supply chain and manufacturing ability that few countries can match. Creative use of the country’s networked manufacturing and logistics hubs makes e-commerce and industrial ecosystem are as different from the Western world as its culture. The country took decades to earn its reputation as the Factory of the World, but it now boasts a cheap and easy. Clothing, electronics, toys, automobiles, musical instruments, furniture — you name it, and you’ll find a manufacturer in China who can turn your intangible concept into a mass-manufacturable reality in mere days. And they’ll do it for cheaper than anywhere else in the world…
China is also home to one of the world’s largest e-commerce and Chinese entrepreneur with a tech background decided to take on Coca-Cola and PepsiCo. The tech revolution hasn’t affected the bottled beverage industry as much as it has.. Hundreds of startups dot the landscape, and the amount of and spent on innovating around the country’s industrial heft is mind-boggling. Incumbent giants, therefore, could lose a sizable chunk of market share if a company could manage to weave together China’s manufacturing proficiency and agility with the modern tech startup philosophy of “moving fast and breaking stuff.” so it was just a matter of time until an intrepid
, a Chinese direct-to-consumer (D2C) bottled beverage startup, is one such contender. A philosophy centered around iteration informed by data, , and a laser focus on taking advantage of China’s colossal e-commerce ecosystem has helped its revenues rise rapidly since it started five years ago. Its sugar-free sodas, milk teas, and energy drinks sell in 40 countries and generated about $450 million in 2020. The company aims to reach $1.2 billion this . If anything, Genki Forest’s valuation has shot up even faster. It recently completed its that values it at a whopping $6 billion, triples the price it fetched a year earlier, and has raised at least half a billion dollars. It’s striking how closely Genki Forest’s operations resemble a tech startup’s. So we thought we should look closer and see what this company’s graph can tell us about the new wave of Chinese D2C entrepreneurship looking to take over the globe.
Finding a more significant wave to ride
The bottled beverage industry wasn’t what Genki Forest’s founder, Binsen Tang, initially set out to tackle. His first startup was a successful casual, mostly countries worldwide, including one of the first versions of Happy Farm, a predecessor to Zynga’s Farmville. But Tang wasn’t satisfied and eventually sold ELEX Technology to a publicly listed company for about $400 million in 2014.outfit called ELEX Technology. It was nowhere near record-breaking, though — some 50 million users logged on to a few popular games in over 40
Tang wouldwith a few essential lessons. He’d learned by now that Chinese products were already competitive globally, whether people realized it or not. That and geographic arbitrage were real, Happy Farm being the perfect example. Lastly, he knew it was far more critical to choose the proper “racetrack” (as Chinese investors and entrepreneurs like to put it) than to have a great product. Picking the right was perhaps the most important takeaway. It’s also an apart from their Western counterparts — the most worthwhile endeavors are identifying the largest and most rewarding market at hand, regardless of one’s previous expertise. It led Zhang Yiming to create ByteDance, and Lei Jun to find Xiaomi.
That very philosophy led Tang to build Genki Forest. After selling ELEX Technology, Tang didn’t go back to the business that netted him his first pot of gold. As much as he had benefited from the rise of the mobile internet, he thought there was a far more significant opportunity to build a consumer brand and apply the lessons he learned from programming to manufacturing tangible products. He soon set up his , Challengers Capital, convinced that China’s next ample tech opportunity was in tech’s application to everyday consumer products. He soon began to invest in everything from ramen and hotpots to bottled beverages. China’s quickly expanding e-commerce ecosystem and the plethora of D2C businesses flourishing on Alibaba and JD.com would also influence his decision to sell directly to his target audience rather than take the traditional route. But to truly understand his motivations, we and how it has changed over the years.
What’s different about Chinese D2C?
“China doesn’t need any more good platforms,” Tang told his team in an internal email in 2015, “but it does need good products.” Tang was talking about how the age offor e-commerce in China was essentially over; it was now time to create brands that could take advantage of the advanced distribution network laid out. Other investors noticed as well. Albus Yu, principal at China Growth Capital, told me that his fund had stopped investing or marketplaces for a while. “2014 might have been the it was economically feasible to start such a business due to the soaring cost of acquiring customers and the strength of incumbents,” he said.
Indeed, 2015 was when CACs began to exceed or at least rival ARPUs for Alibaba and JD.com. In China, that distribution network was present across the digital and physical worlds. Online, there was immenseconcentrated in the hands of just two players: Alibaba and JD.com, which used to have and still maintain 80% or above in market share.
The dominance of Alibaba, in particular, was so overwhelming that for years, VCs invested not in D2C but in “Taobao brands” since that was the only channel one shopping festival, Singles’ Day. Even today, garnering a in one of the category leaderboards remains a surefire way to build brand awareness, investor interest, and sales records.to conquer to make it. Therefore, customer acquisition was straightforward — throwing everything into advertising on Alibaba’s Tmall platform, especially during its annual flagship
Physically, the Chinese market also differs significantly from much of the developed West.of heavy investment in logistics by the private sector, accelerated by government support and infrastructure buildout, means that delivery costs have come down significantly over the years, even dipping below $0.40 per package wholesale as of this year. Innovations such as return insurance have also sped up customer adoption.
By 2016, China was shipping 30 billion packages annually, accounting for 44% of low cost of delivery is one of the biggest reasons for China’s outsized e-commerce market — the largest globally and estimated to reach $2.8 trillion in 2021, more than triple that of the No. 2, the U.S. Express parcels sit stacked at a Suning before the 618 Shopping Festival. Image Credits: VGC Present-day China also presents another edge: Proximity to an advanced, flexible manufacturing network and supply chain for the of consumer products and the ability to outsource almost everything to them.. That number doubles every three and is expected to exceed 100 billion this year. And the
The original equipment manufacturers of years past have long since evolved into original design manufacturers. An expected consequence of being “the Factory of the World” for so many years, making goods for some of the best brands in the world, is that some knowledge was bound to transfer. It may be difficult for outsiders to understand how vital China’s networked manufacturing hubs are. What used to take weeks now takes mere days, the lead times shortened drastically by software, robots, and other advancements. For example, Chinese cross-border ultra-fast-fashion company Shein has compressed design-to-ship timelines to as little as seven days. And it’s not just for making. The turnaround can be astonishingly fast even when manufacturing completely foreign goods, such as when electric vehicle maker BYD turned its factory into the world’s most extensive plant in just two weeks when the COVID-19 pandemic struck last year.