---
title: "Functional Beverages Remain Hot as New Players Enter the Market"
description: "The functional beverage industry is becoming increasingly segmented, requiring innovative marketing approaches. In the first half of 2022, Dongpeng Beverage reported revenue of 4.291 billion yuan, with its flagship product Dongpeng Special Drink contributing 4.118 billion yuan, over 96% of total revenue. As more players enter the market, competition intensifies, and differentiation becomes key."
author: "许礼清 孙吉正"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-09-03"
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---

# Functional Beverages Remain Hot as New Players Enter the Market

> The functional beverage industry is becoming increasingly segmented, requiring innovative marketing approaches. In the first half of 2022, Dongpeng Beverage reported revenue of 4.291 billion yuan, with its flagship product Dongpeng Special Drink contributing 4.118 billion yuan, over 96% of total revenue. As more players enter the market, competition intensifies, and differentiation becomes key.

The industry is becoming increasingly segmented, and marketing needs to be innovative in segmentation as well.

With the release of Dongpeng Beverage's semi-annual report, functional beverages have once again attracted attention. In the first half of 2022, Dongpeng Beverage achieved operating revenue of 4.291 billion yuan, of which the single major product Dongpeng Special Drink alone contributed 4.118 billion yuan, accounting for over 96%.

**Looking at the entire industry, the functional beverage track is welcoming more entrants.** Coupled with established players such as Huabin Red Bull, Tiansi Red Bull, Lehu, and Zhanma, market competition is becoming increasingly fierce. A notable trend is that the industry is gradually moving towards segmentation, with products like electrolyte drinks, hyaluronic acid drinks, and "stay-up-late water" attracting consumer attention.

However, it is not easy to carve out a share in this highly competitive market. The reporter noticed that several well-known functional beverage products have already appeared in some discount stores for near-expiry products. **Therefore, how to carry out differentiated marketing has become a common issue for entrants.**

**01**
**Many Players Compete in Functional Beverages**

At the performance briefing, Liu Lihua, Secretary of the Board of Directors of Dongpeng Beverage, frankly stated: "Dongpeng Beverage's rapid development in recent years is due to the company being in the golden track of rapid growth in functional beverages."

**In fact, from the perspective of market participants, brand owners' enthusiasm for functional beverages continues, and more and more players are entering the functional beverage market.**

It is understood that in the first quarter of 2022, the functional beverage brand Alien Electrolyte Drink under Genki Forest achieved monthly sales exceeding 100 million yuan; in the same quarter, ORG and China Sports Industry jointly launched the "Xiwang" sports nutrition drink; in May, Sinopec Easy Joy targeted drivers and launched the "Jinchun" small bottle drink; Want Want Foods also re-launched the "Huihai" nutrient drink.

**Prior to this, brands such as C'estbon, Wahaha, and Dali had already laid out plans in functional beverages.**

However, according to Nielsen data, from December 2020 to November 2021, Dongpeng Special Drink's sales increased by 28.4% year-on-year, three times the growth rate of the energy drink industry. **In terms of energy drink sales volume, the company's share reached 31.7%, ranking first in the market.**

It is undeniable that at this stage, consumers' demand for health-related aspects such as "improving immunity" and "enhancing physical fitness" is growing, which has brought new attention to functional beverages. **To a certain extent, behind the functional beverage boom, there are also changes in consumer trends.**

Yu Runjie, a food and beverage marketing expert, said: **On the one hand, young consumers nowadays engage in more sports, which drives the market development of functional beverages. On the other hand, the consumption capacity of young consumers in lower-tier markets has increased.** Products like large-capacity bottled functional beverages are more suitable for them, and their consumption volume is significantly higher than that of consumers in first- and second-tier cities.

"At the same time, the battle between Huabin Red Bull and Tiansi Red Bull has created new opportunities in a market that was originally stable and dominated by one player. Red Bull was previously canned, with limited consumption scenarios, but now consumption groups and scenarios are becoming more diverse. Other brands enter with bottled products, and large capacity and low prices make it easier to penetrate the market," Yu Runjie said.

**02**
**Moving Towards Segmentation**

**According to the new regulations of the International Beverage Industry Association, functional beverages refer to soft drinks with health benefits.** In China's soft drink classification standards, functional beverages, i.e., special-purpose drinks, are defined as: **beverages that adjust the composition and content ratio of natural nutrients to meet the nutritional needs of specific groups, including sports drinks, energy drinks, nutrient drinks, and other special-purpose drinks.**

**As of now, functional beverages have gradually moved towards segmentation.** For example, in recent years, supplementing "electrolytes" has become a popular choice in functional beverages.

Xinhua News Agency once reported: "People who drink plain water during and after exercise are more prone to muscle cramps when dehydrated, possibly because plain water cannot replenish the electrolyte loss caused by sweating, but instead dilutes the electrolytes in our bodies." "Electrolyte drinks are not only useful for preventing exercise-induced muscle cramps but also help the body replenish water. After exercising in moderate or high heat, or after severe diarrhea or vomiting due to illness, one should drink some electrolyte drinks."

**Companies are targeting this track and entering one after another.** In addition to Genki Forest's Alien Electrolyte Drink, Panpan launched "Coconut Beat Natural Electrolyte Water" in November 2021, and the new consumer functional beverage brand Yuaneng also launched "Yuaneng Sports Drink" in May 2022.

In fact, common products on the market such as Pocari Sweat, Gatorade, Mizone, Master Kong Jinpao X, and "China's Magic Water" Jianlibao are all electrolyte drinks.

**However, Zhu Danpeng, an analyst in the Chinese food industry, pointed out that electrolyte drinks still have a certain distance from ordinary consumers, and the domestic general public knows little about the efficacy of this category.** At present, under the premise that the efficacy of electrolyte drinks is widely recognized by industry insiders at home and abroad, there is indeed great development prospects. However, as a type of functional beverage, electrolyte drinks still differ from traditional energy drinks. If brand owners want to expand this segment, they must conduct long-term consumer education on the unique functionality of electrolyte drinks.

**With the rise of the "she economy," functional beverages with beauty and skincare ingredients have also begun to come to the forefront.** A landmark event is that hyaluronic acid, a star ingredient spanning beauty, hospitals, health products, and other fields, has been approved for use in ordinary food additives.

Subsequently, Bloomage Biotech launched two new Shuiquan products, both adding self-developed food-grade hyaluronic acid; By-Health launched the Liujiaoshou drink and also introduced a new "stay-up-late water light bottle" product.

In December 2021, Dongpeng Beverage also launched "Ta Neng" targeting the female group, which has entered some regional markets for trial. In addition, there are refreshing drinks with stimulant ingredients specifically for people who stay up late, such as the new consumer brand "ULOGY" which launched the "Xingxing Bottle" with "red ginseng" as the main ingredient.

Yu Runjie believes that entering a new track with segmented products and segmented populations is a good method for brands, whether innovating in raw materials or consumer groups. **"Now more products, such as hyaluronic acid, are more like new categories co-created by the additive industry and the beverage industry."**

Zhu Danpeng said that the consumer profile of functional beverages used to be mainly athletes, drivers, and workers. But as the pace of work, life, and daily routines of young people accelerates, the consumer base of functional beverages is expanding. Overtime, staying up late, and various "fatigue" scenarios after exercise and fitness are traditional consumption scenarios for functional beverages, while gatherings, travel, and daily health care are becoming more leisure-oriented consumption scenarios. **Personalized products with appealing appearances are increasingly favored by young consumers.**

**03**
**Homogenized Marketing Paths Need to Be Solved**

On the fields of off-road racing, skydiving, bungee jumping, or some extreme sports, a huge Red Bull logo is always present. Coupled with its strong association with sports, when consumers mention functional beverages, they unconsciously associate them with various sports. **Therefore, major sporting events have also become the main marketing battleground for functional beverages.**

Yu Runjie said that sports marketing can gain wide recognition, which to a certain extent shows it is effective, **and it has formed inertial thinking among functional beverage brand companies. It is relatively simple and safe.**

Zhu Danpeng also believes that **due to the natural attributes of the category, sports marketing is unavoidable in the marketing process of functional beverages.**

Taking Dongpeng Beverage as an example, it has been deeply involved in sports marketing, including sponsoring domestic and international sports IPs such as the Chinese Super League, ICC (International Champions Cup), the World Cup, and the Portuguese national team.

Zhanma is also keen on sports marketing. From 2019 to 2021, Zhanma became the top partner of CUBA (China University Basketball Association); in March 2021, Zhanma officially released the "Zhanma Basketball Disciple" basketball ecosystem promotion plan; in 2022, Zhanma became the official sponsor of the CBA League and the official energy drink of the CBA League.

**Zhanma is not the only one targeting basketball.** As early as 2013, Lehu, which was just founded, sought to enter sports marketing and became the official designated functional beverage of the CBA League; in 2018, Lehu became the designated functional beverage for the Stanković Cup Intercontinental Basketball Tournament; in 2019, Lehu also sponsored the FIBA Basketball World Cup. Sports marketing has moved from domestic to international.

**Beyond conventional sports, functional beverages are also keen on esports.** In 2017, Dongpeng Special Drink sponsored NESO (National Electronic Sports Open); in 2018, Dongpeng Special Drink became the official partner of the Royal Never Give Up League of Legends RNG team; in 2020, Dongpeng Special Drink became the official designated functional beverage for KPL (King Pro League).

Zhanma is also enthusiastic about esports. In 2017, Zhanma became the official sponsor of the LPL; in 2021, Zhanma reached a cooperation with PEL (Peace Elite League) to lay out mobile games and mobile esports.

Yu Runjie told reporters that **the industry is becoming increasingly segmented, and marketing also needs to be innovative in segmentation.** "For example, different regional markets have different consumption characteristics. Red Bull's presence in mahjong rooms in the Guangdong market is a 'barrier-type' channel. Canned products are more suitable for mahjong rooms, and playing cards also requires refreshment. Therefore, in the marketing process, companies should also pay attention to new lifestyles, observe various consumer segments in detail, and combine product characteristics for marketing, rather than always following the sports marketing route."

Source: China Business Journal


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