Introduction: Beverages can serve as a microcosm of the social economy because they reflect subtle changes of the times. Author 丨 Wang Qingfeng Reviewer 丨 Gou Gou Layout 丨 He Wen

This summer, have large-format beverages become popular?

"This 500ml black tea is priced at 3 yuan, while the same 1-liter black tea is 4.5 yuan. For just 1.5 yuan more, you get an extra 500ml. It's quite a good deal!"

After hearing the staff's introduction, a customer placed six 1-liter bottles into their shopping cart. Recently, promotional scenes like this for large bottles have become common in major supermarkets nearby.

However, what surprised the author most was news from a distributor. According to him, sales of a large-format dairy beverage he represents have increased by 200% compared to the same period last year.

In an industry where "small bottles" once prevailed, when did "large packaging" become the trend?

El Niño Strikes

"I'm just a sprinkle of cumin away from being barbecue!" This is how a netizen joked about the recent persistent high temperatures in the north.

Recently, temperatures in Beijing have approached 40°C, with some areas even exceeding 40°C. Researchers say: "With the soaring ocean temperatures and the arrival of El Niño in the Pacific, 2023 could become the hottest year on record."

For Xiao Zhang, extreme heat has become a norm. As a truck driver, Xiao Zhang spends most of his time on the road. He mentioned that due to the high temperatures, he has switched from 600ml bottles to 1000ml ones. For Xiao Zhang, "cheap, refreshing, large quantity, and long shelf life" are his core requirements for beverages under high-temperature working conditions.

Data shows that among China's 1.4 billion population, over 700 million people work outdoors in temperatures exceeding 40°C. This year's prolonged heat has increased the demand for larger beverage capacities among outdoor workers.

Xiao Li is a travel enthusiast who bought plane tickets to Beijing for the summer vacation long ago.

"This is my first trip to Beijing since the pandemic was lifted, but it seems hotter than previous years." For Xiao Li, drinking water during travel is a hassle. Bottles that are too small are insufficient, while larger ones are inconvenient to carry.

Xiao Li says he prefers 900ml beverages because: first, they can be consumed alone or shared easily. Second, "one replaces two," reducing the frequency of repurchases. Additionally, if carrying a backpack with ample storage, a 900ml bottle is more convenient to retrieve than two 500ml bottles.

Recently, after visiting several supermarkets, the author found that on beverage shelves, besides large-format carbonated drinks, many brands have introduced various sizes of large-format beverages, ranging from 900ml to several liters. According to some supermarket staff responsible for home delivery, single bottles of 800ml to 1200ml in whole boxes have performed particularly well.

The Downward Banquet Market

Lao Liu is particularly happy this year because sales of a local dairy beverage he represents have surged. This product comes in large packaging (1 liter) but has a shelf life of only 16 days. Due to its previous sales only in restaurants and its short shelf life, it had poor sell-through.

However, doing business is about having sharp vision and patience. Lao Liu, who has deep roots in the local market, discovered an untapped rural market after extensive research. This is a key reason for the improved sales of this beverage that had been "dormant" for five or six years.

In early 2023, in an interview with New Distribution, Lao Liu excitedly said: "In January alone, we sold over 8,000 boxes, about 8 tons. Previously, we only sold 1,000 to 2,000 boxes, just 1 to 2 tons. You know, driven by rural banquets, a single feast with 200 tables, two boxes per table, means 400 boxes. That's a number a restaurant might not sell in a month."

Now six months have passed, what about current sales? Facing this question, Lao Liu chuckled and said: "It's already increased by 200% compared to the same period last year."

Explaining the surge, he said: "With the lifting of pandemic restrictions, rural banquets are becoming more frequent. During the peak wedding season, the sell-through potential is very promising."

Since the outbreak of COVID-19 in 2020, gatherings were banned nationwide, leading to intermittent wedding and banquet events over the past three years. However, for Chinese people who value wedding customs, banquets can only be postponed, never canceled.

According to data from the Ministry of Civil Affairs, the number of marriage registrations in the first quarter peaked in 2013 at 4.282 million couples, and has been declining over the past decade. However, unlike previous years, the number of marriages in the first quarter of 2023 rebounded. According to research data from "Marriage Industry Observation," the national marriage registrations in Q1 2023 were 2.147 million couples, an increase of 40,000 couples year-on-year.

Meanwhile, with rising income levels, spending on rural wedding banquets has also increased year by year. Public data shows that in 2021, the average cost of a wedding for a couple was 253,000 yuan, a 3.8-fold increase over five years. Among these, spending on tobacco and alcohol increased by 31%.

Despite increased budgets, rural consumers still value practicality. According to an industry insider, in rural areas, most consumers choose party beverages priced between 4 and 5 yuan. Based on this price point, he chose several large-format juice products from the brand he represents. To capture the market, he slashed the price of 1.25-liter large juice bottles from 7 yuan to 3.8 yuan each. Comparatively, this price is extremely attractive and clearly exceeds most consumers' expectations. Many customers not only buy for themselves but also recommend to friends and family.

Additionally, he strengthened cooperation with some hotels and restaurants, promoting through extended services, laying a solid foundation for expanding into lower-tier markets.

The Logic Behind the Rise

A seasoned industry insider told the author that larger beverage packaging is not new; it appeared about a decade ago. From the perspective of product life cycle theory, the emergence of large-format beverages is one of the measures to extend the product life cycle after entering the maturity stage.

In 2013, most FMCG companies reached peak sales. Coupled with intensified competition, companies in the same product category had to increase investment in product quality, variety, specifications, and packaging services.

It was around that time that a brand's 1-liter tea beverage emerged and quickly gained market acceptance. According to some distributors, they sold out every day back then.

Let's recall the first scenario at the beginning: "A 500ml beverage is priced at 3 yuan, while a 1-liter is 4.5 yuan. For just 1.5 yuan more, you get an extra 500ml." Why this pricing? The key lies in the average transaction value.

If a customer's consumption is fixed—one person can only drink one bottle at a time—then getting them to buy a higher-priced beverage increases the average transaction value. As is well known, people drink more water in summer. For consumers, the time to consume 500ml versus 1 liter is not much different, but with increased capacity and a price not much higher than regular packaging, repurchase rates increase, thereby raising the average transaction value.

Some might wonder: a 1-liter drink is only 1.5 yuan more expensive than a 500ml one, which seems more cost-effective for consumers.

In fact, while large bottles appear more economical for consumers, production costs for companies are lower. Industry insiders point out that large bottles have larger capacity, and packaging is a significant cost component. That is, for the same volume of beverage, large bottles have lower packaging costs per unit than small bottles, so the average price per liter is also lower.

According to the Boston Matrix, large-format products fall under the "cash cow" category. They are characterized by high sales volume and high profit margins, providing funds for the company. Moreover, since the market is mature, companies do not need to invest heavily to expand market size. As market leaders, they enjoy economies of scale and high marginal profits, bringing substantial returns.

Will It Continue to Be Popular?

Some analyses suggest: "Under downward economic pressure, the overall sluggish environment has led to consumption downgrading, which has also driven the hot sales of large-format beverages."

However, two seasoned professionals with years of experience agree that this logic is flawed. The reason is that consumption scenarios have not changed significantly. The market for large-format beverages is still mainly centered around dining and banquets, with little incremental growth elsewhere.

So, can large-format beverages continue to be popular?

A beverage distributor with annual sales exceeding 100 million yuan gave a negative answer. In his view, the sustained high temperatures since the start of summer and the recovery of the banquet market post-pandemic only served as catalysts for the sale of large-format beverages. Therefore, large-format packaging will not become a trend in the future, and such beverages will not become increasingly common.

First, the warming of the catering industry and the reopening of banquets are exceptional circumstances, not regular factors. Second, as mentioned, from the overall consumption scenario, the total capacity of the large-format market has not changed.

Why?

"The market capacity hasn't changed; only the number of brands entering has increased, which is an illusion," the distributor candidly stated.

For example: this year, large-format beverages sell well, so many competitors will "keep a close eye on rivals" and imitate. In fact, they don't care about the market or what users want; they focus on what peers and competitors are doing. As long as competitors do it, they must do it too.

In reality, the pool for large-format beverages is limited because actual demand hasn't increased. Blind imitation is also the root cause of many brands' problems.

For instance: suppose the market capacity for large-format beverages is 1 million units. Competitor A is the first to launch, capturing the entire market share with sales of 1 million. As other competitors enter, A's share shrinks from 1 million to 500,000, with B taking 200,000, C 150,000, D 100,000, and E 50,000. This gives consumers the illusion that large-format beverages have increased, but the overall capacity hasn't changed; only the number of brands has increased.

This is similar to raising fish in a pond: the dissolved oxygen in the water is limited. When oxygen levels are too low, fish become hypoxic and may die. If the pond size remains constant but the number of fish increases, oxygen levels will drop.

Therefore, in a market with unchanged capacity, merely increasing the number of competitors is unhealthy and unsustainable.

Final Thoughts

According to the annual report of the China Beverage Industry Association, over the past five years, the number of beverage companies above designated size has decreased by 16%, while loss-making enterprises have increased by nearly 40%. The number of above-scale enterprises continues to decline, and loss-making enterprises continue to rise.

For companies, it is precisely during market downturns that they are forced to innovate. After all, who would willingly go under the knife without being ill?

In the view of industry insiders, whether packaging becomes larger or smaller is just a promotional form that precisely targets market demand. For consumers, needs change over time; for brands, capturing changes in segmented market demand can provide better positioning opportunities for their products. Only then can developed products be more accurate, specific, and personalized, thereby having longer-lasting vitality.

Note: All names in the article are pseudonyms.

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