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Consumer prospects remain unchanged, chasing after the dividends of people's hearts.

In 2021, the consumer sector received unprecedented attention and development from society as a whole. However, after the market enthusiasm waned, brand survival became an undeniable issue, raising doubts about the overall industry development.

"Since last year, the high attention to the consumer sector comes from the market's affirmation of the long-term value of consumption. This is the first time in the 40 years of reform and opening up that consumption has received widespread attention across the market, which is a good thing." However, according to Song Xiangqian, it takes 3-5 cycles, or 20-30 years, for a brand to go from startup to becoming an essential part of people's lives. Therefore, it is currently challenging to easily create large-scale, branded, and livelihood-oriented brands in this industry.

Song Xiangqian does not agree with the commonly used term "new consumption" in the industry. He prefers to divide the consumer industry into innovative consumption and traditional consumption. Innovative consumption expands based on logistics, commercial real estate dividends, and more, rather than being just a newly rising brand.

Different from internet logic, building a consumer brand requires time and accumulation. The repeated impact of the pandemic can be seen. Brands that were popular last year have been quickly cleared out due to factors such as changes in consumer situations and preferences.

However, even after the bubble is squeezed out, the prospects for the consumer industry should not be ignored. Song Xiangqian acknowledges that for the entire industry, the most important thing at the moment is to manage society's expectations of the economy well. "Economics is fundamentally about managing expectations, so we believe: People's hearts are more important than gold."

Currently, the country is accelerating the establishment of a unified national market system to break local protectionism and market segmentation, remove key bottlenecks restricting economic circulation, and facilitate the smooth flow of commodity factors and resources over a larger range. This provides a stronger support for building a high-standard market system and constructing a high-level socialist market economy system, ultimately enhancing market efficiency and lowering logistics costs for consumer brands.

03"Here is a portion of the conversation."

Q: Investors favor the long-term and sustainable track, emphasizing longevity, while innovation (especially so-called disruptive innovation) often harbors significant uncertainty. In practical terms, how does Harvest Capital balance this?

A: Indeed, there is a lot of uncertainty. For example, Dongpeng Special Drinks created a digital distribution system, solving the problem of fragmented supply, as well as addressing the smartization of the production end. However, there is still significant uncertainty about whether it can improve the overall production efficiency or if the effects can be sustained in the long term or generate economies of scale.

All companies involved in innovation and digital investment face an important question: those who understand the business may not understand digitalization, and those who understand digitalization may not understand the business. It's challenging to find talent capable of digitizing all business data.

Innovation must be pragmatic. Innovation that empowers revenue and profit growth for the company is true innovation, not just some "pseudo-innovation" that incurs costs without generating revenue.

Q: Today, with the country promoting innovation development from various perspectives such as the technology industry, capital markets, financial policies, and management systems, what advice or views do you have to share, considering Harvest Capital's investment focus and practice?

A: China's industrial chain and technological progress need to move upstream, but not everything should be turned into a "trend theory." It may take the efforts of one, two, or even three generations to achieve our planned goals.

At the same time, in the process of technological development, emphasis should be placed on people's livelihoods, consumption, and the application of technology to industries. Technology and consumption are the core tracks and engines of China's future economic growth. However, technology and consumption are not in opposition; they are interdependent. Without meeting consumption needs, driving employment, and creating tax revenue through consumption, we won't have the economic strength to advance science and technology. Therefore, we must emphasize the role and positioning of consumption in the overall national industry layout.