On November 27-28, 2017, the 11th China Investment Annual Conference M & A Summit co-sponsored by China Investment Information and China Investment Capital was held in Beijing. Jiahua Weiye Capital Partner Su Wenjun was invited to attend the conference and delivered a keynote speech.

With the theme of "Globalization and Industrial upgrading of China Dragon", the summit brought together representatives from the government, scholars, listed companies, investment institutions, securities firms, start-ups and other parties to discuss the trend and realization path of M & A investment in industrial integration, transformation and upgrading in the era of Chinas rise.

The following is compiled from the keynote speech "Consumption Upgrade: New Potential Energy and New Business" by Su Wenjun, Partner of Jiahua Weiye Capital.

1. a change

This past week, Victorias Secret entered China for the first time, holding a "Victorias Secret Show" in Shanghai ". In the "Vimi Show", people saw a beautiful model fall down, which made the already influential "Vimi Show" attract greater exposure.

In the 22 years before "Victorias Secret", the "Victorias Secret Show" was only held in three countries around the world, and this was the first time it was held in China, with seven Chinese faces. "Vimi" also entered the Chinese market in the second half of last year. Many people look for answers from the market. In 2017, Chinas underwear market reached nearly 200 billion yuan, twice that of the US market. But the problem is that with such a large market, didnt Victorias Secret know before? Why did it start targeting the Chinese market in recent years? This reflects a change that has already taken place.

That is, the Chinese peoples consumption ability and consumption concept have been improved by leaps and bounds. In the past, Chinese people talked about saving face, wearing Rolex watches and wearing a famous brand clothes, and their trademarks were retained. However, underwear, which is worn inside and cannot be displayed directly, is in the back position in smooth consumption. But now consumers are willing to pay big money for things that others cant see, to make themselves comfortable and to please themselves.

Looking back at the lingerie market in China, the most popular lingerie brands in stores are Love, Manifin, Amphin, and Diane Finn. We also observed a second-tier underwear brands net profit fell 55% last year. The survival of second-tier brands is generally difficult, which shows that Chinese people are beginning to be interested in higher-quality things. While Chinese peoples income has increased, their spending power has increased, and consumers need better things.

The most profitable admiration among the above-mentioned underwear brands is precisely the trend of this kind. Its price is basically 500 or 600 yuan, seeking Gong Li as its brand spokesperson, and produced the "golden underwear" in the movie "Full of Golden Armor". Jiahua Weiye Capital was fortunate to invest in this company in the first half of the year and became a shareholder of the first brand of underwear in China.

2. Two kinds of potential energy

Japan developed rapidly in the 1960 s and 1980 s, and the gap between the rich and the poor widened. Therefore, in the 1980 s, Japan almost "bought" the world, which is very similar to China some time ago. However, after the 1980 s, Japanese consumption began to return to rationality, consumers began to pay attention to the personalization of products and services, and consumption habits changed. Only then did consumers know Muji. We began to pay attention to the design or connotation of products, as well as an expression of the concept of quality of life and environmental protection, which contains two kinds of potential energy of consumption promotion.

The first is "gravitational potential energy". Netease, the dark horse of e-commerce in 2016, has developed 23 million users in just four months since its launch last year. Its brand concept is "a good life is not so expensive". At present, a large number of consumers have enough money, but can not find good things, which is the largest "gravitational potential energy". Consumers need better things, so brands like Neteases strict selection will attract market attention.

Consumption upgrades not only have "gravitational potential energy" from top to bottom, but also "elastic potential energy" from bottom to top ". The worlds large food and beverage enterprises, such as Nestle and Coca-Cola, have already had a huge scale for more than 100 years in China. Taiwan developed 30 years earlier than the mainland, and Wangwang Food also has tens of billions of sales revenue. This shows that the bottom-up scale tests you press. The sales revenue of Qiaqia melon seeds and Jiajia soy sauce, a leading domestic industry company invested by Jiahua Weiye Capital, is only a few billion, but the market space is very large, as long as it takes time, it can achieve the same scale.

There are huge consumer groups in China and increasing consumer demand. The scale of local consumer service brands is not large, and the development space is huge. And "Vimi" in Europe and the United States to the peak of the scale, you have to decline. What Chinas consumer service brands need to do, just like the new changes in the main social contradictions pointed out in the report of the 19th National Congress of the Communist Party of China, Chinese consumer goods companies must continue to meet the peoples growing needs for a better life. And equity investment is about investing in companies that produce better, better quality products.

3. The nature of the new format: rediscovering the value of offline channels

When it comes to the format is more about the channel, how do you understand the channel? This year "wine is also afraid of deep alley", whether online or offline, the channel needs to do the most is where the consumer channels will be where, offline channels have always been a great scarcity, and now offline channels have begun to accelerate the return. Recently, Alibaba invested in RT Mart more than 20 billion and Hualian, both of which are the second largest shareholders. In addition, Jingdong also invested in Yonghui supermarket.

Online giants such as BAT have gone offline because offline resources are scarce and cannot be copied. Hillhouse Capital recently invested in Belle. The most important thing is that Belle has more than 20,000 terminal outlets. It has the second largest market in the world, second only to Nike. The resources below the line are limited physical space, you cant get it if you occupy others. Even if it is as strong as Alibaba, there is still no way to invest in offline resources such as Hualian, RT Mart and Auchan. After all, these resources have already accounted for the vast majority.

The new format is to rediscover the value of offline channels and transform traditional channels with Internet technology. Including the unattended retail stores that are currently in the tuyere, many are not really going to open stores, but are exploring a set of technical solutions that can improve and enhance the efficiency and experience of traditional retail stores. It is not to establish a new format or open a new channel, but to upgrade the traditional offline formats and channels, and this value is unlimited.

In rediscovering the value of offline resources, Jiahua Weiye Capital is ahead of the industry. The previously invested Qiaqia melon seeds have more than 6000 distributors and more than 300,000 terminal outlets across the country; the invested Barbie Steamed Bread has more than 2,000 retail stores in Shanghai; the Laiyi we have invested in is China The first share of a chain service brand, with more than 3000 self-operated stores. These offline resources are scarce, and Jiahua Weiye Capital understands consumer service brands very well. This is why such a growing company as Dongpeng has only accepted the investment of an equity investment fund of Jiahua Weiye Capital.

Jiahua Weiye Capital has accumulated ten years in the field of large consumer services. The channels, brands and other resources of the large consumer service companies we invest in can be coordinated with each other, which is the so-called "enabling investment" in the true sense ". So, from this point of view, investment institutions like Jiahua Weiye Capital, which focus on large consumer services, have also formed a new potential energy in the current consumer market.