NFC and Low-Temperature Juices Showing Great Potential in China

In recent years, although the beverage market's growth momentum remains strong, the growth of juice, an important category of beverages, is slow. The fruit juice sector even experienced negative growth for three consecutive years from 2013 to 2015, and then slowly recovered ^[1]. According to Mintel's data, annual sales in China's juice market are expected to reach 124.8 billion yuan by 2022 ^[2].

The biggest casualty in China’s evolving demands is the low fruit content juice sector. According to data from the Nielsen, in the first half of 2017, the sales volume of the fruit juice industry increased by 1.2% year-on-year, of which the year-on-year growth rates of high-concentration juice (100% fruit juice content) and medium-concentration juice (26%-99% fruit juice content) were as high as 27.1% and 11.3%. However, low-concentration fruit juices, with juice content between 0% and 25%, saw sales fall 7.4% year on year. In China's fruit juice market, the proportion of the market occupied by low-concentration fruit juice is more than 70%, indicating an unbalanced structure out of alignment with consumer demand ^[3].

With the upgrading of consumption, consumers have increasing demands for healthy, nutritious, and natural products. China's juice market is facing a new era. Clean label products with both positive and negative content claims such as "High fruit/juice content," "minimally processed," "additive-free" will be the future trend in the juice industry.

High fruit content juice has room to grow.

According to Euromonitor data, the consumption of 100% juice in Japan accounted for 59.3% in 2018, while the figure was only 5.2% in China.

At present, China's 100% juice market has two main categories, FC (“From-Concentrate”) and NFC (“Not-From-Concentrate”), available in either low temperature or room temperature. The NFC segment, which has a more natural profile and tends to retain more phytonutrients and better retain juice's natural antioxidant capacity, and therefore this segment is expected to experience the greatest growth.

Source: China Galaxy Securities

In the NFC juice sector, the Chinese beverage company Nongfu Spring has been investing heavily. It launched the low-temperature NFC juice "17.5°" and room temperature NFC juice in 2016. In 2019, it introduced low-temperature NFC juice. So far, the company has three juice product mixes in the NFC juice sector, with different ingredients, tastes, and even different prices for each segment.

Low-temperature juice gains more traction

With the improvement of China's cold chain system, low-temperature beverages and dairy products are increasingly popular with consumers. In addition, the expansion in the number of convenience stores in China, where most drinks are displayed in freezers, has driven demand for low-temperature juices.

Now convenience stores are "popping up everywhere" in China. Japanese convenience stores such as Lawson, 7-11, and Familymart are also increasing their presence in Chinese cities. E-commerce giants, including Tmall and Jingdong, are also scaling up deployment in this sector. According to the "2019 China Convenience Store Development Report", in 2018, China's convenience store sales were 226.4 billion yuan, the number of stores reached 120,000, and the industry growth rate reached 19%. 

Chinese dairy and beverage company Weiquan has developed rapidly in the low-temp juice sector. Its sales of low-temperature juice products reached 910 million yuan in 2018, and its market share of 100% juice reached 36%, ranking first in the industry ^[4].

Opportunities and challenges

Opportunities

According to Nielsen data, new products contribute 46% to the growth of the FMCG sector. The transformation of the Chinese juice industry brings opportunities for more new products. This month, British juice brand Innocent entered China. Its fruit juice products are already on shelves in high-end supermarkets, including Fresh Hema, Ole ', Super Species, etc., in Jiangsu, Zhejiang, and Shanghai. Flavors launched include strawberry, kiwi fruit, and mango, and all these flavors are blends of five or more fruits and are made from 100% fruit.

Chinese juice brand Wang Xiaomang launched the first 100% juice in a cup this March. Both the lid and the body of the cup are made of PP5 and can be recycled five times, aligning with current sustainability trends. 

Challenges

Although consumers are increasingly pursuing low sugar, healthy, and fresh beverage products, NFC juice has not yet gained wide consumer acceptance. At present, there is still a big gap between China's juice market and the market in foreign countries in terms of consumption volume. In developed countries, NFC juice has become a daily consumption necessity, just like milk. In China, soya-bean milk, congee, and soup are more popular than juice during meals.