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Soft-drinks firms sip mixed flavors

By Liu Jie (China Daily)
Updated: 2009-05-27 08:08

A visitor buys a soft drink at a street stand in Shenyang, Liaoning province. [CFP]

It's hot, dry and dusty. The temperature is hovering at around 35 degrees Celsius. In short, it is a perfect day for 20-year-old Hou Jianqin.

Sweating profusely in the tiny space that is his family's newsstand kiosk at one of Beijing's busiest bus terminals, Hou is raking in cash dispensing cold drinks to the thirsty crowd. Pointing to the two 2-meter-tall coolers that take up more than half the space at his kiosk, Hou said he keeps stock of at least 50 different varieties and brands of soft drinks to satisfy the very diverse tastes of his customers.

That diversity hasn't gone unnoticed by the soft drinks producers. In this high-volume, low-profit-margin business, producers know that they must grab market share or perish. To do so, they must constantly come up with fresh ideas and products to get a leg-up on their competitors in the advertising sweepstakes.

"This season, our suppliers added more than 10 new flavors to test-market," Hou said. Of course, not all of them will turn out to be instant hits. Only a few can survive into the next season, Hou observed.

Hou's 24-hour shop sells, on average in summer, over 600 bottles of soft drinks. Over 30 percent of sales come from juice beverages and tea drinks.

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As usual, the top contenders in China's fiercely competitive soft drinks market are US behemoths, Coca Cola and Pepsi, and a few domestic players such as Huiyuan, Wahaha and, Nongfu Spring, which tend to specialize in either distilled water or fruit-juice-based drinks.

Market research house Euromonitor International's report showed that the total sales of soft drinks in China amounted to about 283.6 billion yuan last year, up 14.5 percent from 247 billion yuan a year earlier.

Non-alcoholic drinks

Neither the global financial crisis nor the domestic economic downturn seems to have dented soft drinks sales in China. The total output of all non-alcoholic drinks in the first quarter of 2009 amounted to 15.17 million tons, up 15 percent from the year earlier period. During that period, production of non-carbonated drinks, including fruit juice, surged 332.9 percent, compared to a 3.49 percent decline in soda production, according to the National Bureau of Statistics.

Summer is the best time to test the brawn and smarts of soft-drinks producers.

This year's highlights are mixed drinks with around 10 percent juice, and a variety of tea-based drinks, according to Chen Jing, beverage researcher at Beijing Orient Agribusiness Consultant Ltd, an agriculture and food markets research house.

"These non-carbonated beverages are supposed to be, or marketed as, healthier than traditional soda drinks, and Chinese consumers are expected to opt for low-concentration juice because of their lower price, especially during these economically challenging times," said Chen.

International giants Coca-Cola and PepsiCo have also entered the fray in the low-concentration juice market with their respective brands. Coca-Cola is heavily promoting its reformulated Minute Maid juices and PepsiCo has introduced more choices under its Tropicana brand, the top juice brand in its home market in the US in terms of sales.

After regulators thwarted its high-profile bid for Huiyuan, Coca-Cola announced in March that it would invest a total of $2 billion into the Chinese market in the next three years. The budgeted investment in new manufacturing facilities and the expansion of its existing sales network exceeds the company's total investment in China during the past 30 years.

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