The rapidly growing Chinese beverage market hit a turning point in 2016. According to Euromonitor International, the compound annual growth rate of the soft drink market from 1997 to 2022 was 10.83%, maintaining high growth, and by 2022, the scale of China's soft drink industry had reached 583.159 billion yuan. (Different institutions use different calculation methods; according to iiMedia Research, the beverage market size in 2022 reached 1,247.8 billion yuan. [1] This article primarily references Euromonitor International data.) However, starting in 2016, the growth of the beverage market entered a turning point and subsequently entered a phase of relatively low growth. [2] This reflects that the development trend of the beverage market is consistent with the overall situation of the Chinese economy: shifting from a stage of rapid growth to a stage facing downward pressure. Changes in China's soft drink market size from 1997 to 2022 Data source: Euromonitor International Despite the recent slowdown in growth, in this highly competitive field, future changes have already begun: classic categories are slowing or declining, while emerging categories are stirring! In the past decade, Oriental Leaf, once criticized as "expensive and unpalatable," became a "star product" in everyone's hands; Genki Forest, which introduced the concept of "sugar-free sparkling water," broke through the traditional carbonated beverage market and opened a new track; the unremarkable ready-to-drink coffee has become one of the few beverage categories to achieve high growth in the past five years. In the next decade, China's beverage market will grow by one-third, with nearly 200 billion yuan in incremental space—a huge cake. The era of traditional "big single products" has passed. With changes in consumer demand and channel shifts, categories such as sugar-free tea, ready-to-drink coffee, and pan-functional beverages will rise rapidly, and niche-flavored beverages will also gain greater growth through interest-based e-commerce... This article explores possible trends and changes in the beverage industry from the perspectives of categories, channels, and consumers, combined with the development history of China's beverage market and the current state of beverage development in developed countries/markets, aiming to provide suggestions for beverage companies to find new growth directions.

Table of Contents

  1. China's Beverage Market: Reshaping Category Landscape

  2. What Drives the Development of Various Sub-categories?

  3. Where Are the Opportunities in the Next Decade of Beverages?

China's Beverage Market:

Reshaping Category Landscape

If dairy products are essentially about "nutrition," then beverages are essentially about "quenching thirst and pleasure." When consumers choose, buy, and drink beverages, they are also choosing their lifestyle and obtaining happiness. From this perspective, looking at the development of China's beverage industry over more than 40 years, it is a process of evolving from a "black-and-white movie" to a "VR world": needing iced cola in hot outdoor conditions, drinking an energy drink when tired on the road, always having a large bottle of juice on the table at wedding gatherings, and placing packaged water at business receptions... Since Coca-Cola re-entered China in 1978, beverage categories have flourished, and now it has developed into a diverse consumer market including carbonated drinks, juices, ready-to-drink tea, and packaged water. Beverages are fast-moving consumer goods highly related to consumption experience and scenarios. As categories continue to enrich, consumers' options gradually increase, eventually becoming part of their rich lives. Just as in the waves of the commercial era, people, times, and products naturally have their contemporary characteristics in the same scenario. The expansion and decline of different beverage categories are also influenced by their category characteristics and the times. Taking the 2015-2016 period, when the beverage market shifted from rapid expansion to fluctuating volatility, as a boundary, combined with changes in compound growth rates of different categories, we divide the current Chinese soft drink market into "classic categories" and "sustained growth categories" : | Classic Categories | Sustained Growth Categories Classification (Examples)| Carbonated drinks, ready-to-drink tea, juice, protein drinks| Packaged water, functional drinks, ready-to-drink coffee Past| ● Over the past three decades, these categories supported the rapid growth of China's beverage market, giving rise to classic star products such as Coca-Cola, Ice Black Tea, Wanglaoji, Huiyuan Juice, and Six Walnuts, which occupied significant market shares.| ● The above categories also achieved high growth and have classic star products such as Nongfu Spring packaged water, Hua Bin Red Bull, Dongsheng Special Drink, and Nestlé ready-to-drink coffee. Present| ● Due to channel changes, shifts in consumer preferences, and even companies' own strategic adjustments, some classic products have encountered growth bottlenecks or even declined, putting these categories on the defensive. ● Differentiated sub-categories such as zero-sugar sparkling water, sugar-free tea, NFC juice, and plant-based drinks are rapidly rising, becoming new growth points within the main categories and potentially disrupting traditional sub-categories. ● Still occupy a huge market share.| ● Consistent with trends in channel changes and consumer preference shifts, they continue to maintain high growth rates despite the slow growth of the beverage market. ● They are the focal points for future beverage category innovation. China's soft drink sub-market is in a "category transition period" Data source: Euromonitor Consulting, Prospective Industry Research Institute [3] From the compound growth rates of various categories in China's soft drink market from 2015 to 2020, ready-to-drink coffee leads with 8.2%, showing strong growth; energy drinks and packaged water rank second and third with compound growth rates of 6.7% and 6.0%, respectively; carbonated drinks saw stagnant growth during this period; while classic categories such as ready-to-drink tea and juice even experienced market contraction. China's beverage market is currently in a "category iteration period": classic beverage categories that experienced rapid growth and became mainstream in the past are now facing challenges from emerging sub-categories and sustained growth categories. The market landscape is being reshaped now and will continue over the next decade. What Drives the Development of China's Beverage Industry?

(I) Classic Categories

1. Carbonated Drinks: The Starting Point of Chinese Beverages

Carbonated drinks are the starting point of market-oriented production and competition in China's beverage industry. In 1978, at the beginning of reform and opening up, Coca-Cola reached a cooperation with China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO). The cooperation included opening bottling plants in China by providing Coca-Cola canning, canning, and bottling equipment, while also specifying that imported and locally produced Coca-Cola would be sold by COFCO. At that time, entering the supply and marketing cooperative with state-owned background meant opening up sales channels. With its sweet taste, carbonated texture, addictive high calories, and relatively low price, Coca-Cola won over Chinese consumers who had almost never drunk packaged beverages before. In 1981, Pepsi entered China and established its first bottling plant in Shenzhen in cooperation with Shenzhen Canned Food Factory, selling each bottle for 0.3 yuan. [4] With youthful, fashionable, and popular brand culture promotion, coupled with widely accepted flavors and channel distribution, until 2018, the carbonated beverage brand matrix under "Two Colas" still occupied 90% of the carbonated beverage market share. Although domestic carbonated beverage brand Wahaha's Future Cola attempted to challenge the carbonated beverage market and even once rose to third place, Coca-Cola and Pepsi firmly maintained their leading advantage with more competitive prices, capillary-like channel layout, and strong global brand momentum. Coca-Cola, Pepsi, Future Cola product images Image source: Tmall Supermarket, Taobao @Yueheng Food With favorable timing, location, and people, the "Two Colas" achieved great success in China's carbonated beverage market. As of 2022, the "Two Colas" still occupy 70% of the carbonated beverage market share. However, the share of carbonated drinks in the overall beverage market has been declining year by year, and the once-dominant traditional carbonated drinks are no longer the focus of future development in the carbonated beverage track. Declining market share of carbonated drinks Data source: "Development Trends of Soft Drinks in China," National Bureau of Statistics, Huachuang Securities On the one hand, after experiencing rapid growth, carbonated drinks once fell into stagnation, and other categories that rose on the momentum squeezed the market space of carbonated drinks. The carbonated beverage market size reached 78 billion yuan in 2011, and after ups and downs, remained at 78 billion yuan in 2016, only returning to growth afterward, but the growth rate is far from the previous double-digit compound annual growth rate. According to CICC data, the compound annual growth rate of carbonated drinks from 2008 to 2015 was only 3.5%, while packaged water during the same period had a compound annual growth rate of 16.5%, and energy drinks reached an astonishing 31%. [2] Carbonated beverage market size from 2009 to 2022 Data source: Euromonitor Consulting, CICC Research Department On the other hand, as post-80s and post-90s generations become the main consumers, their attention to health is increasing, and they tend to choose low-sugar, low-calorie beverages. This consumption trend, along with changes in sales channels, has jointly reshaped the competitive landscape of the carbonated beverage market. Genki Forest, by introducing the concept of sugar-free sparkling water, broke through the boundaries of the traditional carbonated beverage market and rose strongly on the new track it created; state-owned soda brands represented by Dayao also re-entered the public eye through catering channels, rekindling people's love for classic sodas. Genki Forest sparkling water, Dayao soda product images Image source: Tmall Supermarket

2. Ready-to-Drink Tea: Latecomer, Continuous Change

The birth of China's ready-to-drink tea category originated from competition with carbonated drinks. In 1993, Hebei Jizhou Supply and Marketing Cooperative was renamed Xurisheng Group and launched a beverage called "Ice Tea," thereby introducing the ready-to-drink tea category to the Chinese market. At that time, the "Two Colas" were rising, and carbonated drinks held an absolute leading position, making it difficult for other brands to threaten them. However, the emergence of "Xurisheng" created an uncontested category track. It was not only China's first carbonated black tea drink but also the first tea beverage. The brand cleverly chose a relatively marginal field compared to mainstream competitors, implementing a "flanking strategy" to challenge the dominance of carbonated drinks in China's soft drink market. Xurisheng Ice Tea product image Image source: Taobao @Hudie Family Food Shop The ingredient list of "Xurisheng" Ice Black Tea includes water, white sugar, black tea powder, and flavoring, with added carbon dioxide for taste. Since water, white sugar, and carbon dioxide are the main ingredients of cola, from a product attribute perspective, "Xurisheng" Ice Black Tea is not much different from cola. [5] However, thanks to the "tea" attribute, which naturally has a favorable impression in Chinese consumers' minds, and the endorsement of being a "national brand," "Xurisheng" sales reached 500 million yuan in 1996 and 3 billion yuan in 1998. Subsequently, companies such as Uni-President, Master Kong, and Wahaha followed suit, launching their own ice black tea products. However, due to poor management and stopped distribution, "Xurisheng" lost its original market position in the "ice black tea" and "ice green tea" competition in the early 21st century. Meanwhile, leading companies with advantageous channels gradually emerged, and brands like Master Kong and Uni-President appeared in the public eye. To this day, Master Kong holds the top position in the ready-to-drink tea category. [6] Master Kong Ice Black Tea, Uni-President Ice Black Tea product images Image source: Tmall Supermarket As a direct competitor to carbonated drinks, ready-to-drink tea also expanded rapidly in the early 21st century, gaining category advantages. According to CICC statistics, China's ready-to-drink tea market had a compound growth rate of 18.4% from 2006 to 2008 and 12.2% from 2008 to 2015, with the industry scale growing from 47.2 billion yuan in 2006 to 122.1 billion yuan in 2015, surpassing carbonated drinks to become the second-largest beverage category after packaged water. During this period, "Kangtong" (Master Kong and Uni-President) fought off Coca-Cola's "Yuanye Tea" (Original Leaf Tea), which claimed to be "100% brewed from tea leaves." Sugary herbal teas like Wanglaoji and JDB also expanded rapidly. However, from 2016 to 2021, ready-to-drink tea showed a downward trend, with a compound annual growth rate falling to -0.8%. Ready-to-drink tea market size from 2009 to 2022 Data source: Euromonitor Consulting, CICC Research Department Looking back at this process, although ready-to-drink tea directly competed with carbonated drinks, its development path was similar: relying on the strong distribution capabilities of big brands (Master Kong & Uni-President), widely accepted refreshing (tea-flavored) taste, low product prices from scale production, celebrity endorsements, and memorable brand promotions like "buy one get one free." As high calories and high sweetness are no longer competitive advantages, sugar-free tea has become the leader in the growth trend of China's ready-to-drink tea market in recent years. Ready-to-drink tea is facing a "decline dilemma" similar to carbonated drinks and urgently needs internal product iteration, and leading this revolution is the sugar-free tea category. According to Frost & Sullivan data, the share of sugar-free tea in the ready-to-drink tea market increased from 1.5% in 2014 to 5.2% in 2019, with an average growth rate of 32.6% in retail sales. [2] From different tracks, from 2017 to 2022, the sugary tea market declined with a compound annual growth rate of -3.6%, while the sugar-free tea category grew at 5.3% during this period. [7] Sugar-free teas represented by Nongfu Spring's Oriental Leaf and Suntory's oolong tea have become new growth points for the ready-to-drink tea category, driving overall growth in the category. [2] Additionally, compared with other countries, China's sugar-free rate in ready-to-drink tea was only 7.7% in 2022, far lower than South Korea (96.1%), Japan (85.2%), and Malaysia (47.1%), and Japan's per capita ready-to-drink tea consumption is about six times that of China. [8] This means that China's ready-to-drink tea market, especially the sugar-free tea track, still has significant growth space.

3. Juice: Shifting from Ambient Concentrate to 100% Fresh Squeezed

Like ready-to-drink tea, the emergence of juice drinks in China also originated from category competition with carbonated drinks. In the 1990s, juice drinks began to develop initially in China. In 1992, Huiyuan Juice was established in the apple-rich Yimeng Mountain area of Shandong Province, starting with the production of concentrated juice for export. Later, through CCTV advertising, with slogans like "Drink Huiyuan Juice, Walk the Healthy Road" and "Only with Huiyuan is it New Year," Huiyuan once occupied more than 20% of China's juice market share. [9] After Huiyuan products gained popularity, many brands entered the juice track, such as Uni-President launching "Fresh Orange Duo" in 1999 and Coca-Cola introducing "Minute Maid" in 2004. Huiyuan Juice, Uni-President Fresh Orange Duo, Minute Maid Pulpy Orange product images Image source: Tmall Supermarket The juice market maintained strong growth momentum. From 2006 to 2008, the compound annual growth rate of the juice market was about 18%, and although it declined from 2008 to 2015, it remained around 7%. However, since 2016, the scale of the juice drink market has gradually shrunk. From 2015 to 2021, the compound annual growth rate of the juice drink market was -1.6%. [2] Early representative brands like Huiyuan and Uni-President began to stagnate or decline during this period. From 2012 to 2016, Huiyuan Juice experienced multiple losses [10]; from 2015 to 2016, Uni-President's juice revenue even fell by 41.5%. [11] Huiyuan Juice net profit from 2006 to 2016 Data source: Prospective Industry Research Institute Looking back at the rise of juice, the key was its strong association with keywords like "health" and "gatherings" compared to other soft drinks. In the Chinese soft drink market dominated by carbonated drinks and sugary tea a decade ago, the advantage of juice was its deeply rooted "healthy attribute": for consumers, eating fruit is good for health, and drinking juice is the same. At that time, Huiyuan also connected the brand with the "New Year" gathering concept, hitting the core demand for family gatherings. However, a series of juice products represented by Huiyuan were actually mostly "juice drinks" made from water and concentrated juice. In the past, when home refrigerators were not yet popular and cold chain channels were not mature, these juice drinks that could be stored at room temperature for a long time brought great convenience to consumers and were therefore popular. With the introduction of technologies like NFC juice and the improvement of China's low-temperature cold chain logistics and sales systems, 100% low-temperature juice that is fresher, tastes better, and has a shorter shelf life has entered the market, directly impacting ambient juice. However, juice products are troubled by their "high sugar" characteristics, raising consumer questions about "health": Is juice, which removes dietary fiber from fruit and mainly contains fructose, really healthier? In 2022, the proportion of Chinese consumers consuming 100% juice accounted for only 6% of the total juice market Data source: Döhler According to Euromonitor International data, from 2017 to 2021, sales in China's juice sub-category fell from 87.139 billion yuan to 75.259 billion yuan, but Bain and Kantar Worldpanel show that in the first three quarters of 2022, juice was still the fastest-growing sub-category in beverage sales. [12] On the Douyin platform, sales of fruit and vegetable juices increased by 288% year-on-year in 2023 before the year ended. In addition, per capita NFC juice consumption in China is only 16 milliliters, compared to over 2.5 liters in Japan, and even higher in the United States at an astonishing 10 liters. [13] New sales channels and consumer demand for specific functions and niche flavors will bring new growth opportunities for the juice category. And if technological breakthroughs achieve sugar reduction while maintaining juice taste, the juice category may have a chance for greater growth. Annual sales changes of fruit and vegetable juice on online channels Data source: Qianzhan Zhongtai Database

4. Protein Drinks: The Success and Loss of "Big Single Products"

In the 1990s, in addition to juice drinks, protein drinks that combine taste and nutrition also became one of the rapidly rising categories in China's soft drink market. Plant-based protein drinks and animal-based protein drinks (commonly referred to as milk-containing drinks) are the two major sub-categories of protein drinks. In 1975, China's first plant-based protein drink, Almond Dew, was developed by Chengde Canned Food Factory and officially launched under the "Lulu" trademark in 1991. China's plant-based protein drink industry thus sprouted. In 1999, Yinlu launched peanut milk, and in 2005, Yangyuan launched "Six Walnuts." Among them, Chengde Lulu once occupied more than 90% of the market share, but after Yangyuan Beverage went public in 2008, it rose rapidly and has ranked first in market share since 2011. [14] Trademark disputes are undoubtedly one of the reasons dragging down Chengde Lulu's development. But the more important reason is that Chengde Lulu has a single product line, an aging brand, and failed to break through regional restrictions to reach the national market, and was even squeezed by Yangyuan Beverage in its home base of Hebei. Meanwhile, Yangyuan Beverage continuously emphasized the connection between "Six Walnuts" and brain health, adding a "nutritional" memory point to its taste. At the same time, in 1996, Wahaha Group launched AD Calcium Milk, marking the start of the milk-containing drink market. In 1998, Shuanghui and Yili successively entered this market, with Yili launching "You Suan Nai." In 2005, Wahaha launched "Nutrition Express," which exceeded 20 billion yuan in sales by 2013. [15] Mengniu also launched "Zhen Guo Li" in 2006. In fact, the rise of China's plant-based protein drink market has "innate advantages." In Europe, the incidence of lactose intolerance is between 19% and 37%, while in Asia it is between 54% and 74%. [16] In China, the lactose intolerant population is as high as 85%. [17] In the dairy market, to reduce lactose intake for consumers, dairy companies have developed products such as yogurt (which converts lactose into lactic acid) and lactose-free milk, meeting the protein needs of lactose intolerant people. Plant-based protein drinks also quickly won market favor due to their naturally lactose-free and cholesterol-free properties. At the same time, milk-containing drinks are widely popular because they combine nutrition, diverse flavors, and consumption scenarios. From 2013 to 2018, when the growth of carbonated drinks and juice slowed and the soft drink market overall declined, milk-containing drinks "rose against the trend." [18] Milk-containing drinks grow faster than the entire soft drink market Data source: China Food Industry Association, Guoyuan Securities Research Institute According to LeadLeo data, in 2022, the market size of China's plant-based protein drinks reached approximately 135.1 billion yuan. [19] The market size of milk-containing drinks grew from 98.86 billion yuan in 2018 to 136.17 billion yuan in 2022. [19] However, both sub-categories have seen slowing growth since 2014, with plant-based protein drinks' compound annual growth rate from 2017 to 2021 being only -2.77%. [20] Market size growth rates of animal protein drinks (milk-containing drinks) and plant-based protein drinks Data source: LeadLeo Data There is product homogenization in the milk-containing drink market, while fermented or lactic acid bacteria protein drinks are limited in sales scope due to the need for low-temperature processing, storage, and cold chain transportation. In recent years, the development of fresh food e-commerce has brought new opportunities to China's protein drinks. From 2017 to 2021, the transaction scale of the fresh food e-commerce industry grew from 140.3 billion yuan to 465.8 billion yuan. During the Tmall 618 shopping festival in 2022, sales of milk-containing drinks increased by 15% year-on-year, and plant-based protein drinks grew by 96%. [19] According to GF Securities research, China's milk-containing drinks have experienced four development stages: low-end paper-packaged milk → ordinary white milk → high-end white milk → fermentation upgrade (such as low-temperature yogurt and lactic acid bacteria). [21] In contrast, the development of China's plant-based protein drinks is relatively lagging and is currently in a transition stage toward high-end. On the one hand, sub-categories in the plant-based protein drink market are occupied by their respective leading brands. For example, Chengde Lulu occupies about 90% of the almond milk category, and Yangyuan Six Walnuts occupies 88% of the walnut milk market. [20] This makes it challenging for emerging plant-based protein drink brands to break the existing order and establish their own market defenses in any sub-market. On the other hand, compared to China, European and American markets initially positioned plant-based protein drinks as high-end milk substitutes, emphasizing their "nutritional" attributes and actively engaging in marketing activities and flavor innovation. For example, Swedish oat milk brand OATLY rose overseas as a "milk challenger," while in China it expanded by cooperating with coffee shops, successfully penetrating retail channels, achieving a compound annual growth rate of 47.2% from 2013 to 2020. [20] In contrast, China's plant-based protein drinks are mostly still limited to the "soft drink" category, lacking product innovation and investing less in marketing than other beverage categories. However, local Chinese plant-based protein drink brands like Finom are also rising. Founded in 2015, the coconut-based plant milk brand Finom has rapidly gained popularity in recent years due to the success of Luckin's coconut latte. At the same time, Finom has sparked a "coconut trend" on social media platforms like Xiaohongshu, further enhancing its brand awareness. In 2021 and 2022, Finom's performance doubled, and its thick coconut milk revenue exceeded 1 billion yuan in 2022. [22]

(II) Sustained Growth Categories

1. Packaged Water: A Rapidly Growing Major Track

Unlike other soft drinks, packaged water has the attribute of a daily necessity, so "water quality" is a topic of particular concern, and competition in China's packaged water market revolves around it. In 1930, China's earliest packaged water brand "Laoshan" appeared, but the high cost of packaging at that time limited consumer demand, making it difficult for China's packaged water to achieve scale production. It was not until 1987 when the national standard for "Drinking Natural Mineral Water" was promulgated, and China introduced two PET bottle filling production lines the following year. In 1989, C'estbon launched China's first bottle of purified water, and since then, various brands of bottled purified water began to emerge. With the improvement of residents' consumption levels and the attention paid to tap water pollution in the 1990s [23], people began to pursue higher quality water, driving the growth of packaged water consumption. Laoshan Mineral Water, C'estbon Purified Water product images Image source: Tmall Supermarket At the turn of the millennium, Nongfu Spring suddenly challenged the "world of purified water" with the concept of "natural water." Through three experimental marketing campaigns (white mouse feeding, narcissus cultivation, and cell experiments), it successfully implanted the idea that "natural water is healthier" into people's minds and announced the cessation of purified water production. This move sparked protests from many purified water companies at the time. While "purified water" and "natural water" were competing, Master Kong took a different approach by launching "mineral water" in 2003, which added minerals to purified water. Combined with the marketing concept of "a little more, a healthier life" and a low price strategy of 1 yuan, Master Kong mineral water quickly rose in the market. In 2000, the dispute between "natural water" and "purified water" ended with Nongfu Spring being fined 200,000 yuan, but it did not give up competing in China's packaged water market. In 2006, Nongfu Spring distributed pH test strips, revealing that its natural water was alkaline, contrasting with the acidic purified water of brands like C'estbon and Wahaha. At that time, the "acid-base body theory" was introduced to China, and in the public opinion environment of the time, weakly alkaline water was considered more beneficial to health, giving Nongfu Spring an advantage in competition again. The "water quality war" surrounding Nongfu Spring revealed that "health and safety" are key factors in winning market share in China's packaged water market. Nongfu Spring product image Image source: Tmall Supermarket Subsequently, Master Kong mineral water reduced packaging weight to lower transportation costs and expanded rapidly through a low-price strategy; C'estbon purified water, backed by China Resources Group, used its own channel advantages to complete national market coverage. Giants such as Master Kong, Nongfu Spring, C'estbon, and Wahaha dominated China's packaged water market. Packaged water has now grown into the largest soft drink category by market size. In 2022, China's packaged water market reached 230 billion yuan. [24] But in fierce competition, Nongfu Spring seems to "win people's hearts." Not only does it rank first in market share, but its revenue growth rate also exceeds other brands in the same category. Meanwhile, former industry leader Master Kong saw its market share drop from 12.0% to 3.0% between 2010 and 2021. [25] Packaged water market size growth rate Data source: CICC Research Department Today, China's packaged water market continues to maintain an upward trend and has exceeded 200 billion yuan. To gain market share from giants in such a large track, the key is to find and seize differentiation points in a timely manner, exploring demand in sub-markets and channel gaps. For example, in recent years, Jinmailang introduced the concept of "cooked water," bypassing traditional water source restrictions and distinguishing itself from "raw water" products on the market. Under the general trend of pursuing health, Jinmailang also emphasizes that boiled water is "more suitable for Chinese stomachs." The core of this strategy is not product upgrading itself, but occupying consumer minds with the concept of "cooked water." On the other hand, increasing investment in instant retail is a new opportunity for packaged water brands to create new growth curves. According to Kantar Worldpanel, in the 52 weeks ending May 2023, 80% of the incremental sales of packaged water in instant retail channels contributed to the category's additional growth. [26] Packaged water continues to maintain high growth and is expected to reach a market size of 300 billion yuan by 2025. However, the space for "category innovation" seems saturated, and the endless "new concept" waters in recent years have not performed outstandingly or have gradually exited the market. In the future, seizing the packaged water market may still be dominated by old brands, and new brands seeking advantages may need to find opportunities in new sub-scenarios and channels. Master Kong cooked water, VOSS premium water, Nongfu Spring maternal and infant water, 5100 low-deuterium water product images Image source: Tmall Supermarket

2. Functional Drinks: More Than Just "Anti-Fatigue"

Unlike the packaged water market, which faced fierce competition from the start, the functional drink market has long been monopolistic. In the early 1990s, the functional drink market in mainland China was almost blank. Although Jianlibao emerged with the momentum of the Olympics, its products were actually closer to fruit-flavored carbonated drinks. It was not until 1995 that Hua Bin Group introduced Red Bull products to China. In the following decade, Red Bull became synonymous with the category and established its monopoly. In 2016, Hua Bin Red Bull became embroiled in trademark disputes, and the market competition pattern began to change. Local brands such as Dongsheng and Zhongwo Tizhi Nengliang quickly seized opportunities, adopting differentiated market strategies and focusing on developing lower-tier markets, thereby achieving rapid growth. Jianlibao, Red Bull, Dongsheng Special Drink, Zhongwo Tizhi Nengliang product images Image source: Tmall Supermarket, Taobao @Yubo Weicheng Food Specialty Store Energy drinks attract consumers with their unique "refreshing and anti-fatigue" effects. From long-distance drivers at the beginning to couriers and delivery workers today, rising social pressure and work intensity have given them a considerable audience. In the entire soft drink market, energy drinks occupy less than 10% of the market share but are one of the fastest-growing sub-categories, with a compound growth rate of 31.0% from 2008 to 2015 and sales exceeding 50 billion yuan in 2021. [2] Dongsheng Beverage has seen significant performance growth in recent years, with company revenue surging from 2.844 billion yuan in 2017 to 8.501 billion yuan in 2022, a compound annual growth rate of 24.48%. [27] Functional drink market size growth rate Data source: CICC Research Department In addition, China's energy drink market has a long-term monopoly competition pattern, but industry concentration has declined in recent years. From 2011 to 2020, the market leader Hua Bin Red Bull's market share (CR1) fell from 90% to 55%. [28] This change can be partly attributed to the rise of Dongsheng and Lehu, which focus on lower-tier markets, eroding Hua Bin Red Bull's market share. On the other hand, as the younger generation of consumers strengthens their health concepts, traditional energy drinks that rely on caffeine and artificial additives have seen sales constrained. "Sports drinks" represented by Mizone and Jianjiao successfully led the category's explosive period, and the concept of "electrolyte drinks" is also gradually rising. In fact, functional drinks are undergoing a major product transformation period, and the traditional "anti-fatigue" function is gradually unable to meet consumer needs. After the COVID-19 pandemic, public health awareness has increased. Products represented by Genki Forest's "Alien Electrolyte Water" have taken advantage of this trend to gradually move away from sports scenarios and into the pan-health field to achieve rapid growth. In 2022, "Alien" occupied 47% of the market share with a growth rate of over 100%, and sales of 1.27 billion yuan made it the top domestic electrolyte water brand, surpassing traditional market giants like Pocari Sweat and Gatorade. [29] Alien Electrolyte Water, Pocari Sweat, Gatorade product images Image source: Tmall Supermarket Like the iceberg theory, the current development state of functional drinks indicates that there may be more market potential to be activated below the surface. On the one hand, although market segmentation and the rise of emerging brands like "Alien Electrolyte Water" have impacted the functional market landscape, it is foreseeable that the growth of various sub-categories will continue to jointly drive the overall functional drink market upward. On the other hand, taking energy drinks as an example, per capita consumption in China in 2021 was only about one-fifth of that in the United States and the United Kingdom. [30] Additionally, according to Newzoo data, about 80% of esports players consume energy drinks. [31] Functional drinks will find new target markets in the rise of emerging consumption scenarios such as esports.

3. Ready-to-Drink Coffee: A Rapidly Growing Sub-category

In 1998, instant coffee giant Nestlé introduced ready-to-drink coffee from Japan to China, followed by foreign brands such as Starbucks and Suntory, which launched affordable products, triggering the industry's first expansion. For years, ready-to-drink coffee did not see large-scale growth, and in 2020 it accounted for less than 2% of China's soft drink market (Euromonitor International). However, the market is changing, and in the past five years, ready-to-drink coffee has become one of the few beverage categories to achieve high growth. According to LeadLeo's 2022 China Ready-to-Drink Coffee Industry Overview data, from 2017 to 2021, China's ready-to-drink coffee market doubled in size with a compound growth rate of 19.3%, reaching 9.64 billion yuan. [32] In recent years, the explosive growth of the freshly brewed coffee market has also driven the rise of the ready-to-drink coffee market, especially with the expansion of freshly brewed coffee shops like Starbucks, Luckin, and Tims China, which have popularized coffee culture. According to Meituan data, the total number of chain coffee shops in China reached 32,844 in 2023. [33] In daily life, ready-to-drink coffee is more convenient than freshly brewed coffee and has a significant refreshing function compared to ordinary beverages, meeting the needs of office workers, students, outdoor activities, and travel groups. In addition, the ready-to-drink coffee market has long had high concentration, with the top two companies occupying 64% of the market share in 2020. Nestlé and Starbucks have long been the leading brands in China's ready-to-drink coffee field, with few "newcomers" in the market. However, in recent years, the ready-to-drink coffee market has attracted more and more "participants" to join this fierce competition. For example, Nongfu Spring's Tanbing became a topic of focus as soon as it launched, and Coca-Cola China also joined the battle with COSTA ready-to-drink coffee. Emerging consumer coffee brands have also entered the market: for example, Tims China cooperated with OATLY to launch ready-to-drink oat lattes, and Finom launched coconut milk lattes. [34] Nongfu Spring Tanbing, COSTA coffee product images Image source: Tmall Supermarket At the same time, multiple leading freshly brewed coffee brands represented by Starbucks and Tims China are also continuously increasing their investment in the ready-to-drink coffee track. For them, entering traditional beverage distributor channels through ready-to-drink coffee can not only increase penetration and expand lower-tier markets but also allow products to reach consumption scenarios that freshly brewed coffee cannot (such as camping, hiking, etc.). According to Euromonitor data, freshly ground coffee and instant coffee are still the more mainstream consumption types in the domestic coffee market, with ready-to-drink coffee accounting for only 8% of total coffee consumption, while in Japan and South Korea, ready-to-drink coffee accounts for 51% and 18%, respectively. In 2022, the U.S. ready-to-drink coffee market was $5.2 billion (approximately 37.1 billion yuan), and Japan, as the birthplace of ready-to-drink coffee, had a market size of $9.1 billion (approximately 64.9 billion yuan). In contrast, China's ready-to-drink coffee market was only 11.6 billion yuan in 2022. [35] There is a huge incremental space in China's ready-to-drink coffee track. With the continuous expansion of channels such as convenience stores and vending machines, ready-to-drink coffee is expected to capture a larger share of the beverage market in the next decade. The Next Decade of Beverages Where Are the Opportunities? Combining the development history of China's beverage market and the current beverage market landscape in developed countries, we use inductive and deductive methods to predict the development trends of China's beverages in the next decade. China's economy will continue to grow in the next 10 years, with urbanization rate, per capita disposable income, and education levels still steadily improving, and the post-90s and post-00s generations will become the main consumers. On the other hand, against the backdrop of downward pressure on China's economic development, consumers are more price-sensitive when shopping and pay attention to product health and quality. On the channel side, the offline "distributor-traditional retail" model remains the most important beverage sales channel, but "new retail" platforms represented by Hema, as well as emerging e-commerce platforms like Pinduoduo and Douyin, will change traditional sales methods and may even gradually disrupt the original market landscape. We predict the next decade of China's beverage market:

  1. The beverage scale will have one-third growth potential;

  2. Categories such as sugar-free tea, ready-to-drink coffee, and pan-functional drinks will rise rapidly;

  3. Classic beverage categories occupying offline distribution channels, such as carbonated drinks and sugary tea, will remain mainstream;

  4. With the construction and improvement of cold chain channels, low-temperature products that require refrigerated transportation and sales will rise rapidly;

  5. On online channels, niche categories will gain greater growth through interest-based e-commerce. Past| Future Big single products, ambient, high sugar| Sugar-free, lightly sweet, healthy, functional, sub-scenarios, premium quality with fair price, niche flavors, online retail, low temperature Based on the above judgments, we believe that in the next decade of beverages:

(I) At Least One-Third Growth Potential

We predict that China's per capita soft drink sales will grow by 33.88% in the next 10 years, meaning that China's beverage market will grow by one-third on the basis of the current 583.159 billion yuan market size (Euromonitor International), with nearly 200 billion yuan in growth potential. From 2012 to 2022, China's per capita GDP increased by 101.9% to $12,720.2, and per capita beverage sales increased by 44.98%, from 41.73 liters per person to 60.5 liters per person (Euromonitor International). According to IMF forecasts, China's per capita GDP will reach $16,800 in 2028, with a compound annual growth rate of 6.02% from 2023 to 2028. If this growth rate is maintained, China's per capita GDP will reach $22,482.19 by 2032. [36] Based on the ratio of per capita GDP growth driving per capita soft drink sales growth from 2012 to 2022, China's per capita soft drink sales are expected to grow by 33.88% by 2032, reaching 81 liters per person. Horizontally comparing developed countries and regions, in 2022, per capita soft drink sales in mainland China were 60.5 liters per person, while in the United States, Japan, Singapore, Hong Kong, and Taiwan, they were 296.15, 189.79, 179.67, 110.1, and 101.24 liters per person, respectively. [37] We compare with Taiwan, where per capita GDP was $22,840 in 2014, and per capita soft drink sales reached 94.33 liters per person that year, close to the aforementioned growth expectation of 81 liters per person. Per capita soft drink sales and per capita GDP ratio in mainland China, the United States, Japan, Singapore, Hong Kong, and Taiwan in 2022 Data source: World Bank, International Monetary Fund, Euromonitor International

(II) Future High-Growth Categories

1. Sugar-Free Tea: Replacing "Water" with "Tea"

Market share of beverage sub-categories in mainland China, Hong Kong, Taiwan, and Japan in 2022 Data source: Euromonitor International According to Frost & Sullivan data, driven by health awareness, retail sales of sugar-free tea drinks in China are growing rapidly, with a compound growth rate of 32.6% from 2014 to 2019. But currently, China's ready-to-drink tea market only accounts for 13.92% of the seven sub-categories, and sugar-free tea accounts for no more than 10% of ready-to-drink tea, still not the main category. [38] However, in Japan, sugar-free tea accounts for more than 80% of the tea beverage category. Ito En and Suntory have launched various sugar-free tea categories such as raw tea, green tea, and oolong tea, giving consumers rich choices in "drinking tea," even replacing water—in the more essential "quenching thirst" scenario, sugar-free tea, whose main ingredients are only water and tea leaves, can meet the needs of consumers who find drinking water "monotonous." Suntory, Ito En ready-to-drink tea product images Image source: Tmall Supermarket Data from Taiwan, Hong Kong, and Japan also provide good expectations: in 2022, ready-to-drink tea occupied 48%, 26.9%, and 29.24% of the main beverage categories in Taiwan, Hong Kong, and Japan, respectively (according to the pie chart above), ranking first, second, and first. We predict that in the next 10 years, sugar-free tea will replace the once "glorious" sugary tea category, raising the market share of ready-to-drink tea to a range of 25%-30%, similar to Japan and Hong Kong. Companies like Nongfu Spring and Suntory, which have been making sugar-free tea in China early, have already seized the first opportunity in this round of growth.

2. Ready-to-Drink Coffee: Function and Convenience

In 2022, ready-to-drink coffee accounted for only 0.44% of the seven sub-categories in China's beverage market, while in Japan, Taiwan, and Hong Kong, ready-to-drink coffee accounted for 13.66%, 2.99%, and 2.37%, respectively. But as mentioned above, China's ready-to-drink coffee industry achieved a compound growth rate of 19.3% from 2017 to 2021, showing strong development. [32] Japan vending machines Image source: Akashi Journal The growth of ready-to-drink coffee benefits from consumers' extreme pursuit of "convenient refreshment." Long commutes and work have become the norm in modern society, giving ready-to-drink coffee a long-term growth opportunity. In addition, the rapidly growing convenient sales channels will also boost the expansion of ready-to-drink coffee. In Japan, ready-to-drink coffee accounted for 13.66% of the beverage market in 2022, which is inseparable from the popularity of vending machines in Japan. Japan had 2.93 million vending machines in 2018, one for every 43 people. Buying ready-to-drink coffee from vending machines to relieve fatigue has become a habit for Japanese consumers. With the help of vending channels, BOSS coffee ranks second in Japan's beverage brand sales, with annual sales exceeding 100 million cases. [39] China's vending machine channel is also growing continuously, with leading brands such as Nongfu Spring, Genki Forest, and Wahaha investing in developing their own smart vending machines. According to Nongfu Spring's prospectus, Nongfu Spring has deployed nearly 60,000 vending machines in nearly 300 cities in China. [40] We predict that ready-to-drink coffee will grow to a market share of 2%-3%, close to that of Taiwan and Hong Kong, in the next decade, driven by the demand for "convenient refreshment."

3. "Pan" Functional Drinks: Niche Flavors + Clean Ingredients + Functional Focus

As mentioned above, classic categories such as carbonated drinks, sugary tea, and juice are showing a downward trend, functional drinks are continuing to grow rapidly, and "pan" functional drinks are gaining more market attention. In the next 10 years, we predict that "pan" functional drinks with niche flavors and clean ingredients, as well as one or more health or emotional functions, that can meet the needs of specific groups and preferences, will achieve great development. According to a 2021 survey by PwC, consumers are most concerned about "taste/flavor," "ingredients/formula/raw materials," and "product features/selling points/efficacy." [41] This is consistent with the generational characteristics of the post-00s generation, who are about to become the main consumer group: a higher proportion of higher education, stronger ability to discover information, more attention to the emotional value consumption brings, and a greater willingness to try different life possibilities. [42] Generational characteristics of the post-00s generation Image source: Ruicong Consulting Therefore, consumers are more inclined to products that match personal preferences, including "low burden," clean ingredients, and the ability to provide specific emotional value. This trend is reflected in the beverage market in that finding the "common denominator" that meets consumer preferences will become increasingly difficult in the next decade. Instead, products targeting specific consumer groups and meeting their special needs are more likely to win market favor. "Genki Zizai Shui" favored by young people Image source: Xiaohongshu For example, Genki Forest launched a new herbal tea drink called "Zizai Shui" in February 2023. "Zizai Shui" has three products: red bean and coix seed water, red date and goji berry water, and refreshing mung bean water. The entire line has clean and simple ingredient lists, refreshing taste, and attracts many young consumers with its health-preserving positioning. The health-preserving attribute of "Zizai Shui" is related to memory: red bean and coix seed water, red date and goji berry water, and mung bean water represent the warmth and care of childhood. Genki Forest pre-packaged them, bringing back memories that are hard to buy, capturing consumers' needs for emotion and health. Examples from overseas markets also confirm this trend. American sparkling water brand OLIPOP, founded in 2018, focuses on prebiotic and dietary fiber low-sugar sparkling drinks and has gained favor among American consumers, with sales reaching $34.4 million in 2022. As of 2023, OLIPOP has completed six rounds of financing. [43] Therefore, we predict that "pan" functional drinks will be a new category with huge growth potential in the next 10 years.

(III) Channel Changes Reshape Sales Methods and Drive New Category Growth

In the next decade of beverages, the traditional offline "factory-distributor-retail" system will still account for the majority of beverage sales channels, and classic categories such as carbonated drinks, sugary tea, ambient juice drinks, and packaged water will still occupy the main market share. However, channels are being reshaped: emerging online channels represented by Pinduoduo and Douyin, catering channels rising around brand chainization, membership store channels represented by Sam's Club, convenient retail channels represented by convenience stores and vending machines, discount stores represented by Hi-Tech and HotMaxx, bulk snack stores represented by Snacks Busy, Zhao Yiming, and Haoxianglai, and instant retail represented by Meituan Flash Purchase... The rise of emerging channels will reshape the way beverages are sold in the future and ultimately reshape the beverage category landscape.

1. Traditional Retail Channels: Classic Products Will Still Occupy an Absolute Share

In 2022, beverages sold offline accounted for the lowest proportion of the total market in recent years, but still accounted for 91.2% (Euromonitor International). Based on this, it is predicted that by 2032, the proportion of offline sales channels will still not be lower than 80%. Changes in the proportion of beverage sales channels in China Data source: Euromonitor International To distribute their beverage products to hypermarkets, convenience stores, discount stores, and small retail stores, companies will still need to rely on the "factory-distributor-retail" distributor system in the future. This also means that established companies like Coca-Cola, Nongfu Spring, Master Kong, and Uni-President, which have been deeply involved in the distributor system for many years and understand local sales rules, remain strong. In the next 10 years, traditional beverage giants will continue to maintain their advantage in traditional channels with their strong supply chains and extensive distributor networks. They will consolidate their leading position by adhering to low-price strategies, especially in categories such as carbonated drinks, packaged water, ice black tea, and orange juice drinks, where market space will remain stable. Hema offline retail store Image source: Weibo @Hema

2. Emerging Offline Channels: Convenience Stores and Catering Channels Drive Growth of Emerging Brands

In the next 10 years, we cannot ignore emerging offline consumption channels such as convenience stores and catering channels, as well as emerging beverage brands born from these channels. In 2009, convenience stores accounted for 8.7% of the entire beverage sales channel. Despite the overall decline in offline channels, this proportion reached 11.8% in 2022, and it is expected to continue growing rapidly in the future. From a penetration perspective, the average number of people covered by convenience stores in mainland China in 2022 was 4,751 people per store, a significant decrease from 7,033 people per store in 2021, indicating improved penetration. However, compared to 2,308 people per store in the United States and 2,204 people per store in Japan, mainland China's convenience store market still has enormous growth space. [44] Guozishule sugar-free tea series product image Image source: Guozishule official website In convenience stores, consumers pay more attention to shopping convenience, relatively less attention to brand and price, and are more willing to try new products. In the past, Genki Forest relied on convenience stores to open up the sugar-free sparkling water market. Today, emerging tea and juice brands like Guozishule, which focus on shelf-driven sales, are also expanding through convenience store channels, gaining their own market share. The growth of convenience stores also benefits the expansion of low-temperature, short-shelf-life beverages. Originally, the development of low-temperature beverages such as juice and ready-to-drink tea was limited by factors such as short shelf life and the need for refrigeration, requiring compromises in flavor. But the expansion of convenient channels represented by convenience stores has solved this problem and will also release growth space for freshly squeezed and fresh low-temperature beverage categories. Haowangshui, Dayao soda product images Image source: Tmall Supermarket On the catering side, catering channels need beverage products that have attributes of relieving spiciness and greasiness, and whose brand positioning matches the dining atmosphere. At the same time, in catering channels, consumers are more willing to accept products with higher premiums. For example, Haowangshui, which specializes in hawthorn juice drinks, designs its entire brand from flavor to packaging to serve the catering channel, achieving sales of 500 million yuan with a team of just over 100 people [45]; Dayao soda, through precise marketing in catering channels such as hot pot, barbecue, and snacks, is moving from Inner Mongolia to the whole country, revitalizing itself [46]; grapefruit juice brand Youxianggu targets the dining and thirst-quenching scenario, with annual sales exceeding 400 million yuan. [47] From 2019 to 2022, the chainization rate of China's catering industry increased by 7.7 percentage points to 20.7%, growing rapidly but still far below the 59% in the United States and 58% in Japan in 2021, and also below the global average of 34% in 2021. [48] Coupled with consumers' expectations for high quality and standardization in the catering industry, the chainization rate of China's catering industry will continue to rise in the next decade. This not only means that beverage brands relying on catering channels will have greater growth space, but also that new brands have the opportunity to compete differently with traditional brands through catering channels, or even overtake them on curves.

3. Online Retail: Opportunities for Niche Categories to Be Heard

Online channels will continue to grow rapidly in the next 10 years, and changes within e-commerce platforms may even reshape the way beverages are sold. According to the Qianzhan Zhongtai Database, sales of packaged beverages on Tmall, JD.com, and Douyin have increased year by year, reaching 13.3 billion yuan in 2022, more than doubling compared to 2019. Not only is there overall growth, but online retail is also evolving: Douyin's beverage sales are expected to surpass JD.com in 2023; and besides these three online platforms, Pinduoduo, which focuses on low prices and discounts, is also growing rapidly, with its market value approaching Alibaba's in November 2023. Changes in sales of packaged beverages on online platforms Data source: Qianzhan Zhongtai Database Pinduoduo and Douyin represent two future sales models for beverages. One is represented by Pinduoduo, which compresses prices to attract customers. In this model, beverage brands need to give up more profit margins, squeeze costs as much as possible, and win with "low price and high quality." The other is represented by Douyin, which relies on live streaming's "interest-based e-commerce" model. This model has advantages that traditional channels cannot achieve, such as "low price, instant interaction, and audience focus," which precisely targets the core needs of contemporary consumers who "crave emotional connection, focus on core functions, and are price-sensitive." Online, the importance of "low price" and "interest" has increased, the weight of product taste, function, and cost has increased, while the influence of brand and marketing has decreased, and competition will be on the same starting line. Moreover, compared to offline retail, the entry barrier for online retail is lower, creating opportunities for niche brands to stand out. A recent example is the niche fruit prune juice, which has been selling well. On the Douyin platform, core selling points of prune juice such as "promoting bowel movements" and "weight loss" are amplified by "interest live streaming," precisely delivering to consumers with related needs, thus driving the popularity of this category and related products. According to Star Chart data, during the 2023 Double 11 shopping festival, the TIQ brand, which mainly produces prune juice, ranked second in sales under the live streaming e-commerce category, second only to Nongfu Spring.

(IV) Opportunities for Going Global

Chinese beverage companies have shown a "restlessness" to explore overseas markets. In the next 10 years, they may continue to make efforts in going global, with opportunities to expand to the global market. Globalization is changing from an option to a necessity for Chinese companies. The successful expansion of new tea drinks has already set the precedent for the packaged beverage industry. As of November 2023, Mixue Ice City has opened nearly 4,000 stores overseas. [49] Brands such as Naixue Tea, Chagee, Heytea, ChaBaiDao, and Tianlala have successively entered overseas markets. Heytea even officially announced on December 8, 2023, that it opened its first U.S. store in New York; Luckin and Cotti chain coffee brands also entered Southeast Asia, Japan, and South Korea this year. In the beverage industry, in December 2022, Genki Forest's overseas version of aluminum can sparkling water entered the top 10 best-selling sparkling water on Amazon US and occupied the top three new product rankings, becoming the only Chinese beverage brand on the list. [50] But overall, the "going global" development of China's beverage industry has not yet shown obvious results. However, the internationalization of China's catering industry, the expansion of cross-border e-commerce overseas, and the globalization of Douyin are all providing new momentum for Chinese beverage brands to go global; on the other hand, markets in Southeast Asia, the Middle East, and Africa, whether due to cultural similarity, geographical proximity, or consumption growth potential, bring huge opportunities for Chinese companies to go global.

1. Catering Channels: Seizing Mindshare and Building New Scenario Consumption Needs

Chinese beverage brands can hitch a ride on the overseas expansion of the catering industry. Since 2012, Haidilao has opened 115 restaurants in 11 countries across four continents [51]; Xiabuxiabu has established an overseas business department, planning multi-brand layouts in markets such as Singapore and Malaysia. In addition, various Chinese food brands such as Yunhaiyao, Tai Er Sauerkraut Fish, Grandma's Home, and Yang Guofu have begun to explore "going global." The deepening globalization of Chinese catering companies will also directly drive the overseas expansion of Chinese beverages. For example, Chinese students and overseas Chinese have drunk Wanglaoji and Vitasoy soy milk in overseas Chinese restaurants. Chinese beverages drunk by overseas Chinese in Chinese restaurants Image source: Xiaohongshu users @Buerjia, @Beiqizai Mexico

2. Cross-Border E-commerce: Low-Cost Channels to Fill Market Gaps

On the other hand, cross-border e-commerce is becoming an important platform for Chinese beverage brands to go international. According to Frost & Sullivan data, China's cross-border e-commerce export scale reached 3.2 trillion yuan in 2022, with a compound annual growth rate of 27% from 2019 to 2022. [52] As early as 2019, Genki Forest cooperated with domestic cross-border e-commerce platform Alibaba International Station. [53] In addition to cooperating with domestic e-commerce platforms, platforms such as Amazon, eBay, Panda Fresh, and overseas online Chinese supermarkets also provide new internationalization paths for many Chinese beverage companies. For example, Genki Forest further expanded its U.S. market through Walmart's online mall and Amazon. [50] Wanglaoji has also entered platforms such as Yami and Amazon to accelerate its "going global" journey.

3. Market Opportunities: Southeast Asia, Middle East, Africa

We predict that in the next decade, the main markets for Chinese beverage exports will be concentrated in Southeast Asia, the Middle East, and Africa. The total number of overseas Chinese in Southeast Asia is approximately 33.486 million, accounting for 73.5% of the global total. [54] Southeast Asian countries have high cultural similarity with China, closer tastes, and geographical proximity advantages. On the other hand, the Southeast Asian beverage market lags in product updates but has huge consumption potential. Taking energy drinks as an example, in 2021, Thailand's per capita energy drink consumption was about one-third of that in the United States; Japan, another Asian country, had per capita energy drink consumption nearly twice that of Thailand. [55] Reports also point out that the rapid growth of manufacturing and industry in Southeast Asia has led to an expansion of the worker population, and increased work intensity will drive demand for energy drinks. [56] Dongsheng Beverage seized the opportunity to "go global" to Southeast Asia, with its products already listed on e-commerce platforms like Shopee and in Chinese supermarkets. In addition, the Middle East and Africa will become new growth points for many companies seeking international expansion. In the Middle East, due to poor tap water quality, demand for bottled water is growing. For example, the UAE's bottled water market is expected to expand at a compound annual growth rate of 11.02% over the next five years. [57] Additionally, hot climates, a growing young population, and increased health awareness are also promoting the development of the local beverage market, such as Saudi Arabia's soft drink market with a compound annual growth rate of 8.56% from 2020 to 2027. [58] Overall, the Middle East has a population of 490 million, with per capita consumption power 3 to 5 times that of China; the internet penetration rate of the six Gulf countries exceeds 95%, far higher than the world average. [59] Extremely high consumption power and rapidly growing demand create opportunities for Chinese beverages to enter the Middle East. Africa is a market with underestimated potential. Although Africa's economic growth slowed to 4.1% in 2022, it remains one of the regions with the most significant recovery and strongest growth globally, second only to Asia. [60] Chinese companies have created multiple market benchmarks in Africa. Food companies represented by Angel Yeast, after entering the African market in 2013, generated revenue of 710 million yuan in 2021. [61] Recently, Yili's Joyday ice cream was also launched in the largest chain supermarket Shoppers in Tanzania's capital and 65 other mainstream chain supermarkets. As many African countries seek economic transformation and the rise of e-commerce and mobile payments, China's beverage market also hopes to explore new development opportunities in this market. Although developed country markets are more mature, Chinese beverage brands can still achieve overseas expansion by adapting to local needs and cooperating with multiple channels such as catering. For example, given Australia's large number of coffee shops (216,000) and rapidly growing demand for plant milk (48% growth in the past four years), Chinese plant milk brand Finom chose it as the first stop for overseas expansion. [62] Summary Even though the beverage market is expected to grow by nearly 200 billion yuan in the next decade, it will still be a highly competitive market. Moreover, compared to the past, there are more market entrants, consumer preferences have become more complex, and channels are more diverse... Extreme market segmentation will make it more difficult to launch successful products using traditional channel thinking or big single product strategies. However, on the other hand, market segmentation also means more opportunities. Brands that can seize emerging or niche consumer groups, category iteration opportunities, and adapt to channel changes will have more chances to be noticed by consumers, thus having a greater possibility of achieving market breakthroughs. 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