Introduction: Catching the right trend and choosing a highly differentiated small category makes it easier to survive in the fiercely competitive beverage market.

China's non-alcoholic ready-to-drink (NARTD) market is a trillion-yuan market. This market is large and steadily growing, attracting many players over the years and creating many wealth myths.

Previously, the head of beverage giant Wahaha repeatedly topped the list of China's richest people; later, Nongfu Spring went public with a hundred-fold PE valuation, sending its founder to the top of China's rich list. And Yuanqi Forest, founded only a few years ago, has already reached a valuation of hundreds of billions in the primary market. From this perspective, although the beverage industry is highly competitive, it is also a track that easily produces giants.

Recently, we interviewed Xu Yingbin, founder of the emerging brand "Qingle" fruit vinegar, which innovates in a sub-category. He leads a team focused on developing innovative fruit vinegar beverages, creatively aligning the product with the human health curve, continuing the brand's light and airy temperament, while evoking associations with "weight loss and fat reduction" through brand creativity and product visuals. The brand conveys the emotional message of "refreshing taste, light body, and relaxed mood" to consumers, meeting current social emotional needs.

Today, we use "Qingle" as a case study to see what big opportunities lie hidden in small sub-categories.

Three Major Trends in the Beverage Market

With the emergence of Yuanqi Forest in recent years, more and more new players have rushed into this track, gradually changing the competitive landscape of the market. More new players, more innovative categories and tactics, actually stem from new opportunities brought by changes in industry trends. We have observed the changes in the beverage market in recent years and summarize them into the following three major trends:

1. Health Trend

Yuanqi Forest seized the sugar-free health trend, emerging with 0-sugar, 0-fat, 0-calorie sparkling water. More health concepts have been proposed, which actually stems from consumers' increasing health awareness, reflected in daily diets, forming new consumer demands. In the past, beverage consumers only cared about whether the drink tasted good; in the future, more and more consumers will care about whether the drink is healthy and whether the ingredient list is clean.

2. Consumption Upgrade Trend

In the past 30 years, the mainstream price range for bottled beverages in China has been around 2-4 yuan. Yuanqi Forest broke this price range through the sugar-free concept, achieving product premium. More and more upgraded products are appearing on the market, such as Haowangshui, which focuses on original fruit brewing, and HEYTEA juice tea, which focuses on 50% real juice.

Therefore, the increase in consumer income levels makes higher beverage prices more acceptable, providing more room for innovation for new players in this industry and activating the entire market.

3. Diversification Trend

The diversification of Chinese consumer demand is also reflected in the bottled beverage market. More and more consumers are no longer satisfied with Coke, Sprite, Wanglaoji, etc., which they have been drinking for 20 years. Young consumers need new things and new brands, which has also given rise to many innovative sub-category players, such as Lemon Republic and Yizheng Gen.

Moreover, the large scale of China's beverage market and the significant differences in consumer demographics determine that the lower limit for small players on this track can be high enough. Many sub-category or regional market players have annual revenues of 1-2 billion yuan.

Amid these market changes, during our interview with Xu Yingbin, we also conducted in-depth research on the fruit vinegar beverage category to which their products belong.

It is worth noting that Xu Yingbin has over ten years of FMCG experience, having held management positions at Coca-Cola China, HEYTEA, and other leading companies, focusing on the bottled beverage track. His team also includes professionals from leading FMCG companies such as P&G, Nestlé, and Mars. We believe that such a professional team must have their reasons for choosing the fruit vinegar beverage sub-category.

Big Opportunities in Small Categories

Xu Yingbin mentioned that the competition in China's beverage market is too fierce. Major categories now have big players, and it is difficult to capture consumer mindshare within existing major categories. From an entrepreneurial perspective, many people like to make micro-innovations in major categories, but we prefer to catch the trend and choose a more differentiated small category to capture category mindshare. This way, it is easier to survive in the fiercely competitive beverage market without falling into a war with giants.

Indeed, fruit vinegar beverages are much more accepted in Japan, South Korea, Europe, and the United States than in China. This category has natural health attributes.

In China, more and more people are drinking fruit vinegar in different product forms, the most common being apple cider vinegar drinks or apple cider vinegar concentrate. This shows that Chinese consumers already have a certain health awareness of fruit vinegar, and the growth trend is obvious. Currently, the fruit vinegar beverage market in China is not large, and there are no national big players. For Qingle, this is an opportunity, and they believe that fruit vinegar beverages can be made big in the future.

We observed that there is currently no absolute winner in the fruit vinegar track.

Xu Yingbin is very confident about this. He said: "We are not worried that market competition will defeat us. Currently, not many players in the fruit vinegar beverage market are doing category education; most are still playing price wars, because many companies have not leveraged the advantages of fruit vinegar beverages compared to other categories. If someone comes to make better fruit vinegar beverages with us and lets more people know the health attributes of fruit vinegar beverages, even if the player who ultimately occupies the fruit vinegar beverage category mindshare is not us, we are still happy to be participants in this trend. However, I am confident in our team. New consumption requires doing well in product, brand, and channel, which is inherently difficult, but our team's experience and professionalism are our advantages."

Xu Yingbin described his understanding of the beverage market and the reasons for choosing fruit vinegar beverages. So what is fruit vinegar?

Fruit vinegar is made from fruits or fruit juice as the main raw material. Through modern biological fermentation technology, the fructose in the fruit is converted through secondary fermentation into beneficial acetic acid, while producing rich amino acids and organic acids. Multiple animal and human experimental studies at home and abroad have shown that adding fruit vinegar to the diet can effectively promote digestion and absorption, lower fasting and postprandial blood sugar, and long-term consumption can also control blood lipids and weight. It is a "superfood" with inherent health benefits.

A 2015 survey study showed that per capita vinegar consumption in the U.S. market was 1.4 kg/year, and in Japan it was 1.8 kg/year, far higher than China's 0.2 kg/year in the same period. The more diverse forms of vinegar beverages, richer flavors, more diverse brands, and clear and recognized understanding of product efficacy in the market are all important prerequisites for the maturity of vinegar beverages in developed beverage markets.

Therefore, China's fruit vinegar market has a very large upside, and the future is a blue ocean.

Qingle's Product Logic

In product development, Qingle fruit vinegar focuses on two main aspects:

1. Optimizing the taste of fruit vinegar

2. Enhancing the efficacy of fruit vinegar

In terms of taste, to make fruit vinegar more delicious, Qingle fruit vinegar has been carefully designed in its formula.

First, it innovatively introduces more fruit flavors. Xu Yingbin believes that fruit vinegar should not be limited to a single apple flavor. To appeal to more young consumers, this category can have more possibilities in flavor.

Second, the product is compounded with up to 30% real fruit juice, far higher than the vast majority of fruit vinegar products on the market. Higher fruit juice not only brings a more authentic fruit taste and fuller mouthfeel, but scientific blending can also effectively cover the irritating vinegar sensation of apple cider vinegar, lowering the category's taste threshold.

At the same time, to make fruit vinegar taste more mainstream and younger, Qingle fruit vinegar also adds bubbles to meet the drinking habits of young consumers.

In terms of efficacy, to amplify the inherent efficacy advantages of fruit vinegar, each can of Qingle fruit vinegar contains 20 ml of apple cider vinegar, higher than the vast majority of apple cider vinegar drinks on the market. This is a recommended intake amount supported by experimental data that can significantly improve blood lipid and blood sugar levels.

The product also meets the major trend of low sugar, zero fat, and low calories. It uses ultra-high temperature instantaneous sterilization technology to achieve zero preservative addition, preserving the product's flavor and nutrients to a greater extent, making the ingredient list cleaner.

According to Xu Yingbin, their team and company are named "Guozhen Youfan" (literally "Fruitful and Stylish"), and they actually want to make "delicious, healthy, and attitude-driven" beverages for young people, not just fruit vinegar beverages. Qingle fruit vinegar is just the first product series they have launched.

Regarding the creative name "Qingle," Xu Yingbin mentioned that the English name is "Delight," meaning "relaxed and happy," with the purpose of conveying to consumers that drinking beverages is a relaxed and happy thing, and also evoking associations with the efficacy of fruit vinegar. The "Qing" (light) in "Qingle" refers to the refreshing taste, the lightness of the body, and the relaxation of the mood.

Bolder brand creativity combined with the product attributes of fruit vinegar to make better products may be the different approach of the Qingle team.

We also look forward to this young team bringing us more innovative beverage products, and we look forward to the small category of fruit vinegar beverages making a big market.