---
title: "Trends in China's Beverage Category as Seen Through Japan's Functional Beverage Market"
description: "Japan's beverage market, with 2.5 million vending machines and annual sales of 2.2 trillion yen (about 176 billion RMB), is seeing a slight decline but still accounts for half of beverage sales. The market is shifting towards functional beverages, including zero-calorie, health, and beauty drinks, driven by an aging population and health consciousness."
author: "王鹤松"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-06-11"
language: "en"
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# Trends in China's Beverage Category as Seen Through Japan's Functional Beverage Market

> Japan's beverage market, with 2.5 million vending machines and annual sales of 2.2 trillion yen (about 176 billion RMB), is seeing a slight decline but still accounts for half of beverage sales. The market is shifting towards functional beverages, including zero-calorie, health, and beauty drinks, driven by an aging population and health consciousness.

## **Beverages sold at Japanese railway stations**
The top image shows a regular vending machine with both cold and hot drink options. The bottom vending machine displays product images; when a consumer stands in front of the image, a voice prompt guides them to purchase via a touchscreen.
Japan has 2.5 million beverage vending machines with annual sales of 2.2 trillion yen (approximately 176 billion RMB). Sales and unit numbers have decreased by 5% from previous years, but they still account for half of the beverage market sales.
The highest-selling vending machine in Japan achieves monthly sales of 3 million yen (about 240,000 RMB), selling 25,000 beverages. On average, there is one machine per 30 people in central urban areas. Male consumers account for 90%. Approximately 100 machines are replaced or updated each night.

## **Beverage market size approximately 5 trillion yen (400 billion RMB), slightly decreasing annually**
Due to population decline, aging, and soaring raw material costs, sales of food, beverages, oils, and seasonings are on a downward trend. According to the Ministry of Agriculture, Forestry and Fisheries, each indicator has declined by about 5% (changes in stomach capacity and volume).
The general beverage market is also saturated. Three factors influence the general and special beverage markets:
> 1. Functional trends such as zero-calorie products and Foods for Specified Health Uses (FOSHU), which address issues like obesity and have strong appeal among female consumers.
> 2. Beverages that help with weather, electricity conservation, heatwaves, and heatstroke (e.g., salt soda, sports drinks, vitamin and mineral drinks, deep ocean water).
> 3. Beverages with health and beauty functions (e.g., yerba mate, burdock tea, drinks containing hyaluronic acid, collagen, and other beauty ingredients).

## **Declining birthrate, aging population, and economic downturn are causing the general beverage market to shrink**

## **General beverage market by container type**
Market beverage forms: 1. PET bottles 65%, 2. Cans 20%, 3. Paper packaging 10%, and others including aluminum-plastic flexible packaging.
Table: Japan Soft Drink Association
Compared to single-use cans and paper packaging, 350ml PET bottles, resealable aluminum cans, and spouted aluminum-plastic pouches are more popular due to portability and storage convenience.

## **Beverage market status: carbonated drinks, coffee, water**
Japan Soft Drink Association
First place: "Carbonated drinks," second: "Coffee," third: "Mineral water." The top three remain unchanged. Only carbonated drinks show a strong trend, mainly due to sugar-free and FOSHU topics. Coffee's main consumers are heavy laborers like truck drivers, directly impacted by economic conditions. Mineral water has seen special demand from earthquakes, with companies making full efforts, but due to large equipment investments and monopoly by major companies, profit margins are thin.
Annual production is 20,000 tons, per capita annual consumption is 150 liters, and the market size is nearly 5 trillion yen (400 billion RMB).
As shown in the chart above, carbonated drinks and mineral water markets are growing, while sports drinks and green tea markets are shrinking; coffee and green tea remain at high levels (see chart).
Other statistics show that sports drinks are selling very well.

## **Evolution of the beverage market**
Beverage market trends (palatability → convenience → functionality)
- 1960s: Coca-Cola arrives in Japan (1965)
- 1970s: Coffee drink "GEORGIA" (1975)
- 1980s: Sports drink "Pocari Sweat" (1980); Green tea "OI OCHA" (1989)
- 1990s: Blended tea "Sokenbicha" (1993)
- 2000s: Environmentally friendly and tasty domestic mineral water "I LOHAS" (2009), lightweight PET bottles
- 2010s: Zero market, FOSHU-approved beverages, mineral water, Kao Healthya, etc.

## **Aging and population decline**
There are 30 million people aged 65 and over, and 5 million requiring nursing care or support. The childbearing-age population is expected to continue declining until the 22nd century.

## **Special-purpose beverages = health and functional drinks**
In Japan, within general beverages, there is a category of health and functional drinks. Here, excluding coffee, green tea, carbonated drinks, and other general beverages, the rest are called special beverages. These mainly include drinks for health and beauty purposes, drinks to enhance male function, and drinks with special functions.
In the health food industry, the distinction between general foods and nutritional supplements is very clear in the United States. However, in Japan, the trend of health-oriented general foods is progressing rapidly, making it difficult to distinguish them from supplements. The same issue exists in the beverage sector.
In the general beverage market, cola with FOSHU approval is growing rapidly and will expand to coffee and other beverages in the future. Sports drinks are also being used beyond sports, energy drinks are continuously launched, and new concepts keep emerging. On the other hand, vitamin and other health/nutrition drinks are being introduced, and contract filling companies are operating at full capacity. Pharmaceutical companies are also launching functional drinks under their OTC brands, with various products hitting the market. Additionally, nutrient-containing jellies (with spouted aluminum-plastic pouches) for the elderly care market will grow rapidly.

## **Canned and paper-packaged beverages (mainly health drinks)**
Recently, bottle-shaped aluminum cans are growing rapidly. Products like coffee are mostly canned. Health drinks such as vegetable juice, probiotics, and soy milk are often in 100ml or 200ml single-serve packages.

## **Trending beverages**
Coffee uses attractive cans, and frozen types are also popular. Best-selling "Power of Turmeric." Nutritional functional drinks from pharmaceutical companies. CC Lemon, which has sold over 10 billion bottles and is a long-time bestseller. Drinks like Alinamin are called "old man's drinks." Red Bull is eyeing the market.

## **Expanding use of sports drinks**
Developed to quickly replenish fluids and minerals (electrolytes) lost during exercise. They mainly supply electrolytes such as Ca, Na, potassium, and magnesium.
Products include Coca-Cola's AQUARIUS, Otsuka Pharmaceutical's Pocari Sweat, and Ajinomoto's AMINO VITAL. The market size is about 280 billion yen. Since Otsuka Pharmaceutical developed a drink that is easily absorbed physiologically, the sports drink market has grown.
Recently, besides sports use, they are widely used and stockpiled for emergencies like earthquakes and as measures against dehydration during heatwaves. Japan's population over 50 is the healthiest in Asia, and the number of people participating in marathons and cycling is rapidly increasing. The average age of sports facility users is over 50, indicating broad growth potential for sports drinks.

## **Palatable drinks - cola products also applying for FOSHU status**
Kirin's METS Cola, after obtaining FOSHU approval, quickly attacked the market. METS Cola is the first cola to receive FOSHU approval in the competitive cola market. After analyzing two weeks of sales, the annual sales target was raised from 1 million cases to over 7 million cases. This zero-sugar drink has captured a 20% market share, with strong support from female consumers.
Kirin's hidden strategy and possibly unmet expectations: To obtain FOSHU approval, a large amount of confidential information must be disclosed, so Kirin believed Coca-Cola could not catch up. However, due to significant target revisions and constraints from partner manufacturing capacity and distribution channels, current market sales are challenging. The outcome will be decided at the end of the year.
Suntory's FOSHU-approved Pepsi Cola is also gaining momentum. Kao's Healthya drink, after adding coffee ingredients, is also applying for FOSHU status.

## **Is it time for FOSHU coffee to be launched?**
Kao has decided to add FOSHU coffee to its Healthya series. It has been confirmed that chlorogenic acid in coffee has a fat-burning effect.
In the coffee sector, in 2007 AGF launched Blendy coffee with coffee oligosaccharides that reduce body fat. In 2009, UCC launched FOSHU "miss beaute" to improve intestinal environment, priced at 168 yen. Once Kao enters the competition, the market will be fully activated.
FOSHU cola captures consumer needs through "FOSHU + advertising." In the fiercely competitive beverage industry, companies are watching how far FOSHU beverages like "METS Cola" can expand as pioneers.

## **General beverages: the advance of "zero"**
In an era of abundance, consumers are trying to prevent obesity, and "zero" products are attracting attention. Zero-calorie, zero-sugar, zero-caffeine, and non-alcoholic beer and sparkling wine markets are growing rapidly. (Of course, drinking nothing is definitely zero...)
The definition of zero sugar is less than 0.5g of sugar per 100ml. Aspartame is not sugar; it is derived from amino acids and is low-calorie, as is sucralose. Due to U.S. soft drink regulations and the low-calorie beverage boom, raw material prices have soared, and reducing sugar usage can also lower costs. Many long-standing beverages and nutritional drinks are moving towards health trends, such as Livita D Light. → Existing products are accelerating their zero-product transformation.
Suntory's Pepsi Cola has obtained FOSHU approval. Kirin's FOSHU "zero" cola has gained a 20% market share.

## **Energy drinks shaking up the nutritional drink market**
Energy drinks like "Red Bull" are very popular.
Japanese nutritional drinks (some are pharmaceuticals) continue to enter overseas markets, while energy drinks originating in Thailand and developed in Austria like "Red Bull," Finland's "BATTERY," and America's "ROCKSTAR" are coming in droves.
Japanese people have long favored various drinks, with "Oronamin C" and "Livita" being famous among "nutritional drinks." These contain vitamins, royal jelly, herbal ingredients, and are formulated with alcohol, caffeine, etc., providing noticeable effects and increasing popularity.
On the other hand, "Red Bull" contains caffeine, arginine, niacin, pantothenic acid, etc., similar to nutritional drinks. However, young people consider traditional nutritional drinks as "old man's drinks," posing a serious threat of product replacement.

## **Unique drinks like "shake-and-set jelly"**
Unlike health and beauty claims, some drinks promote physical functions.
Shaking the container causes the liquid to solidify into a jelly, providing a jelly-like drinking experience. (See photo on the right; different shaking times produce different textures.)
Drinks that enlarge the molecular gaps in vegetable juice and add agar and burdock slices.
Drinks that, when frozen and shaken, become slushie-like juice ice cream drinks.
Heatable sweet red bean soup, oden, and sake. These new products are popular among consumers who like novelty, but due to increased raw material costs, they cannot sustain long-term growth.

## **Laws related to general beverage production and labeling**
The Food Sanitation Act applies to all foods, including beverages (the label on the left is for a sports-type powdered drink). Manufacturing processes are generally problem-free, but issues exist with containers and labeling...
Regarding nutritional labeling, the Consumer Affairs Agency is planning to unify the labeling systems of the Food Sanitation Act, JAS (Japanese Agricultural Standards), and the Health Promotion Act into a "new food labeling system." They are also discussing mandatory nutritional labeling, as well as allergen, genetically modified, and origin labeling.
FOSHU products are subject to the Health Promotion Act, and the PL Act (Product Liability Act) applies as a measure for accidents.
Accidents such as melon soda explosions, packaging embedded in ceilings, PET bottles containing cleaning agents, and injuries to passersby from explosions still occur, but these are due to misuse and are essentially accident-free.

## **The era of health and functional drinks**
Unlike previous beverages, these are drinkable nutritional supplements. Price, capacity, sales channels, and consumption purposes differ from general beverages. In beauty products, large-scale sales of hyaluronic acid, collagen, placenta extract, etc., are emerging.
Kagome's plant-based lactic acid bacteria drink "Laburei" (Lactobacillus brevis) sparked a lactic acid bacteria boom. In direct sales channels, "Power of Turmeric" is sold alongside health foods at 100ml for 190 yen, mainly containing curcumin to prevent hangovers, well capturing young people's needs. "FIBE MINI" (100ml x 50 bottles) sells for only 5,500 yen, containing dietary fiber and vitamin C, popular among women.

## **Changes in the functional beverage market size**
(Chart)

## **Growth of functional beverages**
(Chart)

## **Background of functional beverage development**
The beverage-ization of nutritional supplements and the health trend of general beverages are progressing in parallel. Health and functionality are a survival strategy in the competitive general beverage market, while the supplement industry, besides tablets and capsules, is actively developing beverage forms suitable for women and the elderly.
In recent years, beauty drinks using collagen, hyaluronic acid, placenta extract, etc., have been commercialized rapidly, with contract manufacturers running at full capacity. Ordering companies can only place orders with contract manufacturers.
Raw materials for supplements have been processed using nanotechnology and water-soluble technologies, making them easily soluble in water.
Consumers also demand easier drinking and better absorption (high efficiency) compared to tablets. Additionally, the single-serving bottle format positively influences continued consumption.

## **Topics in health and functional drinks**
In 2007, Professor Ota of Nippon Medical School and others published a paper in "Nature Medicine" on the function of hydrogen in scavenging reactive oxygen species (mainly hydroxyl radicals). This immediately sparked a hydrogen water boom. As a beverage, hydrogen water was commercialized in 4-5 layer aluminum-plastic pouches, achieving sales of 8 billion yen. (300-500ml bottles priced at 300-500 yen, with a monthly usage of 30 bottles, typically sold through call center direct sales channels). Naturally Plus is the top-selling company; ROHTO Pharmaceutical and Ito En have also entered the market. Some companies sell hydrogen water generators for home use.
Company S is promoting its vegetable juice containing beta-carotene to reduce colorectal cancer risk. EISA (Eisai) has transformed CHOCOLA BB vitamin drink into a functional drink. Drinks with collagen and hyaluronic acid are mainly sold through call center direct sales and beauty salon channels, completely different from the previous vending machine and convenience store sales of general beverages. Prices are 2-3 times higher than general beverages, often sold in 24 or 30-bottle boxes, capturing housewives' preference for lightweight packaging, ushering in a new stage of functional drinks.

## **Potential of health and functional drinks**
The general beverage market is shrinking due to population decline, aging, and economic downturn. The era when the coffee market was supported by heavy laborers like truck drivers has ended, and tea drinks have returned from PET bottles to home consumption, increasing sensitivity to economic conditions.
However, the baby and child market is not shrinking with the declining birthrate but is expanding. Not limited to health and functional drinks, the health and beauty market is growing as more women enter the workforce and retirement ages extend, with women's pursuit of healthy lifestyles rising, making it a highly promising market.
In the beverage market, NEAR WATER (juice drinks with added vitamins, calcium, etc., for hydration), FOSHU and sugar-free zero drinks, and energy drinks are growing rapidly, driven by rising health consciousness. Whether general or special beverages, the core is containers and water. In addition to considering transportation methods, companies should leverage health, beauty, and anti-aging selling points to maximize their health and functional advantages.

## **Urgent task: measures against the annually increasing obese population**
The Ministry of Health, Labour and Welfare is promoting obesity safety measures. Will the nation become healthier?

## **Lifestyle diseases accompanying aging**
There are 8 million diabetic patients, and including suspected cases, 19 million (2006). Worldwide, there are 360 million patients, with China first at 90 million, India second at 61 million, and Japan sixth.

## **Consumers are highly concerned about health maintenance and prevention measures**

## **60% of consumers use supplements, 60% demand functional labeling**
According to a consumer committee survey:
> 60% of consumers use supplements, 25% have no experience.
> Usage rates for "health promotion," "health maintenance and disease prevention," "supplementing specific nutrients," and "fatigue recovery" are as high as 35-50%. "Beauty," "weight loss," and "anti-aging" are around 15%. "Disease improvement" is 12%.
> 60% of users are "satisfied," 8% are "dissatisfied."
> Half of consumers have expectations for functionality. 60% want functional labeling.
> Healthy consumers and supplement users have good nutritional intake.

-END-

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