Page 280 - 2018 White Paper on the Business Environment in China
P. 280
8 White Paper on the Business Environment in China
to be the primary carbonated soft drink product for many and retail prices. For example, in third- and fourth-tier
years due to advertising, brand awareness, and image. cities and rural areas, soft drinks that sell well are tea
Lemon soda comprises the second-largest segment in beverages priced at only 1-1.5 yuan and peanut milk
the carbonated soft drink market. Coca-Cola’s Sprite and priced at 2-3 yuan. By contrast, in the first- and second-
Pepsi’s 7-Up are the leading brands in this segment. Sprite tier cities, popular products are functional drinks priced
has long taken third place in terms of market share in the at 5-8 yuan and juice priced at 3-5 yuan (Business Wire).
Chinese market, but has enjoyed new recognition as “the
king’s drink” after President Xi Jinping was seen in the Star products change with time. For example, around
media drinking from a bottle. Orange soda is the third- 2010, the annual sales revenue of Wong Lo Kat herbal tea
largest segment in the carbonated soft drink market. increased from less than 100 million yuan to over tens
Major brands include Coca-Cola’s Fanta, Pepsi’s Mirinda of billions of yuan in less than 10 years’ time. The sales
and Jianlibao (IBISWorld, Soda). “Today China is already revenue of Wong Lo Kat is the highest in China’s soft drink
one of the largest liquid refreshment beverage markets market. In recent years, energy drinks containing taurine
in the world and will be a key contributor to the growth and vitamins have become new hits. Although China’s
of the global beverage sector,” a spokesman with PepsiCo soft drink industry has been developing fast in the past
Greater China Region said in an e-mail to China Daily. decade, consumption volume per capita is still lower
“China remains an attractive consumer market; total than that in developed countries, especially in rural areas.
consumption has grown four times in the last decade, China’s soft drink industry is not controlled by state-owned
well above the rest of the world.” Ali Dibadj, an analyst capital. Market competition is intense, but still has vast
who covers Coke and Pepsi for Sanford C Bernstein and investment opportunities (Drinkpreneneur). The market
Co, said the brand recognition for the two is “quite high” research indicates that the sales model of different types
in China, but Coca-Cola has much higher share. Coca- of beverage companies vary greatly. National beverage
Cola’s Sprite sells well in China, he said, as well as Master manufacturers are capable of distributing products both
Kong and Wahaha, two large domestic Chinese soda online and offline because they invest considerably in
brands. “Trends are clear that per capita consumption is advertising, promotion and channel establishment. In
rising, even though the growth has slowed,”Dibadj wrote. comparison, regional beverage manufacturers rely on
“The penetration of the category is still quite low, so it will conventional offline channels to save marketing costs
grow, even as health and wellness becomes a growing (Business Wire).
concern” (Freifelder).
The size of the Chinese beverage market has led
Tasty beverages will always have a market. In 2015, multinationals to consider China as an essential market
the total production volume of soft drinks in China in their strategies. Profits and rewards in the beverage
was 183.45 million tons, increasing by 3.9 percent from industry are very high. Currently, the revenue rate is over 30
the previous year. The compound annual growth rate percent despite the high segmentation and competition
from 2006 to 2016 was 15.8 percent, far exceeding in the Chinese market. The beverage market in China is
China’s GDP growth rate. The vast volume of soft drink expected to become the biggest worldwide this year
production developed into more varieties. For example, according to the Jihong He, Chairman of the Association
the carbonated beverage sector grew the fastest after for China Food Circulation. In China, the consumption
China entered the WTO, however its shares have been level of soft drinks is one of the lowest in the world even
declining in recent years due to health, calorie, and though the water from the faucet is not potable. The
nutrition concerns. Fruits and vegetables, vegetable potential growth of the beverage industry in China is, as
protein, milk beverages, and energy drinks have been a result, amongst the highest worldwide. As an example,
growing fast. China’s soft drink manufacturers consist of in 2012 the beverage consumption per person was 96
regional leaders as well as national manufacturers such litters in China, compared to 263 litters in the U.S.; meaning
as Coca-Cola, PepsiCo, Wahaha, Master Kong and Uni- that the U.S. drank 2.74 times more beverage than China.
President. Due to unbalanced economic development, Since 1979, the beverage industry has been through three
the soft drink markets in high-income first- and second- district periods, each marked by the introduction of new
tier cities and low-income third- and fourth-tier cities in beverage products. Carbonated beverages were the first
rural areas are different. Market shares of national leaders to be introduced in China, such as Coca-Cola & Pepsi. Then
in certain regions might be smaller than that of regional bottles of water emerged with the rise of large groups like
enterprises. This largely depends on product varieties Wahaha, Robust, and Nongfu Spring. Since 2001, Master
280
to be the primary carbonated soft drink product for many and retail prices. For example, in third- and fourth-tier
years due to advertising, brand awareness, and image. cities and rural areas, soft drinks that sell well are tea
Lemon soda comprises the second-largest segment in beverages priced at only 1-1.5 yuan and peanut milk
the carbonated soft drink market. Coca-Cola’s Sprite and priced at 2-3 yuan. By contrast, in the first- and second-
Pepsi’s 7-Up are the leading brands in this segment. Sprite tier cities, popular products are functional drinks priced
has long taken third place in terms of market share in the at 5-8 yuan and juice priced at 3-5 yuan (Business Wire).
Chinese market, but has enjoyed new recognition as “the
king’s drink” after President Xi Jinping was seen in the Star products change with time. For example, around
media drinking from a bottle. Orange soda is the third- 2010, the annual sales revenue of Wong Lo Kat herbal tea
largest segment in the carbonated soft drink market. increased from less than 100 million yuan to over tens
Major brands include Coca-Cola’s Fanta, Pepsi’s Mirinda of billions of yuan in less than 10 years’ time. The sales
and Jianlibao (IBISWorld, Soda). “Today China is already revenue of Wong Lo Kat is the highest in China’s soft drink
one of the largest liquid refreshment beverage markets market. In recent years, energy drinks containing taurine
in the world and will be a key contributor to the growth and vitamins have become new hits. Although China’s
of the global beverage sector,” a spokesman with PepsiCo soft drink industry has been developing fast in the past
Greater China Region said in an e-mail to China Daily. decade, consumption volume per capita is still lower
“China remains an attractive consumer market; total than that in developed countries, especially in rural areas.
consumption has grown four times in the last decade, China’s soft drink industry is not controlled by state-owned
well above the rest of the world.” Ali Dibadj, an analyst capital. Market competition is intense, but still has vast
who covers Coke and Pepsi for Sanford C Bernstein and investment opportunities (Drinkpreneneur). The market
Co, said the brand recognition for the two is “quite high” research indicates that the sales model of different types
in China, but Coca-Cola has much higher share. Coca- of beverage companies vary greatly. National beverage
Cola’s Sprite sells well in China, he said, as well as Master manufacturers are capable of distributing products both
Kong and Wahaha, two large domestic Chinese soda online and offline because they invest considerably in
brands. “Trends are clear that per capita consumption is advertising, promotion and channel establishment. In
rising, even though the growth has slowed,”Dibadj wrote. comparison, regional beverage manufacturers rely on
“The penetration of the category is still quite low, so it will conventional offline channels to save marketing costs
grow, even as health and wellness becomes a growing (Business Wire).
concern” (Freifelder).
The size of the Chinese beverage market has led
Tasty beverages will always have a market. In 2015, multinationals to consider China as an essential market
the total production volume of soft drinks in China in their strategies. Profits and rewards in the beverage
was 183.45 million tons, increasing by 3.9 percent from industry are very high. Currently, the revenue rate is over 30
the previous year. The compound annual growth rate percent despite the high segmentation and competition
from 2006 to 2016 was 15.8 percent, far exceeding in the Chinese market. The beverage market in China is
China’s GDP growth rate. The vast volume of soft drink expected to become the biggest worldwide this year
production developed into more varieties. For example, according to the Jihong He, Chairman of the Association
the carbonated beverage sector grew the fastest after for China Food Circulation. In China, the consumption
China entered the WTO, however its shares have been level of soft drinks is one of the lowest in the world even
declining in recent years due to health, calorie, and though the water from the faucet is not potable. The
nutrition concerns. Fruits and vegetables, vegetable potential growth of the beverage industry in China is, as
protein, milk beverages, and energy drinks have been a result, amongst the highest worldwide. As an example,
growing fast. China’s soft drink manufacturers consist of in 2012 the beverage consumption per person was 96
regional leaders as well as national manufacturers such litters in China, compared to 263 litters in the U.S.; meaning
as Coca-Cola, PepsiCo, Wahaha, Master Kong and Uni- that the U.S. drank 2.74 times more beverage than China.
President. Due to unbalanced economic development, Since 1979, the beverage industry has been through three
the soft drink markets in high-income first- and second- district periods, each marked by the introduction of new
tier cities and low-income third- and fourth-tier cities in beverage products. Carbonated beverages were the first
rural areas are different. Market shares of national leaders to be introduced in China, such as Coca-Cola & Pepsi. Then
in certain regions might be smaller than that of regional bottles of water emerged with the rise of large groups like
enterprises. This largely depends on product varieties Wahaha, Robust, and Nongfu Spring. Since 2001, Master
280
