---
title: "3 Years, 4 Billion: Will Genki Forest Be the Next Coca-Cola?"
description: "Genki Forest has capitalized on the health trend in beverages, with its sugar-free and low-calorie products gaining popularity among young consumers. The company's success is also driven by the rapid expansion of convenience stores and effective online marketing, positioning it as a potential 'healthy Coca-Cola' for Chinese youth."
author: "徐子"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2019-09-05"
categories: "Brand Marketing, Consumer & Categories, Retail Formats"
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# 3 Years, 4 Billion: Will Genki Forest Be the Next Coca-Cola?

> Genki Forest has capitalized on the health trend in beverages, with its sugar-free and low-calorie products gaining popularity among young consumers. The company's success is also driven by the rapid expansion of convenience stores and effective online marketing, positioning it as a potential 'healthy Coca-Cola' for Chinese youth.

**Product Dividend: The Rise of Health Consciousness**
Undoubtedly, Genki Forest has benefited from the product dividend. As the health awareness of the new generation of consumers awakens, Genki Forest quickly became popular. The health upgrade in the beverage category is reflected in two aspects: first, "sugar-free," and second, "drink less carbonated beverages." Genki Forest has seized both opportunities.
### **The Irreversible Trend of "Sugar-Free"**
Sugar-free beverages are undoubtedly the star category with the fastest growth in the beverage market in the first half of the year. Coca-Cola released its Q2 FY2019 earnings on July 23, with overall sparkling beverage sales up 3%, classic Coca-Cola up 4%, and the sugar-free version "Coca-Cola Zero" maintaining double-digit growth for seven consecutive quarters. Coca-Cola CEO James Quincey emphasized, "Our performance is largely driven by consumer demand for sugar-free versions of our classic carbonated brands." The satisfaction brought by "sweetness" is hard to give up, which is why the market size of sugar-free tea is much smaller than that of sweetened tea. Sugar-substitute beverages combine the advantages of both, offering sweetness without calories. In recent years, scientific research, industrial technology, and market acceptance of sugar substitutes have matured significantly. Sugar-free cola is widely popular, Heytea has launched low-calorie tea using stevia, and sweetener leader Anhui Jinhe has also launched a To C retail product "Ailetian." Almost all of Genki Forest's products have high-sugar counterparts, and it uses sugar substitutes (mainly erythritol) to create similar taste but with lower calories and healthier profile. On major social media platforms, Genki Forest is often associated with keywords like "weight loss" and "fear of gaining weight." **With the "healthy" label, Genki Forest can open the market relatively easily without paying the educational cost of new categories or flavors.** Of course, it targets young people who habitually buy beverages and are willing to pay a premium of one or two yuan for a lifestyle like "health."
**The Sluggish Carbonated Beverage Market and the Soaring Sparkling Water Business**
The health trend in the beverage category is also reflected in "drinking less carbonated beverages." The growth of carbonated beverages is not optimistic. The compound annual growth rate of carbonated beverage sales in the Chinese market over the past five years was only 2%. According to data from the Prospective Industry Research Institute, after reaching a peak of 18.107 million tons in 2014, China's carbonated beverage production experienced negative growth for three consecutive years until the launch of sugar-free sparkling drinks in 2018 slightly boosted overall production. The perception that carbonated beverages are unhealthy has become widespread, and articles condemning cola's adverse effects on teeth, bones, and the digestive system have long occupied consumer minds. Everyone knows they are unhealthy, so why do they still drink? The problem lies in the unique taste memory of carbonated beverages that lingers. Based on this, sparkling water, as a beverage that also contains gas, can effectively stimulate the taste buds while being healthier than carbonated beverages, making it popular among young people. As early as the end of 2014, QDaily mentioned young people's preference for sparkling water: from 2010 to 2014, the average annual sales growth rate of Nestlé's two sparkling water brands, Perrier and San Pellegrino, in the Chinese market was over 30%. In May last year, "Perrier" entered Tmall, and two months later participated in Tmall's High-End Water Super Category Day, with sales on the first day being 33 times the daily average. This year, during Tmall's High-End Water Category Day, Perrier's new customers accounted for 87% of pre-sale first-day sales, and visitor numbers increased by 266% month-on-month. Genki Forest's main product, "Genki Water," a sparkling water with the concept of "0 sugar, 0 fat, 0 calories," is priced at 5 yuan, positioned between ordinary bottled water, cola, and sparkling water products like "Perrier," effectively filling this price band. Riding the wave of sparkling water, Genki's online sales have also performed well. During this year's Tmall 618, Genki Forest sold a total of 2.26 million bottles of beverages, equivalent to 90 times its daily sales, becoming the top merchant in the water beverage category.
**Channel Dividend: The Rapid Expansion of Convenience Stores**
According to 36Kr, Genki Forest's revenue comes 60-70% from offline channels, with e-commerce accounting for less than 30%. Since 2016, convenience stores have also been on the trend, with chain convenience stores telling the story of a Chinese 7-Eleven, while foreign convenience store brands are accelerating their expansion in the Chinese market.
### **Rapid Expansion and Accelerated Downward Penetration**
According to the "2019 China Convenience Store Development Report" released by CCFA, the convenience store industry has maintained high growth in recent years, with a growth rate of 19% in 2018 and 23% in 2017. The number of convenience stores increased from 94,000 in 2016 to 122,000 in 2018, equivalent to more than 1,160 new convenience stores opening every month. Regional chain convenience stores are also increasing, and capital entry has further promoted the chain process. Brands such as Today, Linji, Jianfu, Bianlifeng, Meiyitian, and C-Store, as well as Haoneighbor, have all cooperated with capital. At the same time, convenience stores, once considered exclusive to first- and second-tier cities, are accelerating their downward penetration. Recently, foreign brand 7-Eleven opened regional franchising for the first time, selecting Tangshan to test the third-tier city market in North China. For Genki Forest, the opportunity here is that the rapid expansion of convenience stores greatly reduces the time and cost for brands to enter channels, while accelerating Genki Forest's offline reach.
### **High Overlap in Customer Groups**
Let's speculate on Genki Forest's target group: consumers who care about health, are well-educated, and research ingredients, calories, and efficacy when purchasing. Referring to Perrier's consumer base, a Mintel report shows that more women, younger consumers (20-29 years old), and middle-to-high-income earners (household monthly income of 8,000-15,999 yuan and 16,000 yuan or above) are the main consumers of sparkling water in the market. From the perspective of consumer groups, this result highly overlaps with the target customers of convenience stores. Taking FamilyMart as an example, consumers born after 1985 account for more than half, reaching 58%, those born after 1990 account for over one-third, at 36%, and women account for 60%.
### **Rising Costs and Optimized Product Structure**
The user profiles of convenience stores and Genki Forest match, which can be said to be a two-way selection. **For convenience stores, rent and labor costs are rising, and to win in fierce local competition, product structure and operational efficiency are crucial.** Every convenience store brand is exploring how to select SKUs that are more popular among young people, have better sell-through, and have differentiated characteristics. Therefore, rather than saying Genki Forest needs convenience stores, it is more accurate to say that convenience stores and Genki Forest need each other. Burned Tea and sparkling water need convenience stores to reach users more precisely, and conversely, convenience stores need sugar-free sparkling water and sugar-free tea drinks to capture rapidly changing young consumers.
**Online Marketing: Planting the Seed of "Buy, Buy, Buy" in Consumers**
In terms of channels and promotion, Genki Forest has always played the youth card. First, it prioritizes the layout of convenience stores in first- and second-tier cities, allowing the brand to quickly reach a large number of precise consumers in the early stage; second, continuous exposure on social media has also attracted positive promotion by celebrities and KOLs. According to its official Weibo, Wang Yibo, Wei Daxun, Deng Lun, Huang Jingyu, SNH48, Fei Qiming, Xu Kai, etc., have all cooperated with it. In terms of branding, starting with sparkling water, the design and packaging feature a Japanese style. First, the brand name "Genki" itself is a Japanese term with the meaning of energetic, healthy, and positive; in brand positioning, "Sugar-Free Specialist" is also a Japanese usage, advocating a sugar-free lifestyle; in promotion and packaging, it also uses the description "Genki Co., Ltd." From a market perspective, this is undoubtedly successful. In recent years, "Japanese and Korean snacks" have been easily sought after by young people, with products like Calbee and Shiroi Koibito becoming internet-famous. Imported products are priced higher, for example, the Japanese soda "Youjie" that became popular at the same time, which also has a white peach flavor like Genki Forest, is not sugar-free and retails at 14.8 yuan per 300ml—compared to domestic products, Genki Forest has a premium and endorsement due to its Japanese characteristics; compared to imports, it offers better value for money. Of course, this also brings potential risks to the brand. At present, Genki Forest's new brands, such as yogurt "Beihai Pasture," also continue the Japanese style, but like Miniso, it will still face controversy over this choice after growing larger.
**Can Genki Forest Be Replicated?**
Although maintaining high growth, Genki Forest still faces a very competitive environment, and it is not an exaggeration to say it has internal and external troubles. On the one hand, similar brands and products are emerging. The consumer field is an industry with low entry barriers but very high barriers to building moats. When Genki Forest grows to a certain scale, many competitors have appeared in the market, such as Qinqin Genki's sugar-free sparkling water, which also focuses on 0 sugar and 0 fat, with flavors like white peach, cucumber, and calamondin, and is priced slightly lower than Genki Forest, at around 4 yuan per bottle during promotions. Genki Forest's other hit product, Burned Tea, has also seen new competing brands. On the other hand, giants have also realized the huge market potential of new categories and have begun to layout and adjust product structures. As early as 2016, Coca-Cola launched zero-calorie Sprite in the Chinese market, a sugar-free version of Sprite. In 2018, it launched the new product "Sprite Fiber+", which contains dietary fiber and uses sweeteners as sugar substitutes. After launching Diet Coke and Coke Zero, Coca-Cola is clearly making a "health upgrade" to its traditional carbonated beverage category to adapt to consumers' increasingly strong health awareness. In its Q2 2019 earnings report released recently, Coca-Cola stated that the good market performance in the second quarter was due to consumer-centric continuous innovation, core brand performance, and optimized market execution. CEO James Quincey mentioned, "The all-beverage strategy drove strong market performance this quarter, allowing us to maintain a competitive advantage in this rapidly developing and dynamic industry. Currently, nearly 25% of revenue comes from new or reformulated beverages, compared to 15% two years ago." From the financial report data, the category adjustment strategy has also brought positive market feedback, with Coke Zero maintaining double-digit growth for seven consecutive quarters in the international market, including strong growth driven by emerging markets. For giant food companies, due to rigorous and complex decision-making mechanisms, market response speed may be slower than startups. New brands have a certain time window in the early stages of development, whether in channels or branding, to quickly establish their brand awareness with differentiated products to have a chance to compete against large companies. Conversely, the advantage of giants is that after startups quickly validate market demand, they save on preliminary market research and consumer insights. Large companies can leverage their channel and brand advantages to invest heavily in launching new products, as well as the cost advantages brought by production scale, which startups do not have.
**Summary**
A few days ago, Diaoye's article attracted a lot of attention, and the conclusion at the end, "All consumer goods are worth redoing," can be said to be a shot in the arm for entrepreneurs, giving practitioners great confidence. All consumer goods are worth redoing, but there is a second half: who will do it? How? This is also the significance of our discussion of Genki Forest. Coca-Cola's P/E multiple is as high as 30 times, which is extremely rare in the consumer field. Coca-Cola's high market value comes from its brand moat. In our view, if Genki can support a valuation of 4 billion yuan, it is also because it can be seen as the "healthy version" of cola among Chinese youth. It is undeniable that beverage giants like Coca-Cola grew up on the opportunities of globalization and internationalization. With changes in channels, information, and demographics, we all know that a second Coca-Cola will not appear. But companies with a market value of 10 billion, such as Heytea or Quqi Quartet, still have great opportunities. Cola is no more, but as the "healthy version" of cola for young people, the next company with a market value of 10 billion could be Genki Forest.
Source: 36Kr Pro (ID: Krtech36kr)
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## Citation metadata

- Publisher: New Distribution
- Author: 徐子
- Published: 2019-09-05
- Canonical: https://xinjignxiao.com/en/articles/3-years-4-billion-will-genki-forest-be-the-next-coca-cola-993f6170/
- Original source: https://mp.weixin.qq.com/s/NRZLfS8Y_drh345JQA7orQ

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