By WeiJiu Team | Editor: Gu Debai Recently, multiple distributors have reported that Bacardi's Ice Breaker, one of the leading pre-mixed cocktail brands, has essentially stopped production, and distributor fees have been long overdue. WeiJiu reporters immediately launched an investigation, which confirmed that the Ice Breaker market is indeed in trouble: since around March-April this year, the company has laid off regional staff and owes distributors fees. Distributors say, taking the northern region as an example, "only a few people remain for maintenance, and the company no longer assesses staff on Ice Breaker sales performance, so staff lack motivation to resolve issues." This corroborates earlier industry rumors that Bacardi's focus is not on Ice Breaker but on spirits like rum. A source familiar with Bacardi said, "Bacardi is primarily a spirits company, the world's largest rum producer. Ice Breaker accounts for a small share of its global business and is not a growth priority." Layoffs, Production Halt, and Retreat Rumors: What's the Truth? "Production has stopped. The person handling my account said after a mid-level meeting that the team was disbanded. Later, a new contact explicitly said they are no longer producing and we can apply for a refund," said Mr. Zhang, an Ice Breaker distributor in North China. "They owe us over 100,000 yuan in fees. As a multinational, I believe they will pay, but it's very slow." Other distributors face similar situations. One said, "The production halt is true. Sometimes they said they could produce, sometimes not—it was always unclear. They owe us 600,000-700,000 yuan. We'd accept either goods or a refund." During interviews, multiple distributors noted that since last year, production has been irregular. Payments were accepted but production was queued without clear dates. Sometimes delivered goods were near their expiry date, which they didn't want. Distributors say the market still moves, but volumes are small. The pre-mixed cocktail craze has passed, and RIO (Rui Ao) has squeezed them hard; RIO's market is now relatively stable. WeiJiu immediately called Bacardi executives, who said they were "not authorized to answer this question." Later, Bacardi China provided a regional contact, who said, "Ice Breaker is no longer recruiting distributors; we are in a maintenance phase, and future plans are undecided." Why the Great Retreat After a Boom? Ice Breaker and RIO were the two major brands in the pre-mixed cocktail market. In 2014, the category suddenly exploded. Many distributors and manufacturers entered, such as Gujing's Baise and Luzhou Laojiao Group's "Chao Ti" cocktail. The spring trade fair that year was unprecedented. △ Ice Breaker and RIO RIO's listed parent, Bairun, saw its stock price and performance soar. The boom seemed justified because real consumer demand was also hot! Distributors said that in 2014, pre-mixed cocktails were extremely popular—anything placed on shelves sold. A Shanxi distributor said a prefecture-level city could sell millions then, now only hundreds of thousands, which is normal. A Hebei distributor said anything sold regardless of flavor. One local supermarket chain had annual sales of 3 million yuan; "at class reunions, not having pre-mixed cocktails seemed wrong." Ice Breaker and RIO competed fiercely. During the boom, both did well. But as a foreign company, Bacardi, though seemingly standardized, had too many internal rules and bureaucracy, leading to slow response times. Distributors report that during the peak, Ice Breaker couldn't keep up with production. When the market adjusted, Bacardi, as a foreign company, stuck to its annual budget, couldn't tolerate losses, and cut costs and staff, creating a vicious cycle. Pre-mixed cocktails have a shelf life, and supermarkets, the main channel, demand fresh stock. During the boom, companies pushed inventory, leading to overstock and near-expiry products. Distributors dumped goods, sometimes selling near-expiry products at rock-bottom prices, causing losses after price collapses. Similarly, RIO faced problems with plunging performance. The latest financial report shows that in the first half of 2016, Bairun's pre-mixed cocktail revenue continued to plummet by 78.34%, a sustained decline! △ Bairun's 2016 Semi-Annual Report High-Margin Industry Squeezing Out Bubbles Pre-mixed cocktails are a high-margin category, with gross margins of 70% or more. Bairun's financial report shows a gross margin of 74.47%. Low production costs and simple processes attracted many players during the boom, flooding the market with brands that had little differentiation, leading to price wars. Distributors say pre-mixed cocktails can be a viable business if production matches actual demand and companies avoid overstocking. But with mixed quality and inventory pushing, consumers often drink near-expiry products, harming the category's development. Looking ahead, the market can support two or three brands. RIO is stabilizing, and while Ice Breaker exits, distributors believe the brand still holds value. The industry needs to squeeze out bubbles. This year is the bottom, and the future will be a process of continuous bubble-squeezing and normalization. Does the Industry Have a Future? Mr. Wu (pseudonym), a researcher on pre-mixed cocktails, said: "The initial boom was largely due to RIO's marketing, with product placements in TV dramas creating consumption scenarios and driving trial consumption. But consumers didn't form habitual usage." △ RIO placement in "Silent Separation" Companies aiming for long-term brands had to invest heavily. But fees were often given as product rebates, and when products neared expiry, they were dumped at low prices, causing market chaos. RIO had similar issues. An insider said that as a listed company, RIO must report quarterly and monthly sales, and it required an 8% 'turnover fund' from distributors, regardless of orders. This worked in good times but became burdensome in bad times. Mr. Wu believes consumer demand still exists. "To win consumers' hearts will take at least three to four years." This year is the bottom, and legacy issues are being resolved. Recovery will come, but it must be based on product taste improvements and innovation. Currently, consumers treat it as a beer-like drink; overconsumption leads to unpleasant intoxication, so product innovation is needed. It's a trend-driven consumption without brand loyalty. Do New Alcoholic Beverages Have a Future? During the industry's adjustment period, innovations abound. Strictly speaking, pre-mixed cocktails aren't new, but they attracted industry attention for several reasons: First, the industry was in a downturn and uncertain about the future. Second, pre-mixed cocktails like RIO and Ice Breaker became hot. Third, these youth-oriented products challenged traditional baijiu, sparking debates about whether young people will drink baijiu. We should note that while pre-mixed cocktails are adjusting, other new categories are emerging successfully, such as Jinjiu's Maopu Kuqu. In the traditional beverage industry, marketing innovations are endless, but for consumers, the product matters most. For any industry, the ultimate value is what the product delivers to consumers. The next great beverage company will likely be one that innovates in product. As today's leader Moutai shows, sauce-flavor was once a niche, but history shows that process and technology innovations are valuable in any industry. What are your thoughts? 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