Today we're talking about young people drinking. From a brand perspective, this is about providing new drinking solutions for young people. There must be opportunities here, otherwise a host of well-known investment institutions, such as ByteDance's strategic investment department, Hillhouse Capital, Matrix Partners China, Plum Ventures, Sequoia Capital China, and Tiantu Capital, wouldn't have entered the fray. Not to mention that Moutai, Wuliangye, Luzhou Laojiao, Nongfu Spring, Mengniu, 7UP, Arctic Ocean, Heytea, and Coca-Cola are all laying out plans in the young alcohol market. To cater to young people's drinking, the concept of "low-alcohol drinks" was hyped up a few years ago, with capital investing in this track for three years and billions of yuan flowing in. But tragically, few new alcohol brands truly accepted by young people have emerged. Meanwhile, some new alcohol brands created by veterans have achieved impressive results. For example, RIO, a brand that has been in China for over a decade, and Meijian, another alcohol brand created by the parent company of Jiangxiaobai, both have annual revenues exceeding 1 billion yuan. Recently, there's also Blue Dash, a trendy young people's alcohol brand that emerged from the nightclub channel, with revenue exceeding 100 million yuan last year. So why do some brands succeed while others fail? When we discuss young people drinking, what are we really discussing? Is the essence of low-alcohol drinks just low alcohol content? What is the most fundamental need for young people when drinking?
Image source: BLUE DASH official Weibo
Why have a host of low-alcohol brands "cooled down"?
The young people's alcohol market is as large as hundreds of billions of yuan, and among them, drinks that can achieve a state of slight intoxication, are more affordable, taste better, and have relatively low alcohol content have become the favorites of young people. According to the "Young People's Alcohol - China Alcohol Category Innovation Research Report" released by Ries Strategic Positioning Consulting, the young people group is huge, with a potential young drinking population of up to 490 million. The young people's alcohol market size is as high as 400 billion yuan. Only 11.2% of young people like drinks above 30 degrees, while 39.6% like drinks around 10 degrees, the highest proportion. The market is so large, but in recent years, capital has become increasingly cautious. Low-alcohol investment and financing reached a climax in 2020 and 2021, but cooled down in 2022. In 2021, according to incomplete statistics, there were 56 financing events in the entire low-alcohol track, with total investment exceeding 2.5 billion yuan. Low-alcohol players mainly focused on angel and Series A rounds, with each financing amount basically in the tens of millions. In 2022, there were 19 financing events for low-alcohol drinks (including beer and wine), but excluding beer and wine, the number of financings in the low-alcohol track was in single digits, and most financing amounts were in the millions. The number of financings plummeted, and total investment plummeted.
Neil, founder of BLUE DASH, told New Consumption Think Tank: "The wave of low-alcohol drinks was because everyone saw the rise of the American brand White Claw, which took about 5 years to become a company with annual revenue of several billion dollars that could compete with beer. But the reason for the cooling of low-alcohol drinks in China is that they haven't found a path suitable for China." One man's meat is another man's poison. After communicating with Neil, I summarized several reasons for the cooling of low-alcohol drinks.
First, foreign experience is not suitable for China. The rise of ready-to-drink (RTD) cocktails in Japan was against the backdrop of higher beer taxes compared to RTD cocktails, but in China it's the opposite. So in Japan, RTD cocktails are cheaper than beer, have higher alcohol content than beer, and taste better than beer, making it less difficult to replace beer. In the US, RTD cocktails are related to the "house party culture" of the US drinking channel structure. The US has a low population density, many large houses, and a mature house party culture. Through the online dividend of social media in recent years, it's suitable for conversion to centralized procurement in retail channels like convenience stores. But China has a high population density, and food delivery and catering services are relatively developed. Most young people's social activities and entertainment scenes are outside rather than at home, so copying the US model of online seeding and retail channel conversion is also not feasible.
Second, the new "channel dividend" has failed in the "alcohol category." In recent years, China's new consumer brands have undergone tremendous changes, and many have risen with new channels, such as e-commerce, live-streaming e-commerce, or emerging convenience store channels. But the alcohol category has its own characteristics in China. Referring to the channel distribution of beer, the current domestic beer industry sales channels are mainly divided into on-premise channels and off-premise channels. In the past, on-premise sales accounted for about 40-50% of total sales, with about 80% of on-premise sales coming from catering and about 20% from nightlife consumption. In off-premise channels, the ratio of online to offline is 1:9. The trendy alcohol for young people may also follow the laws of beer. Neil, founder of BLUE DASH, said: "Alcohol is a product of consumption scenarios. In most cases, alcohol is not drunk alone but shared with friends in social scenarios. That's typical group decision-making, and that attribute makes it difficult to form impulsive consumption and decisions through live-streaming e-commerce or e-commerce, which are personal scenarios." And alcohol is not a core product in convenience store channels. Neil once did research and found that all products in the liquor cabinet combined don't sell as well as beverages. This is the gap caused by category differences.
Third, the state of slight intoxication is not equal to "too low alcohol content." Young people don't like baijiu because it's too strong and spicy, and they don't like traditional drinking culture. But young people still need alcohol because alcohol is a prop. The essence of drinking is to help people get into a state and solve problems that can't be solved when sober. Consumers are not consuming alcohol but the result of alcohol. If it's 0.5% alcohol or too low, how much do young people need to drink to get into that state? This may also be one of the reasons for the "failure" of some new low-alcohol brands. The origin of all things and all businesses is to provide solutions for specific groups. From this perspective, to do the business of young people drinking, you must first find the scenes where young people drink daily, and then develop related products based on those scenes.
Overview of young people's "new alcohol" scenes:
RIO in retail, Meijian in catering, Blue Dash in nightclubs
Next, let's break down the consumption scenes of RIO, Meijian, and Blue Dash.
1. BLUE DASH
Neil, founder of BLUE DASH, has worked at McKinsey, BCG, and Gobi Partners, with years of experience in management consulting, venture capital, and serial entrepreneurship. He judges a market or project from two dimensions: one is top-down logic, breaking down from the perspective of industry research, investors, or consulting firms; the other is bottom-up logic, substituting into an individual to test. If it doesn't work in real cases, the logic may be problematic. "When making decisions, I ask more whys to derive some axioms of entrepreneurship, things we believe are 100% certain. We established several axioms at that time: First axiom: Most drinking in China happens in on-premise scenarios, and multi-person social scenarios are the majority in on-premise scenarios. On-premise scenarios are important. Second axiom: In social scenarios, drinking is a group decision, not decided in a one-person scenario; the underlying logic is closer to social logic than traditional consumer goods logic. Third axiom: Alcohol is a tool to enhance the atmosphere. People buy alcohol not to taste it but to buy a solution. Based on these axioms, making decisions becomes simpler. For example, how to make a good-tasting drink? The answer is simple: remove the alcohol taste as much as possible, because your purpose is not to drink. Why target the nightclub scene? This is derived from group decision-making. To follow social logic, you need to capture the core crowd first. Where is the core crowd? In nightclubs. Why make large bottles? Because the main consumer product in nightclubs is foreign spirits, so you need to use large bottles similar to foreign spirits, not cans. With these logics, our tactics are to first do nightclubs and launch a glass bottle product with about 10-20% alcohol that can compete with foreign spirits." Neil said.
Based on these logics, BLUE DASH insists on removing the alcohol taste while maintaining the alcohol content, positioning itself as an atmosphere enhancer for young people. They use sweetness to neutralize the bitterness of alcohol, and then use lime or cucumber flavors to neutralize the greasiness of sweetness. So Blue Dash launched refreshing cucumber and lime bergamot flavored drinks. On the brand side, the nightclub scene is the most trendy and has the most spending power, gathering young people with the highest acceptance of new things. BLUE DASH uses the logic of trendy brands rather than ordinary consumer goods to manage its target customers. For example, BLUE DASH interviews leaders in various fields, holds metaverse music festivals, presents high-aesthetic and high-style product designs, and even extends to the expression in its official account. Blue Dash's Valentine's Day copy reads: "The world is so big, you want to hide somewhere without her. Later you realize it's not because she's everywhere, but because you love her all the time."
Blue Dash pop-up store image source: BLUE DASH official Weibo
2. Meijian
How does Meijian do it? We all know that Meijian is another alcohol brand created by the group that owns Jiangxiaobai, founded by Tao Shiquan. During more than 10 years of doing Jiangxiaobai, Tao Shiquan's team has been reserving other alcohols, such as sorghum liquor and plum wine, which may have been researched for more than 5 years. This is the basic skill of "good taste." In terms of scenes, Meijian chose catering, the main scene for Chinese alcohol consumption. Relying on the catering channels laid out by Jiangxiaobai, Meijian has an advantage in channels. On this basis, Tao Shiquan's team verified that Meijian's sweet and sour taste is very suitable for spicy and greasy hot pot, crayfish, skewers, barbecue, and other catering scenes. Eating and drinking is the natural consumption scene for the alcohol category. And Meijian's taste is sweeter than ordinary plum wine, also to meet this scene.
Image source: Meijian official Weibo
From Meijian's product, its form is very similar to a whiskey bottle. Whiskey represents mid-to-high-end alcohol, forming a price anchor, making users feel that Meijian is presentable. In social scenes, Meijian's social currency attribute is established. A user once mentioned that a friend wanted to buy Blue Meijian for business banquets because he thought that placing Blue Meijian on such occasions would be very friendly to women. This case can also serve as confirmation. In fact, from the design of the Meijian bottle itself, it doesn't use pink or other styles favored by young girls, but is more neutral, possibly considering broader, more formal scenes like banquets.
Image source: Meijian official Weibo
As a sibling brand of Jiangxiaobai, Meijian sounds like "long time no see" in Chinese, which gives it a natural communication advantage. The character "梅" comes from calligrapher Lu Jianzhi, and "见" comes from Zhao Mengfu. The bottle design and expression stand at the level of Chinese cultural output from the beginning, so we see that Meijian's subsequent communication is mostly presented in the form of traditional Chinese culture. It is understood that from 2019 to 2022, the plum wine market reached a scale of 100 billion yuan, and Meijian's annual sales have reached 1.2 billion yuan.
3. RIO
Ready-to-drink cocktails first caused a craze among young people during 2010-2015, with the representative brand being RIO. Reviewing RIO's brand path, in the mid-2000s, RIO shifted from the nightlife channel to emerging online channels like Taobao, and with its 3.8% alcohol and positioning as "youthful small wine for girls' gatherings," it made a profit of 10 million yuan in 2010. Subsequently, RIO expanded through supermarket channels and sponsored variety shows and TV dramas, reaching a peak in 2015 with revenue of 2.351 billion yuan. But by 2016, RIO's parent company, Baorun Co., Ltd., suffered a loss of 142 million yuan because rapid marketing brought trial customers but didn't create repeat purchases. After a 3-year trough, RIO returned to the right track with the "3-degree slight intoxication" product improvement and scenes like "one person's small wine." After that, RIO launched the 5-degree "Refreshing" series and the 8-degree "Strong Refreshing" series, expanding the consumer group to males.
Image source: RIO official Weibo
In 2021, Baorun Co., Ltd. dominated the ready-to-drink cocktail market with a market share of 89.4%. According to the 2021 financial report, Baorun's ready-to-drink cocktails (including sparkling water) achieved revenue of 2.285 billion yuan, a year-on-year increase of 33.49%. RIO acquired the incremental group of young women in alcohol consumption through the scenes of drinking alone and girls' gatherings, entering the market through the one-person decision scene of drinking alone, and then extending to scenes like girls' gatherings, house parties, and even launching suitable products for males.
In the drinking market, there is another type of alcohol that has attracted much attention: rice wine. Brands like "Xiaogan Rice Wine" represented by Mi Popo have entered consumers' life scenes through snack-like rice wine jelly, rice wine drinks for catering, or buying rice wine mash to make homemade rice wine soup or rice wine soup at home.
Future trends in young people's alcohol
By analyzing Blue Dash, Meijian, and RIO, I believe the trends in the young people's alcohol market are as follows.
Trend 1: Alcohol between 10 and 20 degrees may be most suitable for young people. Most beers are 3 to 5 degrees, but we find that RIO's Strong Refreshing is 8 degrees, Meijian is also around 10-20 degrees, and Blue Dash has products around 10-20 degrees and a 5-degree slight intoxication product. Overall, around 10-20 degrees seems to be the common choice of these "top students" in young people's alcohol. Neil said: "Comparing with Japan and South Korea, the sake and soju that people drink more are concentrated in the 10-20 degree range. With young people's high attention to health, high-alcohol and too strong baijiu is not friendly to young people, while beer may require large amounts to consume alcohol, causing bloating and not necessarily a good experience. Based on the group decision-making characteristics of drinking, the more inclusive it is, the easier it is to form a unified decision. Besides baijiu and beer, red wine or liqueurs like Blue Dash will become new choices."
Trend 2: Alcohol is highly dependent on scenes; you need to "do alcohol" within the framework of channels. The difference between alcohol and ordinary food and beverages is that it is very dependent on scenes. No matter what type of alcohol, it must fulfill the attribute of alcohol, serving as a medium to help people reach a state of "drunkenness." In China, doing the "alcohol" business, catering and nightlife are still important channels. You need to innovate and express within the real scenes of these channels. If you put the cart before the horse, it will be difficult to form repeat purchases and make the consumer goods business of alcohol successful.
Trend 3: Alcohol is a category with inherent cultural attributes; the future competition may be in "culture." Unlike other consumer goods, Chinese alcohol culture has a long history. Meijian's promotional focus is on plum wine culture, using traditional Chinese culture and banquet scenes to enrich the brand connotation of Meijian. RIO's promotional focus is mainly on women, promoting the spirit of freedom and vitality. Blue Dash promotes being the alcohol for young people, even advocating for alcohol equality. "In the past, in drinking, first, men and women were unequal in drinking, and second, with the occurrence of consumption downgrade, more and more people are returning to the essence of drinking, which is that everyone happily and equally enjoys the fun of alcohol," Neil said. I believe that the alcohol culture extended by each type of alcohol has no distinction of good or bad, but behind each alcohol culture, it needs long-term, consistent support from the brand through detailed, real alcohol culture scenes to form a true brand culture or distinct social symbol, rather than just promoting the concept itself.
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