Recently, according to industry insiders, several well-known investment companies, including professional liquor investment teams, are successively heading to Sichuan famous liquor Xiao Jiaolou to begin investment inspections. At the same time, the news said that a co-founder of a well-known innovative baijiu brand is also in deep strategic cooperation talks with Xiao Jiaolou. According to other industry media reports, since last year, leading liquor distributors from various regions have been joining the Xiao Jiaolou brand, such as Minjiu.com, Guangxi Pengrun, Henan Shenglin, and other super distributors have also been visiting in an endless stream. Why has a provincial baijiu brand enterprise attracted sustained and high-density heavy attention from capital and major liquor distributors in 2021? The last golden decade of baijiu created countless fortunes; will there be another decade of opportunity for baijiu? Where is the opportunity? -01- The dividend of the past golden decade was the dividend of famous liquor brands The decade from 2003 to 2012 is the "golden decade" that all baijiu people will never forget. During the decade, the annual production and sales volume of the baijiu industry rose from a low of 3.11 million tons to an absolute peak of 11.53 million tons in 2012; the output value of the baijiu industry soared from about 60 billion yuan to nearly 600 billion yuan in 2012. In the decade, the scale grew nearly 4 times, and sales increased nearly 10 times. In addition, countless baijiu distributors achieved success they never imagined during this decade and earned wealth beyond their imagination. The super distributors we are familiar with today, such as Zhejiang Shangyuan, Hebei Qiaoxi, Henan Xiyangyang, Wuhan Renren Da, Anhui Baichuan, including Jindong Group, all seized the opportunity during the golden decade and developed at an accelerated pace, and to this day each has annual sales of several billion yuan. In 2018, China's baijiu industry total output was 8.712 million tons, a year-on-year increase of 3.14%; sales were 536.383 billion yuan, a year-on-year increase of 12.88%. Various data indicate that a new golden decade for China's baijiu industry has begun. Therefore, we suggest that FMCG, especially beer and beverage distributors, must pay close attention to the opportunities in the baijiu industry in the next decade. The opportunity of the last golden decade was mainly the opportunity of national famous liquors, and this dividend was mainly the dividend of national famous liquor brands. The scarcity of national famous liquor brands created the national famous liquor market with both volume and price increases over the past decade. The opportunity of this round of golden decade is mainly the opportunity of provincial famous liquors in mass-quality liquor. The opportunity mainly lies in two aspects: capital advantage and model innovation advantage. Xiao Jiaolou, which has recently frequently attracted the attention of multiple capitals and major liquor distributors, is precisely based on excellent product quality and positioning, and with the advantages of capital introduction and model innovation, it is running faster and faster, and is becoming a dark horse in the camp of Sichuan famous liquors. -02- Product quality and positioning are the strategic foundation for the rise of provincial famous liquors Although the baijiu industry has many opportunities, it is also deep and full of traps. For example, in the last decade, the output value of the baijiu industry increased tenfold, but at the same time, more than 10,000 distilleries disappeared nationwide, equivalent to more than 80% of baijiu enterprises and brands in the entire industry eventually becoming cannon fodder. And what about the distributors behind these disappeared brands? Their fate can be imagined. When distributors choose baijiu products today, they must not just rely on courage and go into battle bare-chested; they must also see whether the quality and positioning of the product meet the strategic foundation of "can be done for a hundred years, can be done for a hundred billion". 1. To do it for a hundred years, you need a century-old foundation Choose a brand with history, culture, and origin endorsement. Such a brand has strong vitality, which is crucial. As mentioned earlier, baijiu is a cultural consumer product, and cultural value often determines brand value, and can even help enterprises cross market risks and economic cycles. For example, Shanxi Fenjiu once fell into decline for nearly two decades due to a crisis, but because of its unique history, culture, and brewing status, it has returned as a king in recent years and developed rapidly. Among provincial famous liquors, Sichuan famous liquor Xiao Jiaolou has a good historical, cultural, and brewing origin endorsement. Aerial view of the Sichuan Bazhong Yuanhong Xiao Jiaolou Distillery in the forest Sichuan produces good liquor, and Xiao Jiaolou is one of the ten little golden flowers of Sichuan liquor. It is also a China Time-honored Brand and a well-known trademark. The distillery is located in the ancient city of Bazhong, with a history and culture of fine liquor brewing for thousands of years. The "Shui Jing Zhu · Jiang Shui" recorded: "On the left bank of the river is Ba Xiang Village. The villagers are good at brewing, so it is commonly called Ba Xiang Qing Jun famous liquor." The earliest documentary record of Xiao Jiaolou dates back to 1679. The "Pingchang County Annals" of Bazhong says: "In the late Ming and early Qing dynasties, the people were accustomed to brewing fermented glutinous rice and Dinggang wine, and within the territory, the Xiao Jiaolou small vinegar wine of Baiyi was famous." It can be seen that the name of Xiao Jiaolou was already quite prominent locally at that time. Xiao Jiaolou also has good genes for nationalization. There is a saying in the baijiu industry: "Xiao Jiaolou's fame is drunk out." In the 1980s, Xiao Jiaolou ranked first in national production and sales for three consecutive years; in 2003, Xiao Jiaolou's Jinxin pottery jar packaging set a single-product record of 3 million cases a year. With history, culture, and excellent national brand genes and market memory, Xiao Jiaolou is the primary opportunity for distributors at the level of provincial famous liquors. 2. To do a hundred billion, product quality and positioning must conform to the trends of the next decade First, the aroma type. Generally, when distributors choose baijiu products, they first choose the strongest market segment, strong aroma baijiu. Strong aroma baijiu still occupies more than 70% of the market capacity, the market does not need education, and it is suitable for distributors with extensive networks and strong distribution capabilities. Why not choose sauce aroma and light aroma? Although sauce aroma is rising, it still needs time; light aroma works in the north, but it has always been unsuitable in the south. Therefore, distributors can pay attention to multiple aroma types at the same time, but when choosing and investing, the first choice is still strong aroma. Second, the price range. High-end and ultra-high-end products above 500 yuan rely on circles and connections, and are not suitable for FMCG distributors. Boxed liquor around 300 yuan faces both the downward pressure of famous liquors and the upward attack of regional liquors, with fierce competition from both sides, and relies heavily on group purchases. It is not the advantage of FMCG distributors, so it is recommended not to consider it. We suggest that FMCG distributors must focus on and choose high-line bare bottle liquor priced between 50 and 100 yuan. "Drink quality, not the box" has become the clearest trend after baijiu entered a rational market. The demand of original bare bottle liquor consumers has upgraded, and consumers who originally drank boxed liquor at more than 100 yuan per bottle have also begun to return rationally. The bare bottle liquor at the base of the pyramid has entered an era of rapid upgrading and volume expansion. The most obvious example is that high-line bare bottle liquors represented by Fenjiu's 55 yuan "Bo Fen" and Xiao Jiaolou's 68 yuan "Lüshui Qingshan" have quickly gained consumer favor, and their market share has grown rapidly. As one of the representative products of domestic strong aroma high-line bare bottle liquor, Xiao Jiaolou Lüshui Qingshan has a market terminal retail price of 68 yuan per bottle. At the same time, it is based on high quality specially supported by Wuliangye's technical expert team. With volume and profit, Xiao Jiaolou Lüshui Qingshan is indeed the most suitable product for FMCG distributors to enter the baijiu field. -03- Capital and model are the core driving forces for the rise of provincial famous liquors The core advantage of national famous liquors lies in the scarcity and non-replicability of the brand, but the market stock is too large, and a single move affects the whole, making model innovation too difficult. This is precisely the advantage of provincial famous liquors and one of the core driving forces for the rise of provincial famous liquors in the next decade. In the next decade, the key to whether a provincial famous liquor can rise lies in whether it has the advantages of capital and model innovation. Brands without capital advantages cannot develop in the long term, cannot continuously invest in brand building, and without the advantage of model innovation, it is not difficult to brew good liquor, but it is extremely difficult to sell it well under today's fierce competition. -04- Xiao Jiaolou's "Huawei Model" creates a community of shared destiny between manufacturers and distributors In the field of Chinese baijiu, as long as you are in the origin of good liquor, have technical experts, brewing a good liquor is not impossible. But why have tens of thousands of baijiu enterprises disappeared in the past decade or more? Because in today's fully competitive environment, brewing a bottle of good liquor is easy, but selling it well is difficult. So we see that in the past decade or more, although the baijiu industry was developing rapidly, many good liquors disappeared into the long river of history because of poor operating models. And the most important part of the model is the manufacturer-distributor cooperation model. Between manufacturers and distributors, is it transaction or collaboration? Is it game or symbiosis? Is it short-term arbitrage or long-term shared destiny? These questions are the soul-searching questions of the manufacturer-distributor model. It is understood that in the design of Xiao Jiaolou's brand revival strategy, the innovative manufacturer-distributor model will be the core link of the design. Xiao Jiaolou introduces the "Huawei Model" into the channel strategy design, and in the form of "equity incentives", it integrates Xiao Jiaolou and distributors into an inseparable whole. According to the latest policy released, Xiao Jiaolou will offer new distributors—those who complete a minimum of 1 million yuan in the first year and a minimum of 5 million yuan in three years—the right to subscribe to the company's original shares. Most importantly, this equity is not the habitual verbal routine of many manufacturers, but must be truly written into the agreement and the shareholder list after industrial and commercial changes. For many distributors with market influence, because they only have a transactional relationship with the brand manufacturer, no matter how big they become, they have no sense of security at all. Xiao Jiaolou's innovative channel model, with the design idea of a community of shared destiny of "whoever develops, whoever builds, whoever owns", has quickly gained the recognition and choice of a large number of distributors across the country, including super distributors, and has embarked on a path of rapid development. Today, the involution competition in most categories in the consumer goods field is becoming increasingly fierce. When low gross margins can no longer be exchanged for sales growth, distributors relying on the idea of "solving existing problems" can no longer achieve ideal growth. And opportunities like baijiu, which can continue to grow for ten years, are indeed very limited. "Success often comes not from solving problems, but from seizing opportunities." Opportunities like the Xiao Jiaolou brand, which "has profit in the short term, growth in the medium term, and security in the long term", for distributors deeply trapped in involution, such opportunities are enough to help companies escape the involution dilemma and are absolutely worthy of serious attention from distributors.