"Suddenly, like a spring breeze, cocktails are everywhere." Overnight, cocktails became a craze, spreading like wildfire across the country, inexplicably. Many industry insiders and outsiders wonder: how long can the cocktail craze last?
In fact, pre-mixed cocktails are nothing new. The world's first pre-mixed cocktail, TWO DOGS ALCOHOLIC LEMONADE, was created in 1993 by Australian Duncan Mac Gillivray and was a huge success. It sold well first in Australia and New Zealand, then in Japan, Southeast Asia, Europe, and the United States. In Japan, Kirin initially acted as an agent and later acquired TWO DOGS. Suntory and other major companies also entered the market, leading to the current triopoly of Suntory, Kirin, and Takara. In China, the author obtained the mainland distribution rights in 1997 and introduced it to the Chinese market.
Another heavyweight player at that time was New Zealand's Independent Liquors. Its owner, Michael, a former mathematician, became New Zealand's richest man within a few years through his cocktail (then called soda wine) business. The company had brands such as Stinger, Purple Star, Cruiser, KGB, and Tattoo, which were all the rage in mainland China. The author once served as the general distributor for Purple Star (also known as Purple Lizard) in South China.
In the early 2000s, local Chinese brands (or brands produced locally) began to emerge, such as Bacardi (Jazz, Breezer), Rio, Blue Spirit, and Power Train. However, they were mainly sold in nightlife channels like bars and KTVs. It was only after 2010 that cocktails moved out of nightlife venues and into supermarkets and households.
In my view, there are three main reasons for cocktails' transition from niche to mainstream. First, as Chinese consumers' purchasing power improved, a huge demand for premium FMCG products emerged. The popularity of imported German beer priced above 10 yuan is a good example. Before 2010, Breezer, Rio, and even our Blue Spirit were sold in supermarkets, but with mediocre results. Because the price was also above 10 yuan, purchasing power had not reached that level. After 2010, the market began to mature, just waiting for an opportunity to ignite. Second, leveraging popular entertainment. In 2013-2014, Breezer and Rio invested in hit TV dramas like "iPartment" and "Running Man," sparking follow-the-crowd consumption among urban youth, completely unlocking the market and igniting sales! Third, a star company drove the industry's takeoff: Rio's meteoric rise in 2014.
In the FMCG industry, new hotspots and emerging sub-sectors appear every year. For example, walnut milk, apple cider vinegar, and fresh-squeezed coconut juice have formed sales scales of billions or even tens of billions. But their influence is often limited to the industry. To become a household name like herbal tea, which captured the whole society's attention, requires an outstanding or even great industry leader. JDB is a typical example. Without JDB, Guangdong herbal tea would never have become popular across China. Rio is another industry leader of JDB's caliber.
In 2014, Rio defeated Breezer in one fell swoop to become the new industry leader and continued to widen the gap. An obscure Chinese private enterprise completely defeated a world-renowned international spirits giant ranked third globally. This is a significant chapter in China's FMCG history! This victory was so thorough, so brilliant, and left the opponent so subdued that they had no power to fight back! In brand building, channel operations, capital management, and every other aspect, Rio performed flawlessly, almost perfectly. Even more remarkable is Rio's mastery of pop culture, as if wielding a magic wand, hitting wherever it points, making countless young people flock to it with obsession!
In 2014, Rio's revenue was 980 million yuan; in the first quarter of this year, it was 770 million; the full-year forecast is 4 billion; and within the next 2-3 years, it aims to reach 10 billion. This report card not only indicates that the strong will only get stronger, discouraging the second-place player from coveting the top spot, but also gives a crisp and clear answer to cocktail industry skeptics: the future of cocktails is bright and boundless!
Who will be the second Rio?
The industry generally predicts that in the next 3-5 years, the cocktail industry will see a duopoly, like the two colas, two teas, and two herbal teas. So, besides the undisputed leader Rio, who will be the future second?
I disagree with China Merchants Securities' research report on Rio, which claims that Breezer's second-place position is unshakable. Last year, Breezer was attacked by Rio and reacted slowly, mishandling the situation. Its new product, the "Holiday Limited Edition," was poorly received; channel operations were lax and weak; the brand ambassador was unpopular; and advertising investment lost the former glory of "iPartment." It was a total failure on all fronts. This typically reflects the company's long-standing big-company ailments: slow response, bureaucratic exaggeration, and lack of focus and professionalism. Combined with its market performance since entering China, from the early Jazz and Breezer to the later Dewar's whisky, as a seasoned professional, I would put a big question mark on this industry's second-place player.
Today's cocktail market is a battlefield of many contenders. Some observers divide them into three categories. First, the "authentic lineage" group, represented by Rio, Breezer, Blue Spirit, and Purple Star; second, the "baijiu wanting to mix" group, represented by Wuliangye, Gujing Gong, and Yanghe; third, the "food extension" group, represented by Huiyuan and Black Bull.
China Merchants Securities' research report on Rio argues that the second category, baijiu companies, can basically be excluded from the main competitors. I agree, for three reasons:
First, baijiu companies are huge in scale. Making cocktails would yield at most tens of millions a year, which is too insignificant for these hundred-billion-level giants to care about. Second, baijiu companies find it difficult to break out of their fixed mindset to create a young, fashionable product. Even Yanghe, which has a relatively modern business approach, would face a huge leap to step out of the baijiu mold. Third, there is a genetic conflict. The base spirits for cocktails are imported products like vodka, whisky, brandy, and rum. Using baijiu as a base spirit, aside from taste, would face a psychological barrier among young people culturally. Wuliangye's baijiu cocktail is a negative example. The baijiu giants' desire to "mix" cocktails is likely a fleeting impulse during market downturns. With the recovery of baijiu this year, the bigwigs may have already put it aside!
Compared to the baijiu industry, food companies with far stronger innovation capabilities are strong contenders in the cocktail arena. Companies that have officially entered the cocktail industry include Huiyuan and Black Bull. However, except for Black Bull, most treat it as an auxiliary category, selling it alongside their main products. These companies appear strong but are essentially just dabbling. Black Bull is currently the only player in the market that genuinely treats cocktails as a strategic development goal. The company is determined and has invested heavily in the market. However, in terms of industry experience and operational expertise, it still lags behind the industry leaders. Given time, it may achieve success.
Among the so-called "authentic lineage" group, the market still features several old brands. They have a first-mover advantage in product development and market operations over newcomers. What they lack is financial strength. In the context of the cocktail craze and the booming NEEQ capital market, cocktail brands will inevitably seek capital support. Rio's success is largely due to the endorsement of the capital market. Once old brands like Blue Spirit receive capital support, they will be like tigers with wings, accumulating strength and soaring to the sky!
Of course, the biggest competitor may be an unknown one. This hundred-billion-level wealth feast will attract heroes from all walks of life, who will strategize, dance with long sleeves, gallop across the battlefield, and compete for the central plains! Who will become the industry's second, who will become the second Rio, will likely be decided in the next two to three years.
How to choose cocktail products?
For those in the liquor business today, one phrase sums it up: "Business is hard"! Baijiu is constrained by the three public consumption restrictions and has plummeted; red wine has too many sellers and too few buyers; beer saw its first sales decline in over a decade last year... So, the dazzling debut of cocktails has indeed brought a ray of hope to the domestic beverage industry. However, faced with numerous cocktail brands, how do you choose and distinguish?
Experience tells us that a good product can save a company or grow a company. Aligning with a good brand and company is like getting on a highway and catching a wealth express. But in the cocktail industry, who are the good brands and good manufacturers? As a seasoned practitioner, I offer distributors a few tips.
First, avoid "letter brothers." The market is flooded with knockoffs and imitations that often don't even bother to come up with a proper name, just reversing letters like ABC to CBA to create a brand. I call them "letter brothers." They sell at low prices, are shoddily made, and their products are just "three essences and water." Quality is not guaranteed, there are no service personnel, and price stability is poor. They can only do one or two rounds, making money for three to five months. They can't make big money or last long. Distributors with ambition and vision should not engage with them.
Second, for bottom-price operations, act according to your capabilities. Bottom-price operation means the distributor plays the role of the manufacturer, requiring a strong market network and resources. Although profits are considerable, risks also increase. So, for such products, distributors should assess their own strength and act accordingly. Moreover, even if successful, it's a regional brand, and how long it lasts is unknown.
Third, be cautious with distributor private-label products. Some distributors with strength and a good network might spend a few hundred thousand to create their own brand, given the low entry barrier for cocktails. However, such products have inherent defects compared to branded manufacturers in terms of brand power, product strength, and overall marketing planning. Distributors must be extremely cautious when taking on such products!
Fourth, don't blindly trust big companies. Distributors often trust the "strength" of big companies but neglect to analyze their corporate will in the cocktail sector. Some baijiu companies, seeking a way out during market downturns, use cocktails as a test; when the market improves, they toss it aside. Some manufacturers are pursuing marginal profits, launching a cocktail to sell alongside dozens or hundreds of other products. If even the salespeople can't explain the product, how can it succeed? Another type of big company is where the boss's siblings, aunts, and uncles, seeing cocktails selling well, start their own ventures under the company's banner... The list goes on. So, when distributors take on big company brands, they must discern the entanglements. If cocktails are not the company's main business, I suggest distributors not aim too high, or they'll waste time and money.
Fifth, don't do it if the match is unequal. Big brands like Rio have high requirements. If you lack the corresponding strength, capital, network, and personnel, you'll end up abandoning halfway.
Choice is more important than effort. Choosing a good product for mutual development is like choosing your life partner. If you choose a rich kid, they might have too many options and not fancy you; if you choose a simpleton, you might live in poverty for life. So, as the saying goes, choose with your eyes open. When choosing a product, look at the past (company reputation, history), the present (packaging, taste, market performance), and the future: whether the boss has grand ambitions, whether the team is united, and whether the company has spirit and core competitiveness.
"Standing at the风口, even a pig can fly." To friends who are paying attention and preparing to enter the cocktail industry, congratulations. You have unique vision and keen senses, targeting cocktails as the future trendsetter of consumption. However, no one is willing to be a pig; everyone wants to be an eagle or a roc, soaring high! This requires not only vision but also ambition. As the saying goes, birds of a feather flock together. Ambitious merchants will find ambitious manufacturers. Manufacturers and distributors join hands to create the future, living up to this great era of mass entrepreneurship and innovation!
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