---
title: "The Shelf War in Lower-Tier Markets: Do Sugar-Free Beverages Stop at the County Level?"
description: "Sugar-free beverages occupy a very small share of shelves in third-tier cities. As the frontier of consumer innovation, first- and second-tier cities always lead trends, but can these trends be accepted by consumers in lower-tier markets? Yuanqi Capital recently surveyed supermarket shelf samples in lower-tier cities."
author: "元气酱"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-08-08"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/eP6n7Vht7ZzhSCBe-IpQLA"
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---

# The Shelf War in Lower-Tier Markets: Do Sugar-Free Beverages Stop at the County Level?

> Sugar-free beverages occupy a very small share of shelves in third-tier cities. As the frontier of consumer innovation, first- and second-tier cities always lead trends, but can these trends be accepted by consumers in lower-tier markets? Yuanqi Capital recently surveyed supermarket shelf samples in lower-tier cities.

**Click the image above for details**
Sugar-free beverages occupy a very small share of shelves in third-tier cities.
As the frontier of consumer innovation, first- and second-tier cities always lead trends, but can these trends be accepted by consumers in lower-tier markets? Yuanqi Capital recently surveyed supermarket shelf samples in lower-tier cities.
Liuzhou, Guangxi, is typically considered a third-tier city and is also a current "internet-famous" city—most known for its river snail rice noodle industry and the former "divine car" company Wuling Motors. Currently, the booming river snail rice noodle industry has become one of Liuzhou's pillar industries, and the city even has a dedicated river snail rice noodle industrial park.
In Liuzhou, there are only two Starbucks stores in the entire urban area. A Wuling Motors engineer told Yuanqi Capital that he rarely goes there, dislikes meeting friends there, and finds it "too formal." In contrast, in Jinxiu County, Laibin City, which is even smaller, there is not a single café in the urban area, but **milk tea shops are everywhere**, and most of their customers are young people.
Liuzhou lacks the chain convenience stores like Lawson and 7-Eleven that are ubiquitous in first- and second-tier cities. Instead, there are self-operated small supermarkets. Some small shops hang up "convenience store" signs just to appear "trendy," but they are still essentially "mom-and-pop stores." Some small supermarkets borrow the shelf display methods of convenience stores and also reference their product selection, **insisting on a small but refined range of categories**.
Regarding soft drinks on the shelves, although sugar-free beverages are all the rage in first- and second-tier cities, third-tier city supermarkets do carry sugar-free drinks like Genki Forest and Chali Wang, **but they currently occupy a very small share of the shelves**. According to store staff, these products "sell moderately," and in the even smaller Jinxiu County, **there are no sugar-free beverages at all**. It can be said that sugar-free drinks are still confined to larger cities and have not yet reached more down-market counties.
**-01-**
**Sugar-Free Beverages Stop at the County Level**
In community small supermarkets in Liuzhou, Genki Forest is also displayed. In addition to sparkling water, Genki Forest's new milk tea and "Ran" series drinks also appear on the shelves.
The chain brand Lianhua Supermarket is everywhere in Liuzhou, and Lianhua also stocks quite a few Genki Forest drinks. Sparkling water is standard, but the assortment varies by store: some have the Ran series, some have the milk tea series, and some have everything. Genki Forest's sugar-free sparkling water has some coverage throughout Liuzhou.
Small supermarket in Liuzhou
Besides Genki Forest, Uni-President's brand "Chali Wang" also focuses on sugar-free products and is available in certain large and small supermarkets. Whether sugar-free beverages enter a store also depends on the supermarket itself. For example, "Lao Lin Ju," a supermarket brand that has been operating in Liuzhou for nearly a decade, only carries Chali Wang's sugar-free drinks, not Genki Forest. According to staff feedback, sales of sugar-free beverages are average, and not many people drink them.
Lao Lin Ju supermarket
As a new brand, Genki Forest can be seen on the shelves. However, overall, the proportion of sugar-free beverages is still relatively small, and they are not placed in prime positions (lower shelves). The shelf positions are occupied by products from major channels, such as old beverage brands like Uni-President and Nongfu Spring.
A community Lianhua supermarket in Liuzhou
Sugar-free beverages are gradually being accepted in Liuzhou, **but in Jinxiu County, Laibin City, there is no trace of sugar-free beverages at all**. In the supermarket opposite the central square in Jinxiu County, the shelves are stocked with "old" drinks such as milk tea, rock sugar pear, and iced black tea, with no sugar-free beverages in sight. Moreover, dairy drinks like Wahaha's Nutri-Express and Yinlu's peanut milk occupy a large space on the shelves, nearly a quarter of the entire shelf.
Jinxiu County is also a tourist area with many visitors, but the supermarkets here still do not sell many new products. As a fifth-tier city, the absence of sugar-free beverages indicates that this trend still has room for further growth, but in the short term, companies need to find ways to gain consumer recognition.
Supermarket near the central square in Jinxiu County
In large supermarkets like Walmart, the beverage selection is very rich, with sodas and carbonated drinks still being the mainstream, while sugar-free sparkling water is relatively scarce.
A Walmart supermarket in Jinxiu County
In terms of sparkling water, besides Genki Forest, there are other brands, such as **Youzhen sparkling water**. Many companies have begun to follow the sparkling water category.
Beyond sparkling water, soda water is also taking up an increasing share of the shelves, with more brands and quantities than sugar-free sparkling water. Soda water is also sugar-free, has a fizzy taste, and is about 40% cheaper than sugar-free sparkling water. In terms of taste, soda water is slightly better than purified water, and its price is similar to purified water.
Many local small supermarkets have a wide variety of soda water brands
Overall, tea drinks and carbonated beverages remain the most popular categories, occupying the widest shelf space, and products from strong-channel brands like Uni-President, Coca-Cola, and Wahaha still hold a greater advantage in variety and quantity.
**-02-**
**Few New Functional Beverages**
In terms of functional beverages, all supermarkets in Liuzhou stock them, but they are generally placed at the top of the shelves, including Red Bull, Dongsheng, and Coca-Cola's Monster. Monster is sold in Walmart and Lianhua supermarkets, but in smaller community stores, it is less common. The most common functional beverages in community small stores are Red Bull, Dongsheng, and Zhanma, and Nongfu Spring's mineral drinks are also quite common.
A community Lianhua in Liuzhou
Local Walmart supermarkets have a wider variety of functional beverages, including Pepsi's Gatorade, Coca-Cola's new functional drinks, and many products like Jianjiao, Mizone, Red Bull, and Nongfu Spring mineral water. In a county like Jinxiu, functional beverages are basically limited to Red Bull and Dongsheng. In Liuzhou, functional beverages are mostly consumed on special occasions, and consumers generally associate them with driving, exams, and sports; they rarely drink them on other occasions.
Walmart in Liuzhou
Red Bull and Dongsheng have such strong recognition that their usage scenarios are limited. In contrast, lightly functional beverages, such as mineral drinks or those with a small amount of functional ingredients, have a wider variety and quantity, indirectly indicating that the market for drinks between purified water and strong functional beverages is larger and more accepted by consumers.
**-03-**
**The Channel Dominance Effect in Beverages Remains Strong**
Soft drinks are a channel-heavy industry. If the channel is strong, even products that are not very novel can still capture a large market share, especially in lower-tier markets. In supermarket shelves, the products that can be widely distributed are mostly relatively traditional brands. When new products appear in the market, these brands can act as "followers" based on market response and leverage their strong offline channels to win.
This situation is even more pronounced in Jinxiu County: **In fifth-tier cities, beverage shelves have almost no new brands**, and even drinks that look new are from old brands with strong channels.
In the lower-tier cities we visited, Wahaha still occupies a large proportion. A significant portion of Wahaha's revenue depends on lower-tier markets, especially in dairy drinks, where it holds a large space in both products and categories.
A supermarket in Liuzhou
Below fifth-tier cities, there is also a preference for dairy-related drinks. Products like Wahaha, Daliyuan, and Yinlu dairy drinks occupy a relatively large share of supermarket shelves, which is uncommon in third-tier cities like Liuzhou.
A corner of a supermarket in Jinxiu
Excluding factors of city layout strategy, according to Yuanqi Capital's research, sugary drinks remain the mainstay on shelves in lower-tier cities. **For new soft drink categories, to build consumer mindshare in a broader market and secure a place on the shelves, they may need not only "internet-famous" attributes but also the strength to win in head-to-head competition.**
Source: Yuanqi Capital (ID: yuanqicapital)
Analyst: Bu Yao


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