---
title: "In-Depth: Where Are the Real Opportunities and Profit Models in Alcohol B2B?"
description: "As is well known, with the rise of 'find*' websites, B2B became a hot topic in 2015. From bulk commodities to FMCG, and from matchmaking to self-operated models, B2B quickly became a darling of the investment community. However, as capital's understanding of B2B deepened, it seemed that B2B faced a rapid cooldown overnight. Yet, amidst this heat and cold, one industry—alcohol B2B—has maintained sustained rapid growth, even standing out in the B2B field. Why alcohol B2B? Is it accidental or inevitable? Let's explore this mysterious and ancient industry."
author: "悉昙"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-10-22"
categories: "Dealer Operations, Supply Chain & B2B"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/z57fmnBt5sKZnQmF8K-0Qg"
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citation: "悉昙. “In-Depth: Where Are the Real Opportunities and Profit Models in Alcohol B2B?.” New Distribution, 2016-10-22. https://xinjignxiao.com/en/articles/in-depth-where-are-the-real-opportunities-and-profit-models-in-alcohol-b-4b6de703/"
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---

# In-Depth: Where Are the Real Opportunities and Profit Models in Alcohol B2B?

> As is well known, with the rise of 'find*' websites, B2B became a hot topic in 2015. From bulk commodities to FMCG, and from matchmaking to self-operated models, B2B quickly became a darling of the investment community. However, as capital's understanding of B2B deepened, it seemed that B2B faced a rapid cooldown overnight. Yet, amidst this heat and cold, one industry—alcohol B2B—has maintained sustained rapid growth, even standing out in the B2B field. Why alcohol B2B? Is it accidental or inevitable? Let's explore this mysterious and ancient industry.

As is well known, with the rise of 'find*' websites, B2B became a hot topic in 2015. From bulk commodities to FMCG, and from matchmaking to self-operated models, B2B quickly became a darling of the investment community.
However, as capital's understanding of B2B deepened, it seemed that B2B faced a rapid cooldown overnight. Yet, amidst this heat and cold, one industry—alcohol B2B—has maintained sustained rapid growth, even standing out in the B2B field.
Why alcohol B2B? Is it accidental or inevitable? Let's explore this mysterious and ancient industry.
**Before discussing alcohol B2B, let's talk about the industry itself**
If I were to summarize in one sentence, the alcohol industry appears outwardly like a 'village girl' but is actually a 'rich beauty.' Outsiders' perception of the industry is obscured by two 'recognized' misconceptions, allowing those in the know to quietly make fortunes. In simple terms, the Chinese alcohol industry has the following six 'unknown' characteristics:
**1. Large market capacity.** The alcohol industry has a trillion-yuan scale and has maintained healthy growth. Although high-end liquor prices have declined in recent years, due to continuous consumption upgrades, the overall liquor category still shows a clear trend of simultaneous volume and price increases.
Additionally, red wine and health liquor categories are driving overall industry growth with high growth rates and vast growth potential.
**2. Many long-tail products.** Data shows that the liquor industry alone has around 20,000 SKUs, with fewer than 1,000 bestsellers. In each region, bestsellers are even fewer, and nearly 40% of industry sales come from long-tail products that account for 95% of SKUs.
**3. High industry profits.** Production enterprises have annual net profits of 130 billion yuan, and sales channels have annual net profits of 90 billion yuan. Brands have strong pricing power; for example, Moutai and Wuliangye's main products can have gross margins as high as 90%.
**4. B2C e-commerce is difficult.** After ten years of alcohol B2C e-commerce development, online sales still account for less than 2%. Due to the immediacy of consumption, high logistics costs for fragile liquid products, and payment cycles for corporate group purchases, offline terminal sales remain absolutely dominant, and this will not change in the long term.
**5. Fragmented upstream and downstream.** Upstream, there are over 2,000 production enterprises above a certain scale; downstream, there are about 1 million sales terminals primarily selling alcohol.
**6. Numerous channel distributors.** There are about 80,000 traditional trading companies engaged in alcohol agency sales, with one distributor per region and one per product, highly fragmented, with redundant resource allocation and low efficiency. They have long survived on high channel fees.
Clearly, by any 'indicator,' the alcohol industry is the most suitable for internet transformation. However, two common claims have led outsiders to misunderstand the industry.
**One claim is that 'restrictions on official consumption have hit the industry, causing rapid decline.'** In fact, after an average annual growth rate of 25% over the past decade, in 2015, industry production volume grew 5.07% year-on-year, and sales revenue grew 5.22%. Since the national restrictions on official consumption began in 2013, the industry has only slowed its growth. Notably, since 2013, alcohol companies have been transforming, seeking sales from business and broader consumer markets. Once these two markets are fully activated, the golden decade for the alcohol industry will truly arrive, as the industry will become healthier and more sustainable.
**Another claim is that 'alcohol consumption brands are too concentrated, and upstream is too powerful, making commercial success difficult.'** In fact, fewer than 10 companies have revenues exceeding 10 billion yuan, and industry concentration is much lower than in other industries. The largest company, Moutai, had sales revenue of 32.6 billion yuan in 2015, accounting for only 3.53% of industry sales. In 2015, there were 2,689 enterprises above a certain scale, an increase of 45 year-on-year.
With industry changes in recent years and increased sales pressure on manufacturers, distributors' bargaining power is gradually strengthening. Cases of strong upstream companies partnering with quality distributors are increasing, and alcohol B2B has moved from initial observation to active cooperation in the eyes of upstream companies.
**Where are the real opportunities and profit models in alcohol B2B?**
I have always believed that if 'Internet+' cannot improve the efficiency of existing industries, it is nothing but a sham, with no value and no longevity. Alcohol B2B aligns with the purpose of a B2B company, and more importantly, due to industry characteristics, its profit model is highly predictable.
**1. Improving efficiency creates value—the efficiency opportunity.**
The industry has one product per distributor and one distributor per region, with numerous and fragmented first-level distributors. The channel chain from general distributor to sub-distributor to wholesaler to large customer to small terminal is long. Information is closed, logistics involves multiple handlings, and cash is passed layer by layer, all 'three flows' are inefficient.
Appropriate internet transformation, integrating information, reducing redundant resource allocation, and centralizing warehousing and logistics can create enormous social value just by improving efficiency, and there is significant room for companies to integrate.
**2. Whose job can you do, whom can you replace: channel restructuring.**
The internet is not omnipotent. B2B companies transforming an industry rely not on slogans but on whether they can 'cut' unnecessary links. Alcohol B2B companies can achieve a partial 'factory-to-terminal' sales model, replacing long-tail and fragmented general distributors, and more importantly, directly replacing the 'distribution and wholesale' link.
In reality, in the alcohol channel chain, general distributors provide value in capital pooling and brand cultivation, while 'distribution and wholesale' has long been reduced to a delivery role. Alcohol B2B companies can better serve alcohol sales terminals than second- and third-tier wholesalers through centralized order management, warehousing, logistics, and after-sales service.
**3. Rich profit space from extended businesses: industrial banking, centralized warehousing and delivery, chain management, and upstream/downstream services.**
By reducing transaction links and improving channel efficiency, the main business of alcohol B2B already has huge profit potential. Once sales scale is achieved and infrastructure is completed, traditional supply chain finance, warehousing and delivery, enterprise information services, and terminal resource integration services will provide additional profit sources for B2B companies.
**4. High value and long-tail value: lower costs and higher profits.**
Alcohol is a unique FMCG product with high value and high usage frequency. A typical mainstream-priced liquor costs over 100 yuan per bottle, and a case (6 bottles) costs nearly 1,000 yuan. For B2B, where fulfillment costs are calculated per 'truck,' high-value products mean high sales per truck. Even with the same profit margins and fulfillment costs as other FMCG products, alcohol sales yield several times higher profit per truck.
Alcohol products have strong brand premium capabilities, and brand concentration is not high, with a high long-tail rate for products sold. This makes it easier and more feasible for B2B companies to create their own long-tail, high-profit products than in any other industry.
**Non-typical models and challenges in alcohol B2B**
**1. Challenges of SAAS-type B2B.** When B2B emerged, 'asset-light, high turnover' was regarded as the benchmark for excellent internet companies, and many alcohol B2B companies adopted this model. They do not change the existing channel hierarchy, do not participate in logistics or cash flow, and hope to 'harmoniously' move the offline transactions of distributors and second-tier wholesalers online, existing like a SAAS.
This model faces two contradictions: First, from the terminal's perspective, the online seller will inevitably set a 'standard price' to inflate the selling price, while offline terminals will naturally choose offline negotiation or discounted prices. So why order online? Eventually, the online platform becomes nominal, with traffic either dependent on subsidies or fake orders, becoming fake traffic that can never be monetized.
Second, from the seller's perspective, online sellers vary in size and compete with each other. They have formed a stable competitive landscape offline, and no one will voluntarily share users and markets with competitors. So why would they let their customers order online? More importantly, under this model, industry efficiency improves minimally—it's just replacing a phone call with an online order, with no other changes, greatly diminishing the value of B2B.
**2. Challenges of subsidy-burning B2B.** Subsidies are synonymous with internet competition. As long as you dare to burn money on subsidies, users will come. C-end consumers flock under the temptation of subsidies, forming purchasing habits, with a clear Matthew effect. This tactic only 'works' half in B2B: if you burn money, I'll come; if you stop, I'll leave without hesitation. Ordinary consumers won't install multiple apps for one product category; their phones can't hold hundreds or thousands of apps, and they won't even install multiple comprehensive product apps.
But B-end users will install multiple apps and may compare prices on every purchase, because their business profits come from 'procurement,' and purchasing is their core work. So, from start to finish, you won't see a B2B company burn its way to scale and profit; instead, one after another burns out. Clearly, smart investors are no longer willing to pay for such meaningless investments.
**Case analysis of traffic and profit models in alcohol B2B companies**
On October 18, the alcohol FMCG B2B platform Yijiupi announced the completion of its Series C financing at its national partner recruitment conference, raising $100 million. According to ToB Online reporters, the lead investor was Jingshan Capital, with Source Code Capital, Guangyuan Capital, Meituan-Dianping, and Huagai Capital following.
ToB Research believes that with internet giants like Alibaba and JD.com entering the FMCG industry, capital will inevitably become more cautious and rational in FMCG investments. In this context, this B2B e-commerce company, founded in September 2014, raised hundreds of millions in two years, with monthly sales turnover of 500 million yuan, and claims to have exited the loss-making investment period and entered a profitable era.
**ToB Research analyzed Yijiupi as a case in the 'China FMCG B2B Industry Development Report (2016).'** The report mentioned that Yijiupi, as an open alcohol terminal supply platform, mainly connects upstream with two types of partners: first-level distributors of local best-selling brands and regional distilleries; downstream, it serves alcohol terminal retail stores (tobacco and alcohol shops, convenience stores). Through a 'matchmaking + self-operated' approach, Yijiupi links upstream and downstream manufacturers, first-level distributors, and stores, flattening the alcohol supply chain from 'factory to terminal' and 'terminal to terminal.' Ultimately, upstream partner distilleries and first-level distributors achieve network supplementation of sales channels and sharing of Yijiupi's local terminal resources through the e-commerce platform.
**ToB Online analyzes its main traffic and profit models as follows:**
**1. Traffic model:** More competitive pricing for bestsellers + strategic cooperation with major distributors, quickly seizing and becoming the traffic entry point for terminal procurement.
Yijiupi's founding team previously engaged in traditional alcohol consulting and trading, deeply understanding the industry's profit methods. On one hand, by directly purchasing from first-level distributors and bypassing second- and third-tier wholesalers to sell directly to terminals, they cleverly passed on part of the profits that second- and third-tier wholesalers used to earn through platform promotions, keeping APP product prices more favorable than offline wholesale, attracting terminal procurement without relying on subsidies. On the other hand, through regional joint ventures with general distributors of bestsellers, Yijiupi became the official ordering channel for bestsellers, gaining procurement traffic for mainstream products. Beyond price advantages, with added value like 'one-case delivery,' 'fast delivery,' and 'one-stop procurement,' terminals were quickly captured, and the platform quickly gained highly sticky user traffic 'for free.'
**2. Profit sources:** Logistics + long-tail products + extended businesses, creating profit space for the company.
Although the products that attract traffic—conventional wholesale sales—have basically no net profit contribution after deducting sales expenses and acquisition costs, and the service-for-traffic cooperation with major distributors no longer provides additional profit sources, Yijiupi saves more than half of distribution costs compared to traditional offline merchants through centralized logistics and delivery; gains sales profits through long-tail products with gross margins exceeding 30%, especially ODM/OEM and direct sourcing from wineries for red wine; and earns additional profits by providing third-party delivery services to partners and financial services to terminals and suppliers, supporting its continued rapid and healthy development.
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## Citation metadata

- Publisher: New Distribution
- Author: 悉昙
- Published: 2016-10-22
- Canonical: https://xinjignxiao.com/en/articles/in-depth-where-are-the-real-opportunities-and-profit-models-in-alcohol-b-4b6de703/
- Original source: https://mp.weixin.qq.com/s/z57fmnBt5sKZnQmF8K-0Qg

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