Ben Cooper

Research in Focus - Health Concerns a Boon for Stevia-Based CSDs in China?

By | 10 May 2012

Scepticism towards artificial sweeteners has inhibited growth in lower-calorie carbonated soft drinks (CSDs) in China but as obesity rates rise, consumer demand for lower-calorie, healthier beverages will increase. To meet this demand and to prevent consumers deserting the CSD market for healthier non-carbonated products, CSD producers will have to develop lower-calorie, naturally sweetened offerings, and stevia-based products could be the obvious solution.

With a population of 1.35bn people we are used to everything related to China being on a massive scale, not least of course market opportunity. However, it appears that this also extends to the problem of rising obesity levels with which so many countries are grappling.

According to a survey by the China Academy of Medical Science in 2002, 7.1% of adults over 18 years old were obese and 22.8% were overweight. That equates to around 300m, or to put it another way roughly the population of the US. Over the past decade, the problem has worsened. A survey published by the General Administration of Sports of China revealed that 32% of the adult population aged 20 to 59 were overweight in 2010 and 10% were obese.

A recent report from Mintel suggests health awareness is rising among Chinese consumers and that this will impact on growth in the carbonated soft drinks (CSD) market.

Mintel forecasts that the market for CSDs in China will reach around 20.6bn litres by 2016, representing growth of 47% from 2011. However, it suggests the stronger appeal of non-carbonated drinks, such as juices, tea drinks and even mineral water, prompted by rising concern over obesity and the growing desire of Chinese consumers to adopt healthier lifestyles will dampen growth in the CSD sector.

Moreover, the carbonated sector faces a further challenge in that there is widespread consumer scepticism towards artificial sweeteners. For example, there was a major public health debate in China three years ago over the use of the artificial sweetener, aspartame, in Coke Zero. Despite the Chinese Ministry of Health issuing a public statement that aspartame was safe according to Chinese food safety regulations, doubts have remained among consumers as reflected by much negative comment online.

The public scepticism over additives is also reflective of the broader problems with food quality in China where food scares are common. Beverage companies have not been immune from such problems, with the melamine scandal involving Mengniu, China’s top dairy producer, a notable example.

While Mintel’s research has shown consumers are trying to adopt a healthier lifestyle - in its survey two thirds of consumers said they were likely to purchase lower-calorie drinks - concerns over artificial ingredients appear to weigh just as heavily. Mintel's research also found that seven out of ten (72%) carbonated beverage drinkers try to avoid CSDs with artificial ingredients. Of course, this in itself restricts the uptake of conventional lower-calorie CSDs, which is not great news for the battle against rising obesity.

So while growing concern over calorie intake is likely to lead more consumers to seek out lower-calorie options the CSD sector does not necessarily have the products to meet that demand.

Indeed, Mintel observes that the sector has seen a decline in launches of low- or zero-calorie offerings "as they struggle to attract and engage consumers". The number of new products with such claims fell to just 7% of all new products launched in 2011, against 30.8% in 2006, Mintel states.

The problem is exacerbated by a lack of distribution for diet variants. In Mintel's consumer survey, as many as 47% of consumers said they mainly bought CSDs in independent mom-and-pop stores which owing to lack of space will only carry the most popular products.

And the problem for CSD producers is that when more and more consumers do seek out lower-calorie drinks, in looking for natural products they may well eschew the carbonated sector entirely. Such consumers "will be attracted to other, healthier soft drink markets unless better carbonated soft drinks become available," Mintel suggests.

The question is whether CSD producers can turn rising consumer awareness about calorie intake to their advantage by producing more naturally sweetened offerings which also address the strong prevailing consumer concern over artificial sweeteners.

"Recent public debates over artificial sweeteners and preservatives have presented manufacturers with an opportunity to address the growing well-being trend with ‘all-natural’ carbonated soft drinks with no additives or preservatives," Mintel suggests.

However, so far manufacturers have failed to take advantage. The report adds: "Looking from the angle of new launches, carbonated soft drinks companies in China have not been wholeheartedly embracing the no additive/preservative agenda compared with countries such as the UK and the US."

The answer is likely to lie in some of those solutions which are already being extensively developed in those other markets, and certainly the most exciting natural sweetener prospect in the soft drinks market at the moment is stevia.

With a rising demand for lower-calorie offerings and the prevailing scepticism over artificial sweeteners, the potential for stevia in China is clear. "Introducing stevia-sweetened versions will help to fill the lack of choices in the natural segment and engage consumers looking for more natural beverages," the report states.

While stevia has not been immune from health concerns, Mintel notes that there is a marked lack of negative publicity around the ingredient in China. 

Stevia is already being used in some foods in China, as well as in juices and RTD tea, but not yet in mainstream carbonated soft drinks. Ironically, China is the world’s biggest producer of stevia and exporter of stevia extract and the sweetener has been allowed in food in China since 1984, whereas it was only approved in the US in 2008 and in the EU last year.

Sectors: Emerging markets – BRIC, Soft drinks, Water

Companies: Coke

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