Source | 听筒Tech Every midsummer, every retail outlet goes through a "water war." This "intense" scene plays out almost every day. As soon as June begins, tens of thousands of mom-and-pop stores, convenience stores, and even cigarette and alcohol supermarkets all put "water" at the C-position of their shelves. Based in Hubei, Lv Jie, who runs a cigarette and alcohol supermarket in a lower-tier market, has recently made "selling water" a key focus for making money in the coming months. Lv Jie has been running her store for over 15 years. In her view, once summer arrives, the cigarette and alcohol business enters its off-season, while "selling water" enters its golden period. In fact, compared to other businesses, Lv Jie prefers "selling water." In her view, it's always a high-frequency demand business: clearly priced, no need to push sales, time-saving and hassle-free, and prices and profits tend to be stable. Consumers' growing awareness and demand for "water" also constantly push new products to the market. Carbonated drinks, energy drinks; mineral water, purified water; soda water, sparkling water, and the sugar-free tea drinks that have become popular in the past two years... Every consumer choice is clearly reflected on the shelves of every supermarket and convenience store. This has allowed "Lv Jies" to accumulate wealth and also complete the transformation and upgrade of the water and beverage industry. "Water and Beverages" Seize the C-position in Cigarette and Alcohol Stores The most intense confrontations and the most vivid merchant choices always seem to happen offline. Lv Jie knows this well. "Sister, stock up on Oriental Leaf; this one is selling well this year!" "Sister, put our shelf at the C-position, and I'll apply to the company to get you a bigger fridge." As soon as May begins, leading beverage and water brands start competing for store space. Lv Jie told the author that, persuaded by sales representatives, she just stocked up on water and beverages from several brands. Of course, Lv Jie also joked that she got a free large fridge with a bright red logo, which she placed at the C-position of her store. Beyond the C-position, Lv Jie's store also has upright refrigerators from other beverage brands, filled with carbonated drinks, black tea, green tea, and energy drinks. Image: The new upright freezer in Lv Jie's store Lv Jie doesn't mind the sales reps' competition for shelf space. After all, as a businessperson, making money is what matters. Even after running a cigarette and alcohol supermarket for years and witnessing many brands fight fiercely, Lv Jie always believes, "This is business warfare; there's nothing wrong with it." The reason is simple: even with e-commerce so mature today, "water and beverages," a traditional FMCG category, still relies heavily on offline channels and provides a stable cash flow for Lv Jie's store. In fact, Lv Jie's cigarette and alcohol supermarket has experienced several rounds of severe impact from e-commerce channels. Only through adjustments and innovation has she maintained her current scale and customer base. However, despite intense competition among brands, the attention and protection that beverage and water giants give to offline channels also make Lv Jie always open to "selling water." The reason behind this is also simple. To sell "water and beverages" online, companies must pay high logistics costs. This cost comes from the brand side. That's why beverage giants constantly fight offline for territory. For Lv Jie, running a small FMCG store, "selling water" is a very good category in itself. In fact, the off-season for cigarette and alcohol business is in spring and summer, but this period is the rising season for "water and beverages." "Every summer, the water business picks up quickly, whether it's single bottles or cases; they sell very fast." Lv Jie also noticed that consumers buying water are generally not very price-sensitive and don't haggle much. On one hand, over the years, "water and beverage" prices have become transparent and stable; on the other hand, as the "source of life," even consumers with different spending power are willing to pay for water. "At the very least, buying a bottle of Ice Dew for less than one yuan doesn't hurt anyone's wallet." In fact, whether traditional beverage brands or water giants, after years of competition and conquest, they have mature control over channels, market scale, and product capabilities. This allows every link in the industry chain to circulate effectively, and prices tend to stabilize. In Lv Jie's words, "In the beverage industry, prices are regionally stable and transparent. Whether it's bottled water or tea drinks, it's basically 'sell one bottle, earn one yuan.'" More importantly, because "water and beverages" have low unit prices, compared to the high-cost cigarette and alcohol business, the capital pressure for stocking up is much smaller. Moreover, even for products with expiration dates, brand companies constantly inspect retail outlets. "Once near expiration, they replace them immediately." This is standard practice for leading beverage brands and a basic after-sales guarantee. For all these reasons, compared to other retail categories, Lv Jie has always been enthusiastic about "selling water." Over the past 15 years, despite strong impact from online platforms and large supermarkets, and changes in consumption patterns, Lv Jie has cut many FMCG categories but has always kept "water" at the C-position of her shelves. New Categories Continuously Rise Almost every trend in the FMCG industry is clearly reflected on Lv Jie's supermarket shelves. For example, unlike previous years, this year Lv Jie's purchase list includes a new category—sugar-free tea drinks—in addition to regular drinking water, soda, and tea drinks. "On one hand, sales reps are promoting it with stocking discounts. For example, Oriental Leaf is indeed more profitable than selling other water; on the other hand, recently many young consumers have come asking for this new type of tea drink by name." Lv Jie sighed that over the years, both on the merchant side and the consumer side, she has personally felt the consumption upgrade and iteration in the water and beverage market. In 2010, when Lv Jie first opened her store, Wahaha purified water sold best; later, she started stocking Ice Dew because it was cheaper than Wahaha and very popular in lower-tier markets. In fact, Lv Jie also briefly sold Evergrande Spring for a few years. However, in recent years, consumers' first choice is no longer just price but "quality." They prefer to buy "better quality water," especially a series of high-end drinking water. In the non-drinking water category, the market is even more diverse, and iteration is faster. When Lv Jie first entered the industry, the market was dominated by functional and carbonated drinks, as well as sugary tea drinks. "At that time, beverage consumption wasn't very mainstream. People's pursuit of drinks was more about whether it tasted good and whether it could trigger dopamine and emotions." According to Lv Jie's recollection, at that time, Uni-President Green Tea and Master Kong Iced Black Tea were very popular; some people were keen on energy drinks like Red Bull, Jianjiao, Mizone, and Dongpeng Special Drink; of course, more young people preferred classic carbonated drinks like Coca-Cola and many soda brands. In the following years, people began to realize that drinks purely pursuing "good taste" and "sensory stimulation" didn't seem to add health value. So, under the slogans of "more nutritious" and "better for health," plant-based protein drinks began to capture market mindshare. Especially Six Walnuts. According to Lv Jie, this plant-based protein drink, targeting students and the elderly, became a craze and the most fashionable representative of daily drinks. However, the plant-based protein trend didn't last long. The market then began to pursue "sugar-free" and "0 sugar 0 calories." Reflected in the market, various brands labeled their products "0 sugar 0 calories" and continuously launched sparkling water, electrolyte water, and sugar-free tea drinks. Especially in the past two years, sugar-free tea drinks have become extremely popular, which Lv Jie finds "a bit unbelievable." Because, in fact, Lv Jie had come into contact with sugar-free tea drinks more than a decade ago. In 2011, Nongfu Spring's Oriental Leaf was launched, but initially, because it was "tasteless" and "bitter," it was rated by netizens as one of the "worst-tasting drinks." Previously, Lv Jie wasn't interested in this taste either, and no one came to her store asking for it. So, for years, she hardly stocked sugar-free tea drinks. But more than a decade later, it suddenly became a "hot commodity," not only among young people but also middle-aged and elderly consumers. Lv Jie sighed, "Consumers' hearts have changed after all." Running a retail store, Lv Jie feels she has directly witnessed the "epitome of China's beverage and water industry" over the past decade or so. And with the continuous evolution of this epitome, Lv Jie has experienced the true meaning of consumption changes. She even began to ponder topics like "the relationship between consumer goods and consumers." Who Is the King of Beverages? Lv Jie's feelings exactly confirm a proven growth logic in the beverage market. Japan's beverage industry, due to its development path having some similarities with the Chinese market but with higher maturity, to some extent offers inspiration to Chinese merchants. In the 1950s, Japan's economy was in a recovery period. Due to insufficient consumer goods and market size, the beverage market was still in the stage of meeting basic human needs. For example, at that time, carbonated drinks and juices were the main categories, satisfying people's pursuit of taste and emotional dopamine. Later, with Japan's economic development and breakthroughs in aluminum can packaging technology, the beverage market began to upgrade functionally, with canned oolong tea and electrolyte drinks appearing. Entering the 21st century, Japan's water and beverage industry began to shift toward health, with clear signs: the explosion of sugar-free tea drinks, the rise of specific health drinks, and the premiumization of packaged water. The sugar reduction revolution also continued to deepen. According to Bloomberg, in 2023, sugar-free tea retail sales accounted for 82.5% of total tea drink retail sales in Japan, and Coca-Cola also went fully sugar-free in Japan. The Chinese market, to some extent, is at the early stage of health transformation. In fact, whether it was Genki Forest in 2018, which quickly became popular with sparkling water using erythritol ("sugar-free but sweet"), or Oriental Leaf's resurgence after years of obscurity, or the recent frequent appearance of brands like Guozishule, Rangcha, and Chaxiaokai, all indicate a fact: the industry has truly begun competition in sugar-free tea drinks. Of course, besides beverage brands increasing investment in sugar-free tea drinks, original leaf tea brands are also gradually entering the sugar-free tea drink track. In May this year, Xiaoguan Tea officially entered the sugar-free tea drink market and released its sugar-free tea drink products. Mei Jiang, vice president of Xiaoguan Tea, told the author that as a "super water substitute" and "super beverage substitute," sugar-free tea drinks are facing unprecedented development opportunities. In Mei Jiang's view, for original leaf tea, constrained by specific elements of tea culture, even though Chinese tea has a rich history, its commercialization path has been slow and difficult. To some extent, sugar-free tea drinks have opened a new market carrier for original leaf tea. In fact, Xiaoguan Tea has previously made some innovations, such as using "FMCG thinking" to reconstruct tea as an agricultural product. Sugar-free tea drinks, riding on consumption upgrades and the concept of healthy water drinks, offer Chinese tea companies a visible path. On one hand, the market has reached the stage of gradual sugar reduction, and the market penetration of sugar-free tea drinks in China is still severely insufficient; on the other hand, based on their accumulation in original leaf tea, tea companies have the possibility to create differentiated products compared to traditional beverage brands. However, despite the verifiable logic in the market, China's regional differences are greater than Japan's, and brand and market competition is more complex. Whether sugar-free tea drinks can replicate the "king of beverages" status seen in Japan remains to be seen. But one fact may be inevitable: in the next 3-5 years, functional sugar-free drinks, age-friendly products, and eco-friendly packaging will be definite tracks. Brands can break through technical barriers in specific functional ingredient applications through industry-university-research cooperation. In Lv Jie's view, the FMCG industry never lacks new products or brands; what it lacks is "how to avoid homogenization" and "how to keep consumers fresh." For example, regarding sugar-free tea drinks, will they become "passersby" on shelves again? Behind the competition is not just a single health label, but a comprehensive contest of supply chain, consumption scenarios, and user education. As the summer beverage consumption peak season arrives, brands must find lasting differentiated entry points to win the long-term battle in the hundred-billion-yuan market. 🔺Scan code for ticket consultation🔺