Does the herbal tea market "reduce sugar and add gas" to seek new increments and please young people?

A few days ago, JDB announced the listing of new zero-calorie herbal teas, and it is also launching bubble herbal tea. Prior to this, Wang Laoji launched a 0-sugar, 0-fat and 0-calorie version of herbal tea, and the herbal tea industry seems to be undergoing an exploration, and invariably chose the hottest products in the beverage industry - sparkling water and sugar-free drinks.

From a local beverage to the formation of a ten-billion-level market, herbal tea was once a legend in China's beverage industry, but in recent years, the herbal tea industry has been in a bottleneck state. In the face of the impact of new tea drinks and new brands, the herbal tea industry is groping for ways to please young consumers.

Industry insiders said that the price war has made it difficult for new entrants in the herbal tea industry, so herbal tea has become a rare beverage segment that has entered a period of decline, and the current market size is less than half of the peak period. The launch of the current hot category in the market is a step taken by herbal tea companies to try to cater to young consumers, but the time is late, and it is still unknown whether it can win the hearts and minds of consumers.

Herbal tea companies follow up on zero-calorie, sugar-free products

On July 5th, JDB Herbal Tea Zero Calorie New Products will be held in the form of online cloud release, after a 10-day pre-sale, JDB announced the launch of zero calorie herbal tea new products, including slimming jar 310ml and PET bottle 550ml two specifications.

According to the information released by JDB, Pang Zhenguo, general manager of the quality management department of JDB Group, said, "JDB zero calorie herbal tea is a new herbal tea product carefully created by JDB Group for many years. While achieving zero calories in the product, the raw material formula of Materia Medica remains unchanged, the production process remains unchanged, the quality management remains unchanged, and the quality is the same, which further meets the diversified needs of consumers for herbal tea drinks."

Before JDB released zero-calorie herbal tea, and it is launching a sugar-free herbal tea featuring "0 sugar 0 calories 0 fat", retaining the herbal tea formula and using sugar substitute erythritol. In addition, Waqizheng also launched bubble herbal tea. According to public information, in addition to the patented technology of Chinese herbal medicine boiling extraction, the product also adds non-phosphoric acid bubbles to meet the young consumer group's pursuit of refreshing taste.

Wang Laoji, another brand in the herbal tea industry, launched sugar-free herbal tea and low-sugar herbal tea as early as 2016. A few days ago, Wang Laoji updated the packaging of sugar-free herbal tea and marked "0 sugar, 0 fat, 0 calorie" in a conspicuous position.

For herbal tea companies to launch new categories of products that have been popular with consumers in recent years, Wu Xiaopeng, a senior consumer goods investor, told the Beijing News reporter that the launch of sugar-free and bubble-free products by herbal tea companies in the context of the popularity of sparkling water and sugar-free beverages is also forced by competitive pressure, which is basically a new venture. However, in the new category of entrepreneurial incubation within traditional enterprises, it is more difficult than the current large number of young entrepreneurial teams.

The herbal tea market has shrunk

Looking back at that year, Wang Laoji and Jiaduobao expanded the herbal tea industry and had a hidden tendency to compete with categories such as cola.

From 2009 to 2012, the herbal tea category maintained a rapid growth rate of 16%-18%, and various enterprises have been involved. At the hottest time in the industry, there were more than 50 herbal tea brands in the market, and even pharmaceutical companies were involved in herbal tea, including Hutchison Whampoa, Pan Gaoshou Pharmaceutical, Beijing Tongrentang, and Guilin Sanjin. With the emergence of new brands such as Yuanqi Forest and Good Hope Water in the market and occupy a place, it invisibly brings pressure to the development of herbal tea enterprises.

As a "new upstart" in the beverage market, Yuanqi Forest has shined in recent years. Yuanqi Forest was established in 2016 and its main business is to produce sugar-free, low-calorie products such as sparkling water. According to the Tianyancha App, Yuanqi Forest has received five rounds of financing since its establishment, and the latest round was completed on March 1, 2021. In terms of performance, according to media reports, the performance of Yuanqi Forest in 2020 increased by about 270% year-on-year, and the annual sales volume reached 3 billion yuan, of which the sales of sparkling water accounted for more than 70%. During the "6·18" period in 2019 and 2020, Yuanqi Forest achieved the first sales result of Tmall beverages. Tang Binsen, founder of Yuanqi Forest, set a sales target of 7.5 billion yuan in 2021.

In addition, Dongpeng Beverage, as the "first share of domestic functional beverages", is also growing and developing. Dongpeng Beverage released a performance forecast showing that it is expected to achieve operating income of 3.6 billion yuan - 3.72 billion yuan in the first half of 2021, an increase of 45.78% - 50.64% year-on-year; to achieve a net profit of 665 million yuan - 685 million yuan, an increase of 50.69% - 55.22% year-on-year.

In fact, while the development of various new beverages is in full swing, the size of the herbal tea market is shrinking, and the previous double-digit growth is becoming a thing of the past, in the final analysis, herbal tea is a relatively niche category.

From the perspective of JDB, it previously wanted to lean on the "big tree" of COFCO Group, but was asked for compensation by COFCO Group. The cooperation between COFCO Group and JDB is mainly through its packaging listed company COFCO Packaging, the two sides have been deadlocked due to cooperation, after which COFCO Packaging asked JDB to compensate about 230 million yuan and pay interest of about 7.7348 million yuan.

In the end, the dispute was resolved, and on March 2 this year, Wang Jinchang, chairman of JDB Group, and Lu Jun, secretary of the party group and chairman of COFCO, exchanged views on further deepening cooperation. Wang Jinchang said that he hopes to have further cooperation with COFCO in packaging services, product innovation, technology research and development, and equity investment and listing in the future.

Wang Laoji's performance is reflected in the financial report of Baiyun Mountain, a listed company under his parent company Guangzhou Pharmaceutical Group. According to the financial report, in 2019, Baiyun Mountain achieved revenue of 64.952 billion yuan, an increase of 53.79% year-on-year; deducting non-net profit was 2.746 billion yuan, an increase of 28.84% year-on-year. Among them, the main business income of subsidiary Wang Laojida Health Company reached 10.296 billion yuan and net profit was 1.38 billion yuan. In 2020, the main business income of Wang LaojiDa Health Company fell to 6.862 billion yuan, and the net profit was 1.195 billion yuan.

As the third in the industry, he is suppressed by Wang Laoji and Jiaduobao, and the performance is also declining. And its brand parent company Dali Food said in the 2019 financial report that the overall growth of the herbal tea market in 2018 and 2019 was weak, and it is planning to re-plan resource investment, sort out the sales system, and strive to achieve sales growth. In the 2018 financial report, Dali Foods' data on herbal tea business is more detailed, and in 2018, The sales of Dali Foods' functional drinks, plant proteins and milk-containing beverages (including bean beans) increased by 15.1% and 27.0% respectively, while the herbal tea business fell by 6.3% to 2.361 billion yuan.

Wu Xiaopeng pointed out that the current herbal tea industry has three characteristics, first, herbal tea is not a national beverage, sales are mostly in the south; second, the reshuffle of the herbal tea industry is basically completed, and the current market size is only about half of the peak period; third, modern food science and technology can not analyze the quantitative mechanism of plant extracts. Therefore, the herbal tea industry is looking forward to resuming high growth with difficulties.

The new category may not be able to save herbal tea

The herbal tea industry, which is still a relatively "niche beverage", has begun to consciously "please" young consumers in 2021, but its involvement in sparkling water, zero-sugar drinks and other fields has been half a beat slower.

Wu Xiaopeng told the Beijing News reporter that due to the entanglement of the two giants of Jiaduobao and Wang Laoji, the endless debate on trademarks, packaging and advertising slogans has consumed a lot of management energy, capital and media resources on both sides. In the past 10 years, a variety of new beverages have emerged in an endless stream, many traditional brands and products have been updated and iterated, and the image, reputation and value of the herbal tea industry have declined with the disputes of giants. How to develop healthier products and formulate positioning in line with new consumer trends has become a challenge that the industry must face to move forward.

The growth of old products is not smooth, and herbal tea companies have started the idea of new categories of products. Dali Food has told the media that with the deepening of consumption upgrades, consumers have higher and higher requirements for health and taste when choosing drinks, and sparkling water has become a new consumption outlet. Based on the judgment of consumer trends, combined with the development of the industry and its own research and development strength, Dali Food launched and its positive bubble herbal tea in a timely manner to meet the more diversified needs of consumers.

Although sparkling water products are popular products in recent years, there have been many giants entering the market, making it and its positive does not occupy an advantage. In the market, Yuanqi Forest has driven the development of the sparkling water industry, and then food and beverage giants such as Nestlé, Coca-Cola, and PepsiCo have introduced or newly introduced or newly introduced to develop their sparkling water products. Compared with the brand power and channel power of these brands, and it is in a weak position.

Wu Xiaopeng said that even if it has a strong brand effect, the goal is to maintain consumer habits, and it is very difficult to transform consumer habits from not drinking herbal tea to drinking herbal tea. The emerging opportunities in the food and beverage industry in the future will certainly be rewarded to products or companies that can meet consumers' demands for upgrading the quality of raw materials, emotional relaxation or social demands.

Beijing News reporter Wang Ziyang

Edited by Li Yan Proofreader Chen Diyan