The domestic beverage market has encountered a 'black swan' event, with a new product survival rate of only 5%.

The "Win Another Bottle" promotion, once a sensation in the beverage industry, has disappeared this year, replaced by various "fan-gathering" methods. Although beverage companies have discovered that emotional resonance from consumers is far more effective in driving sales than promotions, fan economics has replaced price wars in practice. However, this round of "fan-gathering" battles has not rescued the beverage industry from its "lean year." Extreme weather, cumbersome marketing methods, overly similar new products, and self-deprecating positioning have further muddied the already unclear beverage industry.

Rainy weather dampens industry enthusiasm

After thirty years of rapid growth, China's beverage industry has entered a period of slow growth. The "2015 Annual Report on the Overall Operation of China's Beverage Industry," released by the China Food Industry Association in February this year, shows that in 2015, the total output of China's beverage industry reached 176.61 million tons, with a year-on-year increase of only 6.23%; the main business income of beverage manufacturing enterprises above designated size reached 615.733 billion yuan, a year-on-year increase of 6.21%.

Although still maintaining positive growth, the growth rate of the beverage industry is significantly lower than before. According to data from the National Bureau of Statistics, the sales volume of soft drinks nationwide in 2015 increased by only 4% year-on-year. In 2014, this growth rate was 13%, while in the ten years from 2001 to 2011, the average annual growth rate of soft drink sales nationwide exceeded 20%. In recent years, large enterprises such as Coca-Cola, Uni-President, Master Kong, and Wahaha have all experienced varying degrees of performance decline.

It is noteworthy that this year's extreme weather has also cast a shadow over the growth of the beverage industry. "This year's beverage industry is relatively flat; all the passion has been extinguished by the rain." An insider in the beverage industry succinctly points out the crux of the problem. After last year's lean year, beverage companies were full of hope for a bumper year this year. During the summer, the peak season for the beverage industry, although the high temperatures in the north have brought forward the peak consumption season for beer and other beverages, the continuous rainy weather in the south has had a negative impact on the beverage industry. Taking the leading brand of light beverages, Powerade, as an example, its sales reached 6 billion yuan last year, but in the first half of this year, Powerade's sales declined by 4% compared to last year. Zhu Danpeng, a researcher at the China Food Business Research Institute, pointed out in an interview with the media that Powerade's main sales areas are concentrated in South China, East China, and Central China, and the rainy weather in many areas of South China and Central China has led to a decline in sales. Although the beverage war will not reach its peak until early August, the current sluggish market has left many companies hesitant about whether to pin their hopes on next year.

Marketing methods turn consumers into "Waiting for Godots"

The bad news comes not only from the weather; the marketing of the beverage market is also changing this year. "Winning the young wins the world" has always been considered a golden rule in the industry. It is true that the preferences of young consumers influence the direction of product development, and young people are also the main consumer group in current society. However, the purchasing groups that companies expect have not arrived as scheduled, and scenes of "Waiting for Godot" are being played out in front of the shelves of beverage sections in supermarkets.

Although the "Win Another Bottle" activities have decreased, consumers have not expressed much regret. Consumers would rather see companies invest their energy in the quality of the products themselves. In addition, some consumers have reported that it is "easy to win but difficult to redeem." Indeed, in the past few years, in addition to some beverage packaging already indicating redemption at the point of sale, there have been cases where merchants refuse to redeem prizes, and some beverages do not clearly state the redemption location on the bottle after winning, and salespersons also refuse to redeem prizes. Although relevant management departments have coordinated with enterprises, these problems have not been resolved in a timely manner. Some consumers question, "To redeem a drink worth two or three yuan, you have to waste a lot of time and travel expenses. Isn't this deceiving consumers?"

In an era of slowing overall industry growth and the prevalence of healthy eating and high-quality consumption concepts, the mainstream price range of the beverage industry is also quietly shifting upward. Industry insiders point out that after hovering in the three-yuan mainstream price range for ten years, Chinese beverages have entered the five-yuan mainstream price range. Zhu Danpeng said that the increase in the mainstream price range of beverages from three yuan to five yuan gives companies more funds to expand channels and increase their fan base, "and more funds to interact with fans."

Current beverage promotions are mainly developing in the direction of deep binding with consumers. At the same time, it has also been found that bottle cap promotions have not completely disappeared from the market; instead, they have been replaced by "surprise openings." From phone credit to movie tickets to tickets for entertainment and sporting events, sports marketing and entertainment marketing have become the most important ways for beverage companies to communicate with consumers. In addition to appearing in variety shows such as "Running Man" and "I Am a Singer," this year's European Cup has become a hot spot for beverage endorsements. From entering verification codes to check prize information to scanning WeChat codes to follow, the marketing direction of beverage companies this round has been aimed at "gathering fans." However, reality is always harsh. An employee at a Lotte Mart supermarket in Dongcheng District told reporters, "Every day, a large number of un-scraped barcodes and unredeemed beverage bottles are collected; many of them are actually winning bottles." The above-mentioned person believes that cumbersome activity procedures, delayed prize information, and unstable activity pages are all reasons for the failure of promotional activities. "Consumers have lost patience and interest in the beverage industry's money-making methods."

New product survival rate is only 5%

Grasping the young consumer market is not as easy as imagined. In the annual new product launch battle, major brands are gearing up, but they are faced with the embarrassment of finding it difficult to create a hit product. Because no matter what kind of fast-moving consumer goods, the launch of new products seems to be difficult to keep up with the speed at which Chinese consumers tire of the old and embrace the new. This makes companies feel helpless in the face of "new product launches." On the one hand, there is overcapacity of old products; on the other hand, they have to launch new products. New products are given the expectation of "lifting all boats" within the entire brand, which adds more elements of gambling to the "new product launch" for beverage companies.

In addition to the upward shift in pricing, new products invariably emphasize health. Recently, Bain & Company and Kantar Worldpanel released the "China Shopper Report," which shows that the sales growth rate of China's fast-moving consumer goods market in 2015 was 3.5% year-on-year, the lowest in the past five years. Among them, beer sales fell by 3.6%, and instant noodle sales fell sharply by 12.5%. In contrast, reports show that the performance of health-concept foods in China in recent years has been excellent. For example, yogurt sales increased by 20.6%, functional beverages increased by 6%, and water purifier sales increased by more than 50% from 2011 to 2015. This has led almost all beverage companies to invariably target health in new product development. Data from China Resources Vanguard shows that there are currently 455 single products on sale, and nearly 70 new products were launched this summer, accounting for 15% of the total number of products. This has led to a proliferation of energy drinks, vitamin drinks, probiotic drinks, and drinks with high-tech labels such as "quantum water," goji berry juice, and walnut milk.

It is understood that the survival rate of new products in the current beverage industry is only 5%. In response, Zhu Danpeng believes that the low survival rate of new products is mainly due to several aspects: China is in an interwoven period of rapid information and industrial development, and the rise of new-generation consumer groups has led to a mismatch in many product innovations. The overall beverage product R&D capability is very lacking, and new products have no major highlights and lack innovation.

In an era where post-90s have become the mainstream consumer group, beverage companies have had to adapt to changing trends. To break free from homogenization, they've started "self-deprecating" marketing. Not long ago, a series of drinks, touted as "the worst-tasting in history," emerged, with slogans like "Regret not drinking this beverage for life, regret drinking it for life." While such positioning surprised many, it also struck a chord with curious consumers. After this product series gained popularity, Laoshan Mineral Water Company, one of the producers of the "bad-tasting" drinks, released original emojis on its WeChat official account, such as "The other party doesn't want to talk to you and force-fed you a mouthful of White Flower Snake-grass Water." Meanwhile, two bottles of Baishui Mountain Mineral Water appeared in the live stream of Huajiao Live streamer Juanfu. Regarding this self-deprecating marketing, Zhu Danpeng believes that while it is creative, it is difficult to promote, because brand rejuvenation is not as simple as just changing product definitions and packaging. Although he predicts that more and more beverage companies will use live streaming for marketing in the future, he still calls for beverage companies to strengthen their new product development capabilities and let the value of beverages return to the product itself.

Afterword: Through the ebb and flow of time, after many years of development, China's food and beverage industry has experienced many twists and turns but continues to move forward. In an increasingly diversified era, entering the international market has become a prerequisite. Perhaps then, a mature domestic beverage brand will have fully fledged wings, conquer the world, and make everyone fall in love with "Made in China"!