Suntory offended Guangdong consumers during the National Day. How did they manage to ruin a good situation?

During this year's National Day, Suntory suddenly encountered a major problem with "Lao Guang Zao Cha," causing a great commotion among consumers in Guangdong. The incident was triggered by an unknown individual who screenshot a small segment of the advertisement for Suntory's 1.25L drink, "Lao Guang Zao Cha." As a result, this image caused an "accident"...

The image depicts a family of five enjoying morning tea at a Cantonese teahouse. The father is pouring bottled Suntory Oolong tea into a teapot to brew. The family is shown harmoniously enjoying the moment. The accompanying text reads: "Guangzhou, having morning tea the Cantonese way together."

This advertisement is not the latest one from Suntory, but an ad released by Suntory for the Chinese New Year (CNY). The slogan of the advertisement is "Let's celebrate Chinese New Year with Oolong tea, full of festive flavors." Since most of the consumers who criticized it did not watch the complete advertisement, they simply judged it based on the image content, thinking it was just a typical "Lao Guang Zao Cha" (Old Guang's Morning Tea). If you pay attention to the ad slogan, you'll realize it's a Chinese New Year advertisement, which would likely increase the irritability index of Cantonese people several times.

Nevertheless, this has led many netizens from Guangdong to express that this is an "insult" to the traditional Cantonese morning tea culture. Netizens commented passionately, saying that this is akin to asking a family from Chongqing to eat self-heating hotpot, a family from Guangxi to eat ready-to-eat packaged river snail rice noodles, a family from Shanxi to eat dried noodles, and a family from Northeast China to eat frozen dumplings during the Chinese New Year.

Sales volume of packaged tea beverages

In 2023, the sales volume of packaged tea beverages in China exceeded that of carbonated beverages. While the volume of carbonated beverages declines each year, the sales of packaged tea beverages increase by around 10% annually, especially the proportion of sugar-free tea beverages. Another set of data shows that in the eastern and western Guangdong regions, the sales volume of Master Kong beverages is 5 billion. If we add other packaged teas like Wanglaoji herbal tea and Uni-President Assam milk tea, the sales of packaged tea beverages will reach 10 billion. Clearly, Suntory does not yet reach a sales volume of 10 billion in China.

Of course, we cannot say that Suntory has offended the consumers in this billion-dollar market. The last "tea" not recognized by the people of Guangdong was Wanglaoji Herbal Tea. The people of Guangdong believe that authentic herbal tea is the kind that Huang Zhenlong sells, which is bitter. The herbal tea in the red can is too sweet and is not considered authentic herbal tea. What caught Wanglaoji's attention was the large number of migrant workers who couldn't handle the bitterness of the original Cantonese herbal tea, but also had a need for heat-relieving properties.

However, Wang Lao Ji herbal tea's "authentic cool tea" did not seek the approval of Cantonese people, claiming to be Cantonese-style cool tea, emphasizing the concept of "preventing overheating". This commercial from Suntory seems to have directly confronted the "Cantonese people," which is why it has received criticism from some consumers in Guangdong.

In the past two years, colleagues in the fast-moving consumer goods sector have noticed some changes in distributors. Previously, when discussing matters with distributors, they would typically serve tea and the tea set was indispensable. Having tea had become an essential part of business discussions. In recent years, with the rise of the unsweetened tea market, distributors have switched from freshly brewed tea to serving "pre-made tea" heated up for guests, which does not affect communication during business discussions.

However, this matter can be done privately by you. If you bring it up publicly, the business will feel that the distributor is not showing respect for the manufacturer. For Guangdong consumers, this advertisement does not show respect for them and also gives consumers in other provinces the mistaken impression that Guangdong's morning tea is just reheated unsweetened tea.

After all, consumers from other regions do have a deep longing for Cantonese morning tea culture, so you can reverse the advertisement to make consumers feel that your Suntory Oolong tea is like the morning tea brewed at tea houses in bottles.

The presentation of Suntory hitting a snag despite holding a strong hand is the "result" of a series of operations conducted in the Chinese market in recent years. As a veteran brand of unsweetened tea with 27 years of history (established in 1981 and entering the Chinese market in 1997), it should have been the one riding the wave of the booming unsweetened tea market. However, the reality is that some newcomers are now dividing its market share.

Sales methods that are not chosen well

"When we worked with Sundelion back then, it was also a separate team. From business to the team, everything was separate from the Sundelion team. Sundelion really treated this as a business," said the business manager Pan Sheng, who went through the cooperation and breakup between Sundelion and Suntory back then. However, at that time, he was just a businessperson. After Sundelion and Suntory parted ways, the whole team also disbanded, and Pan Sheng had to find another path."

"To put it plainly, Suntory is seeing good performance and wants to get rid of Huiyuan, and operate it themselves," Pan Sheng believes that Huiyuan is acceptable to Suntory. He said that Shanghai itself is not the main battlefield for Huiyuan, but a weak market. Huiyuan adopts a strategy of two teams competing for the market: the office business team and the distributor business team. The strategy of most companies is for the business team to secure orders, and the distributors to handle the distribution. Huiyuan's strategy is that the office team also acts as distributors, and the distributors have to secure orders on their own, which creates internal competition."

Perhaps Huizhong itself feels that this strategy is problematic. After cooperating with Suntory, it has proceeded to organize its business team and distributor team normally, adopting the traditional approach of the business team handling orders and the distributors handling deliveries. Huizhong's basic salary is not high. Although the salary of Suntory-Huizhong is not considered high in the industry, it is slightly higher than the salary at Huizhong's Shanghai office. This is because most of Huizhong's business is handled by old Huizhong employees who were transferred, while Suntory-Huizhong hires externally. This is a common strategy in the fast-moving consumer goods industry.

In 2014, the lawsuit between Wanglaoji and Jiaduobao officially began, marking their breakup. Meanwhile, Suntory and Huiyuan started to collaborate.

"Suntory accused Huiyuan of producing counterfeit products at their factory when they were in a lawsuit. At that time, Huiyuan's cooperation factory with Suntory required Huiyuan to submit requests to Suntory and Suntory had to stamp the orders before given to Huiyuan's factory for production. However, when the business was doing well, Suntory stopped stamping the orders for Huiyuan's factory, even though the market demanded products. As a result, Huiyuan's factory started producing on their own. Suntory claimed that these unlicensed products were counterfeit, which led to Huiyuan not placing orders after 2016 and producing products on their own. The cooperation between the two companies lasted only two years at that time.... Pan Sheng mentioned that many distributors supported Huiyuan during that lawsuit since it was Huiyuan who started the business. After Suntory and Huiyuan parted ways, these early distributors were also replaced, and Suntory brought in new distributors. The business teams from the early days were also disbanded, and members like Pan Sheng moved on to different jobs."

When asked how many team businesses from the past went to Suntory, Pan Sheng said that Suntory's subsequent business strategy is to focus on large distributors. The businesses that belong to Suntory are very few, basically no one goes there, or Suntory also does not want them.

"At the time when Huiyuan Sanlu was together, our price was 3 yuan; after they split, Sanlu sold for 4 yuan (in 2020). In fact, selling for 4 yuan is beneficial for Sanlu in the market, as distributors make higher profits and are more willing to do business. However, later on, as Sanlu's performance soared and the market faced shortages, distributors couldn't guarantee their profits, resulting in selling for just 1 yuan of profit per case, causing some chaos in the market."

From the perspective of those distributors who made the wrong choice in supporting the wrong side, they have also earned considerable profits by sneaking goods to sell. Recently, Suntory has raised prices again, setting a selling price of 5 yuan at the terminal, but most terminals are selling at 4.5 yuan, which has also affected a wave of sales.

The biggest "problem" for Suntory compared to other sugar-free tea manufacturers is that their business is limited, and they do not have their own freezers in traditional channels. Suntory started out in CVS, where there are freezers available for rental. After negotiating promotional policies and rental agreements with the counterpart, there will be staff to help maintain your shelf space. However, in traditional channels, if you do not have a freezer, you rely entirely on displaying your products in someone else's freezer. With few sales personnel, especially during peak seasons when a large amount of effort is needed to maintain shelf space in the freezers, the store owners at the retail end do not have time to help you maintain it. Other manufacturers always try to make your positioning and shelf space the worst when they see your products displayed in my freezer, and they may even ask you to leave.

Some people say that the terminal stores in the Guangdong market are all bought by the store owners themselves, and then the freezer is rented to the manufacturers. However, most of these store owners are not willing to restock a brand two or three times a day. Usually they wait for the manufacturer's business to take action on its own. If you don't take action, they may stock some other products next to your shelf space.

This is the situation we see in the terminal. Suntory's display on traditional shelves is good, but their presentation in the frozen section is not well done. It's important to understand that for products like Oolong tea with a strong flavor, the frozen and non-frozen presentations result in completely different textures.

In contrast, a successful case is Uni-President Chun-Fu Green Tea. It is a single product that relies on its own business and freezer display. This year's sales are close to 500 million. Another example is Fruit Ripened products, which focus on special channels and high profits. Although the manufacturer's business is not as successful as traditional brands because they offer more incentives, terminal owners are still willing to make extra effort. Of course, this relates to the relatively small competition in these special channels.

Actually, relying on the power of distributors has always been a "problem" for companies like Suntory, Perrier, and Yakult. Despite the fact that the market has been cultivated and has prospered greatly, as soon as dominant manufacturers enter, they immediately take away their market share. In the end, they can only continuously shrink their own market.