Riyuan Drinks Raises Tens of Millions of Yuan to Expand Bayberry Beverage Solutions

This is an English adaptation of a FoodBud historical article originally published on June 22, 2022.

Riyuan Drinks, a beverage customization solutions provider for chain restaurants, recently completed a new financing round worth tens of millions of yuan. Investors included Jiamei Packaging, Jinding Capital and Shengyin.

Founded in 2011, Riyuan Drinks is headquartered in Shanghai’s Greater Hongqiao area. Its production center is in Shangrao, Jiangxi, and its digital bayberry industry base is in Lanxi, Zhejiang. The company has built an integrated model covering planting, production, R&D, design, training, standards, talent and supply chain, with the stated aim of developing a full beverage-industry ecosystem.

Over more than 10 years, Riyuan Drinks has worked with more than 500 brands, covering over 10,000 stores. Partners include leading chains and retailers such as Haidilao, Xijiade, Zuo Ting You Yuan and Hema Fresh.

Bayberry as the Core Product

Riyuan Drinks focuses on bayberry-based hit products, supported by an integrated solution spanning planting, production, R&D, branding and supply chain. The financing came during bayberry production season, giving the company additional capacity to concentrate procurement and expand production.

FoodBud understands that Riyuan Drinks has posted solid revenue growth. Comparable companies in the market suggest possible development paths.

One example is Haowangshui, which grew out of a restaurant business. It began with barbecue restaurants, then created Haowangshui to provide matching beverages. Its best-known product is likely Wang Shanzha, built around hawthorn. After completing a new financing round last year, Haowangshui said in media interviews that its online, foodservice and retail channel mix was 1:2:1, meaning foodservice accounted for half of sales revenue, with the other half from online e-commerce and offline retail.

If Riyuan Drinks follows a similar logic, the next capabilities to strengthen would be brand positioning and consumer-market execution.

Another bayberry-focused beverage company is Chengyou Wangji in Guizhou, founded in December 2016. Its predecessor was the century-old “Wangji Ice Bayberry” shop in Qingyan, Guizhou, a nationally recognized historic and cultural town. Wangji Ice Bayberry dates back to 1907, during the Guangxu period of the Qing dynasty, and has been passed down for more than 100 years.

According to related media reports, Chengyou Wangji’s current capacity has reached 100,000 cups per day. Its products have entered retail channels including Walmart, Yonghui and Hema, and are also sold overseas. Overseas orders have multiplied, and sales rose from several hundred thousand yuan in 2018 to 3 million yuan. When Chengyou Wangji was producing 70,000 to 80,000 cups per day, it stated externally that annual sales were 300 million yuan; based on current capacity of 100,000 cups per day, FoodBud estimated annual sales at around 400 million yuan.

By comparison, Riyuan Drinks still appears to have significant room to grow: first proving the foodservice channel model, then expanding into offline retail and online e-commerce.

The pressure point for this type of supply-chain company is capital. Expanding production scale requires sufficient cash flow. Tianye Shares, which was recently preparing to list on the Beijing Stock Exchange, had tied itself to tea-drink chains such as Nayuki, gaining both capital input and order support.

Why Jiamei Packaging Invested

Among the investors in this round, Jiamei Packaging is a listed company. Its major customers are mainly food and beverage companies, including Six Walnuts, Want Want, Wanglaoji and Yinlu.

FoodBud’s view is that the Riyuan Drinks investment was likely Jiamei Packaging’s first external investment in a beverage company. The move fits Jiamei Packaging’s strategy of building a “full-industry-chain beverage service platform” and represents an attempt to invest in beverage categories.

Jiamei Packaging is currently focused on beverage contract manufacturing. Given Riyuan Drinks’ current scale, the direct sales contribution to Jiamei Packaging would be small, because Jiamei’s major customers such as Six Walnuts and Want Want have annual procurement volumes measured in hundreds of millions of yuan.

Jiamei Packaging’s reading of the beverage market is that, like other fast-moving consumer goods categories, beverages will eventually move toward specialized division of labor: brands as asset-light players and manufacturers as asset-heavy players. It therefore wants to build its beverage production business. Although contract beverage manufacturing does not generate especially high margins, it is strategically meaningful for Jiamei Packaging’s future growth and risk diversification.

At present, Jiamei Packaging’s share among legacy customers in traditional plant-protein beverages and dairy-containing beverages is stable and improving. In newly expanded functional beverages, leading brand customers have achieved continued scaled order production and delivery. Its platform strategy also covers potential customers across fast-selling beverage segments such as jelly soda, oat milk, thick coconut milk, coconut milk, soy milk and coffee, including startups, crossover brands, traditional beverage brands and new product lines.

In recent years, it has not only been brand-side companies extending investment upstream. Upstream listed companies in packaging materials, meat products and other foodservice-related supply sectors have also been extending investment downstream, aiming to bind themselves earlier to high-growth companies.

Note: financing, listing and forward-looking strategic references reflect the article’s historical context as of June 22, 2022.