Source: BBB Institute (ID: gh_c21f49b602dc) Author: Li Xiaowai (Image source: @Tianfu Cola official Weibo)
To date, no Chinese domestic beverage has been able to rival the former Jianlibao. This carbonated drink, born in 1984, firmly occupied urban and rural markets in China for the next decade and sparked a wave of entrepreneurship in Chinese food and beverage companies.
In terms of national recognition, the myth written by the "Oriental Magic Water" is incomparable even to international beverage giants Coca-Cola and Pepsi. But the giants are by no means idle. The two colas once flooded the seven armies, completely defeating China's seven major state-owned soda factories. Old soda brands were either acquired, shelved, or lost their timing, struggling to regain market glory.
In the 1990s, under policy-guided merger waves, Chinese enterprises did benefit from the mature management experience and brand models of European and American companies, but they could not truly become strong. During the two decades (1990-2010) when consumer material demand expanded rapidly, domestic brands found it difficult to compete with overseas brands.
Market erosion was not instantaneous; it was the result of gradual development over time. Fortunately, during these two decades, Chinese manufacturing was able to build the advanced digital and intelligent production lines of today, and the conception, implementation, and maintenance of brands gradually got on track, leading to the flourishing diversity we see now.
From the day the "Two Colas" entered the market, the development history of Chinese beverages has been turbulent for forty years.
Looking back at several famous Sino-foreign beverage battles, we can see not only the struggle and persistence of national brands but also the relentless efforts of giants to suppress local enterprises. We attempt to return to the most tragic defeat and divide it into four stages to redraw the story of these forty years.
- The Two Colas Flood the Seven Armies
- The Oriental Magic Water's Killing Move
- The Time for Chinese Cola Has Not Come
- The Beverage War Returns
The Two Colas Flood the Seven Armies
This was the first lesson foreign enterprises taught local companies.
In the 1990s, under the guidance and encouragement of policies such as opening up and exchanging market for technology, some local enterprises cooperated with foreign capital. This wave of cooperation surged from the cosmetics industry to the food and beverage industry, then extended to home appliances and 3C fields.
The story of "The Two Colas Flooding the Seven Armies" happened here. The two international giants swallowed seven of the eight old state-owned carbonated beverage factories.
These eight major soda factories—including Chongqing Tianfu Cola, Guangzhou Asian Soda, Beijing Beibingyang, Shandong Laoshan Cola, Henan Shaolin Cola, Shanghai Zhengguanghe, Shenyang Bawangsi, and Tianjin Shanhaiguan—accounted for 42% of national sales in 1983.
(Geographic map of Chinese soda, image source: Qiongyou.com)
According to the description in "Chinese Brands Forty Years (1979-2019)" by Zhao Xinli, Huang Shengmin, and Zhang Chi [1], before the "Two Colas" entered, the former Ministry of Light Industry worried that once the market was opened, domestic beverages might collapse, so it designated the eight major factories to cooperate with international beverage giants.
Tianfu Cola, originating from Chengdu, Sichuan, deserves a prominent mention. It was China's first true domestic cola, and both "Two Colas" had their eyes on it. At its peak, Tianfu Cola had 108 joint ventures across China, with annual sales exceeding 200,000 tons and profits and taxes over 70 million yuan.
In 1991, Coca-Cola began seeking cooperation with Tianfu Cola. The then general manager, Li Peiquan, "blocked and dodged" because Coca-Cola's conditions seemed harsh: the joint venture could only produce Coca-Cola (though it agreed to set up another plant for Tianfu Cola). Since no "imperial sword" was granted, cooperation was postponed repeatedly.
Pepsi seized the opportunity to enter negotiations. Thus, on January 18, 1994, Pepsi signed a joint venture agreement with Tianfu Cola, holding 60% control, and took it over without a fight. They gained a lot: first, joint ventures across the country; second, a nationwide sales network.
After the cooperation was reached, the approval document stipulated that Tianfu Cola's production and sales should not be less than 50% of total output. In the first year, Pepsi complied, but then began to decrease.
By 1996, the production share of Tianfu Cola under Pepsi's control had fallen below 25%, far below the "red line" set in the approval, and a large number of original Tianfu Cola management personnel were stripped away, leading to years of losses. [2]
(Image source: @Tianfu Cola official Weibo)
Looking from south to north, Tianjin's Shanhaiguan soda also fared poorly. After Coca-Cola and Shanhaiguan Soda Factory jointly established Tianjin Jinmei Beverage Co., Ltd., Jinmei was unwilling to provide raw materials to the original township enterprises. The factory could only manually mix production, leading to uneven quality and a sharp decline in reputation and sales.
In this wave of joint ventures, Laoshan Cola ceased production in 1997, Wuhan Binjiang's No. 2 Factory soda stopped in 2000, Beibingyang and Asian Sarsaparilla were shelved, and the Bawangsi trademark was sealed for ten years. Except for Shanghai Zhengguanghe, almost all major brands of the eight soda factories were wiped out.
The Two Colas' tactics were aimed at the channel advantages of local soda factories across China. In "The Fate of COFCO Before and After Ning Gaoning's Arrival in Beijing," Wei Sanshui elaborated on Coca-Cola's desire for channels and its strong distribution system.
In the United States, Coca-Cola has the largest distribution network, second only to the postal system. For a long time, Coca-Cola relied on this massive system to sell products to more than 200 countries and regions daily, with daily consumption exceeding 1 billion cups, equivalent to more than 40 million standard cases, accounting for 48% of the global beverage market.
[3] Quoted from Wei Sanshui's "The Fate of COFCO Before and After Ning Gaoning's Arrival in Beijing," Contemporary China Publishing House, 2006.1
However, local soda factories segmented by geography did not completely collapse. Coca-Cola crossed Shanhaiguan [4] but was cut off at the Qinling Mountains. Shaanxi people's love for "Bingfeng" soda was unwavering, giving the "Sanqin set meal" its name.
Of course, in the 1990s when the Two Colas were aggressive, apart from Jianlibao and Wahaha, almost no local beverage brand could compete with them. Most old soda brands were either joint ventures, acquired, or equity-participated. Even after regaining control after the millennium, their revival path was long and arduous.
The Oriental Magic Water's Killing Move
Turning the clock back ten years from the 1990s, Jianlibao's market position was already established, and the Two Colas had not gained any advantage from it.
One important reason was that Jianlibao cleverly straddled the boundary between functional and carbonated beverages. You could call it orange soda or a sports drink—athletes drinking this orange-yellow liquid could quickly recover their strength.
Researcher Ouyang Xiao from the Guangzhou Institute of Sports Science developed it, and it caught the eye of Li Jingwei, then director of the Sanshui County Sanshui Winery in Guangdong Province.
Before becoming the winery director, Li Jingwei was the deputy director of the Sanshui County Sports Commission. In 1983, he went to Guangdong on business and bought a canned Coca-Cola, suddenly conceiving the idea of having the winery produce beverages.
At that time, China's beverage production lines were rudimentary, with common packaging being glass bottles with aluminum caps and recycling. In 1984, there was no fully domestically developed and manufactured can production enterprise in China [5], and the Sanshui Winery certainly did not have such a line. But Li Jingwei miraculously persuaded Shenzhen's Pepsi-Cola to produce for him.
Perhaps because various colas were emerging in the market, Pepsi did not see Jianlibao as a competitor.
At the 1984 AFC Guangzhou Conference and the Los Angeles Olympics, Jianlibao became famous overnight. Sales that year exceeded 3.4 million yuan. At its peak, Sanshui County was crowded with trucks from all over the country waiting to load goods, and the allocation slip for one carload of Jianlibao was speculated to 20,000 yuan.
In 1987, at the 6th National Games in Guangzhou, Jianlibao and Coca-Cola clashed head-on for the title of "designated beverage." Coca-Cola offered 1 million yuan, and Jianlibao directly raised to 2.5 million yuan. As the largest beverage company in China at the time, Jianlibao won without suspense [6].
Coca-Cola and Pepsi finally realized this was a formidable opponent. This direct confrontation between a Chinese enterprise and foreign companies at the National Games also began Jianlibao's myth of the "Oriental Magic Water."
From 1984 to 1994, during Jianlibao's decade of dominance, the "Two Colas" had not yet fully deployed due to immature sales channels (before acquiring the eight major factories), and the eight major factories focused on soda and cola products, seemingly differentiated from Jianlibao's "sports functional" type. Meanwhile, "Wahaha" focused on purified water and juices, and without a can production line, also avoided direct competition.
This was the best era for the Oriental Magic Water's killing move. On its tenth anniversary, Jianlibao announced its entry into the United States, setting up an office in New York and buying a floor in the Empire State Building for $5 million.
Fame brings trouble. As Jianlibao reached its peak, the property rights issue remained unresolved.
In 1997, Jianlibao planned to list in Hong Kong. The Sanshui municipal government refused to approve Li Jingwei's team's shareholding, citing "no Hong Kong residence permit, thus unable to purchase H-share original stocks," and the conflict between the two sides became public. The decline of an enterprise ultimately turned due to institutional and management issues.
The Time for Chinese Cola Has Not Come
After Jianlibao's decline and the Two Colas' dominance, domestic beverages did attempt to regain lost ground, albeit limited in scope and time.
New entrants drew on some experience—the stimulating sensation of carbonated drinks entering the mouth seems closely linked to sports passion and shouting. Both Coca-Cola and Jianlibao became household names through the National Games. This time, new entrants were no exception [7].
On June 10, 1998, the first match of the French World Cup kicked off, and CCTV's live broadcast was about to begin.
In the final seconds of the countdown, the slogan "Future Cola, Future Choice" took the lead, marking the official debut of "Chinese people's own cola" that Zong Qinghou had high hopes for.
Future Cola fought its way up, from 380,000 tons in 1998 to 620,000 tons in 2001, capturing about 12% of the national carbonated beverage market. Although it didn't defeat Coca-Cola, it was increasingly on par with Pepsi in individual metrics.
A key reason for Future Cola's initial success was its early capture of second- and third-tier cities and rural areas. The book "The Determined Walker" details Zong Qinghou's confidence in the strategy of "encircling the cities from the countryside."
In 1998, China's rural consumer retail market expanded rapidly, growing 10% that year, with growth exceeding urban areas for the first time. The entire beverage market in rural areas also rose 16.9% over the previous year. Although the Two Colas had absolute dominance in first-tier cities, their reach had not yet penetrated rural areas [8].
Li Yanjun, deputy director of the Wahaha Food Science Research Institute, recalled that in the nutrition liquid workshop of the medical insurance company, Future Cola's concentrate was successfully extracted after hundreds of experiments. The product was later produced at the Baili Company in the Xiasha base in Hangzhou, and due to a shortage of personnel, more than 20 employees were transferred from the Hangzhou Canned Food Factory.
Subsequently, Wahaha, which had gradually established market dominance through bottled water, built a supply and marketing consortium, shared profits with distributors, and spread Future Cola to over 80% of rural sales channels. The situation was completely opened up.
During this period, Fenghuang Cola, born in the same year as Future Cola, also had a brief moment in the spotlight. Starting from its base in Chaozhou, Guangdong, it expanded to the southwest and became popular in Sichuan, using advertising offensives to capture 8% of the national beverage market share.
At its peak, it squeezed into the top four colas, following the Two Colas and Future Cola. However, Fenghuang Cola, which spent 150 million yuan on TV ads in 1999, quickly ran out of cash flow due to misjudgment and only survived three years in the market. But as a national brand, it was later called one of the "two giants, three youths" along with Jianlibao and Future Cola [9].
If the story had ended there, Zong Qinghou might have high-fived Li Jingwei. The myth of the Oriental Magic Water being passed to Chinese "Future Cola" would have been a decent ending. But the old brother couldn't hold on.
In 2002, the Sanshui municipal government transferred 75% of Jianlibao's shares to Zhejiang State Investment, and 28-year-old Zhang Hai became chairman of the group. Li Jingwei's team was completely out.
That same year, Coca-Cola held a grand distributor meeting at the Lanzhou Feitian Hotel. The Gansu branch of COFCO Coca-Cola Beverage Co., Ltd. communicated enthusiastically with local distributors, marking the official entry of the world's largest beverage company, with 116 years of history, into the western region.
Coca-Cola excels at urban warfare, but that doesn't mean its rural shortcomings can't be remedied. Cooperation with COFCO was a perfect opportunity to leverage channel advantages.
According to a report in the Lanzhou Daily on May 23, 2002, the Gansu branch of COFCO Coca-Cola, established less than six months prior, used wholesaler network resources, transportation resources, and channel resources to quickly distribute products to every retail point. This allowed consumers to enjoy Coca-Cola anywhere at any time.
In the following years, Coca-Cola pushed into Hunan, the northwest, and Xinjiang, sponsoring photography contests, university student charity events, and donating to Hope Primary Schools. Consumers formed an image of the overseas brand as "high-end, international, and socially responsible."
A classic brand positioning issue was revisited here. Cola originated from American culture. Future Cola targeted rural markets, so short-term sales could rise, but once the Two Colas distributed their products to rural areas, local consumers began to question whether Future Cola was a "knockoff," and trust naturally wavered.
Chinese cola seemed not to have waited for its good time.
In the first decade of the 21st century, the public was hungry for high-end, international European and American brands, and their information habits and brand awareness were being cultivated. At this time, China was in a period of rapid consumption growth, and the market needed many players to fill the gaps.
At that time, Chinese enterprises lacked overall brand strategy planning and mature business management experience. This decade of overwhelming growth was inevitably dominated by European and American brands.
The Beverage War Returns
History is a cycle, and now a battle between Chinese and foreign beverages is inevitable.
When media reported the "Two Colas Flooding the Seven Armies" in the 1990s, Chinese consumers were in the early stages of building confidence in domestic products. It coincided with the climax of foreign investment, where multinational corporations were aggressive, and infrastructure differences left domestic brands with little ability to resist.
Even if the public had the emotional determination to revitalize national industry, the industrial side could hardly meet expectations in a short time, leading to a regrettable ending.
After nearly two decades of dormancy, a moment arrived when both consumer confidence in domestic products and industrial strength had climbed to new heights. Statistics show that since 2018, at least 10 domestic beverage brands have emerged, including Genki Forest, Hankou No. 2 Factory, Bestinme, and KellyOne.
(Image source: @Genki Forest official Weibo, cropped)
The tension began with the "Two Colas" paying attention to new rivals. A former Pepsi executive told 36Kr, "At every important meeting in 2021, Genki Forest was definitely mentioned."
Before this subtle tension was brought into the open, the Two Colas seemed to have already pressured their opponents.
According to Genki Forest, from 2018 to 2020, they encountered multiple production supply disruptions. "Once the contract manufacturer's production plan changed, Genki Forest's product production would be disconnected."
The most intense moment was when the contract manufacturer directly called Genki Forest, saying, "Before 12 o'clock tonight, all factories producing Genki Forest must stop work." The other party was the OEM for Genki Forest's milk tea product and also a related factory of a major domestic beverage company.
It was reported that the boss of an international beverage giant personally called the OEM, demanding that its factories immediately stop cooperating with Genki Forest, even at all costs: "No matter how much loss is caused, production must stop" [10].
Not only contract manufacturers, but also the scarcity of key raw materials put Genki Forest in a "stockout" dilemma. Although the sugar-free track had existed for a while, it was Genki Forest that truly built the market, and a key ingredient was "erythritol."
Previously, the supplier of erythritol was Shandong Bailong Chuangyuan. In 2020, the company produced about 20,000 tons of erythritol, and Genki Forest consumed most of it. Logically, with mutual benefit and appropriate prices, the relationship should have been harmonious.
But Bailong Chuangyuan had a special identity: it was Coca-Cola's first fructose supplier in China and once the sole supplier of high-fructose corn syrup to Coca-Cola China.
In 2008, media reported with the headline "Bailong Chuangyuan: Boarding Coca-Cola's Ship, 12 Years of Sweet Wealth Creation of 2.2 Billion" [11], hinting that founder Liu Zongli was one step away from his listing dream after partnering with Coca-Cola. Indeed, the company went public the following year. By 2015, Bailong Chuangyuan received the "Coca-Cola Top Ten Supplier Award." The two parties were closely linked.
Therefore, when the sugar-free sparkling water market was expanded by Genki Forest, the giants decided to act.
LatePost contacted a person familiar with the erythritol supply chain, who revealed that Coca-Cola and Pepsi successively approached Bailong Chuangyuan to order this ingredient around the Spring Festival in 2021, indicating that the formula was already in hand, waiting for the right moment [12].
Around March 2021, Coca-Cola and Pepsi's sparkling water brands AHA and Bubly launched sugar-free drinks. When Coca-Cola began seeking sugar substitutes, Bailong Chuangyuan was destined to be drawn into this war, perhaps even forced to take sides.
It's not uncommon for suppliers to prioritize large customers, as big orders sustain a business. Even in cross-industry cases, Tesla's initial low vehicle production was because contract manufacturers had to prioritize orders from traditional automakers.
Interestingly, during Genki Forest's troubles, the "Oriental Magic Water" Jianlibao also lent a helping hand. On the label of Genki Forest's citrus-flavored sparkling water, the entrusted manufacturer is "Beijing Guangdong Jianlibao Beverage Co., Ltd."
Looking back over the past three years, from the raw material erythritol to filling and bottle preforms on the production line, new domestic brands faced numerous constraints, each step difficult. After another supply disruption halted production, Tang Binsen personally flew to the contract manufacturer to negotiate, but failed. Upon returning to Beijing, he sent a message to the executive group:
"We need to build our own factory."
The supply chain iron curtain of international giants was finally pried open by the full efforts of new brands. In July 2019, Genki Forest signed its first self-built factory contract in Chuzhou, Anhui. The location not only has sweetener suppliers like Jinhe Industrial but also beverage brands like Dongpeng, and supporting enterprises like Jiamei Filling and Tenghui Packaging to form an industrial chain cluster advantage.
Genki Forest set a good example for new beverage brands.
Just as Jianlibao inspired the first wave of Chinese beverage entrepreneurship, new brands like Bestinme and Guozishule have successively entered the sparkling water market; leading new tea brands Heytea and Naixue Tea have also entered the bottled soda market; old players Nongfu Spring and Wahaha have never lagged behind, and even dairy company Yili has come to share a piece of the pie.
More importantly, domestic soda brands have begun to reorganize their territories.
In 2002, after difficult negotiations between the Chinese side and Pepsi, the Asian Soda brand, including its factory, was taken back by the Guangzhou Light Industry Bureau [13]. After Xiangxue Pharmaceutical acquired the brand, Asian Sarsaparilla finally revived and opened its Tmall flagship store in 2019. Although Wuhan Binjiang Soda couldn't be recovered from Coca-Cola, a young team started anew and made the name "Hankou No. 2 Factory" famous.
As for Tianfu Cola, which had cooperated with Pepsi, the former general manager Li Peiquan, now over seventy, personally traveled from Chongqing to Shanghai to submit a negotiation letter to Pepsi's China headquarters. Tianfu Cola eventually regained its formula and trademark after 2010, marking at least a phased achievement in the battle.
In Tianfu Cola's old photo album, there is a photo of a little girl with a red flower in her hair, holding a half-drunk Tianfu Cola. In Tianfu Cola's latest Weibo post, they said they hope to find this girl.
(Image source: @Tianfu Cola official Weibo)
Notes and references: [1] Zhao Xinli, Huang Shengmin, Zhang Chi, "Chinese Brands Forty Years (1979-2019)", Social Sciences Academic Press, 2019.5 [2] Li Tong, "The Last Tianfu Cola", Business Circle · China Business Review, 2009 Issue 3 [3] Quoted from Wei Sanshui, "The Fate of COFCO Before and After Ning Gaoning's Arrival in Beijing", Contemporary China Publishing House, 2006.1 [4] Shanhaiguan is a brand name, not the geographical "Shanhaiguan." [5] There may be doubt here: in April 1981, the first Coca-Cola bottling line was put into operation at Wulidian, Fengtai District, Beijing. This was the first Coca-Cola bottling plant after the founding of New China, but it was not fully independently developed, so it is not counted. [6] Wu Xiaobo, "The Great Defeat (Revised Edition)", Zhejiang University Press, 2013.11 [7] Wu Xiaobo, "Forty Years of Turbulence: National Enterprises 1978-2018", CITIC Press, 2017.12 [8] Wu Aiqie, "Zong Qinghou: The Determined Walker", Machinery Industry Press, 2018.11 [9] The two giants are Coca-Cola and Pepsi. [10] Peng Qian, Qiao Qian, Yang Xuan, "2021 Beverage War: Giants Besiege Genki Forest", 36Kr, 2021.9 [11] Cui Xinshuang, "Bailong Chuangyuan: Boarding Coca-Cola's Ship, 12 Years of Sweet Wealth Creation of 2.2 Billion", Money Week, 2008.8 [12] Zhu Kailin, "Genki Forest, Growing Up in a Year", LatePost, 2021.12 [13] Hu Zhiyi, Zhou Meiyan, "The Joys and Sorrows of Domestic Cola: Struggling to Survive Under the Domination of the Two Colas", Time Weekly, 2013.9
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