China's beverage sector booming: New players enter market and exports stay strong

By Tingmin Koe

- Last updated on GMT

Milk products from China dairy company Mengniu. ©iStock
Milk products from China dairy company Mengniu. ©iStock

Related tags Beverages Fruit juice Milk

China's beverage manufacturing industry saw its profits rise 25.2% in the first five months of this year, according to a report from China-based consultancy firm Askci Consulting.

Total profits amounted to 84.53 billion yuan as revenue rose 10.8% year-on-year to around 674.9 billion yuan. 

The firm attributed the improvement to the industry's ongoing structural reform.

From January to May, loss-generating enterprises posted total losses of 3.82 billion yuan, down 4.7% on a yearly basis.

In the first five months, the export delivery value of China's alcohol, drink and, refined tea manufacturing industries climbed 7.7% to 9.23 billion yuan, slowing from a 12.5% increase registered in the first four months.

New players

The spectacular performance of China’s beverage manufacturing industry has attracted new players into the field.

Pagoda, which is originally into the business of growing and selling fruits, has forayed into the beverage industry in May this year.

Through a collaboration with Sichuan Chia Meei, a subsidiary of Taiwan fruit business firm Chia Meei, Pagoda has started to sell non-fruit concentrate (NFC) juices under the brand “Hou Guo Zi”.​ The move reaped instant financial payback.

“Hou Guo Zi”, ​which is available in five flavours, fetched 45 million yuan within three days of its launch, the China beverage organisation announced on its website, citing a local media report.

The NFC juice is selling at 16 yuan per bottle, with the middle class as the targeted consumers. Pagoda attributes the success to their supply chain, a good network of distribution channels, and innovation.  

Chu Cheng Company, another China fruit farm, is also rumoured to launch their NFC products by end of this year.

Dairy players excelling

Across the board, beverage makers, especially dairy milk is also seeing a stellar performance.

Dairy company Yili recording a 43% growth to $6.2 billion in brand value, becoming the only Chinese firm​ to squeeze into the world’s 10 most valuable food brands this year, trailing only Nestle and Danone, a report from brand valuation and strategy consultancy Brand Finance has shown.

Competitor Mengniu also grew at a similar pace as Yili, with brand value rising 45% yoy, and brand value established at $3.45 billion.

Overall, the two firms excelled in international dairy brand ranking, occupied two out of five spots. Yili and Mengniu ranked 2nd​ and 3rd​ respectively, losing only to Danone.

On the other hand, Jia Duo Bao (JDB), dubbed China’s Coca-Cola, has set a target of two-digit sales growth this year.

Li Chunlin, president of the herbal drink company made the announcement when re-launching the JDB red can on 15th​ of last month.

“Wherever there is herbal tea, JDB will definitely be present. And where there is JDB, both JDB red can and gold can will be available, in order to achieve the aim of double-digit sales growth this year, and to materialise the dual achievement of growth in sales and profits,”​ he said.  

However, steps to increase the availability of its red can products have not taken off. Local media Securities Daily​ reported that JDB red can is limited in availability. Most herbal tea with a similar red colour can design belongs to rival Wang Lao Ji.

Inventory challenges, the on-going lawsuit with Guangzhou Wanglaoji Health Industry Co. on the rights to enjoy the same red colour can packaging are some challenges that JDB is facing, industry experts noted.

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