CCM: Fruit drinks have great potential despite slowdown in domestic beverage industry 03-15-2016

Under the slowdown of the domestic beverage industry, the fruit drinks industry has maintained strong development. The market of average and high concentrate fruit drinks has great development potential with the changes to consumption habits and the adjustment of the beverage consumption structure. Moreover, functional drinks and fruit drinks which are natural and healthy will be preferred by domestic consumers.


                                     

                                                                                                     Source: Baidu


In the past few years, the domestic beverage industry has had its development restrained by bottlenecks. In Q1-Q3 2015, the sales volume of domestic beverages reached about 130 million tonnes, up by 4% YoY.


In 2014, the sales volume increased by 13% YoY. In 2001-2011, the average annual growth rate was over 20%. With the slowing growth of the beverage industry, fruit drinks, especially 100% fresh fruit juice, will become the new area of growth in the beverage industry.


Overcapacity in the beverage industry


During the "Golden Ten Years" development period for the beverage industry in the 21st century, which was characterized with increasing sales volumes, many beverage enterprises expanded their production capacity. However, much of this newly added production capacity was added in anticipation of high sales volume growth. A huge imbalance between the expanded capacity and the weak demand has appeared because of the slowing sales volume growth.


The beverage industry is encumbered with overcapacity, stated Zhu Danpeng, researcher at the National Institution for Food Business. China Huiyuan Juice Group (Huiyuan) sold nine of its subsidiaries in H1 2015, which is indicative of the current situation of the beverage industry.


The growth of domestic beverage market is obviously slowing down with the intense competition. More beverage products are coming into the market and the available range is continually changing. Average gross profits have declined due to the weak demand, the increasing costs and the intense competition in the industry. As a result, beverage enterprises are facing declines in both their revenues and profits.


The slowdown of the global economy is the main reason for the weak demand in the beverage market. With the expansion of the overall beverage production capacity, the beverage market will be saturated and the competition within the industry will intensify. Thus, the development of the beverage industry will inevitably slow down.


                           


Fruit drinks have strong development potential


Fruit drinks are developing strongly. The average consumption volume of fruit drinks in China is far behind that in developed countries. Therefore, there is a bright future for the fruit drinks industry.


Estimates of the potential market scale of 100% fresh fruit juice in China are based on the sales volume of 100% fresh fruit juice in the US. In the US fruit drinks market, fruit flavored beverages and fruit pulp beverages account for 31% and 9% of the market share respectively, while 100% fresh fruit juice accounts for 60% of the market. 100% fresh fruit juice is very popular with consumers because of their high nutrition value and rich flavors. In contrast, Chinese consumers still prefer fruit flavored beverages and fruit pulp beverages, which together account for 95% of the market. 100% fresh fruit juice has captured only 5% of the market.


The domestic fruit drinks market will remain quite good in its growth while the market of 100% fresh fruit juice will not skyrocket in the short term. However, with changes to consumption habits and the adjustment of the beverage consumption structure, the market for average and high concentration fruit drinks has a bright future.


In addition, NFC (Not from Concentrate) juice, as the new hottest product in the market, can only be found in a few brands like Summi (a brand under China Tianyi Holdings Ltd., a juice enterprise in China) and LingDuGuoFang (a Chinese brand that focuses on producing NFC juice). NFC Juice is 100% freshly squeezed from the fruit without adding any water.


As the pioneer in the NFC juice market, LingDuGuoFang began to sell NFC juice in China in 2011. The NFC juice of Summi, which is very popular with young consumers, can be seen in many supermarkets and cafés in Beijing, Shanghai and Guangzhou.


Various kinds of fruit drinks but not enough high-end products


Currently, the following fruit drinks can be seen in the market.

  • Fruit drinks with low concentration of 5%-10%, such as "Orangeate" from Uni-President China Holding Ltd., "Daily C" from Master Kong Holding Ltd. and "Qoo" from Coca-cola Company.
  • Mixed juices with a concentration of 30% that contains mixtures of different fruit and vegetable juices, such as "Mr. Juicy" from A.S. Watson Group (Hong Kong) Ltd.
  • Fruit pulp beverages with over 40% concentration. It is made with fruit pulps or concentrated pulps, sugar and acidifier, which contains a lot of pulps, fruit fiber and pectin.

Chinese consumers still prefer fruit drinks with low concentration. However, it is already a consensus within the industry that the consumers are becoming more and more interested in fruit drinks with high concentration.


Natural, healthy and functional beverages will be the leading products in the future


According to Nielson, in 2015, the average growth of functional drinks surpassed the growth of ordinary beverages in the domestic beverage market. Consumers are becoming more discerning on the beverages that they consume. Fruit drinks, as a natural and healthy choice, are becoming more attractive. The beverage industry no longer bombards the market with advertisements, since this practice has become ineffective because more consumers prefer beverages of high quality and are reasonably priced.


The healthy beverage industry needs further development. It may have rapid development within 3 years. Natural ingredients are being favored and have great potential. Beverages like protein beverages, fruit drinks and herbal drinks are predicted to be leading products in the future. The drinks like sea buckthorn juice, blueberry drinks, coconut juice, orange juice and apple vinegar drinks will become popular products in the market.

Furthermore, with the increasing range of functional beverages, fruit drinks may incorporate the dietary functions of the dairy products. Vitamins and minerals will be added into fruit drinks. Thus, the boundaries between fruit drinks and dairy beverages, fruit drinks and energy beverages, will become more ambiguous.




About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

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