In mid-March, following the outbreak of the pandemic in Shanghai, Song Xiangqian donated a total of 8.14 million yuan worth of materials, including a cash donation of 5 million yuan. On the night of the donation, he felt very happy, listening to music for a long time. "I've never spent 5 million before, nor have I been so happy."

In the investment circle, Song Xiangqian is an "unusual" figure. Aside from his investment work, he is prolific in writing, sharing his viewpoints frequently. He engages in live broadcasting regularly, sometimes up to three or four sessions a week, generously sharing his experiences and insights. He is enthusiastic about post-investment empowerment, always active on the front lines of the companies he invests in. The offline locations chosen by 文和友 (Wenheyou), a brand he invested in, is an example of his hands-on involvement. He once wrote on his WeChat moments, "Investment is fundamentally a rigorous and counter-human nature profession."

He habitually mentions "the taste of the world, touching the hearts of ordinary people," as in his 15 years of founding Harvest Capital, almost all of the 30+ projects invested in are imbued with this "worldly flavor." Brands like Jinmailang, Dongpeng Special Drinks, Wenheyou, Qiaqia Food, Babimantou, Aimer Lingerie, Meituan-Dianping, Didi Chuxing, and others, span various consumer sectors.

After over a decade of deep cultivation in the consumer sector, Song Xiangqian has recently experienced his moments of glory in the last two years, witnessing unprecedented attention and development in the consumer sector. However, there have been voices of the new consumer trend cooling down, with the bursting of the industry bubble. In an interview with "China Entrepreneur" magazine, Song Xiangqian, Founder and Chairman of Harvest Capital, expressed, "In the past two years, there has been an overheating of consumption, with unquestionable huge bubbles. Now, the valuations of new consumption are indeed declining."

In his view, many new consumer brands relying on traffic are facing significant pressures. The past logic of traffic no longer applies, and with traffic becoming scarcer and more expensive, companies that continue to rely on it are prone to falling into the trap of "winner's curse," only gaining attention but not making profits. He believes that the future of China's business competition lies in the era of doing good business and earning hard money. 

Song Xiangqian strongly agrees with the saying of Wang Yangming: "Polish the mind through focusing on tasks" – where attending to small matters thoroughly leads to the accomplishment of significant tasks. He believes that future new consumer brands must strengthen their supply chain, product research and development, lean management, and channels to offset risks in a market downturn and take the lead.

01

"wenheyou" is not a catering brand but rather resembles Disney.

《China Entrepreneur》: Apart from layoffs, the biggest criticism from the outside regarding Wenyu is that it has not successfully expanded beyond Changsha.

Song Xiangqian: Essentially, Wenyu is not a catering brand; it is a re-creation of the urban living space for young people, playing with the exploration and connection of spirit and urban culture. This is a non-standard industry, challenging to operate, requiring a deep understanding of urban culture, and each city has its own period of introduction, growth, and maturity.

In the future, Wenyu will open 20 stores in cities with a population of over 10 million in China, which is a completely new innovation. For such a challenging innovation, the market needs to show understanding and tolerance.

《China Entrepreneur》: As an innovative format, is there a successful business model in the market that Wenyu can learn from or benchmark?

Song Xiangqian: It's a bit like Disney, providing a living space for young people and cities. It not only involves food and drink but also play, retail, and entertainment. It is still in a continuous growth process, considering it's a company that was only established 5 years ago. We try to leverage its advantages and strengths, while at the same time addressing its weaknesses. This is the logic of the entire industry progress and the continued growth of the company. Alibaba became a platform economy and an economic entity before that; it was also a very small company in its early days.

《China Entrepreneur》: Currently, the entire offline retail faces significant challenges. Does Wenyu also find itself in a similar predicament?

Song Xiangqian: Certainly, it's something all companies go through in their production cycle. It's not just offline retail, the service industry, or offline industries facing shocks; it's a global economic challenge. Due to various factors, including the pandemic, both online and offline are affected. It's not only brands like HeyTea and Naixue cutting staff; bigger companies are cutting more, even Tencent and Alibaba are downsizing.

《China Entrepreneur》: What are the strengths and weaknesses of Wenyu?

Song Xiangqian: The strength lies in market understanding, insight into the needs of young people, and a strong understanding of human nature. Only when built on profound insight into human nature can products truly create a business model with humanistic values. This kind of business model can last because it resonates with customers, creating empathy and emotional value.

Its weaknesses are also apparent. While it has strong creativity and understanding, its system operations and management standardization, as well as scientific management capabilities, may be comparatively weaker.

《China Entrepreneur》: You mentioned that Wenyu is relatively lacking in scientific management. How are you helping them improve their scientific management capabilities?

Song Xiangqian: For brands like Old Town Chicken and Aimer Lingerie, we have invested in many chain brands. So, we know how to manage chain operations, internal budget control, how to operate a single-store model, quality control, and human resource management. We also know how to create organizational dividends, brand dividends, and public favor. The ultimate success of a large enterprise relies on organizational and brand dividends, not just on products or creativity. Creativity can win momentarily but not for the long term. Creativity must be effectively transformed into brand connotations to truly form brand assets.

《China Entrepreneur》: Have you given specific advice to their management?

Song Xiangqian: Of course, we helped establish the entire single-store model and internal control system for the operating management system. Even the selection of locations for the 20 offline stores was done by me and Wen Bin together.

《China Entrepreneur》: In the future, what characteristics should a company possess to become a super brand or a super company? What are the criteria for judgment?

Song Xiangqian: The first is strategic positioning capability. Many Chinese entrepreneurs like to apply positioning to brands and channels, especially brands. Brand positioning is popular, but strategic positioning is actually more critical. What is strategic positioning? It's about what kind of company an enterprise is, what role it plays in the market, what kind of structural competitive advantages it wins among peers, and whether the brand can win the respect of consumers.

The second is an understanding of the market, which includes two points: understanding the matching of productivity and production relations, which brings different organizational systems, incentive systems, and operational management methods; and understanding the consumer market, consumer groups, the dividends of changes in the times, and the preferences and psychological activities of new consumer groups in the era, respecting, understanding, and researching consumer behaviors. Many entrepreneurs are lazy, thinking that each generation is the same, but, in fact, it only takes 5 years to constitute a generation, not even 10 years, and it changes very quickly.

The third is operational management capabilities. You need strong internal control capabilities, organizational system capabilities, human organizational capabilities, product development capabilities, market channel capabilities, channel development capabilities, and cost control capabilities. The future is an era of competing in weaknesses, not an era of competing in strengths.

02  "Jimailang not only wants to enter the city but also to go south."

《China Entrepreneur》: "A 600 million yuan investment in Jimailang, what considerations are behind it?"

Song Xiangqian: "We have three key considerations for our investment: First, we are certain about the industry. Food and beverage is a major track, undoubtedly a high-frequency and essential consumer track. Second, we are certain about the enterprise. Jimailang operates in the high-frequency and essential food and beverage track, and it is a company with infrastructure capabilities. Such companies have the potential to become large enterprises in the future. Third, we are certain about the entrepreneur. It is crucial to invest in an entrepreneur with a learning ability and personal growth because, ultimately, it is the person who makes things happen. No matter how good the planning is, without an entrepreneur with high execution ability, understanding, and management skills, the final realization will fall short of expectations."

《China Entrepreneur》: "Before the investment, you had been in contact with Jimailang for five years. Why didn't you invest five years ago?"

Song Xiangqian: "Every company needs a period of growth and development. In addition, at that time, Jimailang was terminating its joint venture business with Uni-President and Nissin. The entire group's product lines and business lines were in the process of restructuring. These five years have been a period of intense effort for Jimailang's entire business system. They have done well in sinking, maintaining a compound growth rate of over 17% for five years. You have to wait for the right opportunity, and both sides need to join hands."

《China Entrepreneur》: "So, you have been observing this company for the past five years?"

Song Xiangqian: "Not only observing but also having in-depth interactions. We have business seminars every year, discussing not only the development of China's food and beverage industry but also topics such as Jimailang's brand building, channel sinking, product positioning, product development, and data operations. It's not just about communication but deep involvement."

《China Entrepreneur》: "In your observation, what is the biggest change or growth of Jimailang compared to five years ago?"

Song Xiangqian: "Five years ago, I believe Jimailang was just a manufacturing-oriented brand. It had strong manufacturing capabilities and had built a certain brand reputation. However, strictly speaking, its manufacturing capabilities surpassed its brand power and channel strength. In the triangular relationship of all consumer goods, product strength is the foundation, channels are crucial, and only then can the brand truly navigate. A brand is the most important talisman for a company's long-term development, competing for the dividends of people's hearts. A brand empowers a company. However, Jimailang was originally a manufacturing-oriented brand with relatively weak brand power. So, now Jimailang is shifting towards a retail or channel-oriented brand, iterating and upgrading."

《China Entrepreneur》: "In the field of food and beverages, Jimailang faces strong competitors such as Master Kong, Uni-President, and Nongfu Spring. Does this mean that in the consumer industry, not everyone necessarily has to become a leader? Is it logical for each to target its own customer base?"

Song Xiangqian: "If there is an opportunity to reach the top, of course, one should strive to be a leader. Everyone wants to have explosive products, be a leader, and occupy the minds of consumers – there's no doubt about that. People in the consumer goods industry always agree with the idea that we need to compete for shelf space and consumer mindshare. Because an ordinary consumer can only remember so many brands, and in an industry, they can remember only two or three brands. So, the larger the mindshare and physical shelf space, the greater the chance for dual success for the enterprise."

《China Entrepreneur》: "In your meetings with Jimailang's founder, Fan Xianguo, what topics do you often discuss?"

Song Xiangqian: "We discuss entirely new business issues - how to build the brand, how to approach the market channels, how to develop products. It revolves around what? In addition to this, we discuss how to manage human resources, how to strategically deploy personnel, ultimately focusing on efficiency improvement. The goal is to make Jimailang a modernized food and beverage enterprise with a high return on net assets. Additionally, we discuss how to become the 'Nestlé of China.' These are the issues we deliberate on. We hold special business discussion meetings every month, covering various topics like digitalization, digital marketing, research and development, brand building, comprehensive online and offline strategies, and efficiency improvement related to ROE."

《China Entrepreneur》: "In this process, have you encountered particularly challenging problems?"

Song Xiangqian: "As an example, I was dissatisfied with Jimailang's packaging. I felt it was too outdated and not youthful enough to align with the strategy of entering cities. For Jimailang, which is planning to expand into southern regions and cities south of the Yangtze and Yellow Rivers – a market dominated by Master Kong – how can it strengthen its strengths and overcome weaknesses? The first step was to change the external packaging. Packaging is a crucial carrier that embodies a company's understanding of the market and its respect and recognition of consumers. So, I recommended Professor Pan Hu to design it, and they eventually collaborated. Today, Mr. Fan is very satisfied with the design and said to me, 'Using Pan Hu is expensive, but not using Pan Hu is even more expensive.'"

《China Entrepreneur》: "Does Jimailang have concerns about being abandoned by young consumers?"

Song Xiangqian: "The reason traditional consumption is considered traditional is due to what? It's the disregard for market changes, changes in consumer behavior, habits, and psychology. As a result, it loses the young market, loses the people of this era, and attempts to continue harvesting the market with traditional brands and products. This is irresponsible, even a behavior with a generation gap. However, Jimailang is an innovative company that dares to take risks. Currently, they are innovating in brand, channels, products, packaging design, consumer psychology, and social e-commerce, meeting the expressions and preferences loved by Generation Z consumers. This happens to be the reason for our investment."

《China Entrepreneur》: "In recent years, the marketing strategies of new consumer brands have been considered exemplary. Has Jimailang learned from these?"

Song Xiangqian: "Including social e-commerce, channels, and comprehensive online competition, these are areas where innovative consumer brands have performed well. So, why is traditional consumption considered traditional? It's because there's not enough sensitivity to the dividends of infrastructure changes and the changes in consumer habits and behaviors brought about by the times. Of course, we need to learn from small and medium-sized innovative consumer enterprises because they respond more quickly.

However, new consumption also has a problem. Objectively speaking, it's challenging for new consumer brands to become large. Moreover, most of these companies are traffic-driven brands. Once the traffic is upgraded, they don't make money. Most fall into the trap of traffic, similar to what's called the 'curse of the victors.' It looks like the brand and channel marketing are well done, but they aren't profitable; they only make noise."

03"Old masters focus on mastering the basics, while new consumer brands are all about playing with traffic."

《China Entrepreneur》: "Constant news of layoffs, declining sales, closures, and financing difficulties are circulating. Is the new consumer trend cooling down?"

Song Xiangqian: "Objectively speaking, consumption has been overheated in the past two years, and there is undoubtedly a huge bubble. Why did this happen? It's because significant changes occurred in the past two years. Mobile internet, social e-commerce, platform economy, education, healthcare, media, and other industries are undergoing adjustments and controls. Some underlying social operating logics have changed, leading to not-so-good investment options in many sectors, so more money flowed into the consumer sector. More money entering fewer tracks will inevitably create a bubble.

Recently, the market performance, profitability, and growth of many new consumer companies have not met expectations. Combined with the impact of the pandemic, rapid cost increases on the supply side, weakened demand, and a shift in expectations for income improvement, the entire market is declining rapidly. As you can see, many new consumer brands like Heytea, Naixue, Momodiandianxinju, Chayanyuese, and Wenheyoutou are laying off employees. Of course, I know the situation of Wenheyoutou. Contrary to media reports of laying off 200 people, they actually laid off only 46 people. For a company with 2000 employees, laying off 46 people while also hiring for many new positions is a normal optimization and adjustment.

《China Entrepreneur》: "Today, the valuation of new consumer brands has been adjusted downward. How much has the valuation shrunk compared to the peak period?"

Song Xiangqian: "Valuation adjustments are necessary, and indeed, the valuation of new consumer brands is declining. However, valuation is not equal to market value, and market value is not equal to value. We still need to determine the long-term value of the enterprise because the price cannot defy the long-term existence of value. Time is the scale for measuring the value of an enterprise, and money is the by-product of doing things right. Trusting in the victory of long-termism is crucial when building a brand and running a business.

Investment fundamentally involves two things: firstly, buying liquidity, which must be good enough. Even if a company develops well, without liquidity, you won't be able to exit. Secondly, you need to buy growth. Essentially, investment is long-termism. Whether you like it or not, you cannot exit in the short term after entering. Therefore, you can only coexist and grow with the company, working together for mutual success and building a win-win situation."

04《China Entrepreneur》: "Amid the cooling trend of new consumerism, how can companies protect themselves?"

Song Xiangqian: "Open-source, save money, compress unnecessary actions, and have a profound understanding of structural changes in the market to navigate through safely. Simultaneously, enhance internal management and operational capabilities. Lao Gao from Xijiade once told me a very reasonable statement: 'Old masters focus on mastering the basics, while new consumer brands are all about playing with traffic.' So, many new consumer brands playing with traffic are currently under significant pressure. Because traffic is not as easy to handle anymore—it's becoming more expensive, scarce, and facing increasing pressure. Traffic is bestowed by platforms, and platform algorithms are a game. The platform will always have a greater advantage in the algorithm game. It's like going to a casino; the chances of winning against algorithms and platforms are slim.

Therefore, new consumer brands must understand a principle today: solely relying on traffic is just an online channel, not a complete company. Only by competing holistically across online and offline, in all scenarios and with all traffic, filling the gaps in the supply chain, product development, on-site lean management, marketing, and channel strategy, and respecting and acknowledging the consumer market and consumers genuinely, can one potentially hedge risks in a market downturn and be the first to emerge during recovery.

《China Entrepreneur》: "What kind of new consumer brands can cross cycles and become enterprises with strong risk resistance in the future?"

Song Xiangqian: "Love consumers, respect consumption, and honestly create value for society, the people, and the market. Future business competition in China will be an era of good people doing business and earning hard-earned money. The philosophy of Yangming heart learning is excellent – grinding the mind on things, wearing out the small things, and naturally, the big things will be worn down.

《China Entrepreneur》: "What trends will there be in the future of new consumerism?"

Song Xiangqian: "Two characteristics are certain in the future tide and trends of the consumer market – technology and innovation. I personally strongly agree with Peter Drucker's innovation theory. Innovation allows companies to truly have a structural advantage in competition, making them distinct from other enterprises. The so-called structural advantage is what Warren Buffett calls the 'moat.' Brands empowered by technology can resist risks. Therefore, leveraging the digital economy, modern digital media, and a digital distribution system, harnessing the power of technology, while simultaneously building the intrinsic value of your brand, is crucial."

《China Entrepreneur》: "Standardized management is the foundation of the future for Chinese catering."

《China Entrepreneur》: "Many restaurant chain brands, such as Yang Guofu and Hefu Noodle, are advancing the IPO process recently. What is the reason behind the recent trend of restaurant companies going public?"

Song Xiangqian: "The restaurant industry used to be a traditional industry, more like small workshops or family-owned businesses, dominated by a chef's mindset. There was an IPO trend in the restaurant industry in 2000 and 2010, but very few succeeded. Why? It was related to the operating conditions of this industry at that time. The infrastructure wasn't as robust, cold chain logistics weren't so developed, electronic payments weren't as strong, and there weren't as many commercial properties, and the coverage of the population wasn't as extensive. But today, all of this is more mature. It's the dividend released by the mature infrastructure that provides opportunities for many chain restaurant brands in China. The second reason is that restaurant companies are now starting to have brand awareness. Everyone knows they need to achieve branding, chain operations, modernization, standardization, and capitalization."

《China Entrepreneur》: "For a long time, there were very few restaurant companies or brands listed on the capital market."

Song Xiangqian: "Only companies that truly move towards modernization, employing modern management, and achieving the five transformations—standardization, modernization, branding, chain operations, and capitalization—can eventually become market leaders, industry leaders, and darlings of capital.

In addition, globally, only McDonald's, KFC, and Starbucks have truly achieved chain operations, transcending human racial and cultural differences. Why? The core is standardized management. This is the fundamental aspect of the future of Chinese catering. If Chinese catering remains like French or Japanese cuisine, with a small shop culture, oral transmission, a chef's mindset, emphasizing culinary genes and culinary culture, using culture as an excuse to reject management progress, there's no chance."

《China Entrepreneur》: "So, everyone is essentially betting on the future 'China's Yum! Brands' or 'China's KFC'?"

Song Xiangqian: "That's the logic. There's no other logic."