The low-alcohol beverage startup circle was last thrust into the spotlight by an article from Shenran last month: "The E-Cigarette Startup Army Has All Gone to Sell Alcohol."

Accompanying the warming of the low-alcohol beverage track has been an unending debate over "real trend" versus "IQ tax." Compared to the unabated enthusiasm of investment institutions, the market's response has been somewhat "half a beat slow."

Low-alcohol beverage manufacturers, touting "0 sugar, 0 fat, low calorie," bear a resemblance to e-cigarette vendors shouting "harm reduction" slogans—both are innovators in "high-risk pleasure" industries.

But behind them lie two fundamentally different underlying logics, starting from supply chain, brand building, and channel construction: "You take your high road, I'll cross my single-plank bridge."

-01- Low-Alcohol Brands Decoupled from Supply Chain Unaware of the Danger Ahead

E-cigarettes have always played a "light asset" game with the supply chain. This means the brand side is responsible for brand marketing and sales, while outsourcing R&D and production—the "heavy, tiring" tasks with technical barriers—to contract manufacturers.

Many low-alcohol brands also follow this logic. Think of a brand name, find a distillery, pick a product from the distillery's "menu" (or submit requirements for a custom formula), then produce, bottle, and distribute through channels. This seamless operation seems to offer a good path for many "PPT-brewed" brands, thanks to China's overcapacity in supply chain capabilities.

However, unlike e-cigarettes, in the liquor industry, the supply chain is the battleground.

Enterprises without a supply chain have no say. Any alcohol brand that cannot dominate production-level discourse is like walking through a minefield of flowers—beautiful but potentially fatal. The central contradictions are mainly reflected in two points:

1. In R&D, the contradiction between front-end consumer preferences and back-end R&D disconnect.

Similar to the current state of e-cigarettes, many low-alcohol brands have low control over the supply chain, leading to severe homogenization. New products can only choose from already developed and finalized products at contract manufacturers, failing to meet core consumer demands. As a result, they must shift focus from product to marketing, opting for OEM production, heavy marketing spending, and online media hype.

Notably, today's low-alcohol consumers demand both brand prestige and good taste, easy drinking, health benefits, low calories, zero fat, no bloating, and no headaches. Translating these front-end data and insights into products, and implementing them according to corresponding technical indicators—including R&D, raw material procurement, brewing processes, and all quality control—places high demands on both people and systems. Especially, the supply chain requires strong "mine-clearing" capabilities; without "old hands" with 10-20 years of experience, it's difficult to solve the series of problems in various brewing stages.

2. In production, the contradiction between technical barriers and production time.

E-cigarettes adopt a uniform "electronic atomizer" + "pod" format, making it hard to claim a definitive core technical barrier as a moat. Many low-alcohol players follow the same logic, choosing the most basic "blended liquor" (products not fermented, made by adding flavors or juices to spirits). Similar to e-cigarettes, imitating the taste of flavored liquor is effortless; once a product becomes popular, dozens or hundreds of imitations are expected to flood the market quickly.

In reality, the alcohol category is far more complex than cigarettes. Besides blended liquor, there are at least distilled spirits and fermented liquors. Taking fermented liquor as an example, although it requires fermentation time, it also possesses an "individuality" that can only be imitated, never surpassed. Moreover, fermented liquors often taste better, and some fruit-fermented liquors have attributes appealing to young people, such as gluten-free, low sugar, and low calories.

-02- Low-Alcohol Beverages: Some Reach the Fifth Level

While Others Are Still on the First

The core of brand building lies in making trade-offs among broad target consumer groups, application scenarios, and marketing strategies.

In this dimension, many low-alcohol brands are actually drawing boundaries around themselves. Why?

Most low-alcohol brands target "post-adolescent" young people (especially women) for solo drinking at home. Therefore, they adopt marketing strategies very similar to e-cigarettes: heavy spending on celebrity endorsements, online advertising, and leveraging authoritative channel rankings for reverse seeding.

It looks impressive, but at its core, the underlying design is questionable.

First, "post-adolescent" young people are not "friends of time." The ages 25-35 are the "golden drinking age" with the highest frequency of alcohol consumption and certain spending power. The "post-adolescent" young people who prefer blended drinks are concentrated in the 18-22 age group, still in school or just entering society. The "student-era brands" they choose will be quickly abandoned once they reach the golden drinking age.

Second, women and solo drinking are occasional long-term trends, hard to form repeat purchases, and concentrated in a few first-tier cities. In the vast second-, third-, and fourth-tier cities, the real drinking scenario for the new generation is gatherings of young men and women, with evening dinners and entertainment extending from after work until late at night. In many southern cities, young people gather 3-7 times a week, each session lasting up to 5 hours, at restaurants, food stalls, bars, KTVs, and nightclubs to celebrate and drink freely.

Besides user selection, attitudes toward marketing strategies also determine down-market channels. Alcohol is a highly "scenario-based, experiential" product. Unlike e-cigarettes' low dependence on usage scenarios, the pleasure of alcohol needs to be paired with friends' gatherings, appetizing food, dynamic music, and a joyful atmosphere to truly create brand memory and drive repeat purchases.

And all of this is magic catalyzed offline.

-03- Online vs. Offline Consumers and Brands Play Hide-and-Seek

E-cigarette sales channels are relatively singular; after regulation, sales are concentrated in offline specialty stores and convenience stores. Therefore, many low-alcohol startup teams transitioning from e-cigarettes follow the same pattern, choosing e-commerce and convenience stores as the main battlegrounds.

However, in the real world, alcohol's channel categories are infinitely more complex than FMCG. The main battlefields for FMCG channels—e-commerce and supermarkets—are classified as "non-immediate consumption channels" for alcohol, meaning you buy but don't drink on the spot, each contributing only 4% of total channel sales.

The real sales volume of alcohol still comes from "immediate consumption channels," where you buy and drink on the spot.

This is determined by the characteristics of Chinese alcohol consumption, completely different from American party culture and Japanese solitary drinking. Chinese people cannot separate alcohol from "food," with a strong association with dining scenarios. For easy-drinking alcohols below 8% ABV, especially 3.5%-5%, the largest channel is dining, i.e., bars and gastropubs.

Immediate consumption channels test strong resource networks and refined management expertise, which few low-alcohol brands dare to attempt.

For the alcohol business, the offline-online contribution ratio is 96%:4%, and many new products crowding into the 4% online channel are putting the cart before the horse. Even with the rise of interest-based e-commerce, where online is no longer a standalone search e-commerce, a healthier offline-online contribution ratio should be around 7:3 or 8:2.

-04- Brands Still Fighting a Losing Battle How Can the Track Not Be Exclusive?

Admittedly, low-alcohol beverages are hotter than ever among investment circles, industry giants, and young people.

In the past two years, the capital market has always favored the low-alcohol track. New brands like MissBerry, Zouqi Qingniang, Bingqing, Lanzhou, Luoyin, Shidian Yike, and Kongka have all received significant equity investments from various institutions. Over 50 investors have entered the low-alcohol track, including well-known institutions like Sequoia Capital China, Matrix Partners China, Tiantu Capital, ZhenFund, BAI, and Fosun RZ Capital.

Industry giants naturally won't miss out on low-alcohol. In September 2020, Budweiser announced its premixed cocktail brand Mike's entry into the Chinese market, launching Hin Lemon Cocktail and Bare Hard Seltzer with 0 sugar and 0 fat. Many domestic companies are also eyeing this market. Last July, Moutai Youmi launched three new products in the "Yujian" series with around 12% ABV; in May of the same year, Nongfu Spring released TOT sparkling drink, China's first rice wine + sparkling beverage, with 0.5% ABV.

Meanwhile, some domestic craft beer brands have also entered this category, such as Panda Brew's earlier launch of a soda wine product called Chill. Even beverage companies are crossing over into the fray.

In March 2021, Genki Forest invested in Shanghai Bishan Beer Co., Ltd., whose product line includes craft beer, fruit-flavored soda, low-alcohol osmanthus wine, and low-alcohol rice wine. On June 1, 2021, Coca-Cola announced the official launch of its hard seltzer brand Topo Chico in the Chinese market, available on Coca-Cola's Tmall flagship store that day, with plans to expand to more new retail and e-commerce channels.

Why is the track so hot? Because young consumers' preferences are the fundamental reason low-alcohol beverages are favored by capital and industry giants.

According to statistics, in the first quarter of 2021, on Tmall and Taobao sales channels, there were 2,449 alcohol brands with sales growth of 100% or more, of which 1,415 were low-alcohol brands, accounting for 57.8%. CBNData's "2020 Young People's Alcohol Consumption Report" shows that last year, post-90s and post-95s were the only groups with an increased share of alcohol consumption, with low-alcohol beverages becoming "the first sip of alcohol for young people."

Numerous capital, industry giants, and outstanding entrepreneurs are targeting this track based on a consensus on three aspects: category scale, trend changes, and young consumer preferences.

First, from a category scale perspective, in the broad consumer sector, bottled water and beverages are the first and second highest-frequency consumption, followed by beer and beer-like products, with consumption frequency far higher than baijiu, red wine, foreign liquor, and fruit wine.

Young people aged 25-35 are in the "golden drinking age" with the highest frequency of alcohol consumption. They are neither like the 18-22 age group, still in school or just entering society and limited to cheaper brands, nor like those 35 or older who only drink a few sips except on business occasions. Especially in the vast non-first-tier cities, the real drinking scenario for young people is gatherings of young men and women: dinners and entertainment. As night deepens, the alcohol-infused air is filled with tipsiness, filling the leisure time of young people after work.

Second, trend changes are also clear. Over the past 10 years, traditional beer has seen declining consumption due to bitterness, high calories, and bloating, with domestic production falling for five consecutive years. This phenomenon has already occurred in Europe and America, where higher-end craft beers and flavored beers have risen. In Japan, happoshu, RTD premixed drinks, and third-category beers have gradually eroded nearly 60% of the market share of industrial yellow beer, with third-category beers growing the fastest.

Very similar to Japan, the scale and share of new-style alcoholic drinks like third-category beers in China are also growing. Relevant statistics show that by 2027, the market size of new-style beers such as third-category beers in China is expected to reach 249 billion yuan.

Using neighbors as a mirror, one can glimpse the development potential of low-alcohol beverages. In the path of brand popularity, similar logic can be seen between China and Japan. In Japan, the low-alcohol fruit-flavored premixed drink Chu-Hi opened up the female consumer market. Zhou Dongyu-endorsed RIO also focuses on "low alcohol, sweet taste, solo drinking," and her advertisement "A Little Wine for One" shows hints of Japanese premixed drinks from concept to design.

Changes in young consumer preferences can be seen from a small sample.

Globally, why is the market share of industrial lager beer being eroded? Because the drinking habits of young people under 30, who are the main beer consumers (52% of consumption), are changing.

According to CBNData's "2020 Young People's Alcohol Consumption Insight Report," the drinking habits of post-90s and post-95s are shifting from the "drink till drunk" table culture to "light sipping and tipsiness." The new generation of consumers pays more attention to health management, pursues natural low calories, diverse tastes, and is willing to try new things. Meanwhile, female consumers are rising, favoring softer tastes and fresh fruit flavors.

Lianzhou, a low-alcohol brand launched by Shanghai Kujiu, focuses on the consumer preference of "enjoying freely even if you can't drink," promoting consumption scenarios like "gathering with girlfriends, solo drinking for healing."

-05- Why Are Low-Alcohol Beverages So Addictive? The Three "Magic Weapons" of Startup Teams

Low-alcohol beverages are a track that tests a team's "cognition," because in a track with giants and high ceilings, only by having "cognition" that is in sync with or even faster than the giants can one gain competitive advantage or even build barriers. This involves consumer insights, supply chain management, brand management, and channel operations management.

Therefore, having a global vision of the industry, a complete and clear understanding of the development history of alcohol categories in various countries, and the market attack paths of major international manufacturers is very important. In plain terms, in low-alcohol beverages, "foreign monks can't chant scriptures well."

Low-alcohol beverages are also a track that tests a team's "combat capability," because all competition revolves around "efficiency."

To penetrate any market thoroughly requires not only global supply chains, distributor networks, and connections, but more importantly, methodology and execution. That is, based on past experience combined with new scenarios and practices, summarize a set of market operation methods that can empower anyone, regardless of industry, to do sales well according to this system.

At the same time, what is everywhere in the low-alcohol track is the competition of teams' "online + offline integration capabilities." Knowing only online means facing only 4% of the cake; knowing only offline means facing the channel blockade established by the five major beer groups over more than 20 years.

This tests the understanding and execution of new things like interest-based e-commerce and O2O platforms, and whether the team can use its experience, knowledge, and problem-solving methodology to ensure both cutting through thorns and rapidly developing online and offline simultaneously.

In this regard, the reporter interviewed Mr. Lin, who has worked in channel research and consumption scenario insights at Nielsen, AB InBev, and Nestlé for many years. He said, In the final analysis, consumers' core demand for FMCG products, including alcohol, is taste and quality. In the current low-alcohol market with many new brands, most brands have abandoned self-development and chosen to ODM products from contract manufacturers and then slap their own brand labels, leading to severe product homogenization.

According to him, very few brands currently insist on independent R&D. Zouqi Qingniang, Sepin, and Ainomi Wine are rare brands in the market that adhere to craftsmanship and R&D.

"Consumers' memory of food and beverage products is first through smell, then taste. Innovation in food and beverages must stand on the shoulders of giants, upgrading on tastes consumers are familiar with," Mr. Lin said. "Genki Forest's taste is very close to carbonated drinks like Sprite and Coke, so the brand's consumer education cost is extremely low. The same logic applies to low-alcohol beverages: if a product can make consumers immediately associate it with the largest category—beer—on first taste, then the brand is half successful.

From the innovative low-alcohol brands currently available on the market, I found that Zouqi Qingniang has this characteristic. Its fizziness and yeast aroma are very similar to beer, and toasting with it also has beer's thirst-quenching and refreshing effect.

In addition, people choose to drink low-alcohol products rather than beverages at gatherings because alcoholic products can help "break the ice" half an hour before the gathering, quickly getting everyone into a relaxed, happy, and slightly tipsy state, while also allowing continuous drinking and intoxication. Most importantly, they let consumers indulge without bloating, go home by themselves afterward, and wake up the next day without headaches or hangovers.

A certain investor from a top investment institution who has long focused on consumer goods said, Although the three pillars of supply chain, brand, and channel will determine the market share and position of new categories in the future, behind the competition in these three points, what is truly tested is the team's cognitive level and execution capability in the alcohol industry.

Among a wide range of startup contestants, we found that such startup teams are relatively scarce.

Consumer products favored by young people must not only be delicious, good-looking, and fun, but also carry the concept of health and less burden. Specifically for beer and beer-like low-alcohol categories, "drinking heavily with less burden" is a rigid demand for mixed-gender gatherings.

Besides "appearance is justice," consumers need such products to be tasty and easy to drink, low in sugar, calories, and purines, to satisfy the need for proactive toasting and drinking when emotions are high, and to have the special effect of not bloating. The day after heavy drinking, they must not suffer from headaches or hangovers that affect work.

These new user requirements of "wanting it all" test the startup team's strong product R&D and iteration capabilities, and the ability to control stable supply chain quality. In channel construction for gathering scenarios, the team must have the ability to lay down offline immediate consumption channels and the experience and methods to drive sell-through.

In the short term, brand building is not the most daunting challenge for startup teams. In the 0-1 process, product (supply chain) and channel capabilities, especially in immediate consumption scenarios, are the top priorities.

-06- Conclusion

Historical opportunities are before us. Young people no longer blindly worship big factories and overseas brands. This is not only confidence in new domestic brands but also trust in China's supply chain. In the face of such tremendous change, entrepreneurs must rise to the challenge.

Low-alcohol beverages are one of the few categories where new domestic brands can show their prowess. The "assembly call" for the new track has sounded. May the young trendsetting entrepreneurs of the new era remember: ten thousand years are too long; seize the day.

Source: FBIF Food & Beverage Innovation (ID: FoodInnovation) Authors: Stephen, Siya Tips will be paid 400-2000 yuan upon adoption.