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Sparkling Water, a Booming Segment in China’s Beverage Market

In recent years, low-sugar and low-calorie beverages have been performing strongly in China. Leading this charge is sparkling water. The success of emerging sparkling water brand Yuanqisenlin has attracted many stakeholders to enter into this segment, which includes dairy company Yili, beer brand Tsingtao Beer, carbonated beverage giant Coca-Cola, and sports drink company Jianlibao, etc.

In the beverage industry, carbonated beverages are undoubtedly among the most popular categories, especially among young consumers. However, affected by people’s increasing of the role diet plays in health, sales of carbonated beverages have contracted. Coca-Cola, has seen a continued decline in its revenue from 2012 to 2018, dropping a whopping 10% in 2018 [1]. There has been a concomitant surge in demand for low-sugar and low-calorie beverages in tandem with this decline. In line with this trend, sparkling water has emerged as a strong force. According to Nielsen's omnichannel sales data, global sales of flavored sparkling water drinks reached 2.2 billion US dollars and increased by 54% in the past four years [2]. "Analysis Report of China Sparkling Water Industry" shows that China’s sparkling water market reached 9 billion yuan (1.29 billion US dollars) in 2018 and was estimated to have reached 12 billion yuan (1.71 billion US dollars) in 2019.

Sparkling water is healthier.

Nielsen's 2019 data shows that 82% of Chinese consumers are willing to spend more on healthy drinks than the 68% reported by consumers globally. There is a "healthy beverage pyramid" [3] in the minds of consumers, which goes from high to low according to the health level of the beverage. The healthiest drink for consumers is bottled water, followed by sugar-free drinks, and then by 100% pure fruit juice

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The popularity of sparkling water coincides with broader trends towards health and wellness in China. Compared with carbonated drinks, sparkling water does not have high calories and high sugar. Compared with bottled water, sparkling water has the fizzy taste of carbonated drinks, which is a highly sought after sensory experience craved by consumers. Also, by adding natural sweeteners such as erythritol and polyglucose, sparkling water can have a sweet taste but contain 0 sugar, 0 fat, and 0 calories. This allows the product to be positioned as a tasty but healthy alternative to sugary carbonated beverages. According to a Mintel survey of 2,941 people aged 20 to 49 in March last year, 50% had bought sparkling water in the past six months. Cyanhill Capital's "2020 China FMCG Early Investment Opportunity Report" shows that the three keywords for high-growth beverage products are sparkling water, 0 sugar 0 fat 0 calories and Medium and high-end bottled water. Sugar-free sparkling water are undergoing rapid growth. 

Booming China market

About 20 years ago, sparkling water entered the Chinese market [4]. At first, it was only served in some high-end hotels, western restaurants, and Starbucks. The sparkling water brand "Perrier" quickly dominated China’s sparkling water market. At present, on Chinese e-commerce platforms, the sales volume of "Perrier" is still quite high.

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In recent years, China's sparkling beverage market has been booming. Yuanqisenlin, a newly established domestic company(founded in 2016) specializing in sugar-free drinks, has emerged as a first-tier beverage brand with a brand valuation of about 4 billion yuan and a sales volume of nearly 1 billion yuan in 2019. Sparkling water is the most important product in its range, accounting for 65-70% of the brand’s sales volume [5]. The brand beat Coca-Cola, Pepsi, and Perrier to rank second in sales volume during the 2019 Singles’ Day Shopping Festival, coming just behind the dominant Vitasoy.

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Following the success of Yuanqisenlin, this year, several companies, including Yili, Tsingtao Beer, Jianlibao, and Coca-Cola, launched in close succession several sparkling water products.

Chinese dairy giant Yili launched Yiran Milk Mineral Sparkling Water in early 2020, available in two flavors, cucumber, and passion fruit. It claims that each bottle contains 96mg of calcium with 0 sugar, 0 calories, 0 fat, and real juice. This kind of beverage, which sits at the intersection of mineral water, carbonated drinks, and juice, is in line with the demands of young people who seek both taste and health. This month, it introduced a new Honey Pomelo Corona Flavored Sparkling Water, which includes beer flavor notes but does not contain any alcohol.

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In March, Tsingtao Beer launched “Qingling” sparkling water, also featuring 0 sugar, 0 fat, and 0 calories, with three flavors of lemon, peach, and passion fruit. Coca-Cola launched Appletiser, a high-end fizzy fruit drink that contains 99% concentrated juice. It is positioned as a high-end product for parties and dinners. 

In May, Chinese sports drink brand Jianlibao launched “Weipao," sugar-free sparkling water, which has zero fat and is fortified with dietary fiber. The product has two flavors, white peach cherry, and Mojito.

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**Disclaimer: All images used in this article are from the internet.
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