---
title: "Channel Contraction and Unpaid Fees: Where Is Carabao Heading in China?"
description: "Carabao, the Thai energy drink, is contracting its channels in China and focusing on gas station convenience stores, while facing declining sales and dealer disputes over unpaid fees. Despite strategic adjustments, analysts believe the brand's fate is sealed due to intense competition and market saturation."
author: "空空"
publisher: "New Distribution"
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published: "2020-07-31"
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# Channel Contraction and Unpaid Fees: Where Is Carabao Heading in China?

> Carabao, the Thai energy drink, is contracting its channels in China and focusing on gas station convenience stores, while facing declining sales and dealer disputes over unpaid fees. Despite strategic adjustments, analysts believe the brand's fate is sealed due to intense competition and market saturation.

**Click the image above for details**
**The fate of Carabao.**
China Red Bull sells over 22 billion yuan annually in China, but Carabao, also from Thailand, has a different fate in China.
Recently, the author noticed that **Carabao, once sold in many supermarkets, has disappeared, and is now only available online, at the gas stations of the "two barrels of oil" (Sinopec and PetroChina), and in a few foodservice channels. Some distributors report that Carabao is contracting its channels and owes them a significant amount of fees. Information gathered from various sources indicates that Carabao has shifted its main focus to the channels of Sinopec and PetroChina gas stations.**
Carabao is allocating its limited resources to channels where it has relative advantages to sustain operations and avoid a quick exit from the Chinese market. However, with Red Bull dominating the market and domestic brands like Dongpeng and Lehu rising rapidly, coupled with severe product homogenization, Carabao finds it hard to escape its fate of surviving in the cracks.
**-01-
Channel Contraction**
The author noticed that Carabao has disappeared from several markets.
In Anhui Province, Carabao, once sold in many large supermarkets, is no longer available. An insider in Anhui attributed this to insufficient staffing, leading to the cessation of sales in some supermarkets. However, Carabao can still be purchased at PetroChina gas stations and along highways in Anhui.
In the Guangxi market, an insider said that in Nanning, only gas stations sell Carabao, and in Guilin, only gas stations are confirmed to sell it; other traditional channels are uncertain.
In first-tier cities, Carabao is also contracting its presence. In Beijing, due to contract issues, Carabao has withdrawn from some supermarkets.
Notably, convenience stores, an important channel for the beverage industry, are rarely used by Carabao. Staff at FamilyMart and 7-Eleven told the author that Carabao has never entered these stores.
The channel contraction has also affected some distributors. One distributor revealed that Carabao proactively ended the cooperation, repurchasing inventory at 20% off, but after the return, Carabao did not refund the repurchase fee. The distributor is seeking legal recourse.
After the contraction, Carabao's main channels are the convenience stores of the "two barrels of oil." Currently, Carabao is available at PetroChina and Sinopec gas stations nationwide. According to Carabao, "We have a strategic cooperation with Sinopec and PetroChina."
The author noticed that Carabao's major promotions also revolve around these gas station convenience stores. In October 2019, Carabao cooperated with Sinopec's Easy Joy convenience stores, offering a "buy one get one for 1 yuan" promotion, effectively a half-price sale. Recently, Carabao launched a co-branded product with PetroChina's昆仑好客 (Kunlun Hao Ke) convenience stores.
Regarding Carabao's adjustments, Zhu Danpeng, a Chinese food industry analyst, believes that **Carabao's adjustment of its operational strategy to focus on core channels, consumer groups, and scenarios is an effective measure. Revenue will inevitably suffer, but the input-output ratio will improve.**
**-02-
Poor Performance**
**Channel contraction is a helpless move for Carabao. Since officially entering the Chinese market in 2017, Carabao's high-profile image has faded, followed by two consecutive years of losses.**
In 2017, Carabao held its first brand launch event in Beijing, announcing a $300 million investment to open the market. Carabao sponsored various sports events, including the Freestyle Football World Cup, the Tour of Poyang Lake International Cycling Race, and the 2017 Hainan Golf Open, and invested heavily in advertising.
High investment brought high returns. In 2017, Carabao's sales reached 1.019 billion Thai baht, approximately 214 million yuan. However, since then, Carabao has entered a downward spiral and has yet to find a way to stop the decline.
In 2018, Carabao's performance nearly halved. Data shows that Carabao's China market revenue in 2018 was 592 million Thai baht, approximately 125 million yuan, a decline of over 40% from 2017. In 2019, Carabao's China market revenue was 494 million Thai baht, approximately 110 million yuan. Although the decline slowed, it marked two consecutive years of decline.
In fact, Carabao has tried to salvage its performance in China. In August 2017, Carabao officially launched in China, recruiting the original Red Bull promotion team, but channel partners felt that Carabao's "team lacked execution."
In April 2018, Carabao replaced its China general manager with Huang Bao, who had 22 years of FMCG promotion experience. After taking office, Huang Bao began building a core team, straightening out agents in 26 provinces, and proposed a "10-fold growth in three years" target. However, two months later, Huang Bao resigned.
In 2019, Carabao still did not give up on the Chinese market. To continue driving consumption and cultivate drinking habits, Carabao invested another 35 million yuan in a red envelope promotion for 2019. At the operational level, Carabao supplied 40% of its products directly to PetroChina and Sinopec systems, with 60% distributed through dealers. Ultimately, this did not change the declining trend in 2019.
**-03-
Inevitable Fate**
However, Zhu Danpeng believes that **the Chinese functional beverage market has distinct characteristics: brands that enter first dominate, and outsiders have little chance. This is Carabao's fate.**
Currently, China's functional beverage market is about 50 billion yuan. Among them, China Red Bull under Huabin Group has sales exceeding 22 billion yuan, and its sibling brand Zhanma has sales close to 2 billion yuan. Together, the two brands account for 50% of the functional beverage market, creating a situation where one brand is overwhelmingly dominant.
Dongpeng Special Drink and Lehu have each achieved market sizes of 4 billion yuan and 3 billion yuan, respectively, by positioning in different price bands in recent years. Zhongwo's Tizhi Nengliang and Heika have also gained market space through channel下沉 (downward channel expansion).
Industry insiders analyze that "**from the perspectives of timing, location, and harmony, the functional beverage market has passed its high-growth stage. There are relatively strong brands in every channel and region, and consumer awareness has already formed. The elements needed for functional beverage development—timing, location, and harmony—have weakened. Without major innovation, it is difficult for foreign products to gain an advantage again.**"
In the past two years, imported Austrian Red Bull has only been sold in relatively high-end niche markets. Monster has not made significant progress in China despite leveraging Coca-Cola's production and channel resources. Even domestic FMCG giant Yili failed to break through with its "Huanxingyuan" product. Red Bull brand founder TCP Group has also not yet established a firm foothold in China's functional beverage market with Red Bull Angeji and imported Red Bull flavored drinks.
In this regard, Zhu Danpeng believes that **many functional beverage companies "poach" talent from China Red Bull. They may learn the "form" of China Red Bull, such as establishing a dealer system, but the management philosophy and methods are the "spirit" of the enterprise, which is part of the system and content that is difficult to learn.**
Furthermore, **the flavors and packaging of functional beverages are extremely similar, and product homogenization is severe. Unless foreign brands have major innovations, it is difficult to attract consumers, and there is no reason to choose a new product.** This is not a problem that can be solved by changing channels, especially since gas station channels are not mainstream. Therefore, Carabao's strategy of contracting its front and concentrating on gas stations only extends the product's life cycle. It does not add much luster to the Carabao brand itself, and relying on gas stations to change its fate is far-fetched.
Source: FMCG Elite Club (ID: FMCG-CLUB); Author: Kong Kong


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