Download Reviving Road of Regional and Traditional Industry

Reviving Road of Regional and Traditional Industry
------Case Study on Shanghai Jinfeng Brewery Co, Ltd.
Xiong Hong-xing
(School of Economics, Zhejiang University of Finance and Economics 310018)
Abstract
As a regional and mature industry, the yellow wine forgone the stagnate trend and take the
rejuvenation from 2002.Jinfeng brewery high-end marketing and followers prompt this rejuvenation.
High-end does not only mean high price. Improvement in taste, guarantee in quality, innovations in
marketing are the basement for high-end marketing. From the reviving road of the yellow wine industry,
we can see the four procedures: modernization of manufacturing, popularization of product, high-end
marketing, industry revival. The keys are fashionable products and high-end marketing.
Key words Regional and Mature Industry; Industry revival; High-end Marketing;
The yellow wine is a specialty of China, known to the ancient people as early as 4,000 years ago.
Made of glutinous rice or broomcorn millet by a special process, it has an alcohol content of 15-20%. It
is called “yellow wine” because it is amber in color and “liquid cake” because it is valuable in nutrition.
As a kind of mild, nutritional and healthy wine, the yellow wine have some disease prevention and
health functions. So it is fit to the new living needs of modernist and is supported by the government.
The yellow wine is also an important condiment in Chinese cooking. A spoon or two of yellow wine in
the preparation of a dish will enhance the taste of meat and fish, adding a subtlety to its deliciousness.
But for a long time, the product of the yellow wine is low-end and the market is limited in some
regions while breweries wine are often small-scaled and stagnant.
1 Renaissance of mature industry
1.1 The situation of the yellow wine industry before 2002
The traditional characters of the yellow wine industry are regional in market, small in industry
scale, small in company scale, alike in product and low in price.
1.1.1 Concentrated in manufacturing, limited in market scope. The demand for the yellow wine which is
connected to regional culture and consumption tradition localizes in five regions, that are Jiangxi and
Fujiang. The total output of Zhejiang, Jiangsu and Shanghai is over 85% and the total consumption is
over 70% of the national. In Zhejiang, consumers of the yellow wine localize in Hangzhou and Shaoxin
regions; Jiangsu, in Suzhou, Wuxi and Changzhou; Shanghai, in city zone.
1.1.2 Low market-concentration and intensive competition. There are more than 700 companies
producing the yellow wine in China and the average output per year is only 2000~3000 tons. The
proportion of small-scale companies built after 1980 is over 95% and The proportion of hand-work or
half hand-work operations is over 60%. So many small companies cluster together that the products are
similar and the price war is intensive.
1.1.3 Low-end product and unsustainable market. For the history sake, the authentic taste of the yellow
wine is often viewed as bitter and astringent. Most yellow wine breweries follow traditional productive
tools and some even boost its hand-work production technique. Bad taste and unstable quality lose
young consumers interest and restricts the market of the yellow wine within older people.
1.1.4 Aging image and homogeneous products. First, the less variety and simple package in the long run
make the yellow wine difficult to compete with other types of liquor and attract new consumer groups;
Second, brand advertising have not effectively transmit perspective characteristics of the breweries;
Third, market segmentation studies on different regions, different ages and income levels of consumer
groups are not sufficient.
1.1.5 Outmoded concept and less enterprising spirit. As a regional and traditional industry, the majority
of yellow wine breweries have established perspective sales channels and consumption groups. the
ideology---Content, a small victory foot---wears down the managers passion and confidence of opening
up new markets.
Due to the lower grade of products, lower level of mechanization and less innovations of marketing,
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many yellow wine breweries lack of difference in product and plunge into low-price competition in the
long run. The main products are the commons such as "Jiafan" and "Huadiao" which are cheaper than 10
yuan (500ML bottle). Traditional taste and package cannot attract new consumer groups, and the
inherent consumer groups are mainly concentrated in the low-income elderly population, and this group
is still shrinking. As a result, the average gross margin is around 20%, nearly lower than 10 percent
points to sherry, white wine and beer breweries. The development of the industry is stagnated.
1.2. Renaissance of yellow wine industry
As a ancient brewing industry, the yellow wine has already gone into mature stage. For the
limitations of regional economy and traditional managing idea, there presents the decline signs: the
yellow wine output compound rate of increment is lower than 2% in 1996 -2002and there even appear
the zero growth and the negative growth in 1998 to 2000.
250
200
150
100
50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Figure 1 National Output from 1996~2005(ten thousand tons)
There are two forces for industry renaissance, demand recovery or technological breakthroughs.
The basic force for yellow wine industry is technology-based marketing innovations: the modernization
of production technique enhances the quality of products which is helpful to develop fashionable and
top grade products. The latter with differentiation and brand promotion caters to the fashion crowd’s and
the white-collars’ demand. The market gradually increases and breakthroughs geographical restriction.
Shanghai Jinfeng Brewery Limited Company successfully developed high-end market in 2001 and
leaded the yellow wine industry marketing revolution. In 2002, some yellow wine breweries followed
Jinfeng’s strategy and launched some high-end products with the novel packaging and the elaborate
advertising, such as Shaoxing Guyuelongshan’s 20 years Series , Shanghai Guanshengyuan’s "Golden
Age of five yeas", Shanghai Royal brewery s " Orient liquor in 1993," Shaoxing Kuijishan "Monarch
mass hall" and so on. Most in pricing, rang from tens to hundreds yuan. The highest gross margin can
reach more than 80% and catch up with the famous liquor Maotai .
The renaissance of yellow wine industry is not only to deplore the high-end market and boost the
mass market, but also to cultivate the young consumers market which is form the sustainable demand to
ensure yellow wine industry's historical heritage. Beginning in 2002, yellow wine industry output
growth picks up again. In 2003, 2004 and 2005, the perspective of national output annual growth is 7%,
20%, 13%, which exceeded the growth of the liquor, beer, fruit wine in the wine industry, second only to
sherry wine. Inspired by the traditional regions’ consumption, the yellow wine consumption tide began
to move out of Jiangsu, Zhejiang, Shanghai. The companies’ profits rose and yellow wine industry has
become a chasing the target in capital market.
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2 The marketing system of high-end market for Shanghai Jinfeng brewery limited
company
After long-term reduplicative thinking and summarizing historical experiences in yellow wine
industry, the decision-making group of Jinfeng decided to jump out of traditional managing mode and
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forgo low-cost and low price strategy which forms the perfect competition market and induces the
industry into a vicious circle. They use non-price competing tools and create a oligopoly competition
segment market. Therefore, the company established the special leading group and hired the
professional market investigation and study companies to comprehensively advance the high-end market
strategy from producing technique, product design and brand promotion.
2.1 Establish good taste product strategy and closely connect business with culture to erect good
taste elaborately plan the positioning and brand image.
2.1.1 The market study results made by inter and outer professional entities show: the consumers of
traditional yellow wine concentrate in old and poor population which is increasingly shrinking. For the
concerns of the young generation, the traditional yellow wine taste not attractive and the image is not
attractive enough to entertain friends on the public place.
2.1.2 Target middle-aged men including high-tech personnel, middle and senior managers, employees in
arts and design sector. They have higher income, good taste and high profile which is useful to
advertise new image of yellow wine.
2.1.3 In accordance with the target customer’s reminiscence, the company seizes Shikumen architecture
as Shanghai symbol and as the basic setting of its trade name. The name of "Shikumen Shanghai old
wine" inspires nostalgia and sense of familiarity. The "grotto" image shows the thick atmosphere of
Shanghai which is familiar with the excitement for natives and curious with fresh for guests.
2.1.4 "Shikumen Shanghai old wine" adopts a unified image of Shikumen in the outer box, package,
brochure, the box. The packaging bottle foregoes traditional square shape and adopt oval shape which is
more suitable to show Shikumen’s shape and easier to catch the consumers’ eyes.
2.1.5 Apply for patents to protect brand and intellectual property. Jinfeng registered "Shikumen" trade
name and apply appearance patents for bottle shape, capsule and paste format.
2.2 Manufacturing technique modernization and management innovation ensure the high quality
which is consistent to the consumer experience with brand commitments.
As intangible assets, brand is embodied by products and services and the latter reflect the brand's
commitment to give consumers the products, quality, and management innovation to honor. Products are
based on the quality of key management is the guarantee. Without product innovation, there is not way
to activate traditional products and revive the brand.
2.2.1 Break through the traditional brewing process and formulas to create "new type of yellow wine."
The key to fulfill the brand’s commitment is how to brew out new delicate flavor yellow wine which
should be reminiscence and zeitgeist. According to the brand positioning, managers establish product
development plan and set up a new product development team. They break through tradition and
complete three innovations : use the computerized temperature control and replace the manual
temperature control to reform brewing process; draw on advanced technology to improve filtering
techniques and methods; reform the traditional formulas and improve the taste which make yellow wine
be more fit to modern people’ needs.
2.2.2 Improve quality assurance system to achieve quality competence. Jinfeng is equipped with
advanced instruments to monitor the color, smell and taste for new products and surrounded by a strict
system of quality assurance. All help it pass certification of ISO9001 quality management system and
HACCP food management system in 2000.
2.2.3 Accelerate technological progress and lay a solid foundation for greater development. In recent
years, the company undertakes some large-scale technology reconstructions to meet the rapid
development needs, such as the introduction of two canned Production Lines and a new industrial park
in Feng Jing with an annual output of 40,000 tons which becomes the nation's largest single brewing
yellow wine industry base.
2.3 Innovate marketing system to accelerate the spread brand
The brand needs wider dissemination and promotion to consumers. Jinfeng has opened up two
channels to transmit creativity, content, image of "Shikumen Shanghai wine" brand.
2.3.1 Attractive advertisements to interpret "Shikumen" old story. The company's carefully orchestrated
"Shikumen Shanghai wine" brand advertisement which organically closes "Shanghai old wine"
moderate and mild taste with cultural interpretations of the Shanghai Shikumen together and gives
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consumers a warm feeling. Firmly grasping the Shanghai municipal cultural characteristics, product
innovation which closes urban culture and citizen nostalgia reflects the brand meaning --- "luxury,
refinery gentle nature of the modern wine culture" and greatly enhances the grade of the yellow wine,
creates a new concept of the yellow wine and creates a new customer groups
2.3.2 New marketing tactics to spread new brands. Jinfeng establish dual channels which mainly depend
on high and middle restaurants and hotels and dual marketing network which fully cover the target
market. Its high price avoids of traditional price war and highlights its peculiar nature as a leader.
From the perspective of customer needs, Jinfeng Breweries continually developed new products,
and changed the traditional, carefully orchestrated new yellow wine brand, innovated marketing
channels, reconstructed the market structure. Market concentration increased and performance is
markedly improved. "Shikumen Shanghai old wine" became one elegant brand with a strong support of
culture and became one delegate of “new yellow wine” with the fashionable taste and differentiation
from ordinary yellow wine. The Consumers awareness level of "Shikumen Shanghai old wine" is greatly
raised and the first brand recognition increased from 7% in 2003 to 23% in 2004."Shikumen Shanghai
old wine" has occupied 70% of the high-grade yellow wine market in Shanghai. The sale of the new
product is 45 tons in 2001, 635 tons in 2002, 3680 tons in 2004, and reached 4500 tons in 2005. The
accounting index continually overtakes historical record.
Average of the industry
Average of main companies
Jinfeng
Table 1 margin on sales(%)
2001
2002
7.4
7.78
10.79
8.97
7.29
8.83
2003
7.62
7.61
17.48
2004
9.09
7.35
31.58
3 Renaiscance road of yellow wine industry
JinFeng Brewery’s success is observed and imitated by other yellow wine breweries. Zhejiang
breweries, such as Guyuelongshan, Kujishan, Tapai, has began to deplore national market.
Guyuelongshan become the first one in yellow wine industry in 2005 which advertises on China Central
Television to take the leading step into the national market. Meanwhile, other breweries in shanghai,
such as Hejiu and Junzailai, also blends traditional culture and modern elements to improve the color,
taste and appearance package of the yellow wine. Moreover, “Jimo old wine” in Shandong, “Minyue
huadiao” in Fujian and “Guyueloutai” in Hunan aim at high-end yellow wine market.
High-end does not only mean high price. Improvement in taste, guarantee in quality, innovations in
marketing are the basement for high-end marketing. From the rejuvenation road of the yellow wine
industry, we can see the four procedures: modernization of manufacturing – popularization of product –
high-end market – industry revival. The keys are fashionable products and high-end marketing.
Fashionable, superior quality products change the conservative and rigid image of yellow wine
products and attract young consumer group which is the leader of the ongoing tide and is the major of
consumer years later. Meanwhile, gift and entertainment become a kind of main consumption type for
yellow wine which speed it up infiltrating to the white-collar class.
Yellow wine demand greatly is raised with the modeling and leading of high-end consumer.
Numerous breweries introduce all kinds of low and middle products based new yellow wine production
system to meet the needs of mass market demand. The yellow wine industry overall rejuvenation
comes while the market is constantly setting new record turnover. The regional and maturing industry
stages into a new and fast growth circle.
References
[1]Annals of China Light-Industries. Mechanism Industry Press, 1994-2002:200~250.
[2]Giles H. Burgess, Jr.. Industrial Organization. Prentice Hall, 1988:1~10
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