Functional beverages and energy drinks—many people may not have a clear distinction between the two. Let's first look at the differences.

'Functional beverages' refer to drinks that adjust the content and proportion of natural nutrients to meet the nutritional needs of specific groups, with the function of regulating body functions but not for treating diseases. They are divided into four categories: energy drinks, sports drinks, nutrient drinks, and other special-purpose drinks. They can be further subdivided into energy-supplementing drinks, electrolyte drinks, vitamin drinks, digestion-promoting drinks, weight-loss drinks, immunity-boosting drinks, etc.

'Energy drinks' are beverages primarily aimed at supplementing the body's required energy. The principle of energy supplementation is that after consuming an energy drink, the vitamins (usually B vitamins) and sugars (usually white sugar) interact to convert into energy needed by the body, combined with the synergistic effects of taurine and caffeine, to achieve the purpose of replenishing physical strength and relieving fatigue.

Development of Domestic Functional Beverages

With the continuous enhancement of China's national strength, the improvement of national consumption capacity and cultural confidence, and the maturity and growth of the new generation of consumers (Generation Z), new consumption scenarios are constantly emerging, and consumption demands are becoming increasingly diversified (taste, health, packaging, tone, etc.).

The beverage market, especially the functional beverage market, has developed rapidly over the past decade and is unrivaled.

First, there is Red Bull, entangled in lawsuits and weak in advertising, yet its market share remains unchanged. In the middle, there is Eastroc, seizing the opportunity, leveraging the capital market, and rapidly expanding its national layout. At the back, there is Genki Forest's Alien electrolyte water, which has gained popularity, surpassing Gatorade. Furthermore, there are foreign brands like Monster and Celsius from the US, Carabao from Thailand, and domestic brands like Wahaha's Qili, Dali's Lehu, Yili's Huanxingyuan, New Hope's Bafu, and Panpan's Baofali—a host of powerful manufacturers flocking in, making the entire functional beverage market turbulent and fiercely competitive.

However, beneath the bustling scene of crowded and lively gatherings, the reality is not optimistic—it's a mess, and only those involved know the true situation. In the energy drink segment, apart from the dominant Red Bull still ruling the roost and Eastroc soaring with the help of capital, too many products are indecisive in positioning between high-end and low-end, imitating others in channel and advertising layout, repeatedly failing or retreating in defeat. The international situation is magnificent, and the once-in-a-century changes are unfolding; how can the beverage industry remain immune? "Faint fragrance floats in the moonlit dusk," and beneath the surface, there are hidden battles. A struggle for supremacy, like the Chu-Han Contention, may be underway... It is still too early to discuss the success or failure of these energy drink brands, as it may be like the pot calling the kettle black. So let us first look at the staged successes of Red Bull and Eastroc; history seen from different perspectives may illuminate the future...

The Dominant Red Bull

China Red Bull was introduced to China at the end of 1995 by Thai-Chinese businessman Yan Bin. With its grand Spring Sugar Fair exposure and CCTV advertisement "Red Bull Comes to China," it announced the beginning of the domestic functional beverage category. At that time, the brand, born in 1966 to Thai-Chinese businessman Xu Shubiao and developed in 1987 by Austrian businessman Dietrich Mateschitz, had been renowned in Southeast Asia and Europe for nearly three decades. As a refreshing drink supplementing vitamins and energy, it began to expand and rapidly lay out in mainland China with an absolute high-end image at a retail price of 5 yuan per can. The target consumers at that time were mainly professional drivers and a small number of newly wealthy businessmen, with slogans like "Cars need fuel, I need Red Bull" and "Tired and sleepy? Drink Red Bull," hoping to achieve instant success.

Unexpectedly, things did not go as planned. At that time, China's reform and opening-up had just been accepted by the whole people. Except for a few special economic zones like Guangzhou and Shenzhen, the average monthly income of urban residents nationwide was only about 500 yuan. Five yuan was enough for an ordinary person to have a daily lunch at a restaurant. Drinking a can of Red Bull was equivalent to a lunch, and frankly, few could afford it, let alone consume it frequently. At a time when common beverages were priced around one yuan, Red Bull's distribution rate was not high, and sales were not good. As a result, Red Bull became a loud voice but a small wife—advertising was loud, but sales remained lukewarm. At that time, Red Bull's headquarters was in Shenzhen, and the national sales team, like other beverage manufacturers, came from all over, mostly amateurs, with few truly understanding marketing. They fumbled and struggled, constantly making mistakes based on their own understanding, impressions, and perceptions of the consumer market and sales work. From general manager, sales director, minister to provincial heads and chief representatives, they changed frequently, bustling with activity. By 2004, Red Bull finally exceeded 1.5 billion yuan, but a sick leave notice from General Manager Fang Weizhong shattered everyone's dream of stable development. Just as internal discussions and unrest were brewing, Red Bull's CFO Wang Rui was appointed as general manager at a critical moment. At that time, China joined the WTO in 2001, opening its market to the world, with rapid economic growth. International FMCG giants like Coca-Cola, PepsiCo, P&G, Unilever, and Danone increasingly favored China's consumer market and began large-scale entry, indirectly cultivating a batch of professional FMCG talents for the domestic consumer industry. After the Spring Festival in 2005, Ma Yonghong, with a deep Coca-Cola background, was invited to Red Bull as sales director, bringing the then-advanced deep distribution system. The former sales minister was transferred to market director, learning from European Red Bull and hiring top media planning companies like Ogilvy to build a brand strategy centered on sports marketing. With this, the troika leading Red Bull's rapid development was assembled, and all conditions—timing, location, and harmony—were in place, ushering in an era of stability without turmoil... China Red Bull then embarked on the fast track of high-speed development.

However, the higher you climb, the harder you fall. In 2015, Red Bull reached a sales peak of 23.4 billion yuan, but several senior executives left one after another, causing undercurrents. With the expiration of the joint venture's operating period, the brand owner, Thailand's TCP Group, entered China and engaged in a market and brand battle with Huabin Group that remains unresolved to this day. Red Bull has returned to turmoil.

Runner-up Eastroc's Catch-up

On February 20, 2023, Eastroc Beverage released its 2022 annual performance report, with cash received from sales exceeding 10 billion yuan, achieving a breakthrough of over 10 billion yuan in annual revenue collection for the first time. As the first domestic energy drink brand to break the 10 billion mark, it is indeed commendable.

Eastroc Beverage was founded in 1987 as a state-owned beverage manufacturer in Shenzhen. In September 2003, Eastroc transformed from state-owned to private through "employee collective shareholding." At its inception, Eastroc was very weak, lacking both strong financial strength and deep international or domestic background. Relying on the geographical advantage of being in Shenzhen, the forefront of reform and opening-up, and the consumption advantage of relatively concentrated newly wealthy people, it launched a 250ml Tetra Pak product with high cost-performance compared to Red Bull, and later introduced the 250ml small square bottle that sold well in Guangdong for over a decade. Those familiar with this history in the FMCG industry should remember these two initial products of Eastroc. The packaging and logo design were not impressive, but they won on taste and cost-performance. This was not necessarily Eastroc's voluntary choice to lower its status, but due to the differences in origin and strength between Red Bull and Eastroc, Eastroc could only adopt a sales strategy of "starting from cost-performance, encircling the cities from the countryside." The most direct manifestation was then and continues to this day: high-end people and formal occasions drink Red Bull, while ordinary workers drink Eastroc for refreshment and relief. Eastroc, having tested the waters, was never content to remain a regional brand. While stabilizing Guangdong, it also expanded to neighboring regions like Guangxi, Hunan, and Fujian, and attempted to enter central and northern regions through market contracting, but with little success.

Except for neighboring provinces like Fujian and Guangxi, which gradually improved due to rapid income growth, increased personnel interaction, and the radiation and influence of Guangdong's consumption habits, other regions frequently fell into the awkward situation of entering, exiting, re-entering, and re-exiting. Until 2019, Eastroc's revenue was only 4.2 billion yuan, while Dali's Lehu had over 3 billion yuan, roughly on par, with no significant gap. Real changes often occur outside the market (channels, terminals) that people focus on: due to Red Bull's turmoil since 2016, the huge disparity in per capita energy drink consumption between Europe, the US, and China, and expectations of China's vast future market space, capital keenly sensed the opportunity! After reviewing the current state of domestic energy drink brands, in 2017, Eastroc received support from the capital market, leaping from an inland lake to the sea! Outsiders only see that Eastroc suddenly increased investment in marketing and media promotion, frequently sponsoring and placing products in popular TV dramas, variety shows, and major events; the internal sales team expanded rapidly, and a digital marketing system was heavily invested in, thinking this was the secret to Eastroc's transformation and rebirth. Little do they know that without the injection of massive external funds, relying solely on Eastroc's original sales and profitability, it would be difficult to achieve its current soaring success and cross the ceiling of 10 billion yuan, achieving a magnificent turnaround.

Current Landscape and Prospects of the Energy Drink Market

Undoubtedly, with Red Bull's internal strife and Eastroc's milestone of crossing 10 billion, the energy drink market is about to break the stable situation of Red Bull's dominance and usher in a multipolar pattern with two strong players and a host of powerful contenders eyeing the market and fighting fiercely. Whether this new pattern can stabilize and how long it will last remains to be seen. Because we are facing a chaotic moment of unprecedented changes, with gray rhinos and black swans frequently appearing—a situation we may be unwilling to face but must confront. "When times are favorable, heaven and earth work together; when fortune wanes, even heroes are not free." It should be said that the success of every domestic energy drink brand so far is primarily attributed to the vigorous and rapid development of China's market economy, the rapid improvement of people's consumption levels and capabilities, coupled with their own correct selection of market segments and marketing strategies, and persistent and increasingly efficient team execution. This is an era of high growth. So, facing the new normal of low economic growth and intense competition across all industries, facing the cautious, diverse, and demanding consumption gaze of the new Generation Z consumer group, and facing the current low-growth era, will our past successful development paths continue to apply?

The power of capital has accompanied the rapid development of the internet industry for nearly two decades, shaping one industry miracle after another in China. Its entry into the energy drink market is just beginning (so far, only Eastroc and Genki Forest have been relatively successful). In the next decade or even two decades, with the support of capital, I believe that emerging beverage brands will see more and more hit products, enriching the already splendid FMCG world. Perhaps one day, China's "Coca-Cola" or "Pepsi" will be born, and "China's, and also the world's" will no longer be an empty phrase! Let us wait and see...

Postscript: The energy drink market is highly competitive, with brands constantly rising and products continuously innovating. We will continue to publish an article titled "My Views on New Product Breakthroughs in the Domestic Energy Drink Market" in the future. Stay tuned!

About the Author: Founder and General Manager of Zhanying Energy Drink; formerly served as General Manager of Huabin Red Bull in multiple provinces, Northwest Regional Manager of Carabao China, and has held roles as regional partner and marketing consultant for several startup energy drink brands.