Over the past year, the plant-based beverage sector has entered a slow development phase after a surge in popularity. In the oat milk segment, OATLY's 2022 financial report showed losses, and CEO changes, along with many emerging oat milk brands collectively going silent in the media and entering various discount food supermarkets, indicating a halt in growth momentum. OATLY has begun to enter the tea beverage market, seeking a second growth curve for its business. On the other hand, the coconut-based segment, represented by Finomare, has already saturated the tea and coffee markets to the extreme, while also competing fiercely in the C-end retail market with various coconut juices and coconut milk beverages. Meanwhile, traditional Chinese plant-based brands such as Veyi and Lulu are successively establishing new sub-brands to join this battle, while Coconot (Yehua) relies on controversial marketing to gain nationwide attention. The competition is unprecedented; it's time to review the current state of the plant-based beverage industry. B-end: Occupying coffee shops is no longer enough OATLY and Finomare successfully entered the public eye through the coffee track, becoming representative brands for oat milk and coconut-based milk. Since then, emerging plant-based beverage brands have begun to follow suit. For example, Panpan Food's coconut-based brand "Coconut Beat" partnered with Peet's Coffee. Notably, Coconut Beat's investor, Black Ant Capital, also holds resources in premium specialty coffee chains like M Stand and Seesaw Coffee, which it likely shares. In terms of new category expansion, Starbucks and Tims have successively launched almond milk lattes in the past year. Additionally, Retail Jun has noticed at exhibitions a potato milk brand seeking cooperation with coffee shops. The reason plant-based beverages adopt the "curve-saving" strategy of first entering the B-end to educate the market before exploring the C-end is primarily to help consumers better accept the products in the highly competitive beverage market. The most important reason they hit it off with coffee brands is that the involutionary coffee industry needs more innovative elements. The stark reality is that although OATLY is proud of its pioneering market approach and often reminisces at various salons and summits, coffee shops in China's first-tier cities clearly cannot save OATLY's financial report decline. In April this year, OATLY's 2022 financial report showed a net loss attributable to parent company shareholders of $392.6 million, with cumulative losses exceeding $641 million since 2019. Additionally, on the same day as the report, OATLY announced senior management changes, appointing Jean-Christophe Flatin as the new CEO, succeeding Toni Petersson. Fortunately, the Chinese market has been growing, so OATLY has placed its bets on China—on one hand, following coffee brands to penetrate lower-tier markets, and on the other, developing relationships with tea beverage brands. Zhang Chun, legal representative of OATLY's Chinese company Ouli (Shanghai) Beverage Co., Ltd., has publicly stated that after OATLY entered the tea beverage track in 2022, it remains to be seen whether the company can turn losses into profits and whether the Chinese market will replace the US as the brand's largest market. This shows OATLY places great importance on expanding in the tea beverage track. In December last year, OATLY launched a joint campaign with tea brands such as Qifendian, Guigui Tea, KOI, and Chunfeng, promoting its "Tea Master" oat milk product under the slogan "Drinking milk tea is also cool." Image source: Xiaohongshu @OATLY But in the tea beverage track, OATLY faces more formidable competitors. For instance, coconut-based beverages have already taken the lead, carving out a path: after Luckin, coconut latte has become a standard offering in almost all chain and non-chain coffee shops. Besides serving as a base ingredient for tea drinks, the tea beverage track has also seen the emergence of chain brands specializing in coconut drinks, such as cococean, cocosakura, HUNING coconut water, and Good Luck Coconut. Coconut-related categories are becoming increasingly involutionary, with countless colorful new products flooding Xiaohongshu. Image source: Good Luck Coconut WeChat official account From this perspective, people seem more receptive to coconut-flavored beverages and foods with a refreshing, sweet taste. Coconut's unique flavor and clear color also give it more potential to become a "trendsetter." These are advantages that oat milk, almond milk, and potato milk cannot envy. If they merely serve as substitutes for milk, their path seems narrow. More critically, coffee shops and new tea beverage stores have entered a stock market competition, making it harder for emerging plant-based beverages; they must find ways to move from the B-end to the C-end. But this path is clearly fraught with thorns. The domestic brand "Mai Zi He Mai" (OatOat), born on the oat milk trend, focuses on the C-end market with a high-profile approach, but this year it has gone silent in the media, and its products are nowhere to be found on convenience store shelves in first-tier cities. C-end: An awkward positioning After sorting through, Retail Jun found that in C-end promotional and marketing strategies, these emerging plant-based beverage brands have fallen into a vicious cycle. For example, oat milk brands like to emphasize that due to genetic factors, over 90% of Asians have varying degrees of lactose intolerance. They hope this information will make plant milk a substitute for dairy. However, it is an established fact that plant-based milk cannot replace animal milk in terms of nutritional value or taste. This marketing approach is unlikely to convince those with mild lactose intolerance, especially since many animal milk brands have already launched products suitable for lactose-intolerant individuals. If they don't compete head-on with dairy but instead clash with beverages, emerging plant-based beverage brands can only emphasize that they are "healthier"—no additives, no added sucrose. But as the health risks of sugar substitutes become more widely known, consumers have become disenchanted with "0 sucrose" and have gained a basic understanding of ingredient lists. Additionally, plant-based beverages are also striving to play the environmental card. For example, they promote that animals cause large amounts of carbon dioxide emissions, and to promote milk production in cows and goats, farms often adopt "inhumane" methods. Therefore, dairy products are relatively unfriendly to the environment and animals. In contrast, plant-based beverages can produce "milk" products more efficiently, greener, and more "animal-friendly." This series of concepts has become common knowledge overseas, and foreign consumers are receptive, but Chinese consumers are relatively less convinced. At this year's Global Women's Consumer Brand Marketing Summit and "Zhiniuer" Carnival, Zhang Lin, Managing Director of Kantar Group China, shared in her speech that Chinese consumers' attitudes and behaviors toward sustainable development are mostly in the "wait-and-see" stage—they are aware of environmental issues but do not want to change their lifestyles for environmental protection, nor do they want to pay an additional "green premium" for eco-friendly products. Zhang Lin, Managing Director of Kantar Group China, photo by New Retail Business Review Furthermore, large dairy companies can achieve their ESG (Environmental, Social, and Governance) goals by purchasing carbon credits to fulfill social responsibilities. It's hard to say which environmental path is superior. In summary, emerging plant-based beverages have entered an awkward situation in the C-end market. Old brands also want to fight China's C-end plant-based beverage market is not a blank slate; there have long been legends of "West Veyi, East Yinlu, South Coconot, North Lulu." However, they appeared as beverages, using a "brand = category" strategy to dominate their regions. The big single-product strategy adopted by these traditional brands is gradually losing its luster in today's beverage industry, which is highly competitive and requires constant innovation. Many entrepreneurs have seen business opportunities in the plant-based beverage trend in recent years and want to replace them. According to Qichacha data, from 2017 to 2022, the number of newly registered enterprises related to the domestic plant-based food industry grew from 277 to 2,259, with an average annual compound growth rate of 52.16%. Traditional brands have deep accumulations and naturally do not want to sit idly by. For example, Veyi, the "king of relieving spiciness" in the Sichuan-Chongqing region, whose parent company Lanjian Group founded the sub-brand Songyouru in 2021, positioned as "national light drink plant milk." According to Songyouru's official website, since its inception, it has launched 16 healthy beverages, penetrating areas such as "light body health," "coffee specials," and "outdoor camping." In terms of brand promotion, it also follows the influencer route. Image source: Xiaohongshu, Douyin, Weibo According to Songyouru's press release, in 2022, Songyouru's sales target continued to grow at a rate exceeding 400%. It is reported that in 2023, Songyouru's brand sales target is aimed at the billion-yuan level. Unlike Veyi, which is led by a young second-generation born in the 1990s, Yinlu, the pioneer of peanut milk, returned to founder Chen Qingshui's hands after three years "away from the nest," but its approach is similar to Veyi—launching a new sub-brand "Yinlu Plant" focusing on "original nutrition, plant characteristics, 0 additives," and also launching "ōu椰" freshly squeezed coconut juice. Image source: Yinlu Weibo Since 2019, Yinlu has been continuously launching new products, such as the herbal plant beverage brand "Shiqu Caotang," original soy milk drinks, and three sugar-free ready-to-drink teas. Now, these new products are floating between listing and delisting, showing that the path to brand rejuvenation is not easy. Coconot Group continues its traditional corporate art of marketing, becoming famous nationwide through borderline livestreams—after female livestreams were repeatedly cut off by platforms, Coconot simply used male models at the Consumer Expo and started "serious" male model livestreams on Taobao, achieving a broad sense of "gender equality." In contrast, Chengde Lulu has "given up" on its main business. Recently, Chengde Lulu released its 2022 annual report, with operating revenue of 2.692 billion yuan, a year-on-year increase of 6.66%; net profit of 602 million yuan, a year-on-year increase of 5.69%. This revenue is almost the same as its 2.633 billion yuan revenue 10 years ago, indicating the company's development has stagnated for a decade. Additionally, the financial report data shows that Chengde Lulu's total product sales volume in 2022 reached 266,700 tons, a decline of 18.9% from 328,800 tons in 2013, with almond milk sales declining by 15.86% and walnut milk sales declining by about 69.78%. In response, Chengde Lulu's approach is to cross over into the liquor industry—just days before the financial report was released, reporters from "Daily Business News" discovered that Guizhou Quanku Liquor (Group) Co., Ltd. was established, with Chengde Lulu holding 15% of its shares, becoming the second largest shareholder. Media analysis suggests that Chengde Lulu's layout in the baijiu industry is to break through in the southern market. However, in recent years, time-honored brands such as Tongrentang, Wahaha, and Quanjude have all crossed over to sell baijiu. However, most listed companies that cross over to sell liquor have fizzled out—in their financial reports, there is no trace of the liquor business. Having experienced the plant-based beverage boom around 2021, both new and old plant-based beverage brands have now entered an exploratory development period requiring constant trial and error. At this stage, the test is on the company's fundamentals and comprehensive strength. Securing the source supply chain has become an important task for plant-based beverage brands at this stage. For example, in the past few years, OATLY has continuously strengthened its supply chain construction in the Chinese market. Its first self-built factory in China, the Ma'anshan factory, began production in 2021 and added production lines in 2022, making it OATLY's largest factory in Asia in terms of capacity. Another example is Finomare, which comes from a supply chain background and previously relied mainly on imported coconut fruit from Southeast Asia. To further reduce costs, it inevitably needs to compete with other brands for coconut groves in Hainan. They have indeed done so; in March this year, Finomare's new factory in Hainan officially began production, expected to increase capacity by 100,000 tons. Additionally, Finomare, together with Luckin Coffee, the Coconut Research Institute of the Chinese Academy of Tropical Agricultural Sciences, and upstream and downstream coconut-based enterprises, jointly released the "Coconut Milk" group standard, which sets detailed standards for coconut milk through multiple indicators—taking the lead in participating in the formulation of industry standards is also a means to gain an advantage in the supply chain. According to research report data, the current domestic plant-based beverage market, including soy milk, coconut juice, walnut milk, peanut milk, and almond milk, has a retail market size of nearly 60 billion yuan, with factory shipments around 40 billion yuan. Compared to the 400 billion yuan tea beverage market in 2022 [1], the 99 billion yuan carbonated beverage market [2], and the dairy market expected to exceed 500 billion yuan in 2023 [3], the current 40 billion yuan plant-based beverage market still has significant room for growth. The prospects may still be optimistic. After all, consumers have gradually accepted the concept of plant-based beverages, and more lactose-intolerant individuals, environmentalists, and health-conscious people will be attracted to and consume them. Furthermore, more niche plant-based milks are emerging in the market, such as hemp seed milk and bambara bean milk, which may leverage functional benefits to drive market demand. For example, hemp seed milk emphasizes the correction of insulin levels and inflammation levels, which may be more appealing to consumers with weight management or ketogenic diet needs. By solidifying their supply chain foundation and then deeply exploring more usage scenarios for plant milk, the "good days" for plant-based beverages are still ahead. Data sources: [1] "2023-2029 China Tea Beverage Industry Market Management and Development Prospects Planning Report Analysis," Market Research Online; [2] "2022 China Carbonated Beverage Industry Status Analysis: Market Size Approaches 99 Billion Yuan," Qianzhan Economist; [3] "China Dairy Industry Chain Panorama," China Business Research Institute. References: 1. "The Winner's Curse: Domestic Plant-Based Beverage Giants in the Cracks," New Winer; 2. "Finomare Founder Zhang Kai: From Milk to Beverage, Breaking into C-end, Letting Coconut Base Return to 'Daily Life'," Shangdao; 3. "Not Just Hotpot Companion! 90s Rich Second Generation Takes Over for 1 Year, Veyi Soy Milk Joins IPO Reserve," Fortune Quality; 4. "Coconut Industry Status! 2023 China Coconut Industry Market Analysis Report," Zhiyan Consulting; 5. "Another 100,000-Ton Capacity Factory Lands, How Finomare Uses 'Innovation' to Lead the 10-Billion-Yuan Coconut Base Track," Yicai.com; 6. "Chengde Lulu After Wanxiang System Takeover: Revenue Stagnant for 10 Years, Product Sales Down 18.9%, Capacity Utilization Less Than Half," Changjiang Business Daily; 7. "Can Coffee Shop Channels Alone Support Plant Milk's Imagination?" Wu Dui Dui.