frisbee suddenly became popular. It is highly social, low-threshold, weakly confrontational, and very film-producing, which meets the needs of the middle class in first- and second-tier cities, especially novices and women, for outdoor sports.

Wang Yipeng, who has been playing the game for 6 years, is the first player from mainland China to be selected for the American Professional Ultimate Frisbee League and one of the organizers of Beijing's first ultimate Frisbee organization BUC. He recalled to Shenran that in 2020, only 20 to 30 people signed up for each event. Since the late spring and early summer of 2021, the number of registrants has skyrocketed. According to survey data from the National Frisbee Promotion Committee, there were about 500,000 players participating in the sport of frisbee in 2021, and it will grow exponentially in 2022.

The Frisbee market really heated up in the first half of 2022. The rapidly increasing number of Frisbee clubs in first- and second-tier cities first heated up the market . A club in Shanghai, which was established in May 2022, attracted more than 500 members in just one month. The number of clubs in Shenzhen and Beijing has increased from a few a year ago to dozens and hundreds.

In the second half of the year, the first China Frisbee League was held, and ultimate Frisbee was officially included in the compulsory education curriculum as an emerging sport, and the popularity of Frisbee continued. According to iMedia Research, the core industry scale of Frisbee has increased from 36 million in 2019 to 76 million in 2021, and will reach 232 million in 2022.

Frisbee equipment manufacturers, venue operators, Frisbee clubs, and Frisbee teaching in the industry chain all benefited from it. However, manufacturers are scattered, venue operation models are too heavy, and teaching scales are smaller. The remaining most lively Frisbee clubs are still a long way from large-scale commercialization.

Qingqingzi, a practitioner who conducted the research, told Shenran that the biggest problem is that because the overall output value is low, stakeholders get caught up in interest disputes too early; the long-tail effect is insufficient, and new customers need to be attracted to promote activation.

At present, most clubs cannot earn money from tournament sponsorship and advertising fees, and rely solely on membership entrance fees. Each frisbee event organizes 20-50 people, and charges 50-200 yuan per person. After deducting the venue fee, coaching fee, water fee and the cost of attracting new members, it is a state of micro-profit. Only by ensuring the number and stickiness of members can the income increase steadily.

But it is more difficult to attract new players to Frisbee than to camp. Qingqingzi analyzed that Frisbee players are mostly played by individuals or with one or two friends, while camping is generally a gathering of one or more families. Another reason is that before Frisbee events and bases were formed, the industry was basically operated by small clubs . Shen Ge, the head of Beijing Huddler Comprehensive Training Center, explained that due to the strong community nature, low organizational threshold, and transparent costs, it is not easy for Frisbee clubs to "eat the small". Instead, it is easier for the "big" to split into several "small" clubs, and the repurchase rate and scale are not easy to ensure.

The sport of disc frisbee is also subject to seasonal restrictions, and business is affected in winter and rainy seasons. For example, at the end of 2022, practitioners in the north are waiting for the spring of next year, and practitioners in areas severely affected by the epidemic are waiting for the recovery of COVID-19 patients. The disc frisbee activities at the Shen Ge Training Center have been stagnant since the end of October. Considering that strenuous exercise is not recommended within one month after being infected with the COVID-19, the real recovery of the market may have to wait until the beginning of spring 2023.

An outdoor sports enthusiast in the investment circle joked, "For Frisbee, we only play but don't invest." Shen Ge also said that it is unwise for capital to enter the Frisbee industry now because it is too immature and will take at least two to three years to mature.

2. Camping: Equipment is high-end, but campsites are difficult to make a profit

The outdoor consumption trend in the past year has not only made ultimate Frisbee popular, but also blown to exquisite camping. In contrast to the sharp decline in the tourism market due to the epidemic, camping, which became popular in early 2020, has a market size of 100 billion by 2022, and the "camping +" model (camping + Frisbee/paddle board, camping + parent-child/team building, etc.) has become more popular.

The investment opportunities in the camping industry are considered to be far greater than those in frisbees. First, some individual investors, such as those in homestays, cultural tourism, and even catering, entered the camping industry. While the share prices of "camping stocks" such as Mugodi rose in the secondary market, institutional investors also made intensive moves in the primary market.

Let’s first look at equipment companies. For example , Mogod has accelerated its efforts to seize the local C-end market and increase its price range during the window period of weakening external demand and the domestic camping trend . Lin Ke, an investment manager who focuses on the outdoor track, analyzed that although domestic equipment brands have the support of China’s strong supply chain, the outdoor industry started late in China, and the brand power is not enough to support its abandonment of export OEM business. Therefore, although the “Krypton Gold” attribute of domestic camping equipment is prominent, the high-end market was once monopolized by overseas brands such as Snow Peak and Nordisk.

In contrast, Lin Ke is optimistic about investment opportunities in camping sub-sectors such as campsites. He shared a set of data: after the epidemic, the number of campsites has surged, with 7,000 to 8,000 new ones added in 2022.

Some common points can also be seen from the projects invested in the primary market: most of them are related to camping sites, the companies have been established for a short time, and the financing rounds are concentrated in the angel round.

The camping industry is still in its early stages of development, and many investors are taking a wait-and-see attitude towards heavily operated campsites. Campsites charge between 200 and 1,000 yuan per person, but because of intensified competition in the industry, even the top players don't make much money. Take the domestic chain camping operator Dare Wilderness as an example. According to a Huaxi Securities research report, it was established less than a year ago, and its revenue from January to October 2021 reached 10 million yuan (10.96 million yuan), but its net profit was 102,100 yuan and its net profit margin was only 1%.

The biggest uncertainty lies in the sustainability of camping consumption.

The best seasons for camping are spring and autumn. "Currently, due to the dual impact of the epidemic and the weather, the popularity of camping is at a low level," said Zhang Yi, CEO of Guangyuan Camping, a camping brand covering the Jiangsu, Zhejiang and Shanghai regions, and she expects that there will be signs of warming up next spring.

Long-distance travel is recovering simultaneously. As an important carrier of short-distance travel, how much demand is left for camping? The management and services of different campsites vary, and there is still room for improvement in industry supervision. Will this slow down the overall development of the industry?

The "store-in-store" model of camping sites (adding camping sections to existing business formats such as hotels and resorts) is therefore more promising. A camping site practitioner analyzed that under this model, the stability of service and experience, as well as the control of operating costs, are more guaranteed. Currently, many listed companies are making such attempts, and camping sites will also accelerate into a reshuffle period.

03 “Pleasure Yourself”

1. Home fitness: Liu Genghong phenomenon is short-lived, and the popularity of smart fitness mirrors has completely died down

Catalysed by the epidemic, the fitness industry continues to penetrate online. As more people focus on controlling their body shape and improving their physical condition by "staying at home to exercise", 2022 will be the year when home fitness flourishes.

The once popular Liu Genghong phenomenon has driven a large number of novice users to take their first fitness lesson. Content platforms such as Douyin, Kuaishou, and Bilibili have taken over the traffic and increased their investment in fitness.

Keep, China's largest fitness platform, is preparing for an IPO in February 2022. At this time, people suddenly realized that Keep's rivals, such as Gudong and Leke, have joined the "Hundred Mirrors War" in the face of a saturated market.

First, Lululemon acquired Mirror, and then FITURE Magic Mirror was promoted to an industry unicorn. The fitness mirror was once the biggest "dark horse" in the domestic and international fitness industry.

However, the popularity of home fitness, which has been spreading in many places, has clearly cooled down in 2022.

After Liu Genghong, the trend of following bloggers to exercise quickly passed. Li Chao, a sports and fitness entrepreneur, analyzed that due to the homogeneity and lack of advanced content, many fitness novices quit the live broadcast room, and deep users chose to return to the gym after the epidemic recovered.

Keep's listing has not yet been finalized. As the submitted IPO application has expired, it will update its prospectus in September 2022. Keep's user base and live class content are in a leading position in the industry, but the accumulated losses of 6 billion yuan and the losses caused by the large amount of marketing expenses before the IPO have led to its customer acquisition efficiency and profitability being not optimistic.

Fitness mirrors have also become a short-lived product, with only sporadic financing information and negative news such as FITURE's layoffs and Mirror's declining sales. Fitness mirrors from LITTA and Gudong FITMORE are no longer found in the official stores of mainstream e-commerce platforms.

The top-selling products on the current e-commerce platform are Tiantian smart mirror and FITURE. An investor close to FITURE revealed that the team overestimated the fitness habits and exercise foundation of Chinese people. FITURE fitness mirror did not achieve its sales target in 2021. Spending thousands of yuan to buy a fitness screen is only suitable for a small number of people with strong purchasing power and who have developed the habit of exercising at home.

Ultimately, the Liu Genghong phenomenon is unlikely to bring about substantial changes to the industry, and there is still a long way to go to popularize home fitness.

2. Cosmetics: The race to go public begins, and Chinese brands go global in droves

In 2022, the beauty and cosmetics track in the primary market will not be as hot as in 2021. However, in the secondary market, a group of companies have flocked in to compete for the "first stock" in the vertical segments. In overseas markets, domestic beauty and cosmetics continue to expand their territory.

Shanghai is the most active city for beauty investment in China. Zhou Yinan, a partner of an early-stage investment institution in Shenzhen, has traveled back and forth between Shanghai and Shenzhen many times. She looked at many projects, but was extremely cautious. In the end, she only invested in a "not expensive" project because she had no money and no confidence. As optional consumption, cosmetics and skin care were greatly affected by the epidemic. Coupled with the absence of super-headline anchors, beauty consumption was weak throughout the year.

This year, there are especially many cosmetics-related companies lining up for IPOs . After Huaxi Bio (which owns Runbaiyan, Quadi, etc.) and Beitanni (main brand Winona) went public in 2019 and 2021 respectively, in 2022, Juzi Bio, Shangmei Co., Ltd., and Wanmei Interactive successively became the "first recombinant collagen stock", "the first Hong Kong-listed domestic beauty stock", and "the first global beauty fashion technology stock". Fulijia, which is fighting for IPO again, is competing for the "first medical dressing stock", and Chuanger Bio is sprinting for the "first medical device stock".

As capital shifts upstream and the highest single investment of US$200 million in 2022 occurs in the beauty and cosmetics store HARMAY, it proves the maturity of the domestic beauty and cosmetics industry chain: "From serving foreign trade customers in the past, it has evolved to be mature and complete enough," said Chen Xixi, a senior practitioner in the skin care field.

Another trend in the beauty industry in 2022 is that Chinese beauty brands are accelerating their pace to conquer overseas markets. In fact, as early as 2019 and 2020, facing the continuous decline of domestic channels and traffic dividends, a group of brands began to "hunt" in the vast overseas market. In 2022, the spark of going overseas has developed into a prairie fire . In terms of territory, from the "outposts" of Southeast Asia and Japan, to the European and American markets; in terms of channels, from e-commerce to self-built official websites, to offline stores; in terms of promotion, make good use of overseas influencer marketing and beauty teaching. For example, Hua Xizi became popular on Youtube because it was evaluated by the top foreign beauty blogger "J Sister".

At the beginning of 2022, Zhang Tong joined the overseas business department of a leading cosmetics company. He told Shenran that within the company, the strategic position of going overseas is second only to domestic offline stores, and the company hopes to achieve a scale of 300 million in the overseas market in 2022.

In actual implementation, he still felt the great challenges of Chinese cosmetics going overseas. Problems related to local e-commerce infrastructure and localized team building can be gradually adapted and solved, but it is not easy to change the brand perception of only "high cost performance". For example, in the European market, in order to maintain a more credible brand image, the brand must integrate the local supply chain, which requires frequent response to shortages and price increases.

In 2022, skin care and makeup are evenly matched. The leading functional skin care brands are gradually developing high-price bands, and they performed better in the Double 11 shopping festival, which is the "barometer" of the domestic beauty market. However, when it comes to conquering overseas, makeup is better. Because the compliance standards of functional skin care products are different in different regions, the threshold is higher. Domestic makeup has seized the overseas dividends earlier, but it is still in the early stages of brand expansion. Chen Xixi mentioned that in the overseas expansion of beauty products, no high-premium brands have been seen yet.

04 Conclusion: In 2023, new consumption will be more benign

Looking back at 2022, it is difficult to deny the weak consumer demand caused by the epidemic, but we cannot ignore the vigorous vitality of the Chinese consumer market in the face of headwinds.

New consumption has given rise to some new sub-industries, such as pre-prepared meals, frisbees, and camping. The coffee and beauty sectors have demonstrated the rise of "domestic products". Tea drinks, cosmetics, and pre-prepared meals have chosen to go overseas to tell Chinese stories. The craze for online fitness has taken the popularization of national fitness a step further.

Looking ahead to 2023, many institutions are optimistic about the structural investment opportunities in the Chinese market, especially in the consumer sector.

The catering, tourism, and hotel industries are already on the road to recovery, but it is undeniable that the consumer market in 2023 will still be complex. The 2022 of these seven industries can leave some inspiration for the coming year.

New consumption will continue to grow in a healthy way. Chen Xixi's observation is that when building a brand, you have to work on both ends, either to be the best solution at the same price and provide products and services that are worth the money, or to increase brand value and earn spiritual premium.

The best time to transform from exporting goods to exporting brands is now. Zhuang Shuai, founder of Bailian Consulting, said that conquering overseas markets is the mission of Chinese consumer companies and the driving force for new growth in the next 50 years.

*At the request of the interviewees, Ling Han, Ji Yao, Chen Li, Lin Ke, Li Chao, Zhou Yinan and Zhang Tong are pseudonyms in this article.

Author: Jin Yufan; Editor: Wei Jia

Source public account: Shenran (ID: shenrancaijing), focusing on innovative economy and dedicated to in-depth content.