---
title: "Extended Reading 1: 2014 FMCG Industry Competitive Landscape"
description: "This article analyzes the competitive landscape of China's FMCG market in 2014 across 14 categories, highlighting shifts in brand rankings and market shares, such as Pepsi surpassing Sprite in carbonated drinks, Snow Beer rising to second in beer, and the impact of the 'fast-grown chicken' incident on KFC."
author: "New Distribution"
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published: "2014-05-05"
language: "en"
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# Extended Reading 1: 2014 FMCG Industry Competitive Landscape

> This article analyzes the competitive landscape of China's FMCG market in 2014 across 14 categories, highlighting shifts in brand rankings and market shares, such as Pepsi surpassing Sprite in carbonated drinks, Snow Beer rising to second in beer, and the impact of the 'fast-grown chicken' incident on KFC.

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**1. Carbonated Drinks: Pepsi Shouldn't Celebrate Too Early**
Coca-Cola remains the favorite of Chinese consumers, with a share 34% higher than the second-place brand. However, the order of second and third place has changed: last year Sprite was second, but this year Pepsi narrowly overtook Sprite to become second. After Pepsi announced its alliance with Master Kong in 2012, data from Canadean, a market monitoring agency focusing on global beverages, showed that Pepsi's quarterly growth rate exceeded Coca-Cola's by 10 percentage points for the first time in recent years. The increase in consumer preference for Pepsi in this survey also indicates that the cooperation is beginning to yield results. However, the still-huge gap with the first-place brand reminds Pepsi that its performance in China does not match its global status.
**2. Instant Noodles: Lack of Innovation Vitality**
Master Kong and Uni-President together account for 60% of the instant noodle market. Master Kong remains the leader, but its share has dropped by 5%. Uni-President, in second place, has seen its share rise, but at a significant cost. Due to severe homogenization of pickled cabbage-flavored instant noodles, no new product has yet replicated the success of Uni-President's Laotan pickled cabbage noodles. Uni-President has had to increase marketing investment, compressing profits. In contrast, Master Kong, with a more complete product line, better matches the distribution network from cities to rural areas, and its net profit in the first half of the year rose 2.52% year-on-year. However, the industry as a whole lacks innovative products like Master Kong's Braised Beef Noodles or Uni-President's Laotan Pickled Cabbage, and thus remains lacking in vitality.
**3. Beer: Snow Sees Results**
Tsingtao Beer remains the leader with a share close to 30%. Snow Beer is commendable, with its share increasing by 11%, surpassing Yanjing and Budweiser to take second place. In terms of sales volume alone, Snow exceeded 10 million kiloliters as early as 2011, surpassing Tsingtao. However, doubts about Snow's low positioning have never ceased, prompting Snow to continuously strive to enhance its brand image. In recent years, it has sponsored the Ancient Architecture Photography Contest and held the "Brave the World" campaign. Its mid-to-high-end series products, such as "Snow Pure Life" and "Brave the World," have seen substantial growth, and the increase in share in this survey proves the results of its efforts.
**4. Drinking Water: Nongfu Spring Hurt**
The ranking of the top brands has not changed, and Nongfu Spring remains far ahead of the second-place brand. However, Nongfu Spring's share has dropped by nearly 8%, marking its first decline in our surveys over several consecutive years. The "standard gate" incident in the first half of this year, although ultimately proving that Nongfu Spring's product quality was not problematic, had some impact on consumer sentiment due to days of media questioning. Moreover, Nongfu Spring eventually decided to exit the Beijing barreled water market. It seems that even major brands like Nongfu Spring are vulnerable when their painstakingly built "good water" image is questioned.
**5. Dairy Products: Mengniu Begins to Recover**
Bright Dairy remains the leader, but its share has declined. Yili, known for its steady growth, has made significant progress, rising nearly 6% to second place. Mengniu has also improved from fourth to third. Clearly, COFCO's restructuring of Mengniu and the introduction of strategies such as Denmark's Arla have contributed to its recovery. Due to trust in international brands and the convenience of online shopping, pure imported milk brands like Oldenburger and Devondale have even surpassed Nestlé and Danone, two localized foreign brands. Sanyuan's share has also declined, dropping from second to fourth. Its integration of Sanlu has been unfavorable, and performance has declined. This brand, which has a good reputation in the Beijing market, really needs to step up.
**6. Tea Drinks: Unconventionality Wins**
Master Kong remains the top choice, about 9% higher than the second-place brand. Moreover, the top three brands not only maintained their rankings but also had shares very close to last year's figures. However, two brands with faster growth are worth mentioning: Oriental Leaf grew by 4%, just two percentage points behind third-place Suntory, and Lipton grew by 5%, closely following Oriental Leaf with a difference of less than 0.5%. Both Oriental Leaf and Lipton differ from traditional tea drinks in packaging and positioning, and are slightly more expensive. But it is precisely this slight unconventionality that gives them the potential to challenge for third place. To break the old pattern, unconventionality is key to winning.
**7. Functional Drinks: Big Players Fight, Minors Step Aside**
Traditional herbal tea was included in functional drinks for the first time and immediately took the top spot. JDB's share was 35.42%, far exceeding last year's leader Mizone. Wanglaoji ranked third, pushing last year's second-place Red Bull to fourth. Amid the high-profile war of words between JDB and Wanglaoji, promotions of other brands were almost drowned out. Mizone's share fell by 17%, Red Bull's by 8%, and others like Pocari Sweat and Gatorade also declined, while Jianli dropped out of the top ten. In fact, they are not the only victims of the JDB-Wanglaoji battle; Heqizheng, also a herbal tea brand, has almost disappeared this year. When big players fight, others have to step aside.
**8. Edible Oil: Arawana Hard to Topple**
Arawana still holds more than half of the market. Luhua and Fulinmen have hoped to break the dominance of foreign brands, but with little effect. However, Olivoilà olive oil, ranked fourth, despite its high price, has seen its share increase for three consecutive years. Similarly, high-end positioned Hujihua has advanced one step to sixth place. It seems that finding a breakthrough in the high-end market is more effective than directly confronting the powerful Arawana. Olive oil, in particular, is increasingly being placed on dining tables by health-conscious consumers. Although more and more olive oil brands are appearing on the market, few have achieved significant scale, which may also imply more opportunities.
**9. Fast Food Brands: "Fast-Grown Chicken" Hurts KFC**
Affected by the macroeconomic environment, Western fast food chains have seen performance decline. McDonald's is faring relatively better than KFC. In its August financial report, McDonald's same-store sales in the Asia-Pacific region, including China, fell 0.5%, while KFC China fell 12%. Moreover, consumer choices have reversed: in the previous two years, KFC surpassed McDonald's, but this year McDonald's overtook KFC. It seems that the "fast-grown chicken" incident that began at the end of 2012 has left KFC struggling to recover.
**10. Fruit Juice Drinks: Mid-to-High Concentration Juices Recognized**
Huiyuan, whose overall revenue is far behind Master Kong and Uni-President, becoming the top choice for fruit juice drinks seems surprising. However, if you examine the brands that have improved in ranking, such as Wei Chuan Daily C, Tropicana, and Dole, all are mid-to-high concentration juices positioned in the mid-to-high end, it becomes easier to understand. Higher-priced but more nutritious mid-to-high concentration juices are being recognized by consumers, and Huiyuan happens to be the leading brand in this segment. This also explains the decline of Uni-President, a low-concentration diluted juice brand, which fell from first to third. As the saying goes, if you don't advance, you fall behind. Consumer preferences have changed, and brands must adapt accordingly.
**11. Coffee Shop Chains: Craving Differentiation**
Starbucks unsurprisingly retained the championship, with a share of 67.46%, nearly five times that of second-place COSTA. In the future, Starbucks will accelerate its expansion in China. In fiscal 2014, of its planned 1,400 stores, 700 will be located in China and other Asia-Pacific regions. By then, China will become Starbucks' second-largest global market after its home market. However, after seeing the same green mermaid logo everywhere, consumers are beginning to crave more differentiated options. The rapid growth of small chains with unique styles, such as Manner Coffee and Sculpting in Time, is noteworthy.
**12. Hypermarkets: Need New Models**
Rumors of store closures, sales, and exits from China have made this year particularly difficult for some foreign hypermarket brands. Expiring leases and soaring property prices have become unbearable burdens, and they are increasingly absent from core business districts. Metro, which emphasizes wholesale and cash-and-carry, has achieved rapid growth this year due to its differentiated model. China Resources Vanguard, which has consistently adhered to a multi-format operation, continues to maintain strong competitiveness. Traditional hypermarkets need to adopt new models to find new growth points and escape their predicament.
**13. Community Supermarkets: Market Booming**
This is a new category added this year. For small supermarkets near communities, distinctiveness and convenience can help them survive against large supermarkets. Community supermarkets have low investment costs, flexible formats, and more targeted services. As large supermarkets become increasingly unable to afford high rents in core business districts, boutique supermarkets like Ole and City Shop, which have high gross margins and small footprints, are gradually replacing them. Community supermarkets will become a hot spot for future competition.
**14. Convenience Stores: Stepping Out of Comfort Zones**
Convenience stores with clear territories have this year stepped out of their comfort zones. For example, Lawson made its first foray into the Beijing market, breaking 7-Eleven's nine-year monopoly. Several major convenience store brands are entering more second- and third-tier cities according to their plans, seemingly unaffected by the economic downturn. These stores are seeking differentiation through self-developed fresh food products and are putting more effort into "convenience," such as FamilyMart's partnership with Amazon for pickup services.
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