Born in Guangzhou on December 16, 2020, Blue Moon, which was founded 28 years ago, landed on the Hong Kong Stock Exchange.
As a well-known brand that ranks first in China's laundry detergent market share and fifth in China's laundry market share, Blue Moon has won high recognition and attention from the capital market and the secondary market.
According to public information, before the IPO, Blue Moon had only two investors: Hongzhang Capital and Hillhouse Capital.
Today, Blue Moon is known as Hillhouse Capital’s model of adhering to "long-termism". What is less known is that as early as 2006, Hongzhang Capital's founding partner Weng Yinuo met Luo Qiuping, the founder of Blue Moon. Later, Luo Qiuping was introduced to his long-time "good teacher and helpful friend": Zhang Lei, founder and CEO of Hillhouse Capital.
Weng Yinuo said that Zhang Lei had a great influence on him in terms of long-term investment philosophy and investment framework. In addition, Luo Qiuping of Blue Moon is also a practitioner of long-termism. Long-termism does not mean immutability, but it requires both persistence and the ability to iterate itself.
This article further analyzes the long-term investment philosophy by telling the investment story of Blue Moon.
Interviewee | Weng Yinuo Hongzhang Capital Founding Partner 2017 Chaos Entrepreneurship Camp Student
Interviewer | Xie Yuhang Business Research Team of Chaos University
This article is an original article by the business research team of Chaos University
Chaos University: Hongzhang Capital invested in Blue Moon at the beginning of 2012. You once said that this is a trust-based investment in a "circle of friends", which is different from ordinary investment and financing. How did you discover the blue moon? What is the opportunity to make this investment?
Weng Yinuo: In fact, Blue Moon started making hand sanitizers this innovative category very early. At that time, Chinese people were more inclined to wash their hands with soap and soap. Until the "SARS" period in 2002-2003, everyone suddenly began to accept hand sanitizer, and Blue Moon's sales scale began to grow rapidly at this time. In addition, arranging promoters in hypermarkets to intercept terminals, which we often see today, is also Blue Moon’s earliest core method of high growth. I met Mr. Luo in 2006, and learned that Blue Moon has already ranked first in the market for hand sanitizer.
Hillhouse’s Zhang Lei is always an old friend of mine. He has a great influence on my investment philosophy. In the early stage of my investment, he absorbed a lot of his investment philosophy and framework thinking. We often talk together about entrepreneurs with high-growth market opportunities and positive values. Once I told Mr. Zhang that Mr. Luo of Blue Moon was absolutely excellent, and then I introduced them to him.
Mr. Luo and Mr. Zhang also had a long-term exchange, until Blue Moon decided to focus on the laundry detergent category and re-launch the larger category. At this time, Mr. Zhang also thought: "If you want to gamble, then gamble big." Therefore, the money from Hongzhang Capital and Hillhouse Capital went in, and the amount of this financing guaranteed the intensity of Blue Moon's investment in marketing at that time. After the money was raised, Blue Moon invested more in TV advertising and channel expansion, and it quickly gained brand power.
In fact, Luo is always a special person. When it comes to financing, he does not look at the background and brand of investors, but pays more attention to who is with him. In other words, Mr. Luo doesn't care about the brand of investment institutions and pays more attention to the trust of personal friends. Therefore, I said that Mr. Luo's investment is an investment in the "friend circle", which is different from general investment and financing. Until the direct listing, no other new shareholders joined.
Chaos University: Why doesn't Blue Moon care about institutional brands? Is it because it has ample cash flow?
Weng Yinuo: In the consumer industry, companies with a scale of more than 1 billion are actually not short of money. This is also an important reason why Buffett likes consumer monopoly brands. Such companies rarely have long-term debt, have good cash flow capabilities, and return on asset investment. The 1 billion-scale stage requires some funds, and more needs to compete with industry leaders or large international companies.
Our investment with Hillhouse Capital was made at that high-growth time point, but even in this situation, Mr. Luo only needs money from his friends, not from other large institutions. The consensus of values is more important than the funds themselves.
Chaos University: What was the business situation of Blue Moon at that time?
Weng Yinuo: Because of the marketing investment, of course the growth will be very rapid. As Mr. Zhang Gao mentioned, the investment in Blue Moon’s financial data was profitable before, but after a relatively large marketing investment, it actually began to become a staged loss-making company, but market awareness and sales scale increased , Everyone makes more long-term money together. Because to do laundry detergent, this is a new category, there must be a large investment period. At that time, everyone thought about becoming a long-term company with large market capitalization. It didn't make much sense to simply be a listed company with a small market capitalization.
Chaos University: Blue Moon was the first investment project of Hongzhang Capital after its establishment. Was there any pressure at that time?
Weng Yinuo: At that time, there was a lack of LPs (investors) with long-term capital in the market, and it was not easy to start a business to raise funds for the first time. Although this investment is not much, at that time, it was also a relatively large investment for Hongzhang Capital. Of course, today (this investment) is no longer a big investment for me, but at the time, it was actually quite heavy.
Chaos University: What was your expectation of Blue Moon when you invested? What are your expectations for the category of laundry detergent?
Weng Yinuo: When we saw Blue Moon, in the market competition for laundry detergent, it was the initiator of this war, and it was already the absolute number one in the market. Moreover, the basic production capacity has been built, and through consumer awareness education, we can quickly conquer the market in the market. Other competitors, relatively speaking, their investment and determination in this laundry detergent are much worse than Blue Moon. At that time, we were very clear that after the investment, there will be a super-high-speed growth stage of 3-4 years, and then it will enter a highly competitive melee stage, and finally the market structure will be clear again, and then it will be the stage of profit release. Up.
Chaos University: What does this investment mean to Blue Moon? Has it contributed to Blue Moon's laundry detergent category?
Weng Yinuo: Before the investment, Blue Moon had already started to make laundry detergent, and the growth data could support the growth scale, not from scratch. But if you want to bet on this market, you must spend a lot of money to educate consumers to accept this new category in order to quickly increase the sales scale. If you don't have enough cards in your hand, and you don't have so much money, you are definitely afraid to fight this battle. In that case, even if you have to bet on laundry detergent, it is not the same thing in terms of the magnitude of success.
Chaos University: You mentioned that there is always a lot of consensus with Hillhouse's Zhang on long-term value investment. "Find the best company and be a friend of time" is considered to be one of the best interpretations of value investment. So, how to find the best company? At the time, how did you judge Blue Moon to be a good company?
Weng Yinuo: First of all, there has never been a standard view of what is a good company. This is a very subjective perspective.
Simply put, enterprises are made by people, to some extent it depends on the entrepreneur's pattern, execution, and original intention. This is an important perspective for judging whether the company can do something special. People are the soul of an enterprise, and the characteristics of the founder are a very important factor.
In addition, the track must have a lot to do with it. In essence, a person's success and failure are highly related to what he chooses. What kind of track you choose will have what kind of results, this is a very core perspective. So the company must be on the super track to do big business.
Essentially, a company is a product of trends and industries, so the barriers of the company's industry determine whether it can make things bigger. Of course, this is also highly related to the traits of the founder, such as extreme concentration, gambling, super execution ability, self-learning iterative ability and so on.
The success factors of any good company are attributable to multiple factors, not just a standard to judge its quality.
Chaos University: How do you understand "long-termism" and what are the key points to achieve "long-term value investment"?
Weng Yinuo: Long-termism has many meanings. The first is long-term focus. Any company will encounter bottlenecks at different stages. Do you have the concentration to break through these bottlenecks.
The second meaning is that long-termism does not mean change. On the one hand, there will be some constant things in business operations. On the other hand, the market is constantly changing. Therefore, long-termism means that you are constantly adapting to this change, which is a cumulative long-term effect.
At the very beginning, Blue Moon's channel was very dependent on hypermarkets. When we invested, nearly 80% of its channel revenue came from hypermarkets. However, looking at the information in the current prospectus, the proportion of hypermarkets is already relatively low. Blue Moon has changed his style of play many times, so long-termism does not mean that everything remains the same, but that it faces different changes at different stages and has the ability to iterate itself. This is also part of long-termism.
Third, long-termism also refers to perseverance. Every company may encounter various major setbacks, and each setback is an opportunity for self-renewal. The company can take this opportunity to readjust its organization, adjust its culture, adjust its direction, and make some major choices. In fact, every company is the result of some big choices. Just like Blue Moon made hand sanitizer from an obscure company, and suddenly got up. After the hand sanitizer was up, he bet on the laundry detergent and became the first in this category.
We often say, "The extreme person creates extraordinary", that is, only those who have done a certain point to the extreme can finally accomplish a major event and create extraordinary performance.
Chaos University: You mentioned the change and the unchanging part of long-termism, so how do you balance the change and the unchanging? Blue Moon has also made some unsuccessful attempts, such as abandoning the channels of hypermarkets and switching to "moon hut", creating its own "O2O + direct sales" sales model. However, it has encountered many challenges, the Moon House has been closed one after another, and the sales of the original offline channel distributors have declined significantly.
You mentioned that companies must have the ability to iterate themselves, what should be iterated, and if there are errors in iteration, how can they be corrected?
Weng Yinuo: First, many media have talked about some channel changes. I don’t think it should be attributed to failure, especially when Blue Moon withdrew from the hypermarket. This action may be a bit extreme, but this is not Not a failure. To put it simply, maintaining high labor costs to convert hypermarkets to O2O, in fact, the cost ratio (note: the cost of each product, cost ratio = cost/sales quantity) can not be counted. In fact, many media views are wrong, but the company does not respond.
From another perspective, this matter will of course bring about another aspect. Only by doing this extreme can you make a breakthrough in your internal organization. Most strategies cannot be implemented because no one is willing to give up short-term interests and pursue long-term interests in a true sense. This is also a perspective of long-termism.
Of course, from another perspective, if there is an obvious error in the iteration, the founder needs to have the ability to self-reflection, be able to quickly re-adjust the strategy, and quickly make internal adjustments. This is also very difficult. Generally speaking, self-iteration can only be top-down, that is, the founder can adjust himself to fall.
This kind of change is exactly part of the long-termism, and a term often mentioned by Mr. Zhang is called "lagging satisfaction." You dare to abandon some things in the moment to get greater satisfaction.
Of course, only by making some reform mechanisms to the extreme can we truly achieve "survival with broken arms" within the system. Although it will make temporary income growth subject to some challenges, it later proved that Blue Moon has brought a new growth path.
Everyone is calling for long-termism, but when you really touch short-term interests, most people choose short-term interests. Because long-term benefits are not visible, and there are risks.
Blue Moon did O2O. I didn't regard it as a failed experiment. It even reflected the company's highly sensitive and forward-looking market. This is not only a timing issue, but also related to the richness of the category. In fact, the model at that time was the embryonic form of social e-commerce later, but the frequency of selling laundry detergent was not high enough, and only Blue Moon's own category was used as a platform model, which would increase the operating pressure.
At that time, the results of the attempts were not good, and iterated. This is a very normal business operation. In fact, it can also be seen as some exploration in the whole process of Blue Moon moving from a hypermarket to a new flow e-commerce network.
Chaos University: "Thinking with the spirit of entrepreneurship, and building together with a partner" is the philosophy of Hongzhang Capital. Over the years, in the process of growing up with Blue Moon, how did Hongzhang Capital implement this concept?
Weng Yinuo: I think there are two levels of investment empowerment. The first level is the "technical" level, which is something that investment institutions often talk about, including helping investee companies do research, channel docking, and introducing talents, etc. Wait. Hongzhang Capital is the domestic GP (investment institution) most familiar with China's offline channel retailers and convenience store system. We will help investee companies do a lot of channel docking and brand positioning. We have a complete set of enabling tools.
But what I want to talk more deeply is, what do entrepreneurs really need? I think the core is the level of exchange of ideas among friends. When an entrepreneur encounters some big multiple-choice questions, he is also looking for and judging big changes in the pattern, or due to various reasons, he will also encounter many weird and depressing things. As friends and shareholders, we can help him ease his emotions, just like when walking at night, someone can shout, "Turn right, there is light over there!" No one understands him. At that time, this kind of spiritual communication is very important. So the second and more essential level is trust and exchange of ideas. Investors not only need to have knowledge of capital operation, but also need to have a consensus on corporate management and operation, and be able to dialogue with entrepreneurs on the same spiritual level. In addition, not only the internal fund is a partnership mechanism, but also a partnership relationship with the invested company.
Chaos University: Weng is always an expert in branding. Blue Moon has ranked first in China's laundry detergent market for 11 consecutive years. Among them, what role does the brand play? How is its brand built, and is there anything worth learning from?
Weng Yinuo: Great changes have taken place in today's media environment. In the past, about 15 years ago, channels and media were centralized, and supply chains were scattered. But today it is completely reversed. The channels are very fragmented, the media is very fragmented, and the supply chain is becoming more and more concentrated. Nowadays, the cognitive efficiency of the brand is declining rather than improving. Today’s company does a new brand, which is different from Blue Moon’s 2012 brand.
Blue Moon launched laundry detergent in 2008, when branding was a time for strong cognitive transformation. At that time, the main medium for people to obtain information was television, and the role of advertisements in educating consumers was very large. Therefore, Blue Moon sponsored some activities on TV and invited celebrities to endorse that the efficiency of this cognitive association conversion was very high, and it belonged to the marketing techniques of that era.
Nowadays, Blue Moon is doing more naming on TV programs, doing some image advertisements, just to maintain the brand exposure, and more brand building is to promote new concentrated laundry detergent products.
Of course, Blue Moon is also doing a very good job in e-commerce, and the team is also very capable of operating e-commerce traffic. This also implies the logic of Blue Moon operating traffic users for sales and growth. We believe that a brand is a pool of consumer cognition. Not only are marketing activities and marketing activities as a brand, all touch points that interact with consumers are doing brands, accumulating positive scores in the cognition pool.
Chaos University: You mentioned that Hongzhang Capital is good at discovering underwater values that others have not seen. So, how to find underwater value?
Weng Yinuo: Discovering underwater value is still the track first. In the early stage, you have to lay out this industry opportunity trend in advance. This is called discovery value. This is the first level.
The second level is that you are going to run into a good company. This is also related to the characteristics of entrepreneurs. What we are better at is Top down, which is to have the ability to predict the track at the macro level. Hongzhang Capital is an institution that went to the track for graduate students, convenience stores, lifestyle, pets, etc. earlier in the market. We are in The level of trend research and judgment is relatively high. Of course, we have to screen and find companies that can sell and trusted entrepreneurs.