Recently, RIO cocktails, which had been performing well, have been hit by a series of bad news. After inventory issues, the old problems hidden under its rapid development are also emerging one by one.

Growth Slows Down

"It has to be adjusted. Even RIO's high-speed growth may come to an end." A professional manager in the liquor industry told New Financial Observer about the parent company of RIO, Baorun, lowering its Q3 profit expectations.

In early October, Baorun issued a revised performance announcement for Q3, stating that net profit for January-September 2015 is expected to increase by 200%-230% year-on-year, reaching 671 million to 738 million yuan. Compared to the semi-annual report at the end of July, the profit forecast was lowered by nearly 200 million yuan.

Baorun explained that based on long-term development plans, it continued to increase investment in brand and channel construction in Q3 2015, but due to the macroeconomic environment and the impact of early channel inventory structure, Q3 revenue did not meet expectations, significantly affecting profits, hence the revision.

After that, stories about RIO's inventory issues intensified.

"Whether from media reports or investment institutions' market research, the result points to one thing: RIO cocktails were placed in many retail terminals and moved into distributors' warehouses, but failed to achieve good, sustained sales. And those distributors who had earlier endured heavy inventory pressure for various reasons finally chose to break ties," said the aforementioned professional manager.

"RIO aggressively pushed inventory, refused to exchange products nearing shelf life; expenses advanced a year ago have not been approved; cross-region sales issues are not resolved; market prices are chaotic..." A RIO distributor told New Financial Observer that these are the problems many distributors currently face, and they even think RIO is "irresponsible."

In fact, inventory issues had early signs. Besides distributors complaining to the media, on RIO's forum, starting from April or May this year, people have been mentioning inventory issues, continuing to this day.

"This area is about to collapse." A forum user claiming to be a RIO employee said on the 21st.

"The collapse he mentioned refers to the dilemma after failing to complete sales tasks. For salespeople, it becomes difficult to report to both the company and distributors. But given RIO's current situation, the sales tasks for Q3 and Q4 this year cannot be completed," a former RIO employee told New Financial Observer.

Management issues are also spreading within RIO.

"The team brought in from Nongfu Spring and the original team have constant friction in daily work. And the outsiders, brought in with high pay, are more easily valued. With RIO's crisis apparent, I decisively resigned," said the former employee.

The consequence is that such conflicts are known to industry insiders who follow RIO.

"I know a bit, but it's not convenient to comment. For a company, regardless of team changes, the development strategy should be sustainable. Both predecessors and successors should adhere to commitments in strategy formulation and execution," marketing expert Fang Gang told New Financial Observer.

"Siege" by All

Before 2013, most industry insiders knew RIO cocktails only as obscure. "RIO is a hot product born under special circumstances," Fang Gang said.

In 2014, RIO's equity (Shanghai Bacchus Wine Co., Ltd.) was sold to Baorun for 5.5 billion yuan. The capital market's optimism for RIO gave wings to its rapid development.

"After that, RIO went further down the path of high investment and extensive recruitment of distributors," said the former employee.

Public information shows that RIO's sales surged to 980 million yuan in 2014, nearly 8 times that of 2013. This growth benefited from its product placement in "Running Man" and the TV drama "Silent Separation," with placement costs as high as 200 million yuan.

On RIO's official website, in the "RIO News" section, 80% of the information is about RIO's investments. The latest entry shows that in September 2015, RIO invested 500 million yuan in new advertisements...

"The massive advertising investment made many distributors see RIO's 'false fire,' but in reality, pre-mixed cocktails are a small category, and the market still needs cultivation," said the aforementioned professional manager.

In Fang Gang's view, in the first half of 2015, RIO's impressive performance of 1.6 billion yuan came from distribution and recruitment dividends; market sales varied, with good and bad; at the same time, as RIO's distribution focus shifted to traditional channels, poor sales due to product selection and penetration differences were normal.

"Precisely, RIO's crisis indicates that the horizontal layout stage of pre-mixed cocktails has ended. Next, vertical development is the top priority, that is, how to solve single-store and overall sell-through," Fang Gang said, adding that mastering the development rhythm is also important.

In fact, RIO's "barbaric growth" in recent years benefited from collective efforts.

After RIO achieved high growth, pre-mixed cocktail companies began to emerge. Public data shows that at this year's Chengdu Sugar and Wine Fair, nearly 30 pre-mixed cocktail companies appeared.

Some companies even launched "RJO," "IOI," and even "Running Man Cocktail"... Thus, the collective efforts turned into a "siege." While RIO invested heavily, other brother brands competed at the retail terminal with similar appearances and lower prices.

"For some large-scale beverage companies, launching a new product and completing the first round of distributor recruitment can bring in nearly 2 billion yuan. But products reaching distributors' warehouses or retail terminals does not mean real sales. RIO either lacks experience or is suspected of speculation," a senior FMCG professional manager told New Financial Observer.

Unlike RIO's youthful and fashionable positioning, RIO's brand director chose the old-fashioned and traditional approach of liquor companies in dealing with the media. Questions about inventory, management, and market bottlenecks were all met with "silence."

Source: Sina.com

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