Meal replacements, plant-based diets, low-carb, superfoods... Whether in China or abroad, the food and beverage consumer market is undergoing dramatic changes every day. 'Sugar-free, low-calorie, natural' have become the key words for new products from major companies, with an endless array of segmented functions precisely targeting different consumer needs.

However, most functional foods have high market education and price barriers, while zero-calorie, sugar-free beverages have consistently held a large market share due to their convenience, quick consumption, and high cost-performance, making them the 'C-position player' worldwide.

According to Nielsen statistics, sugar-free beverages saw growth rates of over 30% in both 2017 and 2018. In March 2020, the transaction amount for sugar-free drinking water was 72 million yuan, while that for sugary drinking water was only 960,000 yuan.

A report by the Prospective Industry Research Institute, titled '2020-2025 China Soda Water Industry Market Development Prospects and Investment Forecast Analysis Report,' shows that the domestic soda water market was approximately 15 billion yuan in 2019, and is predicted to reach about 32 billion yuan by 2025.

At the same time, beverage consumption has strong seasonality, and the marketing battles in the beverage industry every summer are always full of eye-catching creativity.

Diving into an air-conditioned convenience store under the scorching sun and constantly discovering new sugar-free beverages has become a daily joy for young people.

-01- The Truth About Sugar

By observing young people's dietary principles, it's clear they no longer follow the traditional 'three meals a day,' 'porridge for health,' or the 'food pyramid.' Copenhagen, low-carb, ketogenic, intermittent fasting, paleo... diverse dietary approaches are emerging.

While these new diets have different emphases, they share a consensus: less sugar or even no sugar. The most extreme is the ketogenic diet (high-fat, low-carb), which eliminates all staple foods and limits sugar intake to below 50 grams per day.

The dangers of sugar have only been widely recognized by the public in the last decade.

In 2009, Robert Lustig, a professor of pediatric endocrinology at the University of California, gave a lecture titled 'Sugar: The Bitter Truth,' which is considered the first shot in the 'anti-sugar movement.'

In 2014, Australian actor and director Damon Gameau documented the changes in his body after consuming 40 teaspoons of sugar daily for 60 days in the documentary 'That Sugar Film,' giving people a more intuitive understanding of sugar's various harms.

In 2016, an even bigger sugar scandal was exposed by the Journal of the American Medical Association (JAMA). The American Sugar Association had, in 1967, bribed three Harvard scientists to publish a review article on sugar, proving it was safe and healthy, downplaying the relationship between sugar and heart health, and stigmatizing saturated fat and cholesterol as the culprits of cardiovascular disease.

Coincidentally, Genki Forest was founded in that very year.

With the concept of sugar control gaining traction, zero-calorie beverages without sucrose also saw rapid growth.

Zero-calorie beverages are not truly zero-calorie. According to Chinese nutrition labeling standards, a beverage can be labeled as zero-calorie if it contains less than 17 kJ/4 kcal per 100 ml, while sugar-free means sugar content does not exceed 0.5 grams per 100 grams or 100 milliliters.

Sugar-free beverages first emerged in the United States, where obesity was prevalent. As early as 1952, a New York company called 'No-Cal' launched the first zero-calorie beverage.

In 1995, Coca-Cola introduced Diet Coke, and later Zero Coke. According to statistics, by 2018, Coca-Cola had over 60 products in China, with 13 brands offering 22 flavors of low-sugar or sugar-free products.

Zero-calorie beverages typically use sugar substitutes instead of natural sugars like white sugar. A single sugar substitute can have an unpleasant taste, so most zero-calorie beverages add two or more substitutes.

Zero Coke uses aspartame, acesulfame potassium, and sucralose, which are currently controversial. These artificial sweeteners are criticized by the industry because some studies suggest health risks, such as weight gain and vascular damage.

The safety of artificial sweeteners is still undetermined in the industry. The U.S. Centers for Disease Control and Prevention has confirmed that 'there is no epidemiological evidence to verify that aspartame can cause significant harm or serious risk,' but it has left a mark of 'unsafe' in consumers' minds.

In recent years, natural sweeteners derived from plants have become popular, mainly including erythritol, stevia, and monk fruit sugar. Although monk fruit sugar is touted as one of the 'best natural healthy sweeteners,' its high cost and distinctive color and taste limit its use in beverages.

Stevia, extracted and purified from steviol glycosides of the stevia plant, is a high-intensity sweetener, several hundred times sweeter than sucrose. At high concentrations, it can have a bitter aftertaste, so it is often blended with other sweeteners like erythritol.

Erythritol is a natural sugar alcohol fermented from glucose. It is the sweetener closest to sucrose in taste, but its sweetness is only 0.7 times that of sucrose, and using it in large amounts significantly raises costs. Therefore, both Genki Forest and Heytea use a combination of erythritol and sucralose.

-02- Beverage Dark Horse and New Breakthrough Forces

Founded in 2016, Genki Forest completed four rounds of financing in just four years, reaching a post-investment valuation of $2 billion, becoming a dark horse in the domestic beverage industry.

In the first five months of 2020, Genki Forest's sales reached 660 million yuan, nearly matching its total sales of 880 million yuan for the entire previous year.

During this year's 618 shopping festival, Genki Forest's white peach-flavored sparkling water surpassed Coca-Cola in Tmall beverage sales, ranking first.

Genki Forest has also begun to build greater brand awareness through celebrity endorsements and variety show sponsorships. In June, Genki Forest heavily sponsored the Mango TV variety show 'Sisters Who Make Waves,' with 'face representative' Zhang Yuqi becoming the brand ambassador, and its billboards began appearing in malls and elevators.

On July 4, Genki Forest's first self-owned production base was officially completed in Chuzhou, Anhui, establishing an independent supply chain and simultaneously developing new categories such as yogurt and beer.

With increased exposure and brand awareness, Genki Forest's sales this year are expected to reach new heights, with first-half sales possibly exceeding 800 million yuan and full-year sales surpassing 1.5 billion yuan.

Genki Forest's target consumer group is mainly post-85s to post-95s, accounting for 94%, with women making up 60%, and mostly middle-to-high income groups. They not only pay more attention to their health and figure but are also more willing to pay for curiosity.

Genki Forest's success has led more brands to target the hundred-billion-yuan sugar-free beverage market.

In April this year, Jianlibao, the 'first brand of national beverages,' launched its first new product in 20 years, Micro Bubble Water, on its Tmall and JD flagship stores, officially opening up the young market.

In July, Heytea launched 'Heytea Little Tea,' a 0-sugar, 0-fat sparkling water with erythritol, priced at 5.5 yuan per bottle, directly competing with Genki Forest. In addition to being available at Heytea stores, mini-programs, and Tmall flagship stores, the new product was also featured in Viya's livestream on the launch evening, selling 25,000 boxes overnight.

Recently, Kellyone, a beverage brand under Zong Fuli, daughter of Wahaha founder Zong Qinghou, launched a new 0-sugar, 0-calorie soda water called 'Angry Bubbles,' positioned as a 'new-style national trend sparkling water.' Currently available in white peach, green plum, and watermelon flavors, it specially adds water-soluble dietary fiber polydextrose to help maintain intestinal function.

This summer, Jianlibao, Nestlé, Yili, Beibingyang, Mingren, Hankou No.2 Factory, Want Want... whether new brands or 'time-honored brands,' have all launched their own zero-calorie beverage products.

-03- The Mystery of Bubbles

Although sugar-free tea drinks like Suntory, Ito En, and Oriental Leaf are 'healthy,' they haven't made much of a splash in the market. Since 2017, ready-to-drink tea sales have declined by 5.1%. It's clear that consumers want sugar-free options but also want good taste and sweetness. While the demand for health is growing, they won't sacrifice taste satisfaction.

Sparkling water first entered the Chinese market through premium water brands like San Pellegrino and Perrier. These common table waters in Europe were labeled as 'niche,' 'petit bourgeois,' and 'premium' due to their high price and unique taste. Although they were sought after in elite circles, they didn't become popular among the masses.

Although the sugar substitutes used in zero-calorie beverages have sweetness close to sucrose, their taste and mouthfeel can still be a bit odd. For example, Zero Coke's viscosity and the lingering sweetness differ subtly from regular Coke. Increasingly discerning consumers won't easily accept the taste of flavorings and sweeteners.

At this point, the rich bubbles' stimulation to the mouth can effectively mask these off-flavors, especially when chilled, providing a crisper and fuller mouthfeel. In terms of drinking scenarios and uses, sparkling water can be consumed directly or used in mixed drinks, cocktails, and parties, fitting well with young people's consumption habits.

Tianjin writer Zhang Yi wrote in '1990': 'In midsummer, a large wooden barrel filled with ice hides many Shanhaiguan sodas. The bottle cap suddenly opens, and cold air instantly spreads. Icy and fizzy, full of strength, hard to finish in one gulp. The hand holding the bottle feels numb, and the scalp tingles.'

'Zero-calorie, sugar-free' is undoubtedly the most 'money-making' track in the food and beverage industry. As long as brands actively adapt to the trend of consumption upgrading, perfectly combining 'better taste' with 'better health,' and breaking the awkward situation where deliciousness and health are hard to achieve simultaneously, there is still great development potential in the Chinese beverage market.

Source: TOPHER (ID: TOP-HER), Author: Shang Qing

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