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Standing in front of the shelf of premixed drinks in the supermarket, facing the "sweet drinks" in different packaging, Li Yi, a "post-90s" consumer, has more choices. From the dominance of RIO premixed cocktails to the emergence of various brands today, the competition in the premixed drink market has intensified, constantly distracting consumers' attention.

On August 13, a Beijing Business Daily reporter visited the terminal market and found that the low-alcohol wine shelves that were previously dominated by RIO pre-mixed cocktails have gradually been divided up by products including Heleyi and Yutmiso green plum wine. Not only that, judging from the terminal sales of products, RIO pre-mixed cocktails are also facing great challenges.

The low-alcohol beverage shelf, which was once dominated by Rio’s pre-mixed cocktails, has gradually been divided up by other products.

Inventory turnover days continue to increase

During the visit, the Beijing Business Daily reporter found that in the current terminal market, RIO pre-mixed cocktails are mainly composed of products such as the Tipsy Series, Classic Series and Strong Series with different alcohol content, with a price range of 5-30 yuan per bottle. Among them, the Tipsy Series and Strong Series products account for a large proportion. Unlike a few years ago when RIO pre-mixed cocktails dominated the terminal market, during the visit, the reporter found that low-alcohol brands such as Hele Yi, Meijian and Youmeishuo have also become brands that consumers are keen to buy.

In Beijing Guangcai Supermarket, Beijing Business Daily reporters found that the production date of many flavors of RIO's ready-to-drink cocktails was April 9, 2023. In addition, in the tobacco and liquor store near Ditan Park, the production date of RIO's ready-to-drink cocktail series products was mostly concentrated in January 2024.

Public data shows that from the first half of 2021 to the first half of 2024, the inventory turnover days of RIO ready-to-drink cocktail's parent company Bairun Holdings continued to increase, reaching 52.02 days, 123.16 days, 194.09 days and 313.53 days respectively, an increase of 502.71%.

Regarding the performance of its products in the terminal market, a Beijing Business Daily reporter interviewed the secretary of the board of directors of RIO ready-to-drink cocktails' parent company Bairun Holdings, but no response was received as of press time.

The increase in inventory turnover days is also further reflected in the financial statements. From January to June this year, the sales volume of pre-mixed cocktail products under Bairun Holdings was 17.2151 million boxes, a year-on-year decrease of 8.69%; the production volume was 16.9396 million boxes, a year-on-year decrease of 8.83%. The decline in sales also led to a decline in the performance of the overall pre-mixed cocktail sector. The financial report shows that the revenue of pre-mixed cocktails under Bairun Holdings fell by 1.42% in the first half of the year. Among them, in the peak consumption season of pre-mixed cocktails in the second quarter, revenue fell by 7.3%. Regarding the decline in sales of pre-mixed cocktail products, Guosen Securities pointed out in its research report that it was mainly due to the continued weak consumer demand and the high base pressure faced by the core single product Qiangshuang.

When the sales volume of pre-mixed cocktail business, which accounts for 87.9% of the main business income, declined, Bairun's performance was also affected. From January to June, Bairun achieved operating income of 1.628 billion yuan, a year-on-year decrease of 1.38%; and achieved a net profit attributable to shareholders of the listed company of 402 million yuan, a year-on-year decrease of 8.36%.

Low-alcohol drink practitioners pointed out that although low-alcohol drink consumption scenarios are constantly being explored, white wine, beer and foreign wine have a high voice in self-drinking, business and banquet scenarios, so it is very challenging for pre-mixed cocktails to enter new scenarios. In addition, the current low-alcohol drink market is highly competitive and homogenized, which has caused a decline in the sales of RIO pre-mixed cocktails.

Higher marketing costs

Hidden behind the decline in Bairun Holdings' performance and terminal market performance are not only the internal factor of rising marketing expenses year by year, but also the external factor of increasingly fierce competition in the low-alcohol beverage market.

According to the financial report, from January to June, Bairun's sales expenses reached 708 million yuan, and the sales expense ratio was 24.39%, an increase of 4.32 percentage points from 20.07% in the same period last year. Regarding the annual marketing expense plan, Bairun pointed out in the research letter that the company will continue to invest in marketing expenses throughout the year, and the sales expense ratio will remain at a reasonable proportion.

The process of RIO ready-to-drink cocktails from research and development to market share of 80% is also a microcosm of Bairun's continuous increase in marketing expenses. Beijing Business Daily reporters sorted out the financial reports and found that Bairun's sales expenses increased from 428 million yuan to 708 million yuan from 2020 to 2023, totaling 2.329 billion yuan in four years, accounting for 22.44% of the total revenue of 10.378 billion yuan in the four years from 2020 to 2023.

Among marketing expenses, the proportion of advertising expenses has remained at around 50%. A Beijing Business Daily reporter sorted out the financial reports and found that from 2020 to 2023, Bairun's advertising expenses accounted for 50.45%, 47.94%, 51.47%, and 50.84% ​​of sales expenses, reaching 216 million yuan, 272 million yuan, 322 million yuan, and 360 million yuan respectively.

Xiao Zhuqing, a wine marketing expert, pointed out that premixed alcoholic beverages are a low-profit industry. Channel partners cannot make money, so the channel is not very motivated to promote them. This is a cruel problem facing premixed alcoholic beverages. At the same time, the low-alcohol alcoholic beverage industry is highly homogenized and lacks personalization, which is the main reason why consumers lack sustained interest. Therefore, ensuring R&D investment will ensure a longer market life cycle.

While high sales expenses continue to squeeze profit margins, with the entry of many brands into the low-alcohol beverage market, the survival space of RIO ready-to-drink cocktails is also shrinking.

Ten years have passed since the popularity of premixed cocktails in 2014, and the market size of low-alcohol drinks has continued to expand. Public data shows that the market size of the low-alcohol drink industry is expected to be about 534.3 billion yuan in 2022, with a compound growth rate of 29.3% from 2018 to 2022. In addition, according to iMedia Research, the market size of low-alcohol drinks in China is expected to exceed 600 billion yuan in 2023.

As the market scale expands, many wine companies have entered the market. According to public data, there are about 76,000 companies that have entered the low-alcohol wine market in recent years. Among them, not only imported low-alcohol wine brands such as Heleyi have quickly seized the domestic market, but also Meijian, Zui'e Niang and other low-alcohol wine brands have focused on cultivating them, and liquor companies such as Kweichow Moutai, Wuliangye and Luzhou Laojiao have "distracted" themselves from the low-alcohol wine market. This has created a squeeze for both RIO pre-mixed cocktails and new "players".

Whiskey track becomes a focus

Now, when RIO ready-to-drink cocktails cannot rely on increased marketing investment to drive the parent company's performance growth, Bairun shares are also at a crossroads of whether to continue to deepen the ready-to-drink cocktail track or leverage the whiskey track. In August last year, Bairun shares issued an announcement that the total amount of funds to be raised would not exceed 2.025 billion yuan, which would be used for ready-to-drink cocktail projects such as capacity expansion projects, the second phase project of Shanghai Bacchus Wine Co., Ltd., and the Bacchus Wine (Chengdu) R&D and Testing Center project. But until May this year, Bairun shares stopped the private placement.

Despite the suspension of the private placement, Bairun shares did not seem to give up. Bairun shares stated that after the termination of the private placement project, the implementation arrangements of the relevant construction projects will be adjusted, and the projects will be completed through self-owned funds, small financing and bank loans.

As market competition becomes increasingly fierce, the profit margin of the ready-to-drink cocktail business is squeezed, and Bairun shares are also seeking a "second leg" to walk. Among them, the whiskey track, which has gradually become popular in recent years, has become another focus of Bairun shares.

A Beijing Business Daily reporter found that since its subsidiary Bacchus Wines started construction of a spirits project base in 2017, Bairun Holdings has invested nearly 2 billion yuan in the construction of the Laizhou Distillery, the spirits (whiskey) aging and maturation project, and the malt whiskey aging and maturation project.

It is understood that in the fourth quarter of this year, the finished wine of Laizhou Distillery under Bairun Holdings will be officially released, and the revenue growth of the spirits sector is expected to be reflected in 2025. However, it is not only Bairun Holdings that is targeting the whiskey track. Looking at the current terminal market, in addition to imported whiskey brand products including Pernod Ricard and Diageo, Chinese domestic whiskey has gradually entered the list of consumers' spirits. In recent years, companies including Luzhou Laojiao, Yanghe Shares, Tsingtao Beer and Yanjing Beer have all made layouts for the whiskey track.

Beijing Business Daily reporter Liu Yibo and Feng Ruonan/text and photos