---
title: "From 25 Million in Debt to 1.6 Billion in Revenue: The RIO Miracle!"
description: "With the popularity of TV dramas like 'My Sunshine' and variety shows like 'Running Man', the colorful RIO (Rui Ao) pre-mixed cocktails became a hit, boosting the stock price of its parent company, Baorun, from under 20 yuan to 112.9 yuan. The mastermind behind RIO's success is Liu Xiaodong, a former cigarette factory worker, who took a decade to turn the innovative product from 25 million yuan in debt to a half-year revenue of 1.617 billion yuan."
author: "路胜贞"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2015-09-11"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/SA01LpKdasupPq7H4Uk3Aw"
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---

# From 25 Million in Debt to 1.6 Billion in Revenue: The RIO Miracle!

> With the popularity of TV dramas like 'My Sunshine' and variety shows like 'Running Man', the colorful RIO (Rui Ao) pre-mixed cocktails became a hit, boosting the stock price of its parent company, Baorun, from under 20 yuan to 112.9 yuan. The mastermind behind RIO's success is Liu Xiaodong, a former cigarette factory worker, who took a decade to turn the innovative product from 25 million yuan in debt to a half-year revenue of 1.617 billion yuan.

With the popularity of TV dramas like 'My Sunshine' and variety shows like 'Running Man', the colorful RIO (Rui Ao) pre-mixed cocktails began to sell well, also making its parent company Baorun Shares popular. Since the announcement of the acquisition plan for RIO last September, Baorun's stock price has risen from less than 20 yuan to 112.9 yuan. The mastermind behind RIO's success and Baorun's capital miracle is Liu Xiaodong, who came from a cigarette factory. He spent ten years turning RIO, a new product that is neither wine nor beverage, from a debt of 25 million yuan into a hit product with half-year revenue of 1.617 billion yuan.

The Emergence of a Leader
Like a spring breeze overnight, pre-mixed cocktails are everywhere. Today, the pre-mixed cocktail market has grown to nearly 10 billion yuan, but ten years ago, this new category, now red-hot, almost disappeared.
Ten years ago, Liu Xiaodong, then president of Baorun Flavors, frequented Shanghai's nightlife venues for business, witnessing extravagance. Baorun was making cigarette flavors at the time, and its annual sales nationwide were less than the monthly sales of a set of cocktails in 13 nightclubs in Shanghai.
Where there is profit, there is temptation. Liu Xiaodong was intrigued. In Shanghai's nightlife, beer, foreign spirits, and beverages each held a third of the market. Liu did not dare to directly compete with foreign spirits like Hennessy, Remy Martin, Chivas, Smirnoff, and whisky, all of which were financially powerful. Instead, he creatively combined vodka with fruit juice, giving birth to a new product that was neither wine nor beverage: RIO pre-mixed cocktail.
After careful consideration, Liu priced RIO at 20 yuan (double the normal channel price in nightclubs), hoping to quietly carve out a small share. Unexpectedly, the 20 yuan price made foreign spirits look down on it, but being on par with Sprite and Coke naturally attracted the dissatisfaction of beverage companies.
Sprite and Coke, with deep roots in the nightlife channel, quietly placed sommeliers and waiters around RIO's promoters. To win over sommeliers and waiters, Sprite even calculated rebates based on the number of bottle caps of its products they collected.
Liu Xiaodong reluctantly raised RIO's retail price to 30 yuan, hoping to leave more profit for recommendations from sommeliers and waiters. But then he made a big mistake: the 30-plus yuan price entered another camp—the price range of beer.
This immediately caused backlash. Tsingtao first applied pressure, first by buying out venues, then by exclusive deals; Budweiser followed, doubling its promoters and using a two-on-one strategy to stick to RIO, with promotions and buyouts one after another; then Heineken, Guinness, and Corona attacked in a group with a rejecting attitude. RIO, lacking nightlife experience, was outnumbered.
But one pair of eyes was quietly watching Liu Xiaodong's predicament: Harold David, head of Bacardi's Asia-Pacific operations, believed that although Bacardi had dozens of spirits brands like Grey Goose vodka, Dewar's whisky, and Cazadores tequila, it urgently needed new growth points. RIO's aggressive moves made Harold unexpectedly see a market opportunity.
So RIO gained another competitor.
Bacardi launched its Ice Breaker rum pre-mixed cocktail, which, thanks to the group's power, easily entered Shanghai's most famous 13 nightclubs, but almost repeated RIO's initial failure.
In 2008, Ice Breaker's sales were dismal, with only a few million yuan in sales across Shanghai, drawing criticism from its UK headquarters; meanwhile, RIO was over 25 million yuan in debt. Baorun's board symbolically charged Liu Xiaodong 100 yuan to sell him the RIO brand, as both punishment and face-saving.
When Night Dies, Day Is Born
The strangulation in the nightlife channel nearly wiped out pre-mixed cocktails. Liu Xiaodong and Harold David were both at an impasse.
At that time, e-commerce was quietly emerging. One evening, Harold, staying on the Bund, saw on TV that Jack Ma was investing an additional 2 billion yuan in Taobao, and he got excited.
With a flash of inspiration, Harold drastically reduced nightclub promotions, keeping only basic distribution, and moved almost all products to online sales, cutting the price to 10 yuan per bottle.
Ice Breaker, with its bright colors, wide variety, and cocktail label (though pre-mixed), attracted young consumers' attention online. People loved posting photos of Ice Breaker bottles online, feeling it was stylish. Within a year, Ice Breaker sold over 30 million bottles.
Liu Xiaodong also woke up. The way out for pre-mixed drinks was not the wealthy nightlife crowd, but young people chasing fashion!
Liu Xiaodong launched a more precise positioning: "Youthful drink for girls' gatherings," directly targeting young women, and declared it a "daytime cocktail" (as opposed to nightlife).
For young women just entering society, who have many gatherings, drinks don't liven up the mood, and alcohol can cause embarrassment, "girls' youthful drink" was fashionable, refined, and stylish. For a time, RIO overshadowed Ice Breaker. In 2010, RIO turned profitable with over 10 million yuan.
Thus, pre-mixed drinks survived the crisis, but it also meant that RIO and Ice Breaker, former nightlife rivals, officially clashed in the "daytime" market.
Both Liu Xiaodong and Harold David realized the significant role of e-commerce and understood the need to expand offline to further increase product influence.
First, they competed on entry fees. RIO increased fees for entering KA hypermarkets by 20%, and Ice Breaker went 10% higher; second, they competed on sales rebates; third, they offered favorable payment terms to distributors. These three tactics were conventional, but a closer look at their strategies revealed differences.
In essence, Ice Breaker adopted a large distributor system, assigning a region to one large distributor, who then recruited second- and third-tier distributors. RIO adopted a system of one distributor per city, without second- or third-tier distributors. The difference soon became apparent.
Ice Breaker's large distributors quickly developed many second- and third-tier distributors with various connections, and thanks to local influence, Ice Breaker occupied almost all KA stores in first-tier cities and the most prominent shelves in hypermarkets.
RIO, without second-tier distributors, required its distributors to have full-channel capabilities, but such all-around distributors were rare. After months of effort, RIO only entered limited KAs like China Resources Vanguard and Carrefour.
Just as Liu Xiaodong was anxious, the side effects of Harold's laissez-faire distributor policy emerged: severe cross-region selling and chaotic pricing for Ice Breaker. The Meijiule flagship store selling Ice Breaker closed first, followed by Carrefour and Walmart suspending purchases. In 2013, Ice Breaker's sales halved, and Harold was forced to leave.
Seizing the rare opportunity, Liu Xiaodong, whose distributor system basically prevented cross-region selling, attacked major supermarkets, filling the empty shelves of pre-mixed drinks, and expanded from Shanghai and Shenzhen to the entire East and North China markets, and then into 28 provinces and cities nationwide, including the Northwest and Southwest.
After this battle, RIO firmly occupied over 40% of supermarket shelves for pre-mixed drinks, Ice Breaker held less than 20%, and the rest was divided among small follow-up brands.
Unfortunately, Liu Xiaodong couldn't unify the market. While RIO conquered supermarkets, Ice Breaker struck back, capturing 80% of nightlife venues and large restaurants, and sealing off this channel tightly.
This brilliant counterattack came from Harold's successor, Cindy Car Decker, who had previously served as Asia-Pacific president at Gillette and P&G.
She keenly realized that the sales boom and market education from the competition with RIO had made KTVs and bars no longer off-limits for pre-mixed drinks. Ice Breaker's channel transformation went smoothly. In 2012, RIO's sales were over 58 million yuan, while Ice Breaker delivered 460 million yuan.
The two camps were initially clear.
Fierce Competition Leads to Crises
Ice Breaker's return to nightlife was a revenge. But Cindy was not willing to stop there.
It wasn't that Cindy was insatiable, but only by occupying KA could she dominate the entire market, and also use KA to radiate and drive consumption in surrounding schools, convenience stores, and restaurants. The delicate balance between RIO and Ice Breaker was destined to be broken.
Previously, they had fought over "authenticity."
Ice Breaker argued from a "professional" angle about the importance of authentic base wine, emphasizing that its parent company came from Cuba and was a world-famous rum brand.
RIO also did not back down, claiming its brewing process came from the UK, making its taste purer. Originally, one used rum as the base, the other vodka, which was just a matter of taste preference, but they argued fiercely online. However, this debate successfully attracted nearly a million netizens to argue, heating up the entire pre-mixed drink category, and both sides benefited.
They also competed on new products. Ice Breaker, on top of existing blueberry and green orange flavors, launched 13 new flavors like grapefruit, peach, and strawberry, with colorful bottles lined up, eye-catching.
RIO naturally couldn't show weakness, adding 9 new product systems like Blue Rose + Whisky, Orange + Vodka, and Lime + Rum. In packaging, RIO was even more creative. Pre-mixed drinks were mostly in glass bottles; for convenience, RIO introduced aluminum cans; for coolness, they developed glow-in-the-dark bottles in six colors like pink, blue, and purple.
What else could the commercial war do? Perhaps it was time for a price war. But in a sense, this price war between Ice Breaker and RIO nearly dragged pre-mixed drinks into the abyss.
To deter Ice Breaker's coveting of KA, Liu Xiaodong first launched tasting and buy-one-get-one promotions. Sales in participating stores immediately increased by over 30%. Ice Breaker also got excited, first with tasting gifts like phone books and card holders, then adding a 199-yuan spend for 10-yuan discount.
Once price promotions started, both sides inevitably escalated. Stimulated by promotions, the entire pre-mixed drink market sales approached 3 billion yuan in just two or three months. But an unexpected situation occurred: dozens of pre-mixed drink brands appeared in the market. Followers, with the idea of making a quick buck, triggered a nationwide vicious price-cutting wave. Some claimed to "PK Ice Breaker and RIO," with prices even dropping to 5 yuan or 3 yuan.
Both Ice Breaker and RIO saw their 2013 sales surge by over 30%, but profit margins suddenly dropped by 10%. At this point, both sides suddenly realized that price competition lowered the entry barrier for pre-mixed drinks, which not only led to more competitors grabbing benefits but also risked price chaos again, potentially reducing pre-mixed drinks to low-end products.
Both sides finally stopped the price war simultaneously.
The Burning Money Battle of Open and Covert Struggles
The "open struggle" phase between Ice Breaker and RIO was basically over, but the "covert struggle" continued. At this point, there were roughly three types of players in the pre-mixed drink market.
One type was represented by Ice Breaker and RIO, including brands like Blue Jingling and Purple Star; another type was baijiu companies like Wuliangye, Gujing Gong, and Yanghe. These companies had two strategies. First, their small bottle baijiu products competed for the same young consumer market as pre-mixed drinks. These small bottles indeed introduced drinking methods like adding ice, green tea, black tea, Red Bull, or milk, which had a "pre-mixed" feel. Second, they launched pre-mixed drink brands to directly compete; the last type was food companies expanding into related products, represented by Huiyuan and Black Cow Food.
Whether pre-mixed drink companies, baijiu companies, or food companies, at this stage of market development, the key was who could equate their brand image with youth and fashion, and thus win young consumers. The truly expensive marketing war became the key to victory. The question was how to spend the money.
Baijiu companies' problem was their difficulty in breaking free from fixed thinking to create a young, fashionable new product. For example, Wuliangye promoted using baijiu as the base for pre-mixed drinks, but regardless of taste, young people psychologically found it strange. Among the small bottle baijiu camp, Jiangxiaobai was worth mentioning. With frosted bottles, a cartoon spokesperson with black-rimmed glasses, and slogans on the bottle like "Eating hotpot and singing, drinking Xiaobai and playing finger games, I'm a literary youth," they continuously organized offline "drinking appointments."
Jiangxiaobai's novel approach to connecting with the post-90s generation also impressed Liu Xiaodong. Similarly targeting young people, RIO subsequently launched a creative contest called "College Student Advertising Festival, Colorful Creativity Run," with cash prizes for winners, free RIO for participants, and Zhou Xun as a guest. This activity received a good response among post-90s and even post-80s. Ice Breaker also countered with activities like "Share family photos, win Ice Breaker cocktails."
FMCG giants Huiyuan and Black Cow Food faced the primary challenge of shaking off the impression that their old brands had "aging product structures and outdated images." To achieve this, Huiyuan sponsored "Avenue of Stars," but its pre-mixed drink used PET packaging, which was criticized by the industry as "not fashionable enough"; Black Cow's pre-mixed drink invited Korean star Kim Soo-hyun as spokesperson, but the previous spokesperson, Chen Peisi's classic image, seemed more deeply rooted in people's minds, making it hard for consumers to replace Chen with Kim in a short time.
Meanwhile, Ice Breaker and RIO had already started product placement marketing.
At this time, Bacardi had a new leader, 52-year-old Jon Gray, commanding Ice Breaker's charge in the Chinese market. Seeing the influence of entertainment programs on brands, he targeted the Korean reality show "Running Man," which happened to be licensed by Zhejiang TV, initially gathering stars like Deng Chao and Wang Baoqiang; also, there were rumors that the popular online novel "My Sunshine" was being adapted into a TV drama, both great opportunities for Ice Breaker placement. However, the placement fee for "Running Man" plus the TV drama exceeded 150 million yuan.
Whether coincidence or deliberate, Liu Xiaodong also expressed interest in deep placement. Thus, the placement fee escalated to 200 million yuan.
Could they afford this money? Jon, a seasoned veteran, was torn and hesitant.
Ice Breaker's major project expenses had to be reported to headquarters and included in the annual plan. Bacardi's chairman advised Jon to be cautious, and things often cooled off; Ice Breaker's placement plan was shelved.
Liu Xiaodong, however, had full control over RIO and didn't need to report. Liu valued RIO at 5.5 billion yuan, selling the profitable (over 20 million yuan) RIO equity to Baorun's board to fully fund the placement and secure absolute priority.
As it turned out, Liu Xiaodong bet correctly.
"Running Man" (renamed from "Running Brothers") and "My Sunshine" were both hugely popular. The ubiquitous RIO in the shows successfully "brainwashed" viewers, and its 2014 sales surged to 980 million yuan, nearly 8 times the previous year. Ice Breaker, having missed the opportunity, was passive in KA, failed to enter convenience stores as planned, and except for maintaining dominance in nightlife, sales only hovered around 900 million yuan.
RIO, in one go, in April 2015, placed products in the second season of "Running Man" and over ten TV dramas like "Boss & Me," "Take My Love Home," and "You're Surrounded." From simple endorsements to interactive activities and now big-drama marketing, RIO's brand effect was unmatched. It only needed to do high-altitude pull marketing, not even promotions. In the first half of 2015, RIO achieved sales of 1.617 billion yuan, almost double Ice Breaker's sales for the entire previous year.
Final Summary
After a decade of life-and-death trials, pre-mixed cocktails finally became a new hit category in the beverage industry. Ice Breaker, having missed several fashion trends, is still regrouping to counterattack in the supermarket channel; other also-rans like Ruibo, Blue Elf, and Power Train have no intention of leaving this hot market; new brands keep entering, and as the crops ripen, everyone comes to harvest.

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