Competition has intensified, and the "cocktail boss" RIO also has troubles - the products have not been sold even after they have expired, and the number of inventory turnover days has skyrocketed.
Recently, Bairun Co., Ltd., the parent company of RIO (Ruiao) cocktail, released its 2023 financial report, and the company's revenue last year was 3.264 billion yuan, a year-on-year increase of 25.85%; the net profit attributable to shareholders of the listed company was 809 million yuan, a year-on-year increase of 55.28%; The net cash flow from operating activities was 562 million yuan, a year-on-year decrease of 37.77%.
As the performance pillar of Bairun Co., Ltd., the revenue of pre-mixed cocktail business last year was 2.884 billion yuan, a year-on-year increase of 27.76%, accounting for 88.36% of the company's total revenue; The revenue of flavor and fragrance products was 317 million yuan, a year-on-year increase of 13.18%, accounting for 9.89% of the company's total revenue.
Expired for 2 months and still not sold
On May 6, a reporter from the International Financial News noticed on the shelves of a Lianhua supermarket in Shanghai that several glass bottles had accumulated a thin layer of ash on the body and cap of the RIO bottle, and one of the bottles was still unattended after it expired. The product was manufactured on September 12, 2022 and has a shelf life of 18 months, from which the product should have expired on March 12, 2024, which has been almost two months since it expired.
Expired RIO cocktails sold at Lianhua Supermarket (Water Hibiscus/photo)
This glass bottle RIO is a classic series of products that the company launched in the early market, but it is no longer the main sales force. RIO currently has 6 series: slightly drunk, small beautiful, classic, light enjoyment, refreshing, and strong cool, bringing a total of 2.884 billion yuan of revenue to Bairun last year.
The secretary of the board of directors of Bairun Co., Ltd. pointed out at the performance exchange meeting that more than half of the performance of the cocktail business in the first three quarters was contributed by the Qiangshuang series, which has become the main product. The Qiangshuang series is an 8-degree wine launched by the RIO brand in the past three years, and it is the product with the highest alcohol content under the brand, focusing on "one can on the top", but this star item does not seem to sell well.
The reporter recently visited a Hema supermarket in Shanghai, where there were 3 rows of shelves in the cocktail display area, and a brand of Ruiao accounted for half of the display space. Among them, the production date of the single-can RIO Qiangshuang is mostly in 2024, but the production date of the three-can combination pack is also in July 2023 (more than 9 months of production).
Water Hibiscus/photo
Offline is the most important sales channel of RIO, and last year, Bairun's main business revenue was 3.2 billion yuan, of which offline channel revenue was 2.75 billion yuan, accounting for 86%. The situation that the product does not sell well also exists in online channels. A consumer bought the tipsy series combo in the RIO Taobao official flagship store in early 2023, and found that most of them were produced in 2021 (the product has a shelf life of 3 years). Although it has not expired, it is undeniable that RIO products are not selling so well.
In recent years, the inventory turnover days of Bairun shares have soared. From 2021 to 2023, its inventory turnover days were 58 days, 137 days, and 217.8 days, respectively, and the situation is still getting worse this year, with a further increase to 291 days in the first quarter. This means that three years ago, it took less than 2 months for a bottle of RIO to be bought from the factory, and now it takes more than 9 months, and this wine for young people is no longer "favored" by young people. The reporter communicated with Bairun about the reason for the rapid rise in inventory turnover days, but did not reply as of press time.
The market share is the first by marketing
RIO is a well-deserved leader in the cocktail market, with a market share of more than 80%, from the early stage of brand development to the present, in addition to the good-looking appearance and sweet taste of the product, RIO has always been well versed in marketing. In September 2022, Ruiao signed artist Xiao Zhan as the global brand spokesperson. Last year, Bairun's sales expenses were 708 million yuan, a year-on-year increase of 13%, while the sales expense ratio decreased to 21.7%, mainly due to the early market seizure and competitive advantage.
According to the "Research Report on Alcohol Innovation for Young People" released by Rees Consulting, in 2011, there were fewer wine products for young people, and the market was in a blank period; From 2012 to 2017, various brands began to seize the market: Jiang Xiaobai went public, and liquor giants such as Wuliangye, Moutai, and Luzhou Laojiao began to launch younger products such as fruit wine, cocktails, and plum wine. At that time, the cocktail market was in the blue ocean period, and it was in 2014 that Rui O began to compete for market share through marketing. It can be seen from the financial report that Bairun Co., Ltd.'s revenue and sales expenses were highly positively correlated at that time.
In 2013, Bairun Co., Ltd.'s revenue was only 129 million yuan, and in the second year, it spent 369 million yuan in sales expenses to deeply implant the popular variety show "Run, Brother" to expand the popularity of the RIO brand. The effect of spending money on marketing during the blank period of the market soon appeared, and Bairun's revenue soared to 1.134 billion yuan that year, a year-on-year increase of 780%. RIO, who has tasted the sweetness of marketing, continues to increase its weight. In 2015, Rui O signed two spokespersons, Yang Yang and Guo Caijie, and the company's sales expenses soared to the highest in history, with a year-on-year increase of 150% to 922 million yuan, but also helped Rui O become the largest brand in the pre-mixed cocktail market, with annual revenue of 2.351 billion yuan.
Source: Rees Consulting "Research Report on Young People's Alcohol Category Innovation"
Since then, Bairun has tried to control sales expenses, but revenue has also declined quickly.
In 2016, the company's sales expenses decreased slightly to 741 million yuan, but the revenue plummeted to 925 million yuan, resulting in a sales expense ratio of 80% that year. From 2017 to 2020, the company maintained its sales expenses within 450 million yuan, and its revenue increased from 960 million yuan to 1.35 billion yuan in four years, with a compound annual growth rate of 8.9%. RIO operations are relatively stable, but the era of high growth in the blank market is over.
Competition for low-alcohol liquor is fierce RIO started making spirits
In the past five years (2019-2023), the growth rate of Bairun's cocktail business was 22.42%, 33.82%, 33.49%, -1.24%, and 27.76% respectively. Among them, the market operating environment in 2022 is relatively special, and if it is ignored, the annual revenue growth rate of RIO cocktail business is relatively stable. However, in the past ten years, the low-alcohol wine market has gone from blank to full bloom, and although the market share of Ruiao is still the first, many young people obviously feel that "the last time they drank Ruiao was several years ago".
Since 2018, beverage giants PepsiCo, Coca-Cola and other brands have launched their own sparkling wines; F&B brands Starbucks and Haidilao have also crossed borders to set up taverns, and young people can choose more and more low-alcohol alcohol.
At present, the search for the keyword "cocktail" on the JD.com e-commerce platform contains two Rui O products in the first five search results, followed by Budweiser low-alcohol wine, Jay Chou's MOJT and Suntory. Among them, Moqito is a new brand just launched by Kweichow Moutai in November last year, and Jay Chou's endorsement has brought it an influence that cannot be ignored, and it was once swiped on social platforms. The influence of this product is not limited to the Internet, the reporter visited offline supermarkets and found that Moqito and Suntory cocktails can be found in Shanghai Freshippo, Lianhua Supermarket and other channels, and are the two products with the strongest offline distribution ability in addition to RIO.
The competition in the low-alcohol wine market has become more and more fierce, and RIO has begun to deploy spirits.
In 2023, Bairun Co., Ltd. has set the strategic guidance of "becoming a leader in China's local whisky industry". The company's management said at the performance exchange meeting that nearly 4 billion yuan has been invested in the whisky business, and there are projects under construction, which is a long-term production capacity layout process, and said that the finished whisky will be launched as scheduled in the fourth quarter of this year.
On the evening of August 24 last year, the company disclosed a fixed increase plan, planning to raise 2.025 billion yuan, of which 1.783 billion yuan will be used to expand production capacity in Jiangsu, Tianjin, Foshan and Chengdu. However, the outside world does not seem to be optimistic about its expansion plan. According to media reports, on the second day (August 25) when the private placement plan disclosed the issuance plan, the share price of Bairun Co., Ltd. fell to a limit, and the closing price was 29.39 yuan per share, a decrease of 9.98%.
The reason for this is that although RIO is a leading cocktail brand, it may not need that much production capacity. At present, Bairun Co., Ltd. has four cocktail production bases in Shanghai, Tianjin, Chengdu, Foshan and other places, and the capacity utilization rate has not been disclosed in the annual report. In the past three years, the company's inventory has risen from 184 million yuan to 535 million yuan and 780 million yuan, which shows that the sales pressure after the production of goods has increased significantly.
The chairman of the board of directors was arrested for accepting bribes
In addition to the pressure at the management level, the management of Bairun shares has not been peaceful recently.
On the evening of February 27, Bairun Co., Ltd. issued an announcement that it received a notice from the Supervision Committee of Nanzheng District, Hanzhong City, that Liu Xiaodong, the chairman and actual controller of the company, was personally investigated and detained on suspicion of bribery.
Even though the company stressed that the above incident would not have a significant impact on business and production, it still made many shareholders uneasy. On the first trading day after the news was issued, Bairun's stock fell more than 9%. As of now, the company has not disclosed the results of the investigation. To this day, the discussion posts about the chairman being investigated in the Bairun stock bar still appear frequently.
Whether from the perspective of capital structure or production and operation, Liu Xiaodong is the soul of Bairun shares and RIO brand.
As of the end of 2023, Liu Xiaodong holds more than 425 million shares of the company, with a shareholding ratio of 40.54%, and is the actual controller and largest shareholder of the company. In terms of operation, Liu Xiaodong single-handedly founded the RIO brand and led it to become the No. 1 market share in the segmented track, and was known as the "King of China's Pre-mixed Drinks". In 2023, Liu Xiaodong will be shortlisted for the "Hurun Global Rich List" with a net worth of 17 billion yuan; In 2024, its wealth will fall to 11 billion yuan.
The chairman of the board of directors "had an accident", which added a layer of uncertainty to Bairun's performance and business goals this year.
According to an equity incentive plan previously disclosed by Bairun Co., Ltd., the performance assessment targets are as follows: based on the revenue in 2022, the company's revenue growth rate from 2023 to 2025 will not be less than 25%, 53.75%, and 84.50% respectively. In 2022, Bairun's revenue will be about 2.593 billion yuan. Based on this calculation, the performance targets of Bairun Co., Ltd. from 2023 to 2025 will be 3.241 billion yuan, 3.987 billion yuan and 4.784 billion yuan respectively.
From this point of view, Bairun Co., Ltd.'s revenue of 3.264 billion yuan last year has completed the performance target of the year, and the revenue growth rate this year needs to reach 23%. RIO cocktail sales have no obvious sales off-peak season, the company's first-quarter results have been disclosed, revenue of 802 million yuan, a year-on-year increase of 5.51%, significantly lower than the annual target growth rate.