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THE BEVERAGE MARKET IN CHINA

SEPTEMBER, 2015

Daxue香港上海北京Consulting



THE BEVERAGEMARKET IN CHINA

The beverage market in China is one of the

fastest growing markets in the Chinese food

industry. According to Jihong He, the Chairman

of China’s food circulation association, the

beverage market in China will become the biggest

worldwide by 2015. Production of Chinese

beverages underlines this trend as it illustrates

a 10.34% growth rate for January to May 2014,

compared with the previous year. In this period

Chinese beverage manufactures produced an

output of 64.766 tons of beverage.

From 2001-2014, the average growth rate of the

production of beverages in China is about 13%.

The potential of this industry is also shown in the

fact that in 2012, a Chinese person consumed

96 liters of beverages on average, whereas an

American consumed approximately 263 liters.



The revenue rate in the beverage industry in China is currently more than 30%. However, it is

highly a competitive market with new trends, and

a resulting challenge is a relatively low level of

loyalty towards beverage brands. This is why firms

are investing heavily in new strategies to cultivate

brand loyalty: Coca-Cola for example will invest $4 billion in 2015-2017.

Coca-Cola holds a market-share of about 16

%, which is slowly decreasing. The American

beverage powerhouse has to deal with ever-

changing consumer preferences in the Chinese

beverage market. Chinese people nowadays prefer healthier drinks and local herbal teas.

In some parts of China Coca-Cola is out-sold by

local player JDB and its herbal tea “JDB Red Can”.1. http://www.reuters.com/article/2013/11/08/us-cocacola-china-idUSBRE9A704H201311082. http://www.scmp.com/business/china-business/article/1314083/herbal-drink-giants-recipe-home-grown-success

Chinese people nowadays prefer

healthier drinks and local herbal teas

The revenue rate in the beverage

industry in China is

more than 30%



NEW TRENDSAs living standards have improved in China,

beverage consumption has changed.

Consumers are searching for a greater diversity

of products, and further, have become more and

more discerning. Because of several scandals in

China’s food and beverage industry, consumers’

top priority in this sector is confidence about the

product’s safety and integrity. Moreover, there is a

trend towards healthy living.

As a result, Chinese customers set value on

high quality products that are pollution-free

and safe, and are trending towards imported

food and beverages.3. http://english.cntv.cn/2015/08/06/VIDE1438822925240370.shtml

As a consequence milk and protein beverages

have enjoyed an increase in popularity.

Convenience and freshness are also important to

Chinese consumers, however safety and quality

outweigh all the other factors. Because of these

trends in consumption preferences, the popularity

of traditional carbonated drinks is declining.



THE BEVERAGE MARKETIN CHINA

Tea Beverages

CoffeeWater Carbonated Beverages

Juice Milk & Protein Beverages



WHAT DO CHINESE PEOPLE DRINK?

• Water

Water is a growing segment of the beverage

industry in China. The growth rate of Mineral

Water in 2013 was about 16%; Nielsen estimated it

to be more than 20% for 2014. Further, the growth

rate for high-end mineral water like Baisuishan,

Kunlunshan, and Evian is projected to reach 40%

growth.4. http://www.nielsen.com/uk/en.html 5. http://www.evian.com/zh_cn/

• Coffee

Chinese people are drinking far less coffee than

those in other countries. In 2014, the consumption

of coffee by Chinese people was 5 cups annually,

compared to 240 cups as a worldwide average.

However, the market has potential as it grew

around 7% in 2014.

The demand for coffee drinks and fresh coffee

is rising. For example, the growth ratio of fresh

coffee in 2014 increased to 22.1%. Another trend in

the coffee sector is the desire for high-end coffee.6. http://www.chinahighlights.com/travelguide/article/coffee.htm



• Juice

In 2013, the juice beverage industry had a market

value of around $13.88 billion. With the increased

spending power of the middle class, juice market

revenues are expected to climb to an annual

amount of $25 billion.

Chinese traditional health juice is a new trend.

The first to reach real popularity in this sector was

the Rock Sugar Sydney Beverage. Uni-President,

Master Kong, Wahaha, Jinmailang all launched

this type of beverage in 2011. In the ongoing

years nearly all market players have developed

and diversified their production line for Chinese

traditional healthy juice.

• Carbonated Beverages

Due to the ongoing health trend in the food

and beverage market in China the demand for

carbonated beverages is declining heavily. The

market share of carbonated beverages dropped

from 36% in 2000 to under 25% in 2013. Moreover,

it is difficult to enter this market as the two biggest

players, Coca-Cola and Pepsi, share nearly all the

market power. 6. http://www.chinahighlights.com/travelguide/article/coffee.htm



• Milk and Protein beverages

The milk and protein market is about to grow fast

in China: in 2013, the growth rate was 23.46% and

the total market revenue was 89.522 billion RMB.

Currently, the main market player in this sector

is Wahaha, and in the protein beverage market

the biggest players are Six Nuts, Lulu, Island of

Coconuts and Yinlu. In 2014 and 2015 more and

more competitors have entered the market due

to its potential.

• Tea Beverages

The classical and traditional drink in China is tea.

This is why the tea beverage industry boomed

in the early 2000s. In 2009, consumption

reached 9 million tons, representing 10% of the

total beverage market. This market became

the third largest beverage market in China

after carbonated beverage and mineral water.

However, the market is beginning to shrink: in

2014, the tea beverage market declined 3.6%.

As a consequence, Nestle Ice Tea for example

left the market. The main reason for this decline is

health concern. The high sugar content in many

tea beverages have pushed consumers away.7. http://www.china.org.cn/learning_chinese/Chinese_tea/2011-07/15/content_22999489.htm

8. http://en.wahaha.com.cn/product/index.htm



About usDaxue Consulting is a market research

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