---
title: "The Functional Beverage Arena: Jianlibao's Bitter Decline, Eastroc's Ambition to Lead"
description: "A fierce battle in the functional beverage market is imminent. Mizone, once hailed as a 'dark horse' in the sector, is now struggling to sell. Danone's 2019 results showed another slump in its beverage business led by Mizone, with fourth-quarter sales falling at a double-digit rate due to paused investments. This isn't Mizone's first downturn; sales in China began declining in 2016, and despite new product launches, the strategy hasn't worked. Meanwhile, the market is booming, with retail sales projected to reach 163.528 billion yuan by 2020."
author: "尹太白"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-03-12"
categories: "Consumer & Categories"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/aRtM56B6dBm55xzQZyY2Kw"
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citation: "尹太白. “The Functional Beverage Arena: Jianlibao's Bitter Decline, Eastroc's Ambition to Lead.” New Distribution, 2020-03-12. https://xinjignxiao.com/en/articles/the-functional-beverage-arena-jianlibao-s-bitter-decline-eastroc-s-ambit-347b7aba/"
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---

# The Functional Beverage Arena: Jianlibao's Bitter Decline, Eastroc's Ambition to Lead

> A fierce battle in the functional beverage market is imminent. Mizone, once hailed as a 'dark horse' in the sector, is now struggling to sell. Danone's 2019 results showed another slump in its beverage business led by Mizone, with fourth-quarter sales falling at a double-digit rate due to paused investments. This isn't Mizone's first downturn; sales in China began declining in 2016, and despite new product launches, the strategy hasn't worked. Meanwhile, the market is booming, with retail sales projected to reach 163.528 billion yuan by 2020.

**A fierce battle in the functional beverage market is imminent.**
Mizone, once dubbed the 'dark horse' of functional beverages, is now struggling to sell.
Not long ago, Danone Group released its 2019 performance report, showing another dismal performance in its beverage business, which is led by Mizone.
However, Danone did not disclose specific operational data in the report, only stating that 'due to paused investments, Mizone's fourth-quarter sales declined sharply at a double-digit rate.'
**This is not the first time Mizone has been 'out of form.'**
As early as 2016, Mizone's sales in China were already on a downward trend. To boost performance and reclaim market share lost to competitors, Mizone launched new products in subsequent years, but this strategy did not work.
In contrast to Mizone's sluggish sales, the functional beverage market is rapidly rising. Public statistics show that from 2011 to 2017, the compound annual growth rate of China's functional beverage retail sales reached 17.1%. At this growth rate, retail sales are expected to reach 163.528 billion yuan by 2020.
Currently, functional beverages on the market can be roughly divided into three categories: sports drinks, taurine drinks, and vitamin drinks. From a niche market to a hundred-billion-scale industry, the functional beverage sector has attracted many new entrants, all eager to carve out a piece of the pie.
However, in this market full of fleeting dark horses, most brands are short-lived. They not only fail to take a slice of the cake but also lose their cutlery, ending up in a sorry state.
Image /摄图网, based on VRF agreement
To understand why functional beverages have become the most important goldmine for domestic and foreign beverage giants, we need to rewind to a day in the 1990s when a 'Thai drifter' returned to China.
**-01- The Barbaric Era**
In late autumn 1995, with the cold wind blowing, Yan Bin, a businessman who had lived in Thailand for 11 years, hurried back to China. He had two goals: to survey the domestic functional beverage market and, as the 'lead ox,' to bring Thai Red Bull into the country.
About half a year earlier, 41-year-old Yan Bin and 73-year-old Xu Shubiao hit it off and jointly established Red Bull Vitamin Beverage Co., Ltd. For Yan Bin, Xu Shubiao was both mentor and friend. Despite their age difference of over 30 years, their similar experiences of making a living abroad created a mutual admiration.
**As the inventor of Red Bull, Xu Shubiao was a true inspirational figure.**
In 1924, Xu Shubiao's father took the two-year-old Xu to Thailand, leaving Wenchang, Hainan. The family lived in Phichit Province in northern Thailand, making a meager living by raising ducks and selling fruit, often going hungry.
Fortunately, the young Xu Shubiao was hardworking. He found a job as a salesman, going door-to-door selling medicine, which helped him build connections and resources in the pharmaceutical industry.
In the few reports available, the middle-aged Xu Shubiao is described as a man who never tired or complained. His diligence and perseverance led to a successful career. In 1962, at age 40, he founded a pharmaceutical factory in Bangkok's old town, naming it TCP Group (Thai Tiansi Medical and Health Co., Ltd.).
In the mid-to-late 1970s, TCP developed a tonic beverage, which Xu named Red Bull. The primary target audience was blue-collar workers such as shift workers and truck drivers who needed to stay awake during overnight work.
After Red Bull's launch, Xu did not rush into the Bangkok market. Instead, he took a different approach, distributing free samples to truck drivers to first capture the outskirts of Bangkok.
To expand the market, Xu spared no effort in marketing, such as heavy advertising, sponsoring Muay Thai matches, and holding raffles. These marketing tactics are still used by brands like Red Bull China and Eastroc.
Image / 2016 World Snowboarding Top Event, Red Bull official website
By 1982, Red Bull had successfully covered the Southeast Asian market, with 24-hour production lines, yet supply still couldn't meet demand.
That same year, Austrian toothpaste distributor Dietrich Mateschitz, on a business trip to Thailand, knocked on Xu Shubiao's office door. He discovered Red Bull's effectiveness in relieving fatigue and hoped to partner with Xu to bring Red Bull to the world, earning euros together.
Mateschitz was also a savvy businessman. After bringing Red Bull to Austria, he adopted a more market-oriented packaging and sponsored hang-gliding events, making Red Bull an instant hit locally.
Following Xu's playbook, Mateschitz continued to sponsor sports events and promote Red Bull aggressively. Eventually, Red Bull reached over 160 countries and regions. By 2018, Mateschitz ranked in the top 60 on Forbes' billionaire list with a net worth of $23 billion (approximately 159.5 billion yuan).
**-02- The Oriental Magic Water**
Around the same time as Austrian Red Bull's rise, a functional beverage called Jianlibao appeared in the distant East.
At that time, the term 'functional beverage' didn't exist. Founder Li Jingwei simply defined Jianlibao as a drink that 'can help athletes quickly recover strength, and ordinary people can drink it too.'
In 1983, Li Jingwei, then director of Sanshui County's Sanshui Winery, decided to abandon the low-profit liquor business and transform the winery into a beverage production enterprise.
Earlier, during a business trip to Guangzhou, Li was inspired by Coca-Cola. He realized that beverages, compared to liquor, had higher sales and profits. Upon returning, he collaborated with researchers from the Guangdong Institute of Sports Science. After over three months and 130 experiments, they developed a sports drink containing alkaline electrolytes.
In 1984, two major events occurred in functional beverage history: one was the founding of Red Bull GmbH (Austria) by Xu Shubiao and Mateschitz, authorizing Red Bull's entry into the Austrian market; the other was the official birth of Jianlibao, which gained fame at the 23rd Olympic Games in Los Angeles, earning the nickname 'Oriental Magic Water' from foreigners.
As pioneers in the functional beverage industry, one centered on Austria and Thailand, radiating to Europe and Southeast Asia; the other centered on China, radiating to domestic and North American markets.
**Jianlibao's success was largely due to Li Jingwei's gamble, which followed the same pattern as Xu Shubiao's promotion of Red Bull—sponsoring sports events.**
Image / 11th Asian Games
Unlike Xu's sponsorship of small-scale events, Li aimed directly at the Los Angeles Olympics.
In June of that year, Li overrode objections and spent 250,000 yuan to sponsor 12 national teams. For the Sanshui Winery, which had annual sales of just over 900,000 yuan and net profits of less than 50,000 yuan, this was equivalent to betting several years' profits on the other side of the ocean.
At the Olympics, Xu Haifeng and Li Ning became legends, and the women's volleyball team triumphed, igniting national fervor. The Jianlibao in athletes' hands attracted media attention, and Jianlibao became famous nationwide overnight.
Jianlibao's popularity was most evident in sales figures. In 1984, sales were only 3.45 million yuan; in 1985, they surged to 16.5 million; by 1986, they reached 130 million yuan, and it became the 'No.1 national beverage brand' at an unstoppable pace.
In 1991, Li Jingwei established a Jianlibao office in New York and spent $5 million to buy an entire floor of the Empire State Building, signaling its global ambitions. Li proudly told American reporters, 'In China, Coca-Cola and Pepsi combined don't sell as much as I do.'
Two years later, Jianlibao's annual sales exceeded 1.8 billion yuan, unmatched domestically.
Jianlibao's success stimulated Xu Shubiao in Thailand. He had considered developing the Chinese market, but at the time, China's product classification catalog did not include functional beverages, so approvals were impossible, and production couldn't start. Red Bull's development in China was difficult.
From a poor boy to a beverage tycoon, Xu Shubiao challenged fate more than once, but fate also had plans for him—in 1995, through a friend's introduction, the 73-year-old Xu met the 41-year-old Yan Bin.
**Red Bull's slow development in China improved with Yan Bin's entry.** In many reports, Yan Bin is often described as Red Bull's pathfinder. The real opener of the Chinese market was Huairou Township Enterprise General Company, as state capital participation granted Red Bull market access in China.
According to Yan Bin, the partners initially agreed on a 50-year cooperation agreement, which stipulated that Yan Bin would handle issues like health food approval certificates, while Xu Shubiao would profit by selling raw materials like flavors to Red Bull China during the 50-year term, ensuring that only China Red Bull had the right to produce and sell Red Bull beverages in China.
However, TCP Group later claimed the cooperation term was 20 years, expiring in 2016. The two sides disagreed on the term, hanging a Sword of Damocles over China Red Bull.
At that time, Yan Bin, focused on bringing Red Bull to China, couldn't have imagined that 17 years later, he would be worth 50 billion yuan from distributing Red Bull and rank fourth on the Hurun Rich List.
Nor could he foresee that he would eventually become mortal enemies with his former close ally—in August 2017, TCP Group announced it had filed lawsuits against Yan Bin and several companies he owned or controlled, starting a protracted trademark war.
**-03- The Post-Red Bull Era**
The year Yan Bin introduced Red Bull to China, Lin Muqin, in Shenzhen, was just promoted to General Manager of Sales at Dongpeng Beverage Group.
Dongpeng Beverage Group, founded in 1987 as a state-owned beverage producer, initially focused on water, soy milk, and herbal tea. In 1997, riding on Red Bull's coattails, Dongpeng Special Drink was launched, but since it wasn't the group's main product and was often accused of being a 'Red Bull knockoff,' its performance was lackluster.
After 2000, the system-bound Dongpeng Group was defenseless against Red Bull's aggressive攻势, and with poor internal management, it suffered consecutive losses, nearly going bankrupt.
**The turning point came in September 2003, when Dongpeng Beverage Group decided to transition from state-owned to private.**
At that time, Sales GM Lin Muqin faced two options: one was to pool funds with others to buy the group's 20,000-square-meter land and factory, but with a small personal stake; the other was to buy the brand and production equipment at a lower cost and continue in beverages, but bearing all profits and losses personally.
**Lin Muqin chose the latter, which was thankless and uncertain.**
It was unrealistic for a failing company to develop new products. However, Lin had long sensed the huge potential of the functional beverage market, and Dongpeng Special Drink was his last-ditch effort. But his peers were also eyeing this track.
At the end of 2003, France's Danone Group entered the Chinese market. Its first product after acquiring Robust was Mizone, launched in China. Coinciding with the SARS outbreak, this vitamin and mineral drink saw soaring sales, capitalizing on the moment.
Mizone's success convinced many beverage companies that the functional beverage market was a goldmine. Wahaha's Activate, Nongfu Spring's Scream, Master Kong's Jinpao, and Huiyuan's Ta Ta Shui all joined the fray in 2004.
In 2007, Dongpeng Special Drink became the group's main product. Lin believed that only by making cheaper, more technologically advanced products could they gain a critical advantage.
Lin, a former sales GM, knew how to market products. Dongpeng Special Drink used nearly identical colors to Red Bull in packaging, and its slogan was similar to early Red Bull's: 'Sleepy, tired? Drink Dongpeng Special Drink!' Moreover, wherever Red Bull was distributed, Dongpeng followed.
To avoid direct competition with Red Bull, Lin switched from cans to bottles to save costs and lowered prices, targeting the mid-to-low-end market.
The 'follow strategy' helped Dongpeng grow. From Lin's takeover in 2003 to around 2010, Dongpeng's annual output value soared from 15 million yuan to 250 million yuan.
2013 was a key node for Dongpeng. That year, it abandoned its strategy of sticking to the south of the Yangtze River and expanded into the national market.
Image / Dongpeng Special Drink official
**At this time, compared to Dongpeng's soaring performance, the former magic water Jianlibao was facing its most severe crisis.**
That year, 74-year-old Li Jingwei died with regret. After subsequent mismanagement, Jianlibao, which had once created over 60 'China's firsts,' had lost its brand influence as the 'Oriental Magic Water.' It went downhill and nearly exited the market.
**Red Bull's situation wasn't much better.**
In 2012, Xu Shubiao passed away. His son, Xu Xiongxin, became the new head of the Xu family, serving as CEO of TCP Group and Red Bull Thailand. Upon taking office, Xu Xiongxin immediately challenged Yan Bin and Red Bull China, turning former comrades into irreconcilable enemies.
**-04- Conclusion**
The influx of players has heated up the industry. In 2011, the overall capacity of the domestic functional beverage market exceeded 10 billion yuan.
In 2012, Wahaha, which had abandoned Activate, launched a new functional beverage brand, Qili. In 2013, Fujian Daliyuan Group launched Lehu. Today, Qili has disappeared due to vague positioning and blocked distribution channels; Lehu, using a 'rural encirclement of cities' strategy, achieved annual revenue exceeding 3 billion yuan in 2018. Meanwhile, Dongpeng Special Drink's annual sales surged from 3 billion to 5 billion yuan.
**However, Red Bull's market position remains unshakable for now.** Huabin Group announced Red Bull China's 2019 results: the functional beverage segment achieved sales of 23.6 billion yuan, surpassing the previous peak of 23 billion yuan.
Although Red Bull holds the top spot, this landscape isn't immutable, especially with Lehu and Dongpeng having room to grow, and Red Bull facing trademark disputes.
In the past two years, over 150 functional beverage brands have crowded into this track. Given the market's allure and everyone's desire to lead, a fierce battle is imminent, with even more intense competition in channels and marketing.
Source: Entrepreneur Frontline (ID: chuangyezuiqianxian)


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## Citation metadata

- Publisher: New Distribution
- Author: 尹太白
- Published: 2020-03-12
- Canonical: https://xinjignxiao.com/en/articles/the-functional-beverage-arena-jianlibao-s-bitter-decline-eastroc-s-ambit-347b7aba/
- Original source: https://mp.weixin.qq.com/s/aRtM56B6dBm55xzQZyY2Kw

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