China Consumer


Shanghai Bairun regroups on ready-to-drink cocktails


Rio: carnival time is over

Fancy a guess at the booze generating most buzz in China at the moment? Anyone answering ‘liquid cake’ gets a drink on WiC, after reports that sales of yellow wine – an ancient tipple made from grains such as rice, millet, sorghum and wheat – are the fastest-growing in the industry.

Share tipsters have even been recommending stock in producers such as Anhui Kouzi and Jiangsu Yanghe after the surge in interest in the traditional wine, which is sweeter and less alcoholic than harder Chinese liquor. The wine gets its nickname because of its purported health benefits (proteins and amino acids, supposedly). But could it turn out to be more of a fad than feast for consumers, who seem to be raising their glasses to a new favourite every year?

Another drink, for instance, that proved a flavour of the month was kvass, a Russian favourite brewed from bread, that started making national headlines in 2013 (see WiC203). Ready-to-drink cocktails – alcopops in common parlance – enjoyed a longer run, before showing signs of flaming out last year.

Lead exhibits: the grape brandies and orange vodkas in the Rio range – a brand owned by Shanghai Bairun. In fact, food and wine firm Bairun had sold the lossmaking division that produced Rio in 2009 for just Rmb100 to management. But it bid to buy it back five years later for Rmb5.5 billion ($798.52 million), completing the deal at a time when Rio had ringfenced more than 40% of the market for ready-to-drink cocktails. In the months that followed the deal its share price spiked more than ten times, bolstered by demand from younger consumers who wanted a sweeter drink than beer and a lower-alcohol choice than baijiu.

Much of the focus was on young women, and they were pursued with pink bottles and Hello Kitty packaging. Rio was canny in its marketing too, tying up with the dating show If You Are the One and appointing actress Zhou Xun as its spokesperson. But by the middle of 2015 Rio’s resurgence had attracted a crowd of copycats. New entrants included Blackcow Food, a maker of soy and grain products, which released its own brand of bottled cocktails at the end of 2014, splashing out Rmb200 million on a South Korean actor to promote them. State-backed baijiu manufacturers like Wuliangye and Moutai were also showing interest, after sales of their traditional fare were constrained by Xi Jinping’s campaigns against graft and extravagant spending.

By the time that the new supply was arriving in the marketplace there were signs that demand was cooling, however. After 18 months of stellar growth, Bairun started to report that consumers weren’t quite so ready to drink Rio as it had hoped and that there was an overhang of stock across the market.

After any carnival comes the cleaning up – and Bairun has just reported a Rmb142 million loss for 2016, its first year in the red since an IPO in 2011, and it’s largely because of the reversals in Rio’s fortunes.

Some of the other cocktail producers have now left the market (Blackcow has gone back to soybeans and sesame paste, for instance) but Bairun has responded with a new Rio line with higher alcohol content aimed more squarely at male drinkers. It has also rejigged its packaging and product appeal for the higher alcohol version, co-marketing with video-streaming site Youku and advertising during broadcasts of Sing! China, a singing contest.

Tastes in the Chinese beverage market are changing quickly, with craft beer catching up on mass-produced lagers (see WiC346) and New World wine stealing share from homegrown plonk and expensive bottles from France (see WiC344). But Bairun will be hoping that demand for Rio will be more resilient over the longer term, outlasting alcopop crazes in countries like the UK, where a generation of 1990s party-goers grew out of pre-mixed spirits into wine or flavoured beers. In a national survey last year less than 1% of respondents in the UK said they drank alcopops.

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