As Chinese consumers become more health-conscious and pursue more active lifestyles, the soft-drink market is expanding, with the growing choice of RTD teas, dairy and non-dairy beverages. Revenue in the Chinese soft drink market is forecast to reach USD 31,380m in 2019 and is expected to grow annually by 9.2% CAGR 2019-2023, as reported by Statista.
For the entire Chinese beverage market at present, the decline of traditional CSDs has become irreversible, with protein drinks, occupying a large share of the market. Soy and coconut milk drinks are becoming more popular in the non-dairy category as they are considered a good source of nutrition. However, innovation is key, especially in the dairy and non-dairy category where value can be further added through flavoured milk and drinking yoghurt.
Smaller Formats are Gaining Attention
As consumers' consumption habits have changed from subsistence to quality consumption, especially for urban consumers, smaller packaging formats are becoming more readily available, meeting consumers demand for on-the-go convenience. In China's beverage industry, the packaging sizes are mainly around 500ml PET packaging, 1L for sharing and 310ml cans. However, it is likely we will see smaller aluminium cans become more prevalent in the future, both to satisfy consumer demand for convenience as well as the demand for sustainability. Smaller packaging can help consumers reduce their calorie and sugar intake, as well as help manufacturers protect their profits in a process known as “shrinkflation” where manufacturers reduce the size of their products, whilst keeping the price the same.
Lighter Flavour Beverages Have a Bright Future
Due to improved living standards and changing eating habits, Chinese consumers are now more receptive to fresh and lighter flavours in the products they buy. Vitamin waters are proving a popular choice over fruit juices, nectars and syrups due to the perceived health benefits. Sparkling waters, flavoured waters and sodas are also growing too, with citrus flavours dominating this category for their refreshing and light taste.
Today consumers are paying more attention to the functional and health benefits of beverages. This is apparent on supermarket shelves with superfoods such as turmeric, activated charcoal, matcha, melatonin and aloe vera which are now becoming regular ingredients on product labels. Today consumers seek products that are rich in vitamins and other nutrients, yet convenient.
In China, there is a rich cultural foundation of herbal medicine, and some traditional functional herbs, fruits, vegetables and cereals now play a large role in the future of new product development. Consumers not only pursue the nutritional, but they are also keen for personalised functionality, with products that will improve sleep quality, enhance physical fitness, improve cognitive function as well as improve digestive and mental health. According to statistics, those who work in central business districts are proven to have a higher level of work-related stress and therefore they will attach more importance to the personalisation of functional drinks. This trend is driven by “sub-health”, also known as suboptimal health, where symptoms may not be able to be diagnosed medically but may be helped by the intake of healthier foods.
Unique and Multi-Sensory Experiences
Major players in the beverage industry are concentrating on improving formulas of their products to improve the taste and mouthfeel. Texture is a key trend to enhance products, whether it is with foam, through infusing with nitrogen or through the addition of carbonation, consumers experiences are being heightened by texture. Besides coffee, carbonation and nitrogen infused beverages are becoming popular outside of their categories, for instance in tea, juice, beer, pre-mixed cocktails and protein drinks. This trend is primarily driven by millennials who seek exciting food and drink options that they can share with their community.
The Rise of Street Drinking Industry
The outbreak of street drinking originated from the rise of eating out and ordering takeaways. Today, younger generations would rather spend more on street drinking as they seek new experiential situations and products. Popular beverage options such as milk tea, fruit tea and fresh fruit juices, replace high sugar CSDs, bottled juices and instant coffees as consumers seek the latest trend offering convenient, fresh and healthier options. With a wide range of consumption scenarios on offer, opportunities in retail will continue to grow.
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