On April 22, Dongpeng Beverages (Group) Co., Ltd. (hereinafter "Dongpeng") reported Q1 2024 revenue of 3.482 billion yuan, up 39.8% year-on-year, marking a strong start to 2024. Earlier, on April 15, Dongpeng released its 2023 annual report: full-year revenue of 11.263 billion yuan, net profit attributable to parent of 2.04 billion yuan, with its flagship product Dongpeng Tequila surpassing 10 billion yuan in single-product revenue at 10.336 billion yuan. Along with the strong financials, Dongpeng's market value climbed to nearly 80 billion yuan, and based on shareholding calculations, founder Lin Muqin and his family's wealth approached 40 billion yuan, making him another beverage industry tycoon. Forty years ago, Lin was just an ordinary technician worried about his future.

Entering the Beverage Industry

Born in 1964 in Shanwei, Guangdong, a place full of businessmen, Lin Muqin moved to Shenzhen at age 20 and worked as a technician at Shenzhen Building Materials Industry Group for four years, learning every detail of production. In 1988, unwilling to remain a technician, he resigned and joined Shenzhen Aolin Natural Beverage Company, where he rose from department manager to factory director over nine years, mastering production, technology, procurement, and sales. Aolin was a contract manufacturer for the functional beverage brand Huabin Red Bull, giving Lin exposure to Red Bull's production details and planting the seed for his future venture.

In 1997, Lin joined Shenzhen Soy Milk Beverage Factory (the predecessor of Dongpeng Beverages) as deputy general manager in charge of sales. At the time, the factory's soy milk and cooling beverages were selling poorly and the business was declining. Lin tried various ways to improve the factory's situation. For example, in his second year, he used his production experience from the Red Bull contract manufacturing to replicate Red Bull and launch the vitamin functional beverage Dongpeng Tequila. However, because the product was almost identical to Red Bull and the brand was far weaker, the transformation failed and was labeled "copycat" by the industry. Subsequently, the soy milk factory's performance deteriorated. Despite Lin's reform efforts, the rigid state-owned system limited progress. By 2003, after six years of struggle, the factory's revenue had fallen below 20 million yuan, and it couldn't even pay workers' wages, on the verge of bankruptcy. At this critical moment, an opportunity arose: the authorities encouraged the factory to undergo state-owned enterprise reform, allowing employees to purchase all shares and convert the enterprise to private ownership. At age 39, Lin bet all his savings and borrowed money, raising 2.67 million yuan, and together with 19 other employees, took over the faltering factory, gaining controlling interest. The soy milk factory became Shenzhen Dongpeng Industrial Co., Ltd., with Lin holding 58.04% and serving as chairman, embarking on a second venture with "no resources, no channels, no capital." Even as owner, the early path was rough; for a long time, Dongpeng survived on chrysanthemum tea sold at 1 yuan per box. But Lin, determined to stay in beverages for life, never considered switching industries. Years later, Lin recalled that period: "During those days, my main concerns were two things: how to control costs and how to understand consumer needs and enter new tracks."

Following to Create a Hit

Around 2008, Red Bull was already a household name in China—"Drink Red Bull when thirsty; drink Red Bull when tired or sleepy"—making functional beverages a rapidly growing segment. Lin, despite his earlier failure, still believed this market had great potential and decided to try again. How to find a place in a market nearly monopolized by Red Bull? Learning from his mistake of completely copying Red Bull, Lin decided to do something different. In taste, color scheme, and net content, he still imitated Red Bull, even copying the slogan "Tired? Sleepy? Drink Dongpeng Tequila" (which was a lucky break because Red Bull had just changed its slogan to "Your energy, beyond your imagination"). However, in packaging, price, and target consumers, Lin decided to create his own characteristics. At the time, Red Bull was in cans selling for 6 yuan each. After extensive research, Lin replaced the costly can with a cheaper plastic bottle and added a dust cover, allowing consumers to reseal the bottle if they couldn't finish it, solving the pain point of cans that had to be finished or thrown away. More importantly, Lin decided to compete on price from the start, leveraging his cost-control skills to price Dongpeng Tequila at 3 yuan, half of Red Bull's price. In 2009, Dongpeng Tequila officially launched, and its optimized packaging and affordable price directly attracted hardworking, physically demanding but lower-income groups such as construction workers, truck drivers, and delivery riders. Because of this down-market positioning, Lin chose Dongguan as the first battleground, avoiding direct competition with Red Bull, Lehu, and Qili in Shenzhen while keeping transportation costs manageable—a win-win. Lin also set a goal: Dongguan as the model market; if it doesn't reach 100 million yuan in sales, don't expand beyond. The aim was to gain experience and learn from mistakes in Dongguan before spreading wings. To achieve this, Lin hired actors from the popular Guangdong TV series "Foreign Daughter-in-law, Local Son" for advertising blitzes across the city, and intensified ground promotion to get Dongpeng into every small shop. In 2012, after three years of effort, Lin achieved his goal of 100 million yuan in Dongguan sales, creating a model market. In 2013, Lin began implementing a national expansion plan. Besides continuing cost-effective production, his core strategies were two: first, spending heavily to hire Nicholas Tse for prime-time ads on CCTV and major satellite TV channels; second, launching a channel war across Guangdong to accelerate building a distribution and retail network. That year, Dongpeng Tequila exploded across Guangdong and began national expansion.

Breaking Out of the "Red Sea"

However, in the first few years of national expansion, Dongpeng didn't make much of a splash in the monolithic functional beverage market. That changed in 2016 when competitors handed him an opportunity. China's Huabin Red Bull and Thailand's TCP Red Bull were busy fighting legal battles, suing each other for infringement and illegal sales, with a wave of lawsuits and appeals that lasted six years. During this period, Huabin Red Bull was distracted, affecting its marketing and channels. Lin seized this rare window to charge ahead. The core was building the brand and expanding channels. During that time, Dongpeng sponsored the Chinese Super League, CCTV World Cup broadcasts, and the Portuguese national football team, and made frequent appearances in hit TV dramas and variety shows like "In the Name of the People" and "Happy Comedians." Dongpeng also pioneered creative marketing tactics, such as inventing "band-aid" video ads for seamless brand placement and being the first to use "bottle cap scanning"—where users scan a QR code on the cap to participate in activities—which competitors soon copied. Facing nearly zero distribution channels outside Guangdong, Lin's approach was simple: relentless persistence. He first sent Guangdong teams and distributors to other provinces, province by province, region by region, eventually partnering with strong, experienced local distributors who managed and maintained terminal outlets. In June 2017, Lin met a key ally. Jia Hua Capital invested 350 million yuan in Dongpeng and introduced Lin to executives at Qiaqia and Laiyifen. Qiaqia's distribution network was fully opened to Dongpeng Tequila, and Laiyifen helped Dongpeng enter the Shanghai market, opening up national expansion. By 2018, Dongpeng had 1,123 distributors, growing to 2,779 by 2022. While brand and channels advanced rapidly, Lin continued to innovate on product differentiation. At that time, the 350ml Dongpeng Tequila faced "acclimatization" issues in the north. Lin initially considered price cuts to boost sales, but Song Xiangqian, founding partner of Jia Hua Capital, told him that Chinese consumers like cheap prices, but increasing capacity is better than cutting prices. Cautious Lin went to service areas and chatted with drivers, learning that the 350ml small bottle didn't suit northern habits—Song was right. So Lin launched a 500ml large-capacity version for the northern market at 5 yuan, 1 yuan cheaper than Red Bull's 350ml. The market responded positively. By 2019, the 500ml gold bottle accounted for over 50% of Dongpeng Tequila's total sales, with sales soaring from 60 million to 2.1 billion yuan. On May 27, 2021, Dongpeng listed on the Shanghai Stock Exchange, becoming China's "first functional beverage stock." In 2023, Dongpeng's sales reached 11.263 billion yuan with net profit of 2.04 billion yuan, ten times that at the start of national expansion. By then, Huabin Red Bull had finally won its lawsuit and was ready to regroup, but found it hard to return to its dominant peak. According to Nielsen data, in 2023, Dongpeng Tequila ranked first in China's energy drink market by sales volume with a 43.02% share, and second by sales value with a 30.94% share. After years of struggle, Lin had led Dongpeng out of the "red sea" and secured a place in the functional beverage market. But Lin, who started by imitation, couldn't relax yet.

Following to the End

In the beverage industry, those who have big single products win the world. The ability to create more big single products is the foundation of enterprise development. For example, Nongfu Spring, besides natural water, has created a series of diversified big products like Oriental Leaf. But Dongpeng has had only one big product for 20 years—Dongpeng Tequila—which accounts for 91.77% of revenue. Such a single-product structure risks a "gap" in the future. To improve this, Lin has been consciously expanding categories in recent years, and his strategy seems to be the same old approach: extreme imitation, differentiated innovation. For instance, when Genki Forest's sparkling water became popular, Dongpeng launched Dongpeng Sparkling Tequila; when Alien's electrolyte drinks doubled sales, Dongpeng introduced Hydrate electrolyte drink; when Nongfu Spring's Oriental Leaf became a hit, Dongpeng launched Wulong Shangcha... Also, VIVI cocktail imitates RIO, and Dongpeng Daka targets Nestlé bottled coffee. Lin hopes to create a second Dongpeng Tequila through imitation. In his view, "There are two types of big single products: innovative and distinctive, or mature. The first is relatively harder because it requires originality and market education. The second, mature big products, compete not just on product but on channel and supply chain capabilities." He believes that if supply chain costs are low enough and a complete terminal network is established, imitation can work wonders. But so far, Dongpeng's imitation results have been less than ideal. In 2023, other beverage revenue was 915 million yuan, only 8.12% of total revenue. In a sense, the follow strategy has failed; consumers may recognize Dongpeng Tequila but not other products. Of course, Lin is also trying original products that are "innovative and distinctive," such as the medicinal and edible Chinese herb oil gan (Phyllanthus emblica), which Dongpeng has been developing for seven or eight years. But making it into a packaged beverage that tastes good while maintaining a shelf life of six months to a year and product stability still faces many technical challenges. In other words, commercializing original products is a long process, and any misstep could abort it. Lin admits: "New product development in the beverage industry is a difficult project with a high failure rate." Thus, new challenges arise. Lin must balance and choose between long-termism and short-term gains. However, looking at Dongpeng's annual reports in recent years, the results are disappointing. From 2021 to 2023, Dongpeng's sales expenses as a percentage of revenue were 19.6%, 17%, and 17.4%, respectively; but R&D expenses as a percentage of revenue were 0.61%, 0.51%, and 0.48%, declining year by year. This gap may explain Dongpeng's sustained performance surge, but it may also be the answer to future growth difficulties. Looking ahead, Lin's goal is for Dongpeng to "become a comprehensive, multi-category beverage group." Two things convince us he will succeed. First: Lin sets three alarms for himself every day. When they ring, he takes out his notebook and copies key data from Dongpeng's digital system line by line. He does this almost every day of the year. Second: Every time Lin passes a highway service area, he checks the trash bins to see how many empty Dongpeng Tequila bottles there are versus competitors'. He has maintained this habit to this day.

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