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The soft drinks market in China includes various kinds of products. This report
analyzed the soft drinks, embracing Carbonates, Fruit/vegetable juice, Bottled
water,Sports and energy drinks, Concentrates, Ready-to-drink (RTD) tea, RTD
coffee and Asian specialty drinks.

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After years of rapid growth, soft drinks market in China is approaching

saturation. But, the overall soft drinks market still maintained double-digit
volume and value growth in 2010, which was mainly attributed to consumersǯ
continuously rising concern regarding health, and manufacturersǯ efforts in
terms of product segmentation. RTD tea and fruit/vegetable juice, which are
generally regarded as healthy drinks, experienced stronger volume growth in
2010 than in 2009, balancing to some extent the slowdown in other soft drinks
categories. Manufacturersǯ strategies to segment soft drinks, targeting various
consumer groups and consumption occasions, also spurred soft drinks sales and
helped fight market saturation.

      


New launches involving mixtures of multiple ingredients are expected to attract
consumersǯ attention and perform well in the short term. Because the main
consumer group for soft drinks is young people, who tend not to be particularly
loyal to flavours or products, and are likely to be willing to try innovative mixed
flavours. For example, many students and other young consumers have tried
Wahaha Pi Er Cha Shuang. Huiyuanǯs new product Juizee Pop has also seen
considerable success in the short period since its launch.

     

    


In reaction to multinationalsǯ expansion in Chinaǯs soft drinks market, domestic
players will also focus on developing their soft drinks businesses. Hangzhou
Wahaha Group, which is one of the largest domestic players in China, and has
substantial capital support, will place its soft drinks business in the key position
among its various businesses, such as dairy and baby food. Smaller domestic
companies are expected to seek more investment from venture capital
companies to be able to compete with multinational players. Domestic
companies will also endeavour to maintain their advantages as local players,
such as through further expanding their distribution networks in their local
areas and offering lower prices in order to compete in less developed areas.

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Thinner and lighter packaging is likely to be seen in soft drinks, which is effective
in cutting packaging costs. Cheaper brands, such as Wahaha and Master Kong
bottled water, already have thinner and lighter plastic bottle packaging than
standard and premium products. However, consumers may have doubts
regarding quality if bottles are revised too much in name of cost saving. Hence,
manufacturers will tend to emphasise the environmentally-friendly nature of
new, lighter packaging, rather than the cost-saving aspect.

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The emergence of Internet retailing will be help to stimulate soft drinks
consumption, as consumers who are not necessarily looking to purchase soft
drinks may well be attracted by low prices or promotions on B2C websites.
Internet retailing will also change peopleǯs consumption habits. Chinese people
are not accustomed to drinking a lot of soft drinks at home, but more typically
make hot tea or drink water which has been boiled first. However, with the
development of Internet retailing, young people are more likely to store soft
drinks at home for future consumption. Thus the growth in Internet retailing will
be good for the further development of the soft drinks market, and more soft
drinks manufacturers are expected to exhibit their products on B2C websites.

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Chinaǯs soft drinks market has maintained double-digit growth for over 10 years;
however, it is expected to see slower during the forecast period, because of
increasing market saturation. Nevertheless, in the context of the global soft
drinks market, China will still have the greatest potential for development, with
manufacturers seeking to penetrate the much less saturated rural areas.

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With rapid development of Chinaǯs economy, the soft drinks market in China is
on the up and up throughout the years. According to Euromonitor, Chinaǯs soft
drinks market experienced continuous double-digit growth from 2007 to 2010,
being one of the most dynamic in the world. In view of such a lucrative market,
many brands are driven to get a slice of the cake. As a consequence, competition
within the industry becomes intense among domestic brands and foreign brands.
In particular, multinational companies like Coca-Cola and PepsiCo target China
as her market has the greatest potential around the globe. Therefore, they have
raised their investment drastically. Basically, the capital raised are allocated to
different areas including building new factories, expanding distribution
networks, increasing marketing and promotion activities, and improving R&D
capabilities. No wonder foreign brands dominate the soft drinks market in China.
Facing such strong multinational competitors, domestic players have to sharpen
their competitive edges in order to survive in the market.

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It is a matter of fact, that foreign brands and domestic brands have different
competitive advantages. Simply speaking, they have strengths in different
arenas. In terms of performance, quality and technology, foreign players have
competitive edges over local players. Yet, on the other hand, with regard to price,
convenience and promotion, local brands gain an edge when compared with
foreign brands. Hence, domestic players can take advantage of their strengths
and improve their weaknesses comparing to foreign players.

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First of all, brand image has become increasingly significant in the minds of
consumers as their disposable incomes rise with the growth of economy.
Domestic players are suggested to make huge investment in boosting the profile
of their brands. Consequently, spending more on advertising is essential in the
rivalry.

  
   

Apart from traditional advertising media, the Internet has become an
increasingly popular channel to capture the younger generations. Apparently, it
can apply digital marketing to increase the competitive advantages of domestic
brands. By means of digital marketing, it can facilitate all rounded
communications, especially to foster a positive brand image in the minds of
young consumers. As young people are future of business, it is vital to cater to
this segment. In this digital age, online marketing campaign can be applied to
appeal to younger generation. In an attempt to implant a favorable brand image
in the minds of Chinese consumer, a series of online communication tools can be
adopted through interactive website, e-commerce, social media network, mobile,
e-CRM, search engine marketing, online media and email marketing.

With the Internet proliferation,       can be launched to

promote new products. In order to reach more target audience, online bloggers
and journalists should be invited to watch the video and provide feedback. After
that, they are encouraged to forward the video widely via their online social
network. On top of that, word-of-mouth can be utilized on social networking
sites, such as Renren. These tactics are crucial to spread the viral campaign
widely.

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As the market size of soft drinks market is enormous, domestic players can
actually fight for their corner by catering to market segments that are not
targeted by foreign players. Obviously, soft drinks giants such as Coca Cola have
dominated in Chinaǯs big cities. But in fact, the vast countryside areas remain
unexploited. To fill in the gap, domestic players can simply target those
unexploited segments in the vast rural area to avoid head-on competition with
foreign brands. In addition, domestic players can take advantage of their low
price as one of the competitive advantages. Since brand name recognition is not
high in the vast rural area, consumers are more price-sensitive when choosing
among brands.

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As the soft drinks market in China is approaching saturation. Further market
segmentation of soft drinks should be developed so as to meet the specific
demands of different consumers in the competitive market. As far as consumers
are concerned about the concept of sugar-free and natural ingredients, healthier
drinks are becoming increasingly popular. In other words, consumers are
willing to buy healthier drinks at the expense of higher price, especially for those
in big cities. Therefore, domestic brands should take an active role to segment
soft drinks, focusing on several consumer group and consumption occasions to
boost product sales. This can help domestic players to gain an edge over foreign
players in the soft drinks market.

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In view of the increasingly hectic lifestyles in cities, Chinese consumers are
looking for more convenient purchasing methods, which have spurred a boom in
business-to-consumer (B2C) websites, such as www.yihaodian.com and
www.womai.com specializing in food and beverage sales. Domestic brands can
have business deals with those websites to increase their distribution network.
On top of that, a new way of spending evolved recently, called tuangou (team
buying) add values to Internet retailing. Simply speaking, team buying refers to
the action of consumers teaming up to purchase items from a single Internet
retailer in an effort to get volume discounts. Since Chinese consumers are not
particularly loyal to soft drinks brands, price plays an important role in
purchasing decisions. Domestic brands can join hands with team buying
websites to raise sales to take advantage of price. By collaborating with online
retailers, domestic brands can improve their competitive edges of both
convenience and price against foreign brands.

   
In spite of the success of multinational giants in Chinaǯs soft drinks market,
domestic competitors are moving their way up to challenge the king of soft
drinks world relentlessly. On top of the local strengths of domestic players, there
are still a lot more room for them to improve their competitive advantages.
Nowadays, brand image is everything, so it is crucial to polish the brand image of
domestic players by means of advertising. On the hand, digital marketing can be
utilized to capture the younger generation in the information age, such as the
online video viral campaign. Apart from that, domestic players can choose to
pick winnable battles by exploring unexploited rural area segments to avoid
head-on competition with foreign giants. Moreover, further market
segmentation can be applied to better cater to consumer needs. Last but not
least, Internet retailing is a new platform for domestic players to gain an edge in
terms of convenience and price. Consequently, despite the fierce competition in
Chinaǯs soft drinks market, domestic brands can still gain an edge based on the
feasible recommendations in this essay.