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As beverage sales enter the peak season, carbonated drinks are weak, functional drinks dominate, and juice drinks each show their strengths. Plant-based protein drinks, like a dark horse, are carving out market share and capturing consumer mindshare.
Currently, coconut water products on the market are mainly divided into three categories: natural coconut water, blended coconut water, and flavored coconut water.
In 2018, blended coconut water dominated the Chinese coconut water market with a market size of 253 million yuan, accounting for 49.21% of the total market. Flavored coconut water followed with a market size of 173 million yuan, accounting for 33.72%. Natural coconut water had a market size of 87 million yuan, accounting for 17.07%.
Natural coconut water refers to coconut water that is extracted from the coconut and sterilized and packaged without any additives.
Blended coconut water is made by adding purified water, sugar, vitamin C, flavors, and other food additives and seasonings to natural coconut water.
Flavored coconut water involves adding honey, carbonation, coffee, functional ingredients, etc., to natural coconut water, drastically changing the taste and making the product more functional and better tasting.
Difference Between Coconut Juice and Coconut Water
Coconut water and coconut juice are fundamentally different.
1. Product
Coconut water is the liquid endosperm inside the coconut nut cavity, while coconut juice is made by pressing the coconut meat. Low sugar, low calorie, rich in sodium, magnesium, potassium minerals, rich in natural electrolytes, and isotonic properties are the unique labels of coconut water, while fine texture and sweet taste are characteristics of coconut juice.
2. Production Process
Coconut water requires high production technology and equipment due to its special nature, while coconut juice has a relatively simple production process and mature production lines domestically.
3. Price
Currently, coconut water prices range from 9-10 yuan or higher, while coconut juice of the same specification costs around 6 yuan. From a price perspective, coconut water appears more premium.
It is evident that coconut water must overcome two hurdles to enter the market: raw material supply and advanced production technology. These two factors have become key constraints on the development of coconut water.
Mature Markets in Europe and the US, Major Brands Entering
In Europe and the US, the coconut water market is very mature. According to data, US retail sales of coconut water approached $2 billion in 2016, and UK consumers consumed 25 million liters of coconut water in 2016 alone.
In European and American markets, coconut water has become one of the mainstream daily beverages, and premium coconut water has become a mainstream brand in the US.
Currently, coconut water brands include ZICO, UFC, KOH, Vita Coco, Malee, Kara, Real, and Coconut Palm. With the popularity of coconut water in the international market, leading brands have set their sights on this niche segment.
In 2009, PepsiCo acquired Amacoco, Brazil's largest coconut water company.
On February 1, 2018, Danone announced the acquisition of Harmless Harvest, a US premium coconut water brand founded in 2010, for $30 million.
In October 2018, the Coca-Cola Group and Australian bottled beverage producer Coca-Cola Amatil jointly acquired a 45% stake in Australian beverage company Made. Made's products cover coconut water, yogurt, milk, and more. This was another move following Coca-Cola's acquisition of a stake in Zico, the second-largest coconut juice brand in the US, in 2012.
Giants are increasing their investment in the coconut water market, partly because they are optimistic about its growth prospects abroad and partly to leverage this to open up the Chinese coconut water market.
Five Years in the Chinese Market, Yet No Progress
In recent years, consumers have become increasingly concerned about healthy beverages, preferring low-sugar, low-fat, low-calorie, zero-additive, and natural drinks.
This shift in consumer attitudes has given confidence to concentrated juices, NFC beverages, and plant-based protein drinks, but compared to the massive base of carbonated drink users, coconut water remains a niche product in the beverage category.
Coconut water appeared in the Chinese market in 2014. By 2019, five years later, the consumer base for coconut water has grown, and traditional channels have begun to display coconut water, but its exposure at retail shelves is not high, and it has not yet matured in consumer minds.
In China, coconut water brands mainly include Vita Coco, Zico, UFC, Malee, Coconut Palm, Wahaha Little CoCo, Pure Coco, and some small regional brands. From the brand perspective, the coconut water market in China is dominated by imported brands.
Consumer Profile of Coconut Water: Young, Health-Conscious, Active
New Distribution reporters learned that coconut water consumers in China mainly fall into the following categories:
1. Sports Enthusiasts
Coconut water's natural, hydrating, low-fat, and electrolyte-rich properties make it ideal for replenishing fluids and electrolytes after exercise, so it is also used as a functional drink for post-workout recovery.
2. Health-Conscious Individuals
With increasing health awareness, consumers prefer beverages with zero additives and natural properties, and coconut water meets the needs of this group.
3. Young Consumers
Currently, coconut water is mainly available on e-commerce platforms and in chain convenience stores, reaching a younger consumer base. Its simple packaging and higher price make it a premium drink in the eyes of young consumers, and fashion-forward young people are willing to try it.
Based on the composition of coconut water, its target consumer group is aged 15-40, but from a price perspective, young consumers aged 25-35 are more receptive, as they have the purchasing power and embrace new consumption concepts.
Apart from international brands, it is hard to see other brands. A few years ago, Wahaha launched Little CoCo coconut water, but it disappeared from the market shortly after. In 2016, Tianwo launched Pure Coco coconut water at around 9 yuan, which was once an online-focused product, but now it is hard to find in mainstream hypermarkets. Additionally, some regional coconut water brands have not become popular nationwide.
Why Is It Difficult for Chinese Brands to Succeed in the Promising Coconut Water Market?
1. High Costs
China's coconut production is insufficient to support the large-scale development of the coconut water industry. The top five coconut-producing countries globally are Indonesia, the Philippines, India, Brazil, and Sri Lanka. Vietnam, Thailand, and Hainan, which we are familiar with, do not produce much. The well-known Hainan Coconut Palm brand also relies mainly on imported coconuts. This results in high raw material costs.
Global Coconut Production Distribution Map
2. Strict Production Technology
Pure coconut water requires very high technology and equipment, and companies are reluctant to invest in a category with low sales volume.
3. Weak Market Foundation
Currently, coconut water holds a small market share in China, and many international brands have entered the Chinese market, occupying the mid-to-high-end segment, which is the easiest to reach mid-to-high-end consumers.
Based on these three points, Chinese beverage brands have not devoted much effort to this niche product.
Five Hurdles Restricting the Explosion of Coconut Water
Coconut water has a huge potential consumer base in China, but after years in the market, it has not become a bestseller. Take Vita Coco, for example: in 2014, Reignwood Group introduced it to the Chinese market, and over several years, it became the highest-share coconut water product in China, but compared to the 10-billion-yuan Red Bull, its sales remain unimpressive. New Distribution analysis identifies the following key points:
1. High Price
Whether on e-commerce platforms or offline retail, coconut water generally retails between 9-20 yuan, and some imported premium coconut waters are even more expensive.
Price is the main factor affecting whether consumers purchase coconut water. In the beverage category, the acceptable price range for consumers is 2-10 yuan. For example, 2-yuan Nongfu Spring, 4-yuan Mizone, 6-yuan Red Bull, and around 10-yuan NFC juices are all acceptable to consumers.
Coconut water, however, has no significant differences in packaging, taste, or texture, so a price of over ten yuan is still unacceptable to a large portion of consumers.
2. Immature Consumer Education
In the FMCG sector, beverage promotion is the most challenging because the unique attributes of beverages mean consumers can only perceive their value through packaging and taste. Only after personal experience can consumers decide whether to repurchase. For coconut water, selling points like zero additives, natural, low fat, and low calories cannot be directly conveyed to consumers, making it difficult for them to understand its characteristics through appearance.
3. Lack of Promotion
We rarely see advertisements for coconut water in the market; it seems that coconut water in China relies on its own charm and word-of-mouth for sales.
The reason coconut water is popular internationally is closely related to foreign promotion methods. During the global promotion of coconut water, Hollywood stars played a key role. Many coconut water brands have connections with celebrities.
In China, apart from occasional promotional posters from Vita Coco, it is hard to see advertisements for other coconut water brands.
Brands may believe that in the vast Chinese market, even without promotion, coconut water sales will not be too bad.
4. Unclear Positioning
Coconut water is a small category. Whether positioned as a "functional drink," "juice," "water," or "plant-based protein drink," it has not yet established a stable consumption culture or base in the Chinese market, and substitutability is high in each area. The lack of positioning leads to imprecise consumer targeting, which is dangerous for a niche product.
5. Taste
Coconut water is the liquid from the coconut fruit, packaged and stored using advanced technology, preserving the original taste, but some consumers do not like its flavor, which is another factor restricting sales growth.
However, it is undeniable that coconut water has huge potential in the Chinese market. After Vita Coco entered the Chinese market, coconut water as a new product gradually became known to the public. Although its market share is currently small, it does not mean the market does not recognize it.
Recently, Coca-Cola launched Sprite "Refreshing Coconut" coconut water soda, which contains 2.5% coconut water, a sugar-free formula, and a refreshing taste. Although it is not strictly coconut water, the new Sprite uses coconut water as a selling point, showing that Coca-Cola wants to convey that carbonated drinks can also be healthy through the coconut water concept.
Currently, there are about 20 brands and over 30 products of coconut water in the domestic market, with about 10% produced locally. In recent years, some domestic companies have also begun to test the coconut water market, indicating a clear demand for coconut water in China.
How Should Coconut Water Brands Operate in the Market?
1. Have a Clear Positioning
Currently, most consumers find it difficult to distinguish between coconut juice and coconut water. Therefore, brands need to have a clear positioning for coconut water. Whether in terms of price, taste, or production process, coconut juice and coconut water are quite different. Compared to coconut juice, coconut water is positioned as mid-to-high-end, so consumer education must highlight the characteristics of coconut water.
2. Expand New Channels
With the rise of young consumer groups, new retail channels have become battlegrounds for new products. As a premium coconut water brand, besides traditional hypermarkets, it is more important to develop new channels such as chain convenience stores, e-commerce platforms, social e-commerce, and community group buying.
For example, on Douyin, brands can create interactive scenarios with topics to instill the characteristics of coconut water into consumers. In community group buying, promotional activities can allow more consumers to experience the taste of coconut water and cultivate consumption habits. On Xiaohongshu, content creation and dissemination can help young people reach the brand.
3. Seize the Peak Season to Cultivate Consumers
July, August, and September are the peak season for beverage sales, and these three months are also the best time for consumer education. In summer, consumers have a demand for beverages. However, previously, it was hard to see free tastings or promotional activities for coconut water in offline retail scenarios.
Therefore, seizing the peak season to cultivate consumers is crucial. In the domestic market, Vita Coco does this well, as it belongs to Reignwood Group's FMCG portfolio. Every year during the peak season, Vita Coco displays products in hypermarkets and places advertisements in subway stations with high foot traffic. This is why Vita Coco has achieved good results in the Chinese market.
Now, in new retail scenarios like Hema and Yonghui Super Species, coconut water has appeared on their shelves. This shows that as a niche segment in the beverage category, coconut water, although not yet popular, does not prevent it from being a potential niche product.
According to data, from 2014 to 2018, retail sales of coconut water products grew from 200 million yuan to 1.2 billion yuan, and it is predicted that this category will grow to around 1.5 billion yuan in 2019.
Since 2018, consumer awareness of coconut water has increased, especially among white-collar women, for whom coconut water has become their preferred healthy beverage.
New Distribution believes that driven by the health trend, beverages will see breakthroughs in niche areas. Changes in consumer demand prompt brands to innovate continuously. Nowadays, few products can suit all consumer groups and all sales channels simultaneously.
In the coconut water field, imported brands account for a large proportion, which is also an opportunity for Chinese brands. At present, coconut water sales in China are still in a growth phase with huge market potential. Besides price, the more important factor is consumer cultivation.
In addition, channels are also important. For niche categories, it is essential to precisely target consumer groups and lay out channels where they frequently appear, using new retail tools to get closer to consumers.
Of course, to attract more consumers, coconut water positioning should not only focus on the water concept but also highlight its functionality. Promotion must be precise and not overly broad.
As consumer acceptance of coconut water continues to rise in China, the overall market size will continue to expand, production technology will improve rapidly, and the number of coconut water producers in China will continue to grow.
In the short term, coconut water will not become a major product, but that does not prevent it from being a niche market with huge potential in the healthy beverage segment.