Iced black tea, now popular again as 'diaosi drink' (large bottles), has a nearly 30-year history in China and was once among the most beloved beverages. Although Taiwan brands Master Kong and Uni-President now dominate the category, few know that a small factory in Hebei first ignited the market.
The Rise and Fall of the Rising Sun
In the sweltering 1990s, old business systems were being phased out, and new business ecosystems were springing up with the reform and opening-up. Like Zhang Ruimin and Li Jingwei, a young man named Duan Hengzhong took on the role of director of the Jixian Supply and Marketing Cooperative in Hengshui, Hebei, pushing the 'old machine' to adapt to the new era.
In 1993, Hebei Xuri Group was established, and Duan Hengzhong, then 42, became chairman. That year, Xuri Group targeted the tea beverage market gap, launching China's first tea beverage, adding carbonation to tea and promoting it as 'iced tea'. This was the later famous 'Xurisheng'.
Image source: Xurisheng official website
With its fashionable concept and refreshing taste, Xurisheng iced tea quickly gained popularity among young people in the Yan-Zhao region. After this initial success, how did Xurisheng expand its influence nationwide? Duan Hengzhong adopted a marketing strategy that is still effective today: heavy online advertising and offline human-wave tactics. Starting in 1995, Xurisheng began advertising on Hebei TV, Beijing TV, and other media, and continuously invited popular stars of the 1990s to endorse the iced tea. Yu Quan and Andy Lau were both recruited by this 'small factory'; it is said that Yu Quan's popular song 'Cold to the End' was an advertising song for Xurisheng. From the end of 1996, Xuri Group spent over 100 million yuan annually on advertising—during the most 'crazy' phase, all 8 channels of CCTV were broadcasting Xurisheng iced tea ads, showing the momentum of 'Xurisheng'. Xuri Group also sent hundreds of employees to major cities across 29 provinces, municipalities, and autonomous regions, establishing 48 Xuri marketing companies and over 200 marketing branches through carpet-bombing and intensive sales, connecting countless wholesalers and retailers to form a nationwide 'Xurisheng' marketing network.
Image source: Xurisheng advertisement
After these two moves, Xurisheng's sales rose from 50 million yuan in 1995 to 500 million yuan in 1997, and exceeded 3 billion yuan in 1998. Today's popular Dayao soda only has annual sales of 3.2 billion yuan. Under this explosive success, Xurisheng began to 'get carried away'—expanding its product range from a single iced tea to over 40 varieties, frequently changing endorsers, increasing advertising investment, and engaging in price wars. In 1998-1999, although sales reached over 3 billion yuan, it still owed banks 300 million yuan, and diversification was not satisfactory. To make matters worse, the offline channels that had helped Xurisheng conquer the market began to show problems—under performance pressure, regional channel stuffing became rampant. Some distributors, to complete sales and earn rebates, converted gift rewards into cash and sold products at lower prices to outside or secondary distributors. A large amount of product accumulated in the hands of secondary distributors, leading to severe overstock and even the sale of expired products. As a result, Xurisheng's sales plummeted.
Image source: Xiaohongshu
To change this, Duan Hengzhong implemented drastic reforms, recruiting several senior professional managers from companies like P&G and Coca-Cola, and formulating new management and marketing systems to try to turn things around. But the old employees were united, making it difficult for the 'parachuted' managers to act; within a few months, the reform failed.
The Sun Sets, 'Kangtong' Takes Over
While Xurisheng was struggling with channel chaos, Master Kong and Uni-President took the opportunity to 'attack and conquer'. By 2001, Xurisheng's market share had fallen from a peak of 70% to 30%; in 2007, this once-popular beverage 'trendsetter' declared bankruptcy. The rising sun had become a 'setting sun'. Master Kong and Uni-President gradually took control of the entire tea beverage industry, and their rivalry continues to this day, like the 'Yu and Liang' of the industry.
It was June 1995 when Uni-President launched its beverage business, with iced black tea first appearing in East China, where consumer concepts were relatively new. Once launched, the product was strongly loved by young consumers.
Image source: Xiaohongshu
On the other side of the river was Master Kong, Uni-President's old rival. In 1996, Master Kong was already China's largest food group. Uni-President, which had launched the hit product iced black tea, hoped to turn the tables and surpass Master Kong, but just one year after Uni-President iced black tea was launched, in October 1996, Master Kong's refreshing boxed iced black tea hit the market, and with its marketing channel advantages accumulated from instant noodles, it easily grabbed a large share of the iced black tea market. Seeing the dark clouds over the iced black tea front, Uni-President took a different path, relying on its strong R&D and innovation capabilities to launch green tea in 1998. A year later, the same scenario repeated: Master Kong 'imitated' again, and Uni-President had made a wedding dress for others.
Image source: Xiaohongshu
It was precisely because Master Kong had built a widely distributed distributor network through its instant noodle business that its beverage business could directly use the existing channels and pair with instant noodles for quick market entry. So it's no surprise that Master Kong could always strike later but win. In 2001, Master Kong invited Richie Ren to be its brand ambassador, singing 'Ice Power'. Since then, Master Kong iced black tea has continued the 'cool + music' combination, inviting a large number of trendy stars and creating highly fitting advertisements: from 2002-2003, there was the rock band Mayday waving electric guitars in the concrete jungle, shouting 'Ice pioneer, music whirlwind'; from 2004-2005, there was A-Mei, who, taking advantage of the post-Olympic fitness wave, kicked a football and said 'Appreciate sports, enjoy passion'; from 2009-2010, there were David Tao and Xian Zi humming the 'Ice Power' melody from the recording studio to the yurt, and from the grassland to the Shanghai Bund... Nicholas Tse, Will Pan, Hebe Tien, and others were all found by Master Kong's advertising department—truly 'playing the coolest music, endorsing the iciest iced black tea'. To this day, the slogan 'Ice Power' still appears on Master Kong iced black tea packaging.
Image source: Master Kong advertisement
In the 2000s, Master Kong iced black tea was 'invincible', but it did not take the opportunity to raise prices; instead, it locked the retail price at the 3 yuan price point, and even launched a 1L package with double the capacity for just 1 yuan more, which also blocked competitors' price increases. To this day, people can still enjoy Master Kong's unchanged price and non-shrinking capacity for twenty years. This is extremely rare not only in the tea beverage category but in the entire beverage industry. This is certainly inseparable from Master Kong's 'amazing' cost control—with over 100 factories nationwide (Uni-President has only one-third of that), it reduces logistics and raw material costs through scale! Even so, Master Kong was later caught off guard by a 'blitzkrieg' from Coca-Cola in 2008. In March 2008, Coca-Cola launched the 'Yuanye Tea' series, including Yuanye Iced Black Tea and Yuanye Green Tea, specifically developed for Chinese consumers' tastes; on the marketing front, it invited Jackie Chan and his son Jaycee as spokespersons and launched a massive promotion of 34 million free samples throughout the year. The entire product was aimed at Master Kong. Once launched, 'Yuanye Tea' achieved astonishing sales of over 100 million bottles, capturing a 15% market share. As a result, Master Kong's market share dropped by 3.8%.
Image source: Yuanye Tea advertisement
Real business wars are often simple and crude. To counter the competition, Master Kong used the simplest, most direct, and most effective move—'one more bottle'—with free samples several times the size of the competitor's market, totaling an astonishing 1.5 billion bottles. This 1.5 billion free samples is a spectacle in the history of Chinese beverage marketing. The high winning rate led to high consumer participation, and Master Kong's entire beverage segment saw significant revenue growth. This 'Yuanye Tea' product also resulted in an epic defeat for Coca-Cola in the Chinese market—after gaining a huge market share, it quickly disappeared, which is rare in Coca-Cola's history.
Can Iced Black Tea Still Be 'Icy' and 'Red'?
Master Kong reached its peak, but since then, the ready-to-drink tea industry has seen almost no qualitative innovation—most companies are still resting under the old tree of iced black/green tea categories. The ready-to-drink tea market began to shrink slightly in 2015, with a compound annual growth rate of -0.8% from 2015 to 2021, ranking second to last among major beverage categories. Although the iced black tea market continues to penetrate lower-tier markets and maintains decent sales due to channel advantages, how can a taste that has remained unchanged for twenty years satisfy consumers' increasingly discerning palates? Research shows that 'iced black tea' products have many 'pain points' that need to be addressed: outdated product image, too sweet and cloying, and too many additives...
Image source: Canned Image Library
This is already contrary to the current consumption trend of 'reduced sugar' and 'sugar-free', so it is inevitable that 'new forces' will rise. After the market trough from 2015 to 2021, the ready-to-drink tea market took off strongly in 2022 due to the rise of sugar-free tea drinks. According to the '2023 China Sugar-Free Tea Beverage Industry White Paper' released by EO Intelligence, sugar-free tea beverages maintained a growth rate of 7.9% in 2022, far ahead of sugary tea drinks; it is expected that in the next five years, the compound annual growth rate of the sugar-free tea beverage market will reach 10.2%, with a market size expected to reach 12.4 billion yuan. Correspondingly, sales data from Taobao and Tmall over the past five years show that from 2017 to 2021, online sales of sugar-free tea beverages grew more than 10 times. Facing the growth market of sugar-free tea, Master Kong naturally did not remain indifferent. In 2021, Master Kong officially launched its black-packaged sugar-free iced black tea, emphasizing 'sugar-free, zero calories'; Uni-President took a slightly slower step, announcing that in 2023 it would heavily promote two tea beverages—500ml Uni-President Double Extract Lemon Tea (duck shit fragrance flavor) and 500ml sugar-free jasmine green tea.
Image source: Xiaohongshu
Interestingly, just as 'Kangtong' entered the sugar-free tea track, Genki Forest, which became popular with sugar-free sparkling water, also began to invade the 'Kangtong' beverage market, launching its 'Genki Forest Iced Tea' series. Compared to traditional iced black tea products from Master Kong and Uni-President, Genki Forest's 'Iced Tea' comes in two flavors—reduced sugar and zero sugar, with the reduced sugar version containing 25% less sugar than the classic flavor, and the zero sugar version using 'erythritol' as a substitute. When 'Genki Forest Iced Tea' was launched in early 2023, it invited Richie Ren to film a retro-style advertisement; the Hong Kong-style gangster plot, the counterattack, and the emphasized 'less sugar' feature in the dialogue easily remind people that Genki Forest intends to poach Master Kong's customers. At this point, iced black tea, which had maintained its taste for over twenty years, has reached a historical turning point. With Genki Forest's entry, will the top position in the iced black tea category change hands?
Image source: Genki Forest
For ready-to-drink tea, taste is key to winning consumers; but to pry open the market, the core is still channels, just like Master Kong's 'strike later but win' strategy against Uni-President. According to iiMedia Research data, in 2021, 86.5% of Chinese netizens purchased soft drinks through offline channels. In the FMCG industry, offline channels are like the 'aorta' that continuously supplies blood to enterprises. In terms of channels, Genki Forest does not have a complete advantage. To defend their offline retail territory, the giants have tacitly launched a joint siege against 'Genki Forest and similar companies', not only starting a 'freezer war' in mom-and-pop stores but also pressuring distributors at all levels, especially grassroots ones. According to media reports, as early as April 2021, distributors of Nongfu Spring in multiple regions received notices from headquarters requiring them 'not to represent Genki Forest products, especially sparkling water'; two months later, Nongfu Spring launched its traditional summer promotion project 'God of Wealth Descends' to launch a counterattack against Genki Forest. Even though 'sugar-free' is becoming a key to unlocking consumer minds, to win a hard battle, channels are the key; Genki Forest realized that the internet cannot overturn offline retail reality and began to seek channel transformation.
Image source: Canned Image Library
In April 2022, Genki Forest disclosed some performance data to the public for the first time. In terms of channels, the number of Genki Forest distributors increased from over 500 at the beginning of 2021 to over 1,000; the number of offline terminals such as stores, freezers, and shelves exceeded 1 million, covering more than 800 cities nationwide, giving it the confidence to compete with the giants. Genki Forest seems to want to solve the 'bottleneck' problem of channels in one go. CEO Tang Binsen said at the distributor conference in December 2022: 'In 2023, Genki Forest will attach unprecedented importance to distributors.'
Image source: Canned Image Library
Looking back at the 30-year offensive and defensive battles in the development of Chinese iced black tea, it can be considered one of the most intense category wars in China, and it has also given birth to a market full of imagination. With the improvement of national health awareness and consumption upgrading, the growth space for bottled ready-to-drink tea is still huge, and the business war is destined to continue. In the future, will latecomer brands successfully break through the 'Kangtong' industry position, or will 'Kangtong' continue to lead the category? We look forward to tea beverage companies continuing to write business legends.