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just the Facts – The Chinese soft drinks market

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Earlier this week, Danone agreed to sell its 22.98% shareholding in China Huiyuan Juice Group to Hong-Kong-based private equity firm SAIF Partners for EUR200m (US$260m). Here we take a look at the soft drinks market in China with the help of Euromonitor’s Soft Drinks in China report.

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  • The Chinese soft drinks market maintained double-digit growth in 2009 in both volume and current value terms. Even during the economic downturn, consumers did not reduce their consumption of soft drinks. The increasing concern of Chinese people about personal health made healthy drinks such as fruit/vegetable juice and RTD tea the main drivers of the strong growth. As a result, CSDs experienced slower growth.
  • Coca-Cola China already has the leading position in the fruit/vegetable juice category in China. However, the company still has no presence in 100% juice. This was one of the major reasons why Coca-Cola wanted to acquire Beijing Huiyuan, China's largest 100% juice producer. The company failed, however, when the deal was blocked by the Chinese government on anti-trust grounds. It is therefore likely that Coca-Cola will launch its own brands of 100% juice or nectars in the country in the medium- to long-term future.
  • Lemon has become popular in the soft drinks market in China since the launch of Nongfu Spring Co’s Shui Rong C100 in June 2008. The product has been positioned as supplying the necessary daily amount of vitamin C as consumers in China are attracted not just for their taste, but mainly due to increasing health concerns.
  • Besides new product launches, aggressive promotions and marketing were the main approaches for the leading players to increase their volume sales in the country. Multinationals such as Coca-Cola China and PepsiCo China have both used celebrities as brand or product ambassadors, indicating that competition amongst the leading players is becoming much stronger.
  • The current health trend is expected to continue in China. Not only soft drinks manufacturers, but other bodies are persuading consumers to live a healthier lifestyle, which Euromonitor believes will continue to spur the sales growth of “better for you” products. RTD tea is expected to contribute the highest volume growth, but fruit/vegetable juice and Asian speciality drinks will also be popular. By contrast, the carbonates category is expected to continue its slowdown in growth momentum year-on-year.
  • Since the younger generation is the main target group for soft drinks in China, fashionable packaging is the most effective way of attracting consumers. Manufacturers are expected to launch more designs in PET packaging, for example twisted bottles and wide-neck bottles, in the forecast period. Also, environmentally-friendly packaging is expected to become more popular.
  • Sales of soft drinks in China are expected to grow by 23.5% in volume terms in the on-trade from 2009 to 2014, and 27.2% in value terms. In the off-trade, sales are predicted to rise by 54.1% in volume and 61.1% in value terms.

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