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Research implications
Taking advantage of the wind of consumption upgrading, Chinese consumer enterprises have undergone "branding" transformation and have given birth to a number of phenomenal domestic brands. With the changes in the economic environment, the trend of cost performance, and the intensification of market competition, the rise of domestic products has quietly entered the second half, and the change of the pattern will be the focus. IFC Foresight, together with the large consumption team, combined with top-down and bottom-up perspectives, reviewed the rise of domestic products and looked forward to the future of ChinaConsumer industryThe pattern interpretation aims to find out the "champion brand of domestic products". 
What to study. The rise of domestic products is reviewed, and the brand wave is repeated. Since 2010, China's economy has undergone transformation, and consumer demand has increased rapidly, with a zero CAGR9 of 13 from 2010 to 20199%。"Generation Z", which has a strong willingness to consume and high national self-confidence, has become the main consumer force, giving birth to hot spots such as "home economy" and "single economy", and new local consumer brands have emerged. Since 2017, the number of A-share large consumption IPOs has increased significantly, and the "rise of domestic products" has become the main line of investment2) The theme of 20 years has spread, "all consumer goods are worth redoing", small household appliances, pets, trendy toys, medical beauty, etc. have broken out successively, and the wild consumption events of Xinjiang cotton have been fermented in 21 years, and domestic products have been interpreted to the extreme. 
The rise of domestic products is attributed to the external environment. Product strength is the foundation for the rise of domestic products, and brand transformation is the main reason. Chinese consumer goods companies have gone from following imitation to leading the trend, creating products such as sweepers, blind boxes, and new tea drinks, and keenly grasping the demand to integrate elements such as national tide. Since 2014, it has ushered in three benefits and opened the window of brand building: 1) policy guidance, central media to build momentum;2) Consumer psychology, preference for local brands;3) Channel reform and platform traffic blessing.
A review of Japan's experience to grasp the changing trend. The "rise of domestic products" is not a Chinese characteristic, and Japan went through a similar process in the 1970s. Taking Japan as a mirror, the first half of the rise of domestic products tends to be economically upswing, market demand expands, and local brands rise under the resonance of internal product power + external local preferencesIn the second half of the rise of domestic products, consumer spending in economic transformation is limited, market competition is intensifying, and cost-effectiveness is trending, but brands that are on the right rhythm such as Daiso and Muji still perform well. 
The competition has never stopped, how to interpret the pattern?
After the "rise of domestic products" in the era of the first round of consumption upgrading, China's local brands need to re-analyze the situation and judge the next strategy. Obviously, the biggest change at present is that the pace of consumption upgrading has slowed down, and Chinese consumers have significantly increased their attention to cost-effectiveness during the period of economic structural transformation. However, at the same time, it is worth noting that the factors that domestic brands rely on for success also exist, based on outstanding product strength, policy support, national identity, and channel dividends as catalysts, the rising period of domestic products has not ended, and new brands will continue to emerge.
We judge that in the second half of the rise of domestic products, we should pay more attention to the changes in the internal structure and competition pattern of the industry than the total demand. Those who can achieve "the leftover is king" must be a brand that has excellent product strength, accurate pricing strategy and marketing strategy, and is in line with the trend of the cost-effective era. Internally, we can continue to lead the domestic camp to expand our share, and externally, we can go overseas to expand our territory.
Focus on alpha opportunities and lock in industry championsThe industry is constantly changing, and the market competition is not stopped. On the one hand, industrial transformation will not stagnate with the peak of demand, on the contrary, competition will shift from a single element to multiple dimensions, and the order of brand market share in mature markets may also be adjustedOn the other hand, different industries are in different life cycles, and the pattern of emerging industries is uncertain, and the outcome is not yet known. On the whole, the domestic camp is currently facing "fierce battles for old brands and the emergence of new brands", with competitors including both overseas brands and domestic counterparts, and the key to investment is to lock in the "champion brand" that can reach the top in the future.
Cosmetics: domestic products break through with product strength, and there is still room for improvement in share. China's skin care market has experienced two rounds of domestic product rise, from the early re-channel evolution to the competition of comprehensive capabilities
In the first round (2013-2018), domestic brands quickly occupied the dividend channel with their keen response speed & bold marketing delivery, and their market share increased rapidly, but their brand power and product power were slightly inferior to those of international brands. From 2013 to 2017, the market share of domestic brands increased from 206% to 287%, the products are mainly low-value sets, **, etc., among which Pechoin and Nature Hall performed well (the market share from 2013 to 2017 was 18% to . 3% to 33%）；The second round of the rise of new domestic products (since 2021), the competition has evolved from a single element to a comprehensive capability, and the competition is the company's multi-dimensional capabilities such as product development, formula research and development, refined operation, brand power, and product power, and brands such as Winona and Proya continue to catch up with international brands, and the market share of domestic brands in 2021-2022 will increase from 246% to 255%。
Textile and garment: What is the difference between the rise of domestic products in this round and the previous "Xinjiang cotton"?The rise of this round of domestic products: driven by the dual drive of supply + demand, from the demand side, the consumption downgrade is essentially a return to rationality in consumption, from "affordable" to "want to buy". We believe that consumers' pursuit of a better life is not weakened by fluctuations in the economic environment, so consumption downgrading is not directly equivalent to price reduction, let alone a compromise of low-quality products, but more prominent the core demand of cost performance. Therefore, when the future income expectation is weak, consumers' tolerance for brand premium decreases, and consumer behavior gradually returns to rationality.
In this context, domestic brands have won the favor of consumers by virtue of the "ultimate cost-effective" label. We believe that the essence of the rise of the first round of domestic products is the progress of the domestic high-quality ** chain from imitation to transcendence, which has brought about a significant increase in the strength of domestic productsThe second round of Xinjiang cotton's first stimulation has made the cost-effective advantages and cultural connotation of domestic brands widely concerned and recognized by consumers, and has formed a long-term user retention with excellent product strength and perfect product matrix, that is, from "affordable" to "want to buy" and then to "stable repurchase". Combined with the current consumption environment and weak income expectations, it is expected to further stimulate consumers' pursuit of cost-effective domestic products.
See the specific sub-industries:
1) Cosmetics: domestic products break through with product strength, and there is still room for improvement in share. The skin care market is competing for comprehensive capabilities such as brand, product, operation, and R&D, and the local beauty group Proya is catching up in an all-round wayIn the makeup market, domestic makeup artist IP brands have broken through in the base makeup category with high unit price & high barriers, such as Caitang highlighter contouring plate, Mao Geping caviar cushion, and the share of products such as foundation is expected to continue to increase in the future
2) Textile and garment: the sportswear leader is ready to rise again, driven by the supply side (optimization of marketing resources) and the demand side (consumption tends to be rational and the pursuit of cost performance).3) Light industry manufacturing: personal care, optimization of domestic product operation strategy, leveraging new channels to overtake in corners, Baiya shares launched "probiotics" sanitary napkins and other series;Intelligent toilets, the space is vast and the market is scattered, and domestic products such as Realt seize the opportunity of intelligent all-in-one machine route iteration and online channels to seize the market with cost-effective productsPets, domestic products & brand system formation, the introduction of new technology (staple freeze-dried, baked food, etc.) while highlighting the best advantages, shaping the brand to enhance the share;4) Household appliances: Domestic brands such as Laifen and Dreame have made breakthroughs in high-speed hair dryer technology, replacing volume at a low price, and their share has increased significantly. 
Investment advice and implications
In the second half of domestic products, pay attention to market competition. The rise of domestic products began in 2014 and reached a climax in 2020-2021. On the basis of product power standards, in the era of consumption upgrading, it has been catalyzed by policy guidance, consumption preference and channel preference, and a number of domestic consumer brands have emerged. However, the current economic environment has changed, and with reference to Japan's experience, "cost performance" may become an important consumer trend. Brands need to adapt their strategies to product development and pricing. It is expected that the market competition between local vs overseas and domestic brands will intensify in the future. As domestic products enter the second half, the investment framework should also change, and more attention should be paid to the competitive landscape. 
Seize the changes in the industry and lock the champion brand. The underlying factors of the rise of domestic products have not changed, excellent local brands are still promising, and the market share is expected to continue to increase. In particular, it is necessary to pay attention to the overtaking opportunities brought about by industry changes, including: 1) the best competition in the cost-effective era;2) Product iteration driven by new technologies. We believe that companies with strong product strength, flexible pricing strategies, sound channel layout and marketing capabilities are the most likely to win. In addition, local brands can also take advantage of lower production costs and new channel advantages such as the initial first-class belt and Douyin Kuaishou to strengthen their competitive advantages.
Specifically, there are strong domestic brands rising in various industries, and it is recommended to pay attention to: 1) Cosmetics: Proya, a local beauty group leading the industry change;2) Sportswear: Leading companies such as Li Ning and Anta Sports, driven by the optimization of marketing resources and the trend of cost performance3) Light industry manufacturing: brand potential energy upward Baiya shares, Ruierte, Zhongpet shares, Petty shares;4) Household appliances: Feike Electric, a domestic personal care small household appliance brand.
This is an abridged excerpt from the report, the original PDF of the report
Food & Beverage-The Rise of New Domestic Products in the Consumer Industry: The Second Half of the Rise of Domestic Products, Looking for Future Champion Brands-IFC**-20240109[Page 46]".
Report**: Value Catalog