Tip: How to operate the market in 2016 is a topic of great concern to manufacturers and distributors at the beginning of the year. Recently, this official account and 365 Business School have invited senior practitioners and well-known teachers to share their experiences and ideas on market operations at the start of the year in our community. If you are interested in attending, please long-press the QR code at the end of the article, add the assistant, and reply "2016" to join the group.

In 2016, the economy continues to decline, and the beverage market remains turbulent and competitive. Looking back at 2015, many distributors worked hard but found the ratio of income to effort unsatisfactory. Many distributors have also listened to interpretations by marketing experts, but in practice, results often differ greatly due to various reasons. Based on national beverage data provided by international authoritative data survey institutions in 2015, I will analyze how manufacturers and distributors should operate the market in the highly competitive beverage market of 2016.

I. National Beverage Industry Sales Proportion and Growth Rate by City Level

Data Analysis:

  1. Left chart (January-September 2014): In the national beverage market by city level, county-level cities and below accounted for 47.9% of beverage sales, prefecture-level cities 22.7%, provincial capitals 17.3%, and key cities 12%.
  2. Right chart (January-September 2015): In the national beverage market by city level, county-level cities and below accounted for 48.4% of beverage sales, prefecture-level cities 22%, provincial capitals 17.3%, and key cities 12.3%.
  3. From 2014 to 2015, the sales proportion of county-level cities and below increased by 3%, prefecture-level cities decreased by 1%, provincial capitals increased by 2%, and key cities increased by 5%.

Conclusion: National beverage sales gradually decline as city level rises (mainly determined by population, consumption habits, per capita disposable income, etc.). The market of county-level cities and below accounts for half of the national beverage sales. In other words, the higher the city level, the smaller the market cake, and the greater the competitive pressure. Secondly, sales in key cities and county-level and below markets are rapidly increasing, and the market cake is growing, making it easier to enter the market now. In summary, distributors should understand the overall sales situation of the beverage industry in their target market and choose the right time to enter the market.

II. Beverage Category Development Trends

1. Data from 2013 to 2015 shows that national beverage sales volume grew at an average rate of 1.4%, while sales value grew at an average rate of 4%. The data indicates that the growth rate of sales value is nearly three times that of sales volume, meaning that in the future beverage market, high-end beverages have greater growth potential. Distributors should focus on mid-to-high-end beverages when selecting brands.

Conclusion: As per capita disposable income increases, China's beverage market is gradually shifting towards mid-to-high-end products, and the market share of low-price products will shrink. It is recommended that distributors focus on mid-to-high-end products and prepare for the opportunity to achieve explosive growth.

2. Functional beverages are the products whose sales volume share and sales value share are both steadily increasing, and their absolute values are also growing significantly, far exceeding other types of beverages.

Conclusion: Consumer demand for functional beverages is increasing. Beverages are not only for quenching thirst but also for various functional needs. The market capacity is expanding. As the saying goes, "When the wind blows, even a pig can fly." Distributors will find it relatively easier to operate popular beverage types.

Note two things:

  1. In the diverse functional beverage market, the functional appeal must be clear and easily accepted by consumers. This will make differentiated marketing strategies more effective. Mainstream functional beverage appeals can be classified into the following categories: (1) Polysaccharide beverages: Regulate intestines and reduce appetite. Suitable for constipation patients and those trying to lose weight. (2) Vitamin and mineral beverages: Supplement various nutrients. Vitamin beverages are suitable for everyone; mineral beverages, especially those with anti-fatigue ingredients, are only suitable for adults prone to fatigue, not children. (3) Sports balance beverages: Reduce consumption and restore vitality. Suitable for people after physical exertion; not suitable for children; those with high blood pressure should use with caution. (4) Low-energy and probiotic beverages: Help with beauty and skin care. Probiotic beverages are suitable for those with indigestion, especially the elderly; low-energy beverages are suitable for obese individuals. These four points are functional appeals that can be accepted by consumers. Distributors should focus on these four types of functional products when selecting.
  2. If you lack confidence in doing a new functional beverage well, follow mainstream products, i.e., act as an agent for similar high-margin products with the same function. Always remember that following is the least risky entrepreneurship.

3. Bottled water's sales volume share and sales value share are both steadily increasing, and their absolute values are also rising significantly. In terms of sales volume, it holds a 33% market share; in terms of sales value, it holds 17%.

Conclusion: The bottled water market is currently booming. Especially after the 2013 Nongfu Spring quality incident, many companies have become more aware of the drinking water market. Various types of water have emerged like mushrooms after rain. How to choose a bottled water brand and how to position bottled water for distributors? I will briefly explain from the perspective of terminal retail prices.

A. Positioning of 1-yuan water (mainstream market in county-level cities and below): The main 1-yuan water brands are Kangshifu, Jinmailang, Huiyuan, etc. Other brands have regional advantages, forming regional brands. Due to the very narrow profit margin of 1-yuan water, I suggest that operating 1-yuan water only requires: Using water as a medium: Use low-priced water to build customer relationships. Borrowing water to sail: Use water as a breakthrough, as display awards or channel policy gifts, to help other products enter terminal store shelves. Water naturally flows: Use water to achieve entry of all products, strong displays, and consumer pull. In other words, fully utilize the price differentiation of water to quickly build a network and introduce other single products for profit. In short, regardless of the brand, the positioning of 1-yuan water is to pave the way.

B. Positioning of 2-yuan water (mainstream market in prefecture-level cities, provincial capitals, and key cities): The main 2-yuan water brands are Nongfu Spring and C'estbon. If distributors act as agents for these two major brands, they can balance both channels and profits. That is, the brand power and channel power of these mature, well-known brands will quickly meet your market network needs. However, these companies have strong control over price systems, making it difficult to demand higher profits. In summary, well-known 2-yuan water brands focus on channels while also considering profits; regional 2-yuan water brands focus on profits while also considering channels.

C. Positioning of 3-4 yuan water (high numerical distribution rate, low weighted distribution rate): Note: Explanation of two definitions: Numerical distribution rate = number of stores selling a brand in the period / all sample stores, reflecting coverage. Weighted distribution rate = sales of a brand in the period / sales of that product category in all sample stores, reflecting the importance of different stores. The main 3-4 yuan water brands are Ganten and Hengda Ice Spring. These waters are the future trend, but that future will be delayed for 3-5 years. Distributors choosing to act as agents for these waters should maintain a calm mindset, focus on steady progress, and not be impatient. The operation model must prioritize profit as the first element. As for other regional 3-4 yuan water brands, if the manufacturer does not have a strong marketing planning team to discuss market feasibility with you, no aerial media bombardment, and you do not have very strong channel control, I suggest not touching them for now.

D. Positioning of 5 yuan and above water (high-end water brands): First, address the common misconception about high-end water: not all expensive water is high-end. High-end water has three characteristics: 1. Scarce natural water sources, 2. Naturally balanced mineral elements, 3. Ability to reflect profound natural or cultural connotations. The first two are given by nature; the third requires human effort. In short, if distributors want to do high-end water, pay attention to these points: 1: The manufacturer must be a leader in the industry with deep resources and cultural heritage. 2: You must have specific network channels, such as high-end clubs, five-star hotels, places for celebrity exchanges, etc. It is not recommended to operate if you lack these.

E. Carbonated beverages' sales volume and sales value shares are both steadily declining. The absolute value of sales volume is declining, while the absolute value of sales value is slowly increasing. Although the market sales volume and sales value of carbonated beverages are steadily declining, they are still the mainstream of non-water beverages in the beverage market, ranking high in both volume and value. As the saying goes, "A starved camel is still bigger than a horse." I suggest only operating Coca-Cola and Pepsi products, using their brand power and channel power to quickly improve your network and local market influence. It is not recommended to invest energy in new products.

F. Ready-to-drink tea's sales volume and sales value shares and absolute values are both steadily declining. Common ready-to-drink tea categories include iced black tea, green tea, and jasmine tea. Common brands include Kangshifu, Uni-President, Jinmailang, Wahaha, etc. These brands have uneven market foundations, significant sales differences between north and south, and intense competition, with each dominating a region. Distributors should choose based on regional differences. Profit is the first element of operation. Remember: the ready-to-drink tea market is already mature; it is recommended to act as agents for well-known brands. If operating unknown products, pursue high gross margins and operate in townships and rural markets where brand awareness is relatively low.

G. Juice's sales volume and sales value shares are stabilizing; sales volume is declining by 1.7%, while sales value is increasing by 4.1%, indicating the gradual rise of the mid-to-high-end juice market. Juice is generally defined by juice content: high, medium, and low. As juice concentration decreases, prices also decrease, and packaging sizes vary greatly. Well-known brands include Huiyuan's 2.5L, Nongfu Spring's 1.8L and Huiyuan's 1.88L, Minute Maid's 1.25L, and Nongfu Spring's 100% 380ml juice. Currently, large-packaged juice beverages in China are almost all seasonal products. During traditional festivals like Mid-Autumn Festival and Spring Festival, the combination of high-concentration juice + large packaging + gift boxes is most popular among consumers. If customers want to operate juice beverages, it is recommended to operate seasonally. The principle is: short sales cycle, high product turnover, fast cash flow, and quick profits. That is, operate for one month during Dragon Boat Festival, one month during Mid-Autumn Festival, and one month during Spring Festival. These three months will bring about 80% of your annual profit, while your capital occupation rate is only 20%.

H. Asian traditional beverages (herbal tea, walnut milk, coconut juice, etc.) have stable sales volume and sales value shares; sales volume is declining by 1.1%, while sales value is increasing by 1.5%. Asian traditional beverages cover a wide range, with flexible market operations and strong regional characteristics. Representative herbal teas are JDB and Wong Lo Kat, and representative protein drinks are Six Walnuts. Acting as agents for these brands is beyond reproach, bringing both fame and fortune. However, when choosing to act as agents for new beverages, remember: first, adapt to local tastes; second, for novel new beverages, pay attention to the number of similar products nationwide. The more products, the easier it is to create market atmosphere. As the saying goes, "Many hands make light work." Working together to build the market increases the chance of success.

I. Ready-to-drink coffee has relatively small sales volume and sales value, and has not yet formed a scale in China's beverage market. Data analysis: 1. In the past three years, the sales volume shares of bottled water, carbonated beverages, ready-to-drink tea, juice, functional beverages, and Asian traditional beverages sum to approximately 100%, meaning the sales volume of ready-to-drink coffee is extremely low, with few consumers choosing it. 2. In the past three years, the sales value shares of these six categories sum to 98%-99%-100%, meaning the sales value share of ready-to-drink coffee is 2%-1%-0%, gradually declining, indicating that the growth rate of ready-to-drink coffee sales is lower than the overall beverage market growth. Domestic ready-to-drink coffee market participants include Nestlé, Starbucks, Uni-President, Mr. Brown, Kangshifu, Kirin, etc. Especially Nestlé and Uni-President, which have developed in this field for many years and hold high market shares and good market foundations. In terms of original prices, ready-to-drink coffee from brands like Nestlé, Uni-President Yaha, and Mr. Brown is priced at 4-7 yuan. Although China's current per capita annual coffee consumption is 5 cups, Japan and South Korea in East Asia consume about 300 cups per capita annually, while the world average is around 240 cups. At the same time, the huge population base makes China the world's most potential coffee-consuming country. In summary, I believe ready-to-drink coffee will usher in a golden age as the market fluctuates. Distributors can operate it as a long-term product.

After analyzing all beverage data, how should distributors decide which beverages to act as agents for?

First: Deep self-awareness is important. Position your market and your needs. Do not blindly choose brands. Combine with reality and ask yourself a few questions:

  1. How large is my warehouse, and what is the annual rent?
  2. How many vehicles do I have? How many people? What are the estimated annual expenses?
  3. What type of market am I in? County-level and below? Prefecture-level? Provincial capital? Key city? What is the overall beverage market situation?
  4. How much fixed and working capital do I have?
  5. What are my needs? To make money? To open channels and increase outlets? To enhance my local influence? Or a combination?
  6. How much risk can I bear? That is, if things go wrong, will the loss hurt my core business?
  7. How many outlets do I have? How strong is my channel control?
  8. Which brands do I currently represent? Is adding new products complementary or overlapping? These questions require deep reflection, not blind expansion. Once determined, choices become clearer. One reminder: you cannot have both fish and bear's paw. There must be a focus. High gross margin and high risk are bound to be beverages with weaker brand power; low gross margin and low risk are bound to be beverages with strong brand power.

Second: Choose beverages in rapidly growing categories. As long as the overall market is growing, you won't be far behind.

  1. Follow trends: As consumption concepts change, consumers are increasingly willing to try and accept new things. Therefore, choosing products that lead consumption trends is a feasible method. First, position the brand towards mid-to-high-end, with retail prices at 4 yuan and above, focusing on truly functional beverages. If you have the opportunity to act as an agent for a well-known brand, that's best. If not, choose a product with differentiated marketing essence. Second, regarding bottled water agency, I have already clearly analyzed its significance and positioning above, so I won't repeat it. But I want to emphasize that in the future beverage market, the absolute values of water sales volume and sales value will further increase. As health awareness rises, sugary products will gradually shrink. Therefore, I suggest that when choosing a manufacturer's beverages, prioritize companies that produce and sell water.
  2. See product potential clearly: The market potential for carbonated beverages and ready-to-drink tea will shrink, and growth space will gradually diminish. When choosing to operate these, focus on profit and only accept relatively mature brands. On the contrary, plant protein beverages are developing rapidly. Currently, this field is chaotic, with many fakes and knockoffs. For short-term operations, you can choose low-priced walnut milk with huge profit margins. For long-term operations, choose brands from well-known manufacturers. Although prices are higher, you get what you pay for; they are made with quality walnuts, not inferior walnuts or peanuts. Never treat consumers as fools. It may work short-term, but once consumers realize, not only will the brand fail, but business integrity will also suffer.
  3. Choose differentiation: China is a magical country; wherever there is innovation, there is imitation. We can call it following or homogenization; the name differs. Homogenized products undoubtedly increase competitive pressure, while differentiated products are a unique path to success in category competition. This differentiation includes quality, selling points, price, packaging, etc.

Third: How to choose manufacturers for similar beverages? Of course, well-known manufacturers need no consideration. For first-tier brands like Uni-President, Nongfu Spring, Coca-Cola, etc., just follow the manufacturer's requirements. Agents have no ability to change any decisions of these first-tier manufacturers, such as trade promotions, price systems, profit margin settings at various levels, and even terminal retail stores are strictly controlled by the manufacturer's salespeople. Distributors are often just delivery providers; compliance is sufficient. But how to choose small manufacturers? There are 3 principles:

  1. Profit priority: Choosing a small brand has two purposes: first, to leverage the higher profit margins of small brands to improve the overall profitability of the distributor's product portfolio, while indirectly reducing labor, warehouse, and distribution costs; second, to hope that through one's own operational capabilities and market development, the small brand gradually grows into a major brand in the same category, achieving both fame and fortune during the brand growth process. But both put profit first.
  2. Inspect the manufacturer's strength: Small brand manufacturers have relatively limited strength, and their logistics and business scope are generally within their own province. Before taking on a small brand, it is best to visit the factory in person. This trip can yield three gains: see the factory scale to understand the manufacturer's strength; see the product inventory and production situation to understand sales performance; see the staff's spirit to understand the company's operational status. Do not underestimate these things. Only by understanding these basics can you invest; otherwise, your hard work may be lost overnight. For example, a previous client skipped this step, worked hard for a year, and only then discovered that the product was an OEM product. After investing significant manpower, material resources, and money, and finally starting to see positive market development, the boss made money and switched industries, leaving no product to continue. Regret was too late. That was relatively lucky; if unlucky, the boss might run away with the payment, which is even worse. So remember not to overlook this.
  3. Look at the manufacturer's team's market operation ideas: Talk more with the manufacturer's salespeople, do not rush, fully understand the company's market operation plans, and analyze whether the manufacturer's market operation ideas align with market reality and whether they are practical. Are they talking about immediate or future profits? Are they targeted and pragmatic, or just empty talk? Are they long-term nurturing behaviors for the market, or short-term predatory behaviors? The most feared are those who say a bunch of correct but useless words; they are the most deceptive and lead to the worst outcomes. As an old saying goes, "The manufacturer's salesperson has a thousand tricks, but I stick to my own plan." Be rational, rational, and rational again.

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