---
title: "The 40-Year Rise and Fall of China's Beverage Industry"
description: "After 40 years of development, China's beverage industry has evolved from simple sodas to a diverse market, but is now being disrupted by internet-driven startups and changing consumer preferences, leading to a battle for market share through diversification and capital."
author: "晓碟碟"
publisher: "New Distribution"
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published: "2019-04-15"
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# The 40-Year Rise and Fall of China's Beverage Industry

> After 40 years of development, China's beverage industry has evolved from simple sodas to a diverse market, but is now being disrupted by internet-driven startups and changing consumer preferences, leading to a battle for market share through diversification and capital.

In the business world, nothing stays the same. This is especially true in China's beverage industry. Just as Heytea launched coffee less than a month ago, Luckin Coffee introduced its own cheese tea—on April 10, Luckin Coffee launched "Little Deer Tea" at its Beijing and Guangzhou stores, following the same mid-to-high-end route as Nayuki and Heytea. Consumption upgrade? Diversification? Surging capital? After 40 years of getting used to "drinking beverages," the industry has developed its own rules, only to be shattered by the internet in an instant.

1
Forty years ago, Chinese people were economically strapped. Many had no spare money for drinks; wasn't plain water better? And it was free.
At that time, beverage varieties were limited; soda was synonymous with drinks. In the Chinese market then, 90% of beverages were soda.
In the first episode of the TV drama "The Story of Zheng Yang Gate" about reform and opening-up, there's a scene where they buy a bottle of Beibingyang soda, and two people share it, each taking a sip to taste the novelty.
Soon, Chinese people were no longer satisfied with the status quo.
Those who got rich first began to seek new products and experiences. After Coca-Cola returned to China, it opened Chinese palates: so there are drinks other than water and soda with this kind of taste.
For a long time, instant noodles with Coke—now a typical student meal—were considered a luxury, costing a week's salary for an ordinary person. But many still enjoyed it.
Thus, from not drinking beverages to bottled drinks everywhere, it took only a little over a decade. By the end of the last century, the vast market and fervent consumption habits gave rise to a large number of beverage companies, which in turn nurtured the industry's growth.
Wahaha took a unique path, heavily investing in bottled purified water that became widely popular, arguably sparking a revolution in drinking water. Master Kong made its mark in the tea beverage market; there are probably still loyal fans of "Iced Black Tea" and "Iced Green Tea." Uni-President's Fresh Orange, Huiyuan's juices, and Nongfu Orchard's mixed juices also formed a colorful juice market.
Later, the "health" element was hyped up by industry players.
Plant-based beverages also came from behind to become a formidable force in the beverage market, even giving rise to the saying "North Lulu, South Yeguo." Although Yeguo coconut milk's advertising is now controversial, there's no denying its products are popular.
The next leaders were functional beverages: Mizone, Scream, and even Wanglaoji herbal tea have sparked various topics in China.
This is thanks to the rise of sports, which is a sign of Chinese people seeking spiritual enjoyment after having enough to eat.

2
At 40, life enters a stage of no confusion; industries show their cycles of prosperity and decline.
It can be said that the entire history of China's beverage development is also the history of consumption changes among the masses. In the domestic consumer market, people have witnessed revolutionary upgrades from "nothing to something" and "from something to excellence" in many fields. Of course, with rise comes fall.
At some point, people seemed to lose their love for bottled drinks. Those once loyal fans suddenly turned to other beverages overnight.
Beverage giants were baffled: why?
The reason is that consumers' wallets have fattened; they are no longer satisfied with a few-yuan bottled drink. They now seek face and brand. Serving ordinary iced black tea to guests is certainly less classy than coffee, and drinks everyone is tired of are less attractive than novel milk tea.
Moreover, most beverages are high in sugar. For Chinese people who are now pursuing health and wellness, they are more discerning; drinking a beverage is like drinking sugar directly, so they might as well not drink it.
Another wave of newcomers seized niche markets.
Everyone has heard the slogan: "If the cups were connected, they could circle the globe." Why did Xiangpiaopiao dare to make such a claim? Because it has a market base.
Various yogurt brands also occupy a large share of the domestic beverage market. For many, the probiotics and lactic acid bacteria in yogurt are beneficial, so it's better than giving children drinks full of "saccharin."
The first losers appeared.
Traditional beverage companies, caught between emerging drinks and their own disadvantages, went downhill and had to seek transformation, like the well-known Wahaha. After its products fell into a sales quagmire, Wahaha repeatedly tried to transform and break through, but ultimately achieved nothing.

3
As Qian Zhongshu said in "Fortress Besieged," those inside the city want to get out, and those outside want to get in.
People always need to drink water, and now Chinese tastes have become very picky; plain water and beverages are two completely different concepts. Newcomers constantly try to enter, sweeping away the pioneers.
**In today's Chinese market, the main consumer force is definitely the new generation of young people. They don't care about the price of drinks but rather about health, flavor, and style.**
As a result, milk tea shops have sprung up like mushrooms, with young people flocking to various internet-famous stores. Coffee shops have also firmly grasped the mindset of young people—to put it bluntly, "as long as it's instagrammable"—and are thriving in China's beverage market.
However, it's worth noting that today's milk tea and coffee shops are not like the past, selling only single products. Instead, they are more diversified, meeting the different needs of young people and urbanites.
After all, the current market battle is about whose marketing appeals more to young people. The era of sitting back and waiting for customers to buy is over; those who win the youth win the world.
Hence, we see Heytea's internet-famous stores with queues stretching dozens of meters, 1点点 known for its service attitude, and Luckin Coffee focusing on discount marketing and urban light meals. Even Starbucks has had to bow to the vast Chinese market, launching delivery services to compete with Luckin Coffee.

4
Now, China's beverage industry has entered a new development stage—more diversified, which means beverage brands need to compete through differentiation and capture more market share.
Thus, Heytea launched four flavors of "Heytea Coffee," CoCo Fresh Tea & Juice introduced coffee products as early as 2017, and Luckin Coffee started offering light meals and milk tea. Even Starbucks has begun experimenting with new stores in Shanghai featuring baked goods and launched a tea-based ice cream series called "Teavana."
**This is not only market demand but also a victory for capital.**
The business rules have changed; it's now impossible to grow step by step like Wahaha. Capital is pouring into Heytea and Luckin Coffee, hoping to see returns soon.
How to achieve faster and greater returns? Like all internet industries, by defeating competitors and having the winner take all.
After 40 years of development, China's beverage industry, like other traditional industries, is facing the impact and reshuffling of the internet. These surging newcomers are unwilling to share a competitive environment; they want to overturn the table.
In the foreseeable future, the space for traditional beverages will shrink, while some niche products can survive in the cracks.
**Competition in the beverage industry is not about taste but about lifestyle changes and capital showdowns.**
In the future, cross-market segments will be the battleground. Only diversified companies that see through the market will survive.
Source: No.1 Company (ID: yhgs_2018)
**-END-**


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