BuffX founder Kang Le shares how his functional food brand achieved rapid e-commerce success with nutritional gummies that target strong consumer need for good sleep and energy as well as good eye, immunity, digestion and liver health.
This article is part of a Spotlight series on what marketers can learn from DTC disruptors in China. Read more
- BuffX aims to own the niche category of nutritional gummies and turn supplement-taking into something cool and fun.
- Wanting to educate consumers is entrepreneurial arrogance; BuffX wants to discover, not invent demand, for unmet needs.
- For younger consumers, packaging is important because it differentiates premium goods from those that are basic.
Functional food startups seem to have suddenly sprung up in China in the last two years. What do you think is the acceptance level of functional foods in China compared to overseas markets?
I gave up a lot of stock options to quit Douyin and become an entrepreneur, so I made sure my new undertaking had clear prospects before I could leave Douyin to start my own business.
There was an interesting set of data points.
The penetration rate in China for functional food is about 20% and the per capita consumption in China is about US$50 a year.
This is the situation in China, and China is already the second largest functional food market in the world. The world's largest is the United States, with a penetration rate of 55% and per capita consumption of about US$100 a year. At that time, mature markets including New Zealand and Australia can reach a penetration rate of about 80%.
Based on this set of data points, I came to two conclusions. The first is that functional food will definitely grow in China.
The second is that China is now at 20% penetration rate and you can feel the breadth of the market. This is the reason why there are many new brands entering the industry. By June this year, we will have 62 new competing brands doing exactly the same thing as us, including Jiangzhong Pharmaceutical and Huaxi.
We aim to own the niche category of nutritional gummies and want to turn the mundane task of supplement-taking into something cool and fun. We first gauged the demand for nutritional gummies, then worked with food scientists to make exclusive formulations for BuffX, and after that sifted out the more delicious ones to launch the final products.
BuffX is focused on speaking to young consumers who are immersed in a gamified way of living through your cyberpunk aesthetics and light-hearted messaging. Can you tell us why?
When I was the head of BrandStudio at Douyin, I saw that China was becoming a more egalitarian society. Young people in Beijing and young people in Lhasa now have access to basically the same information.
Information egalitarianism is a precondition for the emergence of new brands in a country. In the United States, the 1960s coincided with the popularisation of television media, so American national brands such as Marlboro emerged at that time. Leo Burnett chose a medium that affirmed information egalitarianism, that’s why the Marlboro TV commercial became a classic and Marlboro became a national brand.
Such brands are bound to emerge in China too.
Kang Le, Founder, BuffX, with Chun Hua (Spring Flower)
This is an epoch-making opportunity. I felt that the structural changes brought by the equalisation of information are comparable to the invention of the Internet.
So the core goal of many new companies, including BuffX, when building their brands is to “play” with young people who have equal access to information. China is now a society where the old learn from the young, who exhibit unique consumer behaviour and habits. The new generation of young people in China have a lot of positive energy, even when they are sad or when they are trolling themselves.
Therefore, we chose young people as the core audience for BuffX. There are various tribes of young people, such as in clothing circles there are JK, Lolita, Hanfu styles and so on. We discovered what most young people can accept is gaming.
Our brand name is BuffX, which is also very game-oriented (Editor's note: "Buff" is a gaming term that refers to the additional gain or improvement in effectiveness made to an in-game element, which can be defensive or offensive). For example, when you're playing King of Glory, a blue buff is for magic; a red buff is for a blood boost.
This is why we choose to be gamified and our seed users are game players. Based on our brand name, assuming we don’t do any marketing at all, our initial consumer base could very well be the DAU of the King of Glory game, and it is a big number.
However, we are still relatively early in terms of the gamification of our marketing, so we have a lot of ideas that have not yet been realised. When we were communicating with King of Glory, we wanted to help design some character skins, such as Li Bai's skin or Zhang Fei's skin. Our brand is all about three keywords: the first is authenticity, the second is vitality, and the third is possibility.
Digital readiness in the China market has provided fertile ground for new e-commerce business models and DTC brands to thrive. Has this environment created opportunities for BuffX?
The most interesting thing is actually our private domain on WeChat and the core objective is to sell goods directly. We have a private domain group of 22,000 people and we send out links to offers in the group with personalised gamification techniques. When consumers buy our products, they will gain points or treasure coins that unlock treasure boxes. People can also group together to play and unlock treasure boxes collectively. This was our internal test group in WeChat and the response has been very good because young people agree with our logic of teaming up to “buff” or boost their capabilities. At any one time, there would be about 2,000 young people teaming up to participate (buy and play). They can win prizes like a RMB10 recharge card or even a smartphone.
To be fair, this is not essentially a real game – we are just using the spirit of gaming for our sales and promotion activity. We still want to think about how to do gamification properly. The most addictive mechanisms of games are actually uncertainty and affirmation.
BuffX officially started selling on Oct 20, 2020 and is barely eight months old. Even then, BuffX has risen through the ranks on major e-commerce platforms and received funding from the likes of Sequoia, GGV and Black Ant. How did you build up your user base and brand awareness so quickly? Did you need to educate consumers first although consumer education is supposed to be a very long process?
We never educate consumers. I have always disagreed with the logic of “educating consumers” or “cultivating the sector”. This is, in fact, a bit of entrepreneurial arrogance – you are assuming that consumers do not understand their own needs.
As per the figures I just shared, I think China’s functional food industry has not reached saturation, unlike cars or 3Cs (a collective term for computer, communication and consumer electronics products).
In an “uncultivated” industry, we don't want to educate consumers. We want to discover demand and not invent demand because a lot of needs have not been met.
On the other hand, in a fully saturated and competitive industry, all the more we have to educate consumers because most of their needs have been already met and brands may have to dig out deeper, unmet needs.
This is contrary to the understanding of many founders of new and emerging brands.
How aggressive were you in discovering latent demand for functional candy targeting sleep, energy, eye, immunity, digestion and liver health?
Analysing active search data on Tmall, we found “sleep” to be one of the top three keywords searched by male users. That is to say, sleeplessness is a big pain point and good sleep is in big demand. Many people want to sleep well, so we provided them with solutions.
In October 2020, at the beginning of our Tmall operations, my partner and I told our team this: From our past experience in managing e-commerce stores, the key indicator of success is not the size of our GMV but whether we can get organic traffic from keywords such as "sleep" and “sleep gummies”.
What does it mean? It means that even if we withdrew adspend, our Tmall store will still be steadily up. Otherwise we may spend a very long time driving in a dark tunnel and never seeing the light. It took us almost a year on NetEase Yanxuan (Netease’s private-label e-commerce brand launched in April 2016) to get some free search words.
After we got through some difficulties in our first two weeks, far more than we expected, we became the number one seller on Tmall for the keyword “sleep gummies”, surpassing traditional big brands like Olly and By-Health. Around December 2020, we also became the number one selling store for the same online keyword on the Pinduoduo platform.
As far as our offline marketing is concerned, 20% of the company's revenue comes from offline advances but most of it is passive.
We ourselves often review and reflect on which of our decisions was right or wrong. We came to the conclusion that essentially, we have no information gap. There is nothing we know that others do not know about operating methods or marketing resources or whatever. Although we used to work for Douyin, that doesn’t mean our ROI will improve by 0.4 points, for instance.
Essentially, from beginning to end, we did not “educate consumers”.
We did not have any entrepreneurial arrogance. If BuffX was developed completely according to my personal wishes, the BuffX you see now would be an aphrodisiac chewing gum with a “sexually indifferent” design in its packaging (laughs).
We did 15 versions of the product’s visual style based on American comics. Consumers voted for their favourites and what you see now is the result of that. In fact, my personal favourites are at the bottom of the list.
Many other founders ask me why I am successful and I tell them, maybe we are more respectful of the consumer, that's all. As long as you respect consumers enough, they will give you good enough feedback. It is such simple logic. I have a founder friend who wants to make an eyebrow pencil for men. It sounds weird, doesn't it? Many guys don't have a need for eyebrow pencils, so he has to educate the male consumer and make them think they have that need. I think he has the courage to do that kind of consumer education but we don't do things like that.
Regarding the packaging choices, do you have some data to explain why consumers chose the opposite of what you personally prefer?
We Bytedancers have a habit of attribution scoping after A/B-testing. We tested the packaging material and form first, and design and shapes second. We exhausted 20 to 30 probabilities and we surveyed consumers on current brands.
In our research, we found that Saturnbird stands out because of packaging. We found that their fans know little about the product features claimed by the instant coffee manufacturer but they are receptive to the plastic packaging because it is easy to share, disposable and stress-free. This shows that plastic is an important material that young people like.
This overturned my perception because when we were managing our NetEase Yanxuan store, we knew that wood and metal are the best packaging, followed by paper and glass, and the worst is plastic. Young people are now the opposite and they find plastic the best and the most fashionable.
Plastic may not be good for environmental sustainability and it doesn't seem to fit sustainable marketing values, does it?
I think environmental protection is the icing on the cake. We need to satisfy the consumer experience first; and second, be biodegradable and environmentally-friendly.
One consumer told us he buys Saturnbird Coffee not because it tastes good. A young person in Beijing or some other urban Chinese city moves about once every year due to the fact that they like to live in all kinds of places. Each time they buy something packed in glass or wood, these young people are under a lot of pressure as they feel that they can't finish the product, or that they have nowhere in their small apartments to place these bulky materials.
That’s one example but in essence, we found that young Chinese born after 1990 seem to be at a higher level on the whole demand pyramid. The post-80s are still fulfilling basic needs, such as health and safety, but younger people have jumped to the so-called respect and self-actualisation levels. What this means is that product packaging cannot look aloof. It must bring the buyer to the top of the totem pole in his or her social circle and it should be brightly visualised. Why? 80% is product, 20% is packaging. For brands, that extra 20% will lead to a price premium; for the post-90s consumers, that extra layer is important to differentiate from goods that are basic.
Therefore, I urge post-80s and post-70s entrepreneurs to listen more to what young consumers have to say.
One of the most talked-about things about BuffX is that half of the founding team came from Bytedance. So for other brands that want to use Bytedance’s emerging platforms, what is your advice?
Many people would think that we might have an advantage because of our team's background and that we might have very strong insider information about channels like Douyin, as the platform will be giving us all the traffic.
Before I started my business, I actually talked to a dozen “dead” founders and a cruel question I asked was “how did you die?”
I came to an interesting conclusion that most founders don't die from their shortcomings but from their longcomings. For example, if the person was born in the marketing world, he or she will probably build a short-lived and fleeting brand, then quickly fall. Because he or she is too confident about marketing – even though the product is not yet perfect, he or she gets confidence from short-term marketing results that are good enough. We have to give up our ego. I think ego is the pointed edge that makes many new brands die.
As for us at BuffX, we are full of fear and less full of empiricism.
Frankly, we know nothing about food supplements. I myself am a foodie but all I know about food before was based on NetEase Yanxuan’s ODM (original design manufacturer) model, but essentially nothing about food brands actually. We have reverence for this industry, so each step of our brand is built on A/B tests and we did not make any decisions on behalf of the consumer.
How you can use Bytedance effectively is by collecting objective information from the consumer side, and combining the information with Tmall sources to get the complete picture, then calmly make a good-enough judgment call for the best ROI.
It cannot be based on just my own ideas or thoughts. For example, my preferred packaging option that was downvoted by consumers had a click rate of 0.9 or so (compared to 20 for the winners) on both Douyin and Tmall when we were doing A/B testing. Success is not determined by my experience, my background or my access to previous resources.
How about your offline layout?
We are selling very well in KK stores in first-tier cities and even in Inner Mongolia, many mom-and-pop shops will take the initiative to find us to procure BuffX goods.
As we started selling online on Oct 20, we only began to invest in offline touchpoints after the Chinese New Year around March 2021. Now we have entered more than 3,000 offline stores with not-bad sales, probably because our packaging is very bizarre.
Offline is challenging because online is where our team's capabilities lie. It is the reason why we force ourselves to focus more on offline as we are actually quite weak when strategising for offline. Our logic is: the human biological instinct is to avoid pain, so we will be constantly grinding until there is no pain.
Regardless of online or offline, I look at these data points: active search keywords, repurchase rates and detailed seller ratings on Tmall.
Our strategy is relatively simple – food safety is the bottom line, and on top of the bottom line, we do these three things better.