The ready-to-drink (RTD) alcoholic cocktail beverage (预调鸡尾酒) division of Shanghai Bairun Investment Holding Group Co., Ltd. (百润股份), best known for the Rio brand, reported strong sales for the whole of 2015, up 125% over the same period a year ago.
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| Compiled by Mini Me Insights from company information |
Rio sales deteriorate
However, the spectacular rise of Rio is overshadowed by the deteriorating second half sales in 2015. The latter half of 2015 accounted for a mere 27% of total sales, compared with 52% during the same period a year ago. The decline is thus not attributed to seasonal factor. The new financial data from Bairun has confirmed the fast-growing alcoholic cocktail segment, which is seen as a saviour for the alcoholic industry reeling from the anti-extravagance crackdown, is no longer as popular as before. Distributors and retailers are now aggressively trying to clear their stock as fast as possible even at a loss as alcoholic cocktail has a short shelf life unlike wine and spirits.
The company spent considerably on sales and marketing in the second half of 2015 to boost sales. The share of sales and marketing out of revenue reached a high of around 250% in the final three months of 2015 as sales collapsed.
End of a fad?
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| Taki endorsed by South Korean heartthrob Kim Soo-hyun |
Has the alcoholic cocktail party ended? Fads come and go quickly in China. An examples of boom and bust is the kvass drink. In all cases, the early bird gets the worms but both early and late comers are burned once the trend ends. One sure sign of the sudden boom in the rise of copycats resulting in over capacity. In 2014, Blackcow Food pinned its hope on alcoholic cocktail (Taki) to diversify away from soy-based products. This plan has since ended in failure and resulted in the company incurring a lost of RMB79.77 million for 2015 after it decided to terminate the alcoholic cocktail beverage business. Even the baijiu maker Jiangsu Yanghe Brewery has scrapped its plans to launch alcoholic cocktail.
Rio goes for manliness
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| Rio 5% ABV for both sexes |
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| Rio 8% ABV for men |
For Bairun, Rio is aimed at young consumers especially females who want something sweeter and low in alcohol. Now, the company is trying to arrest the sales decline by reaching out to consumers who prefer something stronger. The new Rio 5% ABV comes in glass packaging with screw cap, while the new Rio 8% ABV is in can. Both were launched in April 2016. The existing Rio in glass has an ABV of 3.8%, while the one in can has an ABV of 3%. The 5% ABV Rio is targeted at both sexes, while the 8% ABV Rio is aimed at men and the beer market.
Competes with AK-47
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| AK-47 brand spokesperson is Zheng Kai |
The new 8% ABV is also an attempt to compete with AK-47, which has been claimed to be a ‘Men’s Cocktail’ with both the 5% and 8% ABV variants. AK-47 is produced by Douglas (Qingdao) Wines Co., Ltd, a partner of the UK-based Scotch whisky maker Douglas Laing & Co., Ltd.
As men are the biggest consumer of alcohol cocktail, the move by Rio to widen the appeal with men may rejuvenate the category but for the moment, investors of Shanghai Bairun shares are licking their wounds.
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| Shanghai Bairun share price as of 20 April 2016, down 71% from its high of RMB 87.15 per share on 22 May 2015 |
