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Five Key Trends in China’s Beverage Industry

  •   13 Mar 2017
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China’s beverage market has grown considerably over the last several years. According to the National Bureau of Statistics, domestic beverage industry sales had increased by 10.5% in 2016.

2011-2016 China Beverage Market Sales

 

In China, beverage giants like Coca Cola, Pepsi, Uni-President, Wahaha and Nongfu Spring are accelerating research and development efforts and introducing more international beverage brands to China’s markets. In tandem with this some smaller brands offered exclusively through Chinese ecommerce have gained some traction with Chinese consumers. In 2016 beverage manufacturers greatly diversified their product portfolios in an attempt to cash in on key global trends exemplified in the high number of new NFC juices emerging in China’s markets. Here are five key trends that hallmarked China’s beverage industry in 2016.

The influence of Chinese social media

In April 2016, a taste test involving China’s Top 5 “Most Bizarre beverages” went viral. The test pitted 5 brands against each other in a blinded consumer taste test. The 5 brands were Oldenlandia, Sarsaparilla water, Kvass, Scream, and Oriental Leaf. The test prompted some merchants to provide bundled packages of the five drinks and successfully attracted many consumers. Oldenlandia water emerged as the winner in the taste test and drastically increased the profile of the product nationwide. On the back of this public interest Tmall ran a successful sales campaign generating significant revenue.

A similar case was the “Premium Drinking Water Guide” which was publicized several years ago. The guide showcased the superior quality and health benefits of higher value, bottled mineral waters like Voss and Antipodes and greatly stimulated sales.

Beverages with originality, buzz and affordable price are more likely to generate online interest. Four Loko and BLK were interesting cases in 2016:the former is now banned (use of banned stimulants) while the latter sells at a price of 69 RMB/500ml.

The domestic brand “Le Pur” is adept at using social media and continues to make headway in China’s market through the use of innovative marketing and an emphasis on research and development and supply chain management. Le Pur invites millions of food fans to give feedback on their product through social media like Wechat or Weibo, and also hosts offline tasting to guide future new product development and optimize existing products, marketing, sales, distribution and user experience.

Cashing in on emerging trends

Key beverage trends in China include: Low sugar, tea based beverages, use of natural vegetable/fruit 

Low sugar drinks have gained considerable traction in recent years. After “Oriental Leaf”, Nongfu Spring launched Tea π, a low sugar fruit flavored beverage,. The product had sales of more than one billion within six months. Apart from tea based beverages, Nongfu Spring introduced a fruit flavored soft drink to the market.

The use of vegetables and vegetable extracts is also an important trend. An example is coconut water which emerged as a new player in recent years, represented by "Vita Coco” introduced by Huabin Group, parent company of China Red Bull. With more rivals coming into China, the market leader Coconut Palm juice is under considerable pressure.

For e-commerce and original Internet brands, the better option is to focus on how to improve their products and resonate with consumers. This is particularly evident in the liquor business. Low alcohol, sweet rice wine, fruit wine and beer are most attractive to young consumers. In order to convert browsers into buyers in Tmall’s campaign "Global September 9th Wine Festival”,  imported wine merchants promoted the smaller and cheaper 200ml liquor in their Tmall flagships stores and gave young consumers many trial offers. Other traditional liquor manufacturers such as Yang River are attempting to reduce the harsh mouthfeel and astringency of many of their products. Chongqing Jiangji liquor, with its new product "Jiang Xiao Bai", aims to refresh its brand image through the use of a cartoon design. Founded in Shanghai, Milk Wine sells rice wine featuring sweet-scented osmanthus and apple flavors, and could be used to make cocktails. The so-called "fine brewed beer" Leibao launched the crowd funding beer "Rock and Roll” endorsed by Li Zhi, Zhao Lei and other folk singers. The "Little Rosé" appeared on the TV program "The Thousand and One Nights", with only 3% in alcohol strength and 29.9 yuan / 200ml in price, became a bestselling fruit wine on Taobao.

Customization: Letting the Consumer choose what they want

In the beverage industry, custom products are slowly becoming a reality. Recently, Oreo invited consumers to carry out an online "Custom Packaging” activity. Starbucks coffee has also been successful in offering more personalized products.

“KellyOne”, named after Wahaha founder’s daughter Kelly Zong, is a fully customized fruit and vegetable juice brand and has been popular talking point. On KellyOne’s official WeChat purchase page, consumers can make and name their own juice with three to five fruits and vegetables to choose and the system will determine if it tastes “good” based on the percentage set. The price varies (28, 38, 48 yuan) according to the number of fruit types.

This way of customization, however, doesn’t seem duplicable for other categories of fruit and vegetable juice. Dairy brand Mengniu took another route and worked with Ali research team by using big data to achieve precise positioning. New product development and product formulation was shaped by market demand. Eventually, Mengniu launched a line of sweet milk drinks and began selling via ecommerce in June 2016. This product was adorned with gentle Macaron color and cartoon images of a boy or a girl. “Taste and scenario may matter more for drinks,” says Mengniu Digital Marketing director Guo Rui.

Packaging redesign: Old wine in new bottle?

In 2016 Tmall “November 11” Shopping Festival, Yili released a new online skimmed milk named “Mr. Byebye” as an attempt to target young female calorie conscious consumers by using a comic girl image, dazzling color matching and humorous copywriting. Skim milk is nothing new and Yili has merely redesigned its packaging and copywriting.

RIO cocktails also made the same attempt in order to improve its weak performance. According to a financial report released by RIO’s parent company Shanghai BaoRun, the loss in the first half of 2015 was 145 million yuan and pre-wine business sales fell by 78%. In addition to the introduction of slender "S can" in September, it launched the Limited Edition “Line Friends” before Christmas.

Rather than analyzing consumers’ wants and needs, it is actually better to let them play an active role in the process of product design.  The Financial writer Wu Xiaobo who started the bayberry wine brand "WuWine" would share this idea. In 2016, WuWine created a four-season series of wine through crowdfunding design backed up by Wu Xiaobo’s We media. According to WuWine’s CEO Lu Bin, products designed based on the feedback of a diverse community will help forge emotional ties with potential consumers.

Product segmentation: Is NFC juice really a smarter choice?

As part of the trend for healthier beverage, NFC juice has been favored by an increasing number of enterprises, including the above mentioned KellyOne, Heyjuice invested and endorsed by the model and actress Angelababy (Yang Yin) . Even Weichuan, who earned its market share through concentrated juices, has launched the "daily physical management" NFC product line in June 2016.

Nongfu Spring promoted the “17.5 ° oranges nurtured for nine years”, it also introduced two NFC juices, including cold-chain and room-temperature types and four SKU. The cold-chain 17.5 ° NFC juice was first launched in January 2016, divided into orange juice and apple juice, priced at 12.90 yuan / 330ml and 29.90 yuan / 950ml. Perhaps due to the slipping sales of 17.5 ° NFC juice, Nongfu Spring launched a cheaper room temperature NFC juice, priced at 7 yuan / 300ml in September 2016. What’s interesting is that the 17.5 ° logo was replaced by a very eye-catching “NFC" label. Its market campaign still focused on cold pressing of fresh fruit without additives, added water or sugar, with 120 days of shelf life compared with 45 days of the former cold-chain juice.

According to Weichuan Cold-storage Beverage Brand Manager, Jiang Hongyi “The entire market share of 100% pure juice is still very small, accounting for only 6% of the juice market. NFC is even smaller, maybe less than 1%." 

Disclaimer: the above is the author's personal opinion and is not the opinion or policy of Chemlinked.

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ABOUT THE AUTHOR

Chengxuan HE

Mr. He is currently a journalist of Food Community, which is a wechat public subscription accounts, belonging to Global E-businessman (http://www.iwshang.com/), a new media platform of Alibaba Group. Mr. He focuses on the FMCG in China.