-01- Red Bull Has No Lack of Chasers Can Dongpeng Special Drink surpass Red Bull after going public? On October 9, the China Securities Regulatory Commission disclosed that Dongpeng Beverages had completed its first phase of IPO supervision under the guidance of Huatai United Securities. This means Dongpeng Beverages is one step closer to an A-share listing. The industry believes this is a prelude to Dongpeng Special Drink's charge against Red Bull. Admittedly, surpassing Red Bull is no easy feat—Dongpeng Special Drink's sales are only a quarter of Red Bull's. But this has not dampened Dongpeng Special Drink's enthusiasm. According to official Red Bull data, in 2018, Red Bull achieved sales of 20 billion yuan, holding a 58% market share in the functional beverage segment. During the same period, Dongpeng Special Drink's sales reached 5 billion yuan, firmly ranking second in the industry. It is undeniable that in the functional beverage field, Dongpeng Special Drink has moved to the closest position to Red Bull. Investors are also very optimistic about Dongpeng Special Drink. In June 2017, Jiahua Capital, which had previously invested in Qiaqia Food, Xiaoguan Tea, Laiyifen, and others, invested 350 million yuan, becoming the second largest shareholder of Dongpeng Beverages. Song Xiangqian, chairman of Jiahua Capital, believes Dongpeng Special Drink is most likely to become China's Red Bull. He has also expressed his affirmation of Dongpeng Special Drink more than once: Dongpeng Special Drink is developing very fast, with growth rates exceeding many peers, which is rare in the current market. As Dongpeng Special Drink's target to surpass, Red Bull has been mired in trademark disputes and unable to extricate itself. Since August 2016, Hua Bin Group, the operator of Red Bull in China, and Thai Tiansi, the founding company of Red Bull, have engaged in more than 20 rounds of battles over the ownership of the "Red Bull" brand, fighting fiercely and endlessly. The market quickly reacted to this battle, and Red Bull's sales performance fell accordingly. In 2017, Red Bull's sales in the Chinese market dropped to 19.6 billion yuan, a year-on-year decrease of 27.86% from 2016. The Red Bull brand has also been severely damaged as a result. In 2015, Red Bull's sales reached 23.07 billion yuan, but by 2018, sales remained at 20 billion yuan, stagnating. In July 2019, Hua Bin Group released Red Bull's semi-annual performance report. According to the data, the combined sales of Red Bull and its new functional beverage brand Warhorse were 14.72 billion yuan, a year-on-year increase of 3.5%. Among this, Red Bull's sales were 13.89 billion yuan, while Warhorse's sales were flat compared to the previous full year, at 830 million yuan, with a period-on-period increase of 47%. Looking at the semi-annual performance alone, Red Bull faces little pressure to reach 20 billion yuan in sales again, but the competition it faces is equally significant. Currently, the more mainstream functional beverage brands in the domestic market include Red Bull, Lehu, Dongpeng Special Drink, Monster, Tizhi Nengliang, Carabao, Qili, etc. In 2018 alone, more than 20 new functional beverages were launched. Although Red Bull occupies half of the functional beverage market, it still cannot withstand Dongpeng Special Drink's relentless pursuit. Not only has its performance begun to shrink, but its market share has also declined from 63% to 58%. On the road to catching up with Red Bull, Lehu is also unwilling to fall behind. Although its sales are far lower than Red Bull and Dongpeng Special Drink, Lehu's performance has been steadily rising. According to data disclosed by Lehu (Lehu data comes from Dali's annual report), Lehu's sales in 2016, 2017, and 2018 were 2.036 billion yuan, 2.675 billion yuan, and 3.079 billion yuan, respectively. In contrast, Red Bull not only has to divert attention to resolve trademark disputes but also has to deal with the pincer attack of various chasers showing their skills. This instead gives Dongpeng Special Drink an excellent opportunity to overtake on the curve. **-02- The Ambition of a Follower To be fair, even if Dongpeng Special Drink chooses to accelerate its listing at a time when Red Bull is in internal and external difficulties, and despite its own unlimited potential, surpassing Red Bull is not an easy task. In fact, besides its own efforts, Red Bull has also played an extremely important role in boosting Dongpeng Special Drink's growth. Founded in 1987, Dongpeng Beverage Group was originally a state-owned time-honored beverage manufacturer in Shenzhen, initially producing soy milk, water, and herbal tea drinks. It was not until 10 years later, when Dongpeng Special Drink was launched, that the group's name became widely known. This transformation is inseparable from Lin Muqin, chairman of Dongpeng Special Drink. In 1995, Dongpeng Beverage Group was at its peak, and the "Dongpeng" brand Jiuzhi Chenpi beverage was thriving in the southern market. At this time, Lin Muqin had also gradually risen from the grassroots production line, production department head, and technical development department head to sales general manager. In the same year, 73-year-old Red Bull founder Xu Shubiao met Yan Bin, who was also living in Thailand. Yan Bin was only 41 years old at the time, but their similar experiences of making a living abroad made Xu Shubiao and Yan Bin hit it off immediately and appreciate each other. Two years before meeting Yan Bin, Xu Shubiao had considered developing the Chinese market, but at that time, functional beverages were not listed in China's commodity classification catalog, and government approval could not be obtained, so production could not be started. This situation improved with Yan Bin's entry. In December 1995, under Yan Bin's leadership, Red Bull officially entered the Chinese market. The increasingly popular Red Bull quickly made Dongpeng Beverage Group realize that the functional beverage category should not be underestimated. In 1997, taking advantage of Red Bull's momentum, Dongpeng Special Drink was officially launched. However, because it was not the main product of Dongpeng Group and was constantly questioned by the market as a "copycat Red Bull," Dongpeng Special Drink's performance was always unsatisfactory. After entering the 2000s, Dongpeng Group, constrained by the system, was helpless against the strong rise of Wanglaoji. Coupled with poor internal management, Dongpeng Group suffered losses for years and was almost on the verge of bankruptcy. The turning point occurred in September 2003, when Dongpeng Beverage Group decided to transition from state-owned to privatized. At that time, sales general manager Lin Muqin had two choices: one was to pool funds with many others to buy the group's land and factory buildings covering more than 20,000 square meters, but with a smaller personal share; the other was to buy the group's brand and production equipment at a smaller cost and continue making beverages, but with profits and losses borne entirely by himself. Lin Muqin ultimately chose the latter, which was thankless and had an uncertain future. For a company on the verge of collapse, it was unrealistic to develop new products. Lin Muqin also sensed the huge potential of the functional beverage market, and Dongpeng Special Drink was thus seen as a breakthrough for Dongpeng Beverage Group to rebound from the bottom. In 2007, Dongpeng Special Drink was officially put into production. Lin Muqin firmly believed that only by making products cheaper and more technologically advanced than competitors could they gain the most critical advantage in this competition. In the view of many industry insiders, Dongpeng Beverage's development strategy is to continuously imitate Red Bull and then form differentiated competition. This is indeed the case. Lin Muqin had been a sales general manager, so he was naturally familiar with how to promote products. Dongpeng Special Drink not only used almost the same color scheme as Red Bull in packaging, but its advertising slogan was also similar to Red Bull's early one. Red Bull's slogan was "Tired? Sleepy? Drink Red Bull!" Dongpeng Special Drink's slogan was "Tired? Sleepy? Drink Dongpeng Special Drink!" Moreover, wherever Red Bull distributed products, Dongpeng Special Drink also distributed. However, Dongpeng Special Drink knew its strength was insufficient. To avoid direct competition with Red Bull, Lin Muqin deliberately changed cans to bottles to save costs and lowered prices, focusing on the mid-to-low-end market. The follow-the-leader strategy made Dongpeng Special Drink increasingly strong. From 2003 when Lin Muqin took over Dongpeng Beverage Group to around 2010, the group's annual output value rapidly increased from 15 million yuan to 250 million yuan. 2013 was an important node in Dongpeng Special Drink's development. That year, Dongpeng Special Drink began to enter the national market, with Shenzhen as the marketing planning center, setting up six business divisions in Guangdong, South China, East China, North China, Southwest, and special channels, with five production bases under them. In 2015, Dongpeng Special Drink abandoned the advertising slogan that had been criticized as copying Red Bull, changing it to "Young, fight while awake," focusing on youthfulness, and successively sponsored popular variety shows or hit TV dramas with a younger audience, such as "Lao Jiu Men," "iPartment," "Top Funny Comedian," and "The Amazing Race." From 2016 to 2018, Dongpeng Special Drink's market share climbed all the way, and annual sales soared from 3 billion yuan to 5 billion yuan. After growing, Dongpeng Special Drink also attempted to challenge Red Bull. Besides launching canned products imitating Red Bull's gold can, it even adjusted its price to the same range as Red Bull. However, facts have proven that Red Bull's market position is temporarily unshakable. The affordable price allowed Dongpeng Special Drink to quickly open up the Guangdong market in the early stage, but it also firmly tied it to the labels of "low-end" and "cheap," making it difficult for Dongpeng Special Drink to advance in the high-end market. In 2018, Dongpeng Special Drink suffered setbacks in the northern market. To protect its market share, it had to adjust its price back to the previous range and continue to hold the mid-to-low-end market. This attempt also reflected two facts from the side: first, Dongpeng Special Drink has not truly opened up the national market; strictly speaking, it is still a regional brand; second, Dongpeng Special Drink cannot yet shake off its mid-to-low-end positioning. This also means that Dongpeng Special Drink's sales may still be a long way from breaking through 10 billion yuan, and replacing Red Bull as the industry leader is even more distant. **-03- Listing Is Not a Panacea According to Dongpeng Beverage Group's disclosure, the group has formed a product structure with Dongpeng Special Drink as the main product, Jiuzhi Chenpi beverage as a supplement, and purified water and paper-boxed cooling beverages as the foundation. But in reality, apart from Dongpeng Special Drink, other products have been lackluster and have not even been able to break out of the local market. Unlike Red Bull and Warhorse's "dual-wheel drive," although Dongpeng Special Drink's growth rate reached 25%, Dongpeng Beverage Group cannot escape its dependence on a single product. Dongpeng Beverage Group is not unaware of this. In May 2019, Dongpeng Beverage Group launched a new tea beverage, Yougan Lemon Tea, with "fat-burning" as its main selling point. Currently, monthly sales of Yougan Lemon Tea on Dongpeng's Taobao flagship store are less than 200 boxes, compared to Red Bull's monthly sales of up to 4,400 boxes. Yougan Lemon Tea's performance even lags far behind Red Bull's new brand Warhorse. At the end of 2016, Hua Bin Group launched its own brand Warhorse functional beverage, attempting to reduce its over-reliance on Red Bull. Just three months after its launch, Warhorse began full-scale market promotion. With the help of Red Bull's convenient and stable channels, Warhorse quickly entered major terminal supermarkets. Although Warhorse's sales cannot replace Red Bull, it has at least gotten on track, and it is not impossible to break through the 2 billion yuan mark by the end of the year. In contrast, Dongpeng Special Drink is accelerating its listing while Hua Bin Group and Thai Tiansi are in fierce disputes and Red Bull's performance is declining. This move is also seen by the outside world as an attempt to use capital power to narrow the gap with Red Bull, solve the problem of product singularity, and thus open up a new situation. After spreading the wings of "listing," can all of Dongpeng Special Drink's problems be solved? Not necessarily. The market situation facing Dongpeng Special Drink is hardly optimistic. Upward: Red Bull still dominates; even with capital support, it is unlikely to surpass Red Bull in a short time. Downward: brands like Lehu and Monster are attacking cities and territories, and have long coveted Dongpeng Special Drink's position. Although Dongpeng Beverage has completed the first phase of IPO supervision, this does not mean that sprinting for the IPO is without pressure. In fact, even if it successfully lists, Dongpeng Special Drink still has a long way to go, such as how to shake off the "copycat" label, change the habit of walking on one leg, and how to face a new round of fierce battles. Source: Bullet Finance (ID: wwwhygc) Tips will be paid 400-2000 yuan once adopted.