Companies are fighting for China’s thirst for functional beverages 03-31-2017

As China’s functional beverage market is booming, overseas and domestic companies are launching new products in order to get more market share in a fiercely disputed market. While Danone launched a new product in March under the brand Mizone, China’s producers also develop more healthy drinks, increasing their market share.  

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The busier lifestyle of China’s growing urban middle class is driving the market for functional beverages because a rising number of workers don’t have the time anymore for a healthy and balanced meal every day. The lacking energy and nutrients are guaranteed nowadays by consuming functional beverages including taurine and vitamins.


Hence, an increasing number of enterprises discover China as a promising market for functional beverages, launching new products into the large market. One example is French food manufacturer Danone, which is contributing a new vitamin beverage called Mi-PRD to traders in China. The main benefits of the new product are taurine plant-extracted ingredients.


The company hopes to increase the sales in China with the new product, since it was facing wakening profitability in this market recently, with negative effects on the financial numbers of the Mizone brand in 2016. According to the CFO of Danone, Cecile Canabis, the main challenge of vitamin drinks in China is the high competition, leading to short life cycles and small market shares of highly-priced products.


According to market intelligence firm CCM, China is ranked second behind the USA in the number of energy beverage sales in the global market. Recent growth number of up to 25% have caused high attention by international enterprises to penetrate into this promising market. It is expected that the domestic retail sales volume of functional beverages will hit 15.04 billion litres by 2020, with a corresponding sales value of USD23.78 billion.


Many manufacturers are launching new products into the market to gain some market share. One example is the aforementioned product Mi-PRD of the Mizone brand by Danone. Even this product is not being able to buy in retail yet, the company has already announced new beverages with exotic flavours like pineapple, litchi, orange, mango, peach, and cucumber.


Mizone can be described as the forerunner in refreshing drinks in China, even owning a higher market share than Coca-Cola’s Aquarius in the same segment. The first product under the brand Mizone was launched in 2009 in China, labelled as a healthy vitamin water.


Nevertheless, also China’s domestic manufacturers are launching new products in China’s functional beverage market. Hangzhou Wahaha has introduced the new functional drink Burnlaxy. Special ingredients, besides taurine and vitamins, are ginseng, maca, and fresh ginger. The company has lost its market share of 4.9% in 2012 to 0.9% in 2015. It needs to be awaited if the company can get market share again with launching new functional drinks. Other successful products by this company are Wahaha Get C and Hai Jing Lemon.


A third example can be found in Wuhan Hengda, which launched a new product called Hengda Qiuqiu in January. This beverage includes mostly medlar juice and taurine.


What’s more, besides the intense competition in China’s beverage market, trademark issues are also a problem for overseas companies. US energy drink giant Monster is facing one of these problems with its energy drink.


Monster Beverage, the second largest global functional drink producer, announced its plan to introduce its products into China in H1 2016. However, a Shanghai-based company called Monster already sells own vitamin fruit drinks in China, which even look similar to the US ones. Hence, the company is facing a difficult time to clear customers about their own trademark in China. 


Energy beverages are becoming popular among people who want specific health benefits from their food and drink. To date, China has become the largest energy drink market, and now has the highest growth rate in the world. In 2015, sales stood at over 1.30 billion litres, up 25.00% YoY, and sales increased by 15.16% YoY to USD9.04 billion, according to CCM’s research.


However, consumption of functional beverages in China still remains low. The annual consumption averages less than 2 litres per capita, not even a tenth of the figure in developed countries. This huge market has attracted a number of domestic and overseas producers. Yet it may be hard for the foreign ventures to break into the Chinese market.


It is no secret, that healthy products are the big driver for sales in the future in China, as Chinese awareness is surging. Companies, that are doing business in China’s beverage market, are doing good in considering this trend and being orientated to adjust their products and labelling according to the new needs.

About CCM

CCM is the leading market intelligence provider for China's food and ingredients market.

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