On April 18, Budweiser China announced the official signing of an exclusive distribution agreement with Red Bull Austria for the Chinese mainland market. This puts an end to the rumors between Budweiser China and Red Bull, with the previously rumored partner, Red Bull Anji, replaced by the low-key Red Bull Austria. Months earlier, market rumors suggested Budweiser China might become the general distributor for Red Bull Anji in the southern market, splitting the north-south distribution with Yangyuan Group. However, Budweiser China quickly issued an official clarification stating, "Budweiser China has no distribution cooperation with Red Bull Anji and does not operate Red Bull Anji." Nevertheless, according to industry insiders, although Budweiser China denied cooperation with Anji, it expressed support for its distributors' cooperation with Red Bull Anji. Now, less than six months later, Budweiser China has signed an agency agreement with Red Bull Austria. Is this cooperation a remedy for Budweiser China's declining market performance, or is it a wedding dress for Red Bull Austria coveting the Chinese market? **-01-**Budweiser China Seeks Breakthrough A review of Budweiser APAC's 2020 annual results reveals that both revenue and sales volume declined in the fiscal year. During the reporting period, Budweiser APAC's full-year revenue for fiscal 2020 was $5.588 billion, down 12.4% year-on-year; profit attributable to equity holders was $514 million, a decrease of 42.76% year-on-year. In 2020, Budweiser APAC's total beer sales volume was 8.112 billion liters, down 12.1% year-on-year. In China, sales volume fell 10% year-on-year, and full-year revenue declined 11%. China is Budweiser APAC's main revenue source, accounting for about 70% of revenue. The company attributed the decline to the COVID-19 pandemic's impact on the on-trade channel, leading to reduced beer sales. However, a review of Budweiser APAC's financial reports over the past two years shows that its revenue has been negative for three consecutive years. Meanwhile, among other listed beer companies, Tsingtao Brewery, Chongqing Brewery, and Zhujiang Brewery saw net profit increases of 18.86%, 3.30%, and 14.43%, respectively. China Resources Beer did not disclose specific figures, but reported that profit attributable to shareholders increased by over 50% in 2020. Beyond performance pressure, Budweiser APAC's position as the only high-end beer brand in the Chinese market has also been shaken. In recent years, as the overall beer industry in China has nearly stagnated, local brewers have begun to lay out high-end and sub-premium beer lines. Around 2010, Tsingtao Brewery and China Resources Beer, two of the three major industrial beer giants, almost simultaneously began expanding their premium product lines. In terms of Chinese market performance, Budweiser APAC was the only listed beer company with a significant decline. However, it must be noted that in terms of revenue and net profit scale, Budweiser APAC remains the industry leader. Industry insiders point out that even before the pandemic, Budweiser APAC's operations had begun to show signs of decline. In 2019, Budweiser APAC listed on the Hong Kong Stock Exchange, and its performance began to decline slightly that year. According to financial reports, in 2019, Budweiser APAC's revenue and normalized profit attributable to equity holders were $6.546 billion and $994 million, respectively, with year-on-year changes of 1.8% and -1.78%, showing increased revenue but not profit. Regarding this cooperation with Red Bull Austria, industry media reported that Budweiser China's senior management had been in contact with Red Bull since the Anji incident and conducted multiple negotiations. This was largely due to the proactive efforts of one party, resulting in the best outcome after coordinating the interests of all parties. It is understood that Budweiser China's senior management has close ties with Red Bull. Guangzhou Yaonengliang, once a spokesperson for Thai Tansri, was founded in 2012 by several former Budweiser employees. Guangzhou Yaonengliang's products were initially sold through the Budweiser system. However, after two rounds of financing, Yaonengliang failed to gain traction. In 2016, Thai Tansri acquired it and launched Red Bull Anji. Some of Yaonengliang's executives later returned to Budweiser China, establishing personal connections between Budweiser China and Thai Tansri. Whether this successful acquisition of exclusive distribution rights for Red Bull Austria in mainland China was inspired by the 2020 Red Bull Anji incident or the intricate personal connections among executives, Budweiser China's intention is clear: to leverage its traditional advantageous channels to inject new business and find new growth points for its sluggish performance. -02- Red Bull Austria Intensifies Now let's look at the complex relationships of Red Bull. A single trademark brand has created three top wealthy families on the Hurun Global Rich List. The trademark dispute over Red Bull in China has been widely publicized. So what are the complex relationships of Red Bull in China? The signing of the exclusive distribution agreement between Budweiser China and Red Bull Austria for mainland China marks the transition of the Red Bull market in China from a three-way standoff to a four-way division. First, there is Hua Bin Group, which has been operating China Red Bull. Second, there is Yangyuan Group, which controls the distribution rights for Red Bull Anji in the region north of the Yangtze River. Third, there is Red Bull Vitamin Flavored Beverage, launched by Tansri after adjusting the name and taste of Red Bull Anji, directly operated by Pu Sheng. Fourth, there is Budweiser China, which has obtained the general distribution rights for Red Bull Austria in the Chinese market. Regarding Red Bull Austria, industry insiders explain that 51% of Red Bull Austria is held by Thailand's TC Agro Trading Co., Ltd., with the Austrian side holding 49%. The Thai shareholder has its own independently developed brand "Krating Daeng" in the Chinese market. Due to concerns about competition from Red Bull Austria products, the plan for Red Bull Austria to enter the Chinese market was hindered, and it only succeeded in entering China in 2014. In the years since entering China in 2014, due to the ongoing trademark disputes between Thai Tansri and Hua Bin Group over Red Bull Vitamin, Red Bull Austria has maintained a low profile, avoiding involvement. It has not engaged in much market promotion, brand promotion, channel expansion, or team expansion, so sales have remained lukewarm, presenting an image of not competing. However, rumors suggest that things may not be as simple as they appear. During the years of the PK between China Red Bull and Thai Tansri, Red Bull Austria clearly coveted the domestic market share. In 2019, Red Bull Austria announced that it would fully appear in 40 first- and second-tier cities in China within the next 2-3 years. At the same time, Red Bull Austria enlisted Gu Ailing as its brand ambassador, intending to leverage winter sports to expand its product's consumption share and influence in China before the 2022 Winter Olympics. Due to the trademark dispute between Hua Bin Group's Red Bull Vitamin and the brand owner Thai Tansri in the Chinese market, Red Bull Austria maintained a low profile in its early years in China. This time, Red Bull Austria is willing to join hands with Budweiser China to make a high-profile move because through the beer channel, it can enter entertainment venues nationwide for special channel sales. This ensures effective sales growth while maintaining a high-end brand tone, gradually encroaching on domestic market share from the special channel market. Moreover, this does not interfere with Thai Tansri's dual-line brand strategy, nor does it worry about backlash if it grows too big. It is a win-win for both Thai Tansri and Red Bull Austria. This also means that the low-key Red Bull Austria will officially intensify its efforts in China's functional beverage market, formally participating in the domestic Red Bull market competition. The battle in China's functional beverage market will enter a new climax. -03- Summary But at least for now, the domestic functional beverage market is still a situation of one superpower and multiple strong players! The leading brand Red Bull holds a 57% market share, Dongpeng Special Drink 15%, Lehu 10%, Body Energy 6%, XS 5%, Zhanma 4%, and others (including Monster from Coca-Cola, Yili Huanxingyuan, Uni-President Goran, Carabao, etc.) total 3%. In particular, Dongpeng Special Drink has firmly secured the position of the second-largest energy drink in China and has successfully filed for an IPO, with A-shares set to welcome the "first functional beverage stock." More importantly, in the minds of Chinese consumers, "Red Bull" should not be carbonated; carbonated drinks are called "Coca-Cola," which clearly has nothing to do with the refreshing function. A ready example is that Hua Bin Red Bull has the same silver-blue can as Red Bull, with higher taurine content and better refreshing effects, but consumers do not buy it, and sales are not ideal. If Red Bull Austria continues with its existing products, it will have no advantage in competing with China Red Bull in this channel. Once the tip is adopted, a payment of 400-2000 yuan will be made.