The beverage industry faced a cold winter in 2017, with major players seeing sales halve. From tea drinks to cola, functional beverages to light-flavored drinks, no category was spared. Products like Mizone and Hai Zhi Yan, once popular two years ago, suddenly stopped selling. Recently, due to Red Bull's trademark issues, many manufacturers saw an opportunity and rushed into the functional beverage market, but with Red Bull's peak sales at only 30 billion yuan, can others really replace it?

China's Red Bull trademark expiration made the functional beverage market hot.

Markets that are truly promising are not necessarily those with mature products, but rather those that suddenly see a sales explosion despite seeming to have no opportunity. For example, two years ago, Mizone and Hai Zhi Yan created the concept of "light-flavored" drinks, which were well-received by consumers. However, as consumers now seek even lighter flavors, pure water seems to have an opportunity, but people are somewhat resistant to tasteless pure water, as it tastes like tap water but costs dozens of times more.

Light-flavored drinks are popular.

Can light flavors also be enjoyable?

Compared to tasteless pure water or various light-flavored functional drinks, the sweetness and fizzy sensation of cola truly bring drinking pleasure. However, with growing health awareness, sugary carbonated drinks are increasingly criticized. Although Warren Buffett still champions cola, even lending his image to a cherry-flavored Coca-Cola, it hasn't reversed the decline of the cola market. Thus, a "light-flavored" drink that is sugar-free yet still offers the fizzy pleasure has entered people's view: sparkling water.

Sparkling water, being sugar-free and zero-calorie, has become a healthy choice; it also has rich bubbles that provide a pleasant sensation in the mouth, making it refreshing and thirst-quenching, allowing consumers to temporarily forget sugary carbonated drinks like cola.

Therefore, sparkling water is healthier than sugary carbonated drinks and more enjoyable than other light-flavored drinks. Moreover, compared to the dozens of times price difference between Evian in China and abroad, sparkling water brands maintain similar prices domestically and internationally, making it the top choice for health-conscious and fashion-forward consumers.

Sparkling water has become the top choice for health-conscious and stylish people.

Can sparkling water truly replace sugary carbonated drinks?

Despite sparkling water's growing popularity in the domestic market in recent years, can it truly replace sugary carbonated drinks? I have done some research on this.

On Zhihu, there is a question: "What things are commonly used abroad but not in China?" A German student replied: sparkling water machines, which add bubbles to water. The popularity of sparkling water machines in Germany is comparable to that of soymilk machines in China, showing the high penetration of sparkling water in the German market.

Besides Germany, where sparkling water has already captured the market, across Europe and the US, sparkling water accounts for 15-20% of the market, relatively mature. But in Asia, it's a different story. According to 2013 bottled water market data, sparkling water accounts for 5% in Indonesia, 4% in Japan, and about 1% in South Korea, Malaysia, and China. Despite the small share, the sparkling water market is not barren. According to Euromonitor, from 2010 to 2012, sparkling water sales in China remained at about 100,000 liters, while from 2013 to 2015, the figures were 200,000, 500,000, and 800,000 liters respectively. By 2020, China's sparkling water sales are expected to reach 2.1 million liters, with a compound annual growth rate of over 20%, and the market size is expected to reach 77.1 million yuan.

Compared to the 15-20% share in Europe and the US, China's sparkling water market accounts for only 1%.

China's sparkling water sales growth outlook is optimistic.

This growth rate can be better appreciated by comparing with cola. In China, cola annual sales exceed 30 billion yuan, while sparkling water sales are less than 100 million. Cola has been declining at 4% per year, while sparkling water is growing at 89%. It will take time for sparkling water to replace cola, but its development is limitless.

Chaos in the domestic sparkling water market: Did Red Bull choose wrong? Why did Nestlé break its promise?

With the promising outlook for sparkling water, Red Bull's choice is intriguing. In 2016, China Red Bull (Huabin) acquired the famous Swiss VOSS sparkling water, but its strategic position was not only lower than Zhanma but even lower than VITA Coco, leading to VOSS's slow development in China. Perhaps because Red Bull was busy with trademark disputes after the acquisition, or for other unknown reasons, it seems Red Bull made a wrong bet. Compared to Zhanma's overly rustic packaging, VITA's slow development, the bright prospects of sparkling water, and VOSS's excellent reputation abroad, there is no reason to place VOSS at the bottom of the strategy.

In 2016, China Red Bull (Huabin) acquired the famous Swiss VOSS sparkling water.

VOSS is a top-tier premium water brand abroad.

Looking at Perrier, it has always been imported and sold directly by Nestlé China's general distributor, with Nestlé China never touching this project. However, in 2017, Nestlé broke this convention by launching a new plastic bottle priced around 10 yuan. What made Nestlé so determined, not afraid of the bad reputation of grabbing distributor market share? It is because of the boundless prospects of sparkling water. Nestlé is confident that its plastic bottle will not only not steal distributor sales but also expand the overall share, making sparkling water truly popular in China.

In 2017, Nestlé launched a new plastic bottle.

In addition to the introduction of foreign sparkling water brands, domestic giants have also shown strong interest in this market. Nongfu Spring, the most sensitive company in the FMCG industry, has entered the sparkling water field, and Ganten launched the Blairquhan Benlaiwang premium brand in 2017.

Nongfu Spring launched carbonated natural mineral water.

Ganten launched the Blairquhan Benlaiwang premium brand.

Even though there are many players in the current domestic sparkling water market, they are basically operating independently, and the competitive landscape has not yet formed. But once the market forms, problems will inevitably arise. Sparkling water currently has three main problems in China: first, price; either too low at 3 yuan or too high at over 10 yuan, with the 5 yuan price point that consumers need most being missing. Second, the target audience; mature middle-class or business people are the relatively fixed audience, and although many brands are trying to make the category younger, the current investment and scale are far from sufficient to expand the audience. Investment and scale are the third problem.

These gaps may also be the wind gap.

Who will lead the next trend?

In response to the three gaps in the current sparkling water market, I found a sparkling water brand with surprisingly strong "trend-chasing" ability. This brand, called POPSS, launched in May this year and frequently appeared in various popular IPs. Its positioning, strategy, and marketing methods are clearly different from other sparkling water brands, and it's worth studying.

First, in terms of audience positioning, compared to Perrier and San Pellegrino's "business style" and Watsons' "old-fashioned" style, POPSS mainly targets young people who pursue health and fashion. In addition to the common health features of sparkling water, such as "sugar-free, zero calories, zero burden," POPSS also sets the ratio of bubbles to water at 3:1, with larger bubbles compared to sugary carbonated drinks. This more lively and refreshing taste is undoubtedly very much in line with young people's pursuit of novelty and fun experiences. Moreover, the overall product design uses interesting emoji combinations, giving POPSS strong recognition among similar products. It's worth mentioning that the terminal retail price of 4.8 yuan precisely hits the market gap while also fitting the mainstream consumption ability of young people.

POPSS's design uses interesting emoji combinations.

POPSS partners with popular actress Wang Ziwen to target health-conscious and fashionable young people.

Second, in terms of market investment, POPSS is clearly confident. Relatively speaking, Nestlé Perrier's popularity relies on the strength of its general distributor in China, VOSS is unfortunately shelved, and other sparkling water brands lack even promotion and consumer activities. POPSS, on the other hand, played a good hand from the start. It bound popular IPs for precise exposure, appearing in "Running Man" and "Ode to Joy 2"; partnered with top celebrities to create "the can of water in the hands of stars"; and offline, it promoted through multiple channels, with various consumer activities, particularly focusing on embedding in fashion and health scenarios to shape a "fashionable, healthy" brand image.

Online ad for "Running Man".

Online ad for "Ode to Joy 2".

POPSS embedded in running and fitness scenarios.

POPSS has been distributed in national KA channels.

POPSS has just been launched recently, but its marketing moves are continuous, and its visibility in less than a month is remarkable. In response to the "gaps" in the sparkling water market, POPSS has clear positioning, clear strategy, and decisive action. Compared to lukewarm similar brands, it is indeed a new force not to be underestimated. But we must admit that although sparkling water is becoming popular, Chinese consumers' awareness of this category is still limited. Can POPSS, this new force, become the industry leader? There is still a long way to go, but at least it has made a good start, hasn't it?

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