The Dawning of Changes

Speech at the 25^th Anniversary of Byhealth by Mr. Liang, Chairman of the Board

 2020.10.28

Today marks the 25th anniversary of Byhealth (BH). The theme of this year’s anniversary is “昢 (dawning)”.

The title of my speech is “The Dawning of Changes”. The external environment remains uncertain due to the global pandemic. “The dawning of changes” captures precisely what I feel about China’s Vitamin & Dietary Supplements (VDS) industry and our company which is now 25 years old.

This year also concludes our last 3-year plan for a new growth cycle from 2018 to 2020. Over the past 3 years, BH has successfully prevailed over 4 challenges, including healthcare policy reform, industrial regulation, international acquisition and merger, and the COVID-19. “Immunity cannot be improved without going through a crisis.” The past challenges have brought forth opportunities for BH’s transformation.

The 2020 Q3 report released yesterday shows an increase of 114% in our revenues and 82.6% in our net profit, compared with that of 2017. This won’t be accomplished without the strenuous and persistent hard work of our entire staff, including our distributors. We have made the most of every crisis to learn, change and grow. What doesn’t kill you makes you stronger.

The new 3-year plan for 2021 to 2023 is just around the corner, whose positioning has been set as evolving from fission to transformation to achieve business expansion and relatively fast growth.

When considering the new 3-year plan, we have the following 3 judgments and prerequisites:

1.  It’s normal to have problems, and normalized problems are no big problems. The development of the complementary health industry in China has been achieved with a cost. Campaigns to regulate the industry and relevant policy adjustments as well as their impacts on the VDS industry in China will remain for a long time. Such problems are normal and thus require a normalized approach, response and resolution. By taking the initiative to adapt to the changes and trends, we can be a pace-setter in the sustained and sound development of the industry.

2. Two types of dividends can be adopted to offset the effects of normalized problems. They are dividends from the 6-fold increase of the VDS industry and our status as a leader in the VDS industry in China. There are no grounds for us to complain that we are having a hard time.

3. In the post-COVID-19 era, the market demand for nutrition and health products is increasing fast. The unforgettable pain of the pandemic has increased the public’s awareness of health.

The new 3-year plan has 4 strategic priorities:

1. The strategy of “science-based nutrition” should be implemented to enhance the power of our products as science-based.

For the “science-based nutrition” strategy, new testing technologies, evalsuation methods, target group databases, functional products, knowledge graphs, intelligent algorithms and others relating to precision nutrition will be the focus of our R&D. The past years have already seen many results.

As for the new technologies, our decade-long efforts have successfully generated the first personalized vitamin mini-tablet product and the first personalized vitamin production equipment based on core algorithms in the world, in addition to our independently developed and established automatic testing center on Dried Blood Spot (DBS), the first of its kind in China.

As for the new functions, we have developed products to help maintain the normal blood platelet aggregation and found ways to reduce advanced glycation end products (AGEs).

As for the new ingredients, we have developed new patented strains.

As for the new formats, we have succeeded in our R&D of and patented the first micro-effervescing buccal tablet, personalized vitamin mini-tablets in the world, and the first isotonic colloid in China.

In November 2017, BH joined hands with Shanghai Institutes for Biological Sciences of the Chinese Academy of Sciences (SIBS, CAS), the Netherlands Organization for Applied Scientific Research (TNO), and Germany’s BASF in their establishment of the Alliance of Precision Nutrition: Research and Application. In October 2019, BH partnered with the Shanghai Institute of Nutrition and Health of CAS in setting up the Nutrition and Anti-aging Research Center.

For a long time, BH has built coordinated and innovative R&D cooperation mechanisms with many worldwide research institutes to apply science-based nutrition technologies in its health products, including bespoke collagen in cooperation with France’s Rousselot, new diary protein products co-developed with New Zealand’s Fonterra, gut microbiota products jointly developed with DuPont.

At present, a new natural functional health food that works like aspirin developed by BH has been validated through clinical trials. We have also concluded the development of a new functional product with independent intellectual property rights to reduce the advanced glycation end products with the respective testing and evalsuation systems and database in place. The road of innovation ahead remains long and arduous, but our unyielding work would certainly bring success.  

In the future, BH hopes to take the industrial high ground in R&D, application and commercialization of precision nutrition and anti-aging research to enhance our product power of science-based nutrition.

2. The whole-chain digitalization. Our formula is to initiate the consumer-centered whole chain digitalization, from the C-end rather than the B-end, from the outside rather than the inside. Currently, we have many digitalization programs underway in membership, media investment, e-commerce and the whole marketing chain sub-programs to strengthen our consumer-centered digital marketing and customer service. This is what we call the “new infrastructure” of BH.

3. The management of users’ assets. This, when put simply, is the ability to be friends with consumers. Above all, we need to know who she or he is, what kind of person she or he is, and why they should make friends with us. The traditional 4P marketing strategies of product, price, positioning and promotion have left out the most important part - the consumers who are unique and alive. The way I see it, management of users’ assets will be the core capital and capability of future consumer goods enterprises. Loss on this front would mean loss of all.

4. A super supply chain. It means fast satisfaction of the increasingly uncertain and personalized consumer needs to achieve win-win results in a satisfied experience of the users and improved overall efficiency and benefits of the enterprises. In 2021, BH will cooperate with a third-party in the construction and layout of its e-commerce logistics system to B, to C, and directly to C.

During the period from 2021 to 2023, BH will stick to its plan of introducing fission into its distributors from both inside and outside to achieve business expansion, relatively fast-growing offline business, fast growth of main online platforms, expanding the pioneering advantages both online and offline.

1. Why should we start the fission plan? Currently, we’re confronted with the broadening gap between popular hero and core SKUs and some marginalized ones.

2. What are the root causes of such a gap?

Energy, ability and motivation of distributors.

3. What is the goal of introducing fission?

Short-term goal: To fit the overall marketing strategy of multiple varieties, product lines and brands.

Long-term goal: To keep up with the 6-fold increase in China’s VDS industry.

4. What makes the criteria for success? Its key lies in not the quantity, but the quality of fission, including effective distribution, activations, services, repurchase, market share, growth rate and other indicators of business expansion.

Meanwhile, we need to research the following 2 issues:

1. How to help our distributors exceed their peers in gaining sustained profit increase from low inventory, low capital and stable prices.

2. How to respond to the challenges presented by omni-channel integration, as the virus has speeded up passive attempts under anxiety and fear on various fronts?

All along, BH has adhered to the strategy of “Total Consumer-oriented Approach” to create value for our users’ health. The underlying logic is the recognition of the shift in the nature of business from “trade” to “service”, from selling products to selling “products contents services experience”. The value of BH boils down to the value it can deliver to the users’ health.

The basis of the implementation of the “Total Consumer-oriented Approach” strategy lies in the quality assurance principle that “integrity over intelligence”, which is also the cornerstone of the existence and development of BH.

Working in an industry related to products made for human consumption is like tightrope walking for an enterprise. BH always has a sword hanging over its head and walks upon thin ice every day. We can’t afford a moment of slacking off. Quality is the lifeline for a food enterprise, and the market will not give you a second chance. The national standards and regulations merely set up a minimum requirement and baseline. At BH, we aim to rise above the national standards in all aspects. Acts that do not contradict the laws or regulations but that are of health risks must NOT be committed or forgiven. Ultimately, quality reflects the integrity of an enterprise. It is not about money or technology. Gods are watching, and we have to revere every life. BH must live up to its philosophy of making nutrition products of the highest quality in the world for families and friends rather than for clients. It’s in the DNA of our brand. Products not suitable for the consumption of our kids, families and friends must NOT be produced or released. In our transparent factory stands a 100-ton seal of integrity, symbolizing the foundation the company is founded on and serving as a reminder to everyone.

The “Total Consumer-oriented Approach” strategy focuses on business related to consumer health and centers on VDS while expanding its scope of business to OTC and functional foods.

The new generation excels our generation. They are young, confident, characteristic, sharing and spiritual living in a time of cultural awakening, pan-entertainment and fewer geographical barriers. They will drive the growth of China’s consumer goods industry. Catering to the post-1995 and post-2000 generations, the core strategy of “All the Way to C” is set to usher BH into the digital age with omni-channel marketing targeting the young, alive and energetic new consumer groups and growing our core competitiveness for a bright future. We aim to prevail over our rivals and the era.

To quote a few lines from the 25th-anniversary video themed “The Dawning of Changes”

Where does nature come from, and where is it heading to?

In its eon-long course, it has evolved

beyond the understanding of humans as fleeting existence.

Facing nature, we were in awe and reverence.

We tried to change and conquer it.

We took a condescending and reckless stance.

Gradually, we abandoned our reverence for life.

Existence requires fighting.

The earth does not need our rescue.

We do.

The year 2020 marks a turning point of the world before and after COVID-19 in history. The pandemic is like a propeller, a magnifier, or even a truth detector.

Today, we officially announce the BH core values version 2.0, which include:

1. Integrity over intelligence

2. Embrace change through innovation & respond to change with speed

3. Respect everyone & enjoy every day.

Every life is of equal value. The more one achieves, the more is expected of one. Giving is receiving. The more you give, the more you receive. In the morning on the day before yesterday, Byhealth donated over 10 million RMB to join hands with UNICEF in promoting the "Nutrition Plan for the First 1,000 Days in Early Life". In the future, Byhealth will invest more in charity and assume greater corporate social responsibilities.

Every crisis is an opportunity to make us stronger. Eight years ago when the company was in a crisis, I sent a message to our entire staff and distributors:

One gets contempt when one is weak. One gets jealousy when one is strong. But when one is much stronger, one gets respect. Never blame or complain. Face up to every challenge during the growth of the enterprise. Surmount every difficulty and forge ahead. It is the way to maturity and success. We firmly believe that nothing can stand in the way of the determination and aspiration of BH to grow into a great enterprise.”

Today, I’d like to add two more lines to that message:

The flowing water contends not for the first place, but the endless momentum.

We will survive in the fierce competition and thrive with resilience.

There is another annotation to “昢 (dawning)”, the topic of my speech today, that is “after dawn, the sun will shine bright.”

I wish the best for a young BH and China’s VDS industry!

LIANG Yunchao

Chairman of the Board, Byhealth

Zhuhai, China

October 28, 2020