Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 165 SKU (Seeking monthly votes, recommendations, and subscriptions!)
Chen Bingwen has a very clear understanding of Pepsi's intention to discuss bottle cap licensing again.

The next few years will be Pepsi's most glorious period, as they have squeezed Coca-Cola's market share in the United States down to only 24%.

If Coca-Cola hadn't managed to survive through vending machines and fast food channels, it might have truly suffered a complete defeat.

Because Pepsi is currently riding such a strong wave, they can't afford to lose.

The disadvantage of a bottle cap may not seem like much under normal circumstances, but when two companies are locked in fierce competition, this small inconvenience can cause consumers to side with the competitor.

Pepsi must solve this problem, and it can't afford to wait.

So although the conditions he offered were harsh, Pepsi could swallow them, and had to swallow them.

Asking them to open up their channels in North America and Europe might seem like cutting into their flesh, but compared to the loss of being overtaken by Coca-Cola, Pepsi can easily calculate the cost.

As for whether the talks would be successful, Chen Bingwen didn't really care.

The deal is done, and Chenji will be able to directly enter the European and American markets through Pepsi's channels.

If the negotiations fail, Coca-Cola will continue to use this patent to suppress Pepsi, and Chen Ji will be able to get more benefits from Coca-Cola.

Since he holds the patent, he's bound to win no matter what.

After speaking with Vincent Fang, he didn't linger and walked straight towards the research and development center.

As for Pepsi wanting a patent license for the bottle cap, let's wait for them to negotiate that themselves.

Chen Bingwen strode through the corridor toward the research and development center.

The acquisition of Watsons and the backdoor listing are the foundation and capital engine for Chen Kee's future development, which is the level of "Tao".

So what he needs to do next is to solidify the core products and foundation of Chenji's development, which is not only a matter of "technique" but also a matter of "tool".

The success in the Japanese and Southeast Asian markets serves as a large-scale market validation experiment, proving that the "Chen Ji" brand and "Pulse" products have gained initial recognition from cross-cultural consumers.

But this only opens the door to the market; it's still a long way from truly dominating it.

Market acceptance is like the tide; it can carry a boat, but it can also capsize it.

Today they might buy you because of your novelty and effectiveness, but tomorrow they might abandon you because of your monotony and boredom.

To get consumers to go from "trying" to "habiting," and from "one of the choices" to "the only choice," the product's depth must be increased.

In Chen Bingwen's previous life, there was a very precise business term to describe this thickness:
SKU is an abbreviation for Stock Keeping Unit.

Simply put, it is the smallest unit of goods used for counting inventory, making reports, replenishing stock, and promotions.

In the beverage industry, every unique specification, flavor, packaging, or even channel-exclusive packaging creates a separate SKU.

Both are mango pomelo sago, but the 300ml glass bottle is one SKU and the 5L catering bucket is another SKU.

Both are the original flavor "Pulse". The 250ml standard bottle is one SKU, but if a 125ml mini can is launched, that would be a new SKU.

The SKU management model was first invented and applied by American supermarkets and department stores in the 1960s and 70s for product warehousing management.

After being introduced to China in the 1990s, it has since become an indispensable core concept in product sales and warehouse management.

Chen Bingwen clearly remembers that Coca-Cola had about 4800 active SKUs per month, while Pepsi had about 6000.

Even for energy drinks like Red Bull, there are about 40 SKUs in total, including PET bottles, cans, original flavor, sugar-free, fruit flavor, and enhanced flavor.

The reason for doing this is to continuously match different groups of people, different scenarios, and different channels.

Chen Ji's current product line, which can be sold on the shelves, can be summarized into two main categories: bottled sugar water and "Pulse" energy drinks.

For dessert soups, there should be more variety.

There are five or six flavors in total: coconut milk sago pudding, mango pomelo sago, red bean paste, mung bean paste, and sesame paste.

There are two types of packaging: one is glass bottle, which is mainly sold in supermarkets and convenience stores.

Another type is bulk packaging in large barrels, mainly supplied to tea restaurants and dessert shops.

Although it seems like there are many categories, from a professional perspective, this doesn't actually add many real management units.

What really caught his attention was the "pulse".

Pulse energy drinks are now the company's cash cow and growth engine.

However, its structure is unusually simple.

In terms of flavor, differentiations were indeed made to cater to the preferences of different markets: the Japanese market had a unique flavor, the North American test market had another, and Hong Kong, Singapore, Southeast Asia and South Korea shared a third basic flavor.

Ultimately, they are all packaged in 250ml PET plastic bottles.

If calculated by SKU, it can only be counted as three types.

However, these three types of energy drinks have exactly the same specifications and packaging, and are essentially just slight variations of the same SKU, so they cannot truly diversify the risk.

This means that their ability to withstand risks is extremely poor.

If market trends change, the popularity of functional beverages declines, or a strong competitor emerges.

The company has put all its eggs in one basket: "250ml PET bottles." Revenue will plummet instantly, and no other product can immediately fill the gap.

Even a simple shortage of 250ml PET bottles or a malfunction in the filling production line could paralyze the entire global supply chain of Pulse.

Previously, this issue could be temporarily set aside, since it was still unknown whether the energy drink could be accepted by the market, and the primary task was to break into the market.

But now it's different.

The booming sales in the Japanese and Southeast Asian markets have led to market acceptance of the products, but the company's product structure is far from keeping up with the depth of market demand and the requirements for risk resistance.

In particular, the current second oil crisis has led to a rise in the price of plastic raw materials, which has increased the cost of PET bottles. This made Chen Bingwen realize that it was time to expand the number of SKUs.

Research and development center.

The air was filled with a faint aroma of milk and the unique scent of various ingredients.

Zhou Zhiyuan and several researchers were gathered around an experimental table, discussing the solubility of powdered milk tea in paper cups.

"Professor Zhou!" Chen Bingwen greeted him.

"Mr. Chen!" Zhou Zhiyuan looked up and announced the good news: "You've come at the perfect time. There's been a new breakthrough in the cold-dissolving stability of instant milk tea in paper cups."

We adjusted the ratio of maltodextrin to non-dairy creamer, and now the clumping phenomenon when mixed with cold water is greatly reduced.

"Great news!"

Chen Bingwen happily went forward to check.

The liquid in the experimental cup was milky white in color, and the aroma of tea and milk blended perfectly. It did not clump when mixed with cold water.

This is indeed a key breakthrough for the paper cup milk tea project. Zhou Zhiyuan's joy faded slightly as he reported, "Mr. Chen, the problem of using cold water for mixing has been initially resolved."

Besides this, there's another problem: the heat resistance of the milk tea cups.

He picked up a paper cup prototype and said seriously, "We have tested it repeatedly, and the paper cup materials we can currently find have substandard PE coating processes on the inner walls, which cannot withstand hot water above 85 degrees Celsius."

During brewing, the cup may become severely softened and even leak, and the high temperature may cause chemicals in the coating to migrate into the beverage, posing a safety hazard.

Professor Li, a materials science professor from the School of Science and Engineering standing next to him, added somewhat helplessly, "Mr. Chen, to be honest, this isn't just our problem."

Currently, the global food packaging industry still lacks mature technology for paper cups that can safely hold high-temperature liquids, mainly due to limitations in the heat resistance and uniform coating process of food-grade PE film raw materials.

This is almost a global technical challenge.

"For Chenji Company alone to try and overcome this challenge in the short term would be a bottomless pit of investment, with an extremely low success rate."

The atmosphere in the laboratory, which had just become lively due to solving the cold melting problem, instantly turned serious again.

Without cups that can withstand hot water, the concept of "ready to drink" loses its foundation.

Everyone looked at Chen Bingwen, awaiting his decision.

Should we invest heavily and assemble a top-notch team to tackle this global challenge? Or...?

Chen Bingwen did not respond.

Instead, they pondered the reasons for Xiangpiaopiao's success in its previous life.

While the neatly arranged cup-packaged products on the supermarket shelves are certainly eye-catching, the individually packaged or bundled milk tea powder packets also occupy a considerable amount of space.

The powder, packaged in exquisite bags, is bought by consumers and taken home to be brewed in their own cups, where they can enjoy the same Xiangpiaopiao flavor.

"If the cup doesn't work, we just won't use it. There's no need to get so hung up on it!"

Chen Bingwen smiled and said, "We can sell milk tea bags first, and consumers can brew them in their own cups and enjoy them immediately!"
As for the cups, we can assemble them together later when we have enough materials!

Zhou Zhiyuan slapped his forehead, suddenly realizing, "That's right! How did we get so stuck on this point!"
Our core ingredient is milk tea powder, and this unique hot and cold brewing formula and taste!

A cup is just a container; do consumers really need more cups at home or in the office?

Professor Li also breathed a long sigh of relief, saying, "Indeed, instead of spending huge sums of money to overcome a global problem, we should use our existing mature technology to bring our milk tea powder to market first!"
The individual packaging technology using aluminum-plastic composite film is very mature, and it absolutely guarantees moisture protection and freshness preservation!

“That’s it!” Chen Bingwen nodded firmly. “We’ll call this new product ‘Chen’s Hand-Brewed Milk Tea’!”
The main selling point is this packet of concentrated powder. Consumers only need a cup and hot (or cold) water to enjoy a cup of freshly made milk tea that is just as good as that served in a tea restaurant in just one minute!

This is actually more flexible and applicable to a wider range of scenarios!

At this point, Chen Bingwen looked at Zhou Zhiyuan and asked, "Professor Zhou, now that the bottleneck of the cup is gone, how long will it take for the milk tea powder itself to reach its final form?"

Zhou Zhiyuan answered almost immediately with full confidence: "Mr. Chen, the problem of cold water mixing has been solved, and the flavor of the recipe has been optimized many times, so it is very stable."

If we don't get hung up on matching it to a specific cup and only focus on the quality of the powder packet itself, I dare say that with a maximum of three more days of fine-tuning and small-scale testing, the formula will be finalized and meet mass production standards!

"Okay! Three days it is! I need to see the final formula and process standards that can be submitted to the production department in three days."

"This is perfect opportunity to use our Chen's Hand-Brewed Milk Tea at the Spring Canton Fair."

Chen Bingwen made a decisive decision and set a clear timetable for the milk tea project.

After Zhou Zhiyuan arranged the next research and development tasks for everyone, Chen Bingwen gestured for him to walk to the whiteboard in the corner of the laboratory.

Chen Bingwen picked up a pen, quickly drew a simple table, and then said:
“Our past R&D was ‘vertical’, with the goal of developing one new product after another, such as bottled sugar water, functional beverages, chewing gum, energy bars, and paper cup milk tea.”

He first wrote down the product names in the vertical column.

Then, he drew a horizontal axis above the table: "But now, we need to start 'horizontal' R&D immediately."

The goal isn't to create new products, but rather to quickly develop multiple SKUs covering different scenarios, channels, and price ranges for each existing successful product!

This term left Zhou Zhiyuan somewhat bewildered, as it was a rather technical term.

After explaining the meaning of SKU to Zhou Zhiyuan, Chen Bingwen continued, "All the products Chen Ji sells in the market, including energy drinks and sugary drinks, have a total effective SKU count of no more than 15."

Zhou Zhiyuan seemed to understand a little, but still asked doubtfully, "Mr. Chen, our products have a very good reputation and sales are growing rapidly. Is there a problem?"

“The problem is huge,” Chen Bingwen said very solemnly. “It means that our product line is extremely thin and our ability to withstand risks is very weak.”

Like an acrobat walking a tightrope on stilts, it looks impressive, but a gust of wind or a slight misstep can lead to a terrible fall.

Zhou Zhiyuan listened intently, holding his breath; he had never considered the issue from this perspective before.

His goal has always been to develop products that taste better, are more effective, and are more stable.

But Chen Bingwen's words today opened a new door for him: product development should not only consider the contents, but also the form that carries them, and the countless niche market opportunities that correspond to that form.

"Mr. Chen, do you mean that our next research and development focus, besides new flavors, should also be on developing new packaging specifications and materials?"

“That’s right!” Chen Bingwen answered affirmatively. “This is what I mean by ‘increasing the depth of the product’! We want to transform a single ‘product’ into a ‘product matrix’ with both breadth and depth!”

"Professor Zhou, our previous focus was on product innovation and channel marketing."

Next, we need to improve our supply chain system and channel coverage.

The foundation for doing all this is our ability to quickly launch a sufficiently rich SKU matrix that precisely matches every specific need and channel!

"In the beverage industry, we're not just selling water, but also providing solutions that continuously cater to different demographics, scenarios, and channels."

SKU is the physical carrier of these solutions!

Our goal isn't to have as many SKUs as possible, but to have a winning, top-performing SKU in every key price range and every core consumption scenario!

Chen Bingwen paused for a moment, then continued, "Professor Zhou, your core task going forward is to lead the team and go all out to complete the development of the new specifications and packaging for 'Pulse' as quickly as possible!"

I want to see three to five sample SKUs of pulsating drinks within a month!

"The marketing department will fully cooperate with the relevant product and channel sales data." After Chen Bingwen finished speaking, he looked at Zhou Zhiyuan. He knew that having a direction was not enough; a clear and actionable path had to be provided.

He picked up a pen and quickly added several headings to the horizontal axis of the table he had just drawn: “Specifications”, “Packaging Material”, “Flavor/Function”, and “Channel Exclusive”.

"Understood!" Zhou Zhiyuan nodded and said.

“I’ll immediately develop a research and development plan! And it’s not just about ‘Pulse’.”

Including bottled sugar water, in addition to the current bottled form, we are striving to develop more portable Tetra Pak cartons, or 'sugar water powder'.

The research path proposed by Chen Bingwen instantly enlightened Zhou Zhiyuan, as if a brand new door had been opened.

"Yes, we can develop sesame powder for sesame paste, which can be prepared simply by mixing it with warm water."

"Thinking of Southern-style black sesame paste," Chen Bingwen added with a smile.

(End of this chapter)