"Red Bull Variables" attracted all parties to fight for market share

Functional drinks again draw giants to battle.

After Yi Bao, Amway also formally announced would compete in China. The industry's rapid growth is behind Amway’s entry, as well as the problems growth caused.

According to the 2016 review of sports and energy drinks released by Mintel, the global energy beverage market showed strong growth of 10% in 2015, with the United States, China, the United Kingdom, Thailand and Vietnam being the top five countries in sales. China is thriving in growth rates, with up to 25% in 2015, almost four times the U.S. market. Previous market survey data show that compared with the developed countries in the world, China's per capita consumption of functional beverages is only 0.5 kg per year. Compared with the world's per capita consumption of 7 kg, there is still more room for growth. But at the same time, the homogeneity of the market is also getting worse.

Amway XS entered the market in high-profile

In order to layout the functional beverage market, Amway acquired the XS brand in 2015. According to Amway’s data this functional beverage brand, which was introduced to China just a few days ago, sold 10 million tins in the 29 hours after its launch.

According to David, XS co-founder and global vice president, XS sales in China reached twice the annual sales volume of Amway in the Korean market on the first day of its public offering in China. At present, China has replaced Japan as XS's second largest market.

However, different from the traditional beverage channels, XS came into China through Amway’s direct-sales channels. Amway is not the only company promoting beverages in the field of direct sales. Earlier, Nu Skin had launched its g3 energy drink in China, and Infinitus was also promoting Runhe series of functional drinks. However, these brands are mostly promoted with a concept of juice, while Amway’s newly launched products are different.

Is the Red Bull dispute the incentive?

To the outside observer, one important reason why XS only thinks of the Chinese mainland market after launching in 51 countries and regions in the world is that Red Bull, a functional drink in the Chinese mainland market, is falling into an unprecedented variable situation.

On September 12, China Red Bull packaging provider ORG announced that they have received a litigation ruling of suspension of their lawsuit with T.C. Pharmaceutical Industries Co., Ltd (trademark holder of Red Bull). However, reporters from SMW called the securities department of the company as investors, and the reply was that the lawsuit of T.C. and Reignwood Group (the actual operator of Red Bull in China) is ongoing. ORG and T.C. will also make a decision after the lawsuit of T.C. and Reignwood Group in Thailand is finalized.

In fact, the data disclosed by ORG is becoming proof of the market potential of functional drinks in China. Public information shows that the 10-year cooperation agreement between ORG and Red Bull was signed on February 10, 2012. From 2008 to 2016, Red Bull 's purchased value from ORG increased from RMB771 million to RMB4,975 million, surging 6.5 times.

According to statistics from the China Food Industry Association, retail sales of beverage products in China reached 217.5 billion yuan last year, up 10.5% over the previous year, and its growth rate dropped by 4.3% over the previous year. However, the market share of tea drinks, functional beverages and healthy drinking water increased year by year.

Against this background, in May and July of this year Wahaha and C’estbon specially launched the sports drinks brand, “SURAN,” the newmagic drink.

However, Amway has always insisted that its introduction of XS products is intended to raise recognition of the XS brand among young people. The brand is popular among young people around the world, helping Amway direct-sales channels attract young marketers and continue to strengthen the connection between the company and young entrepreneurs.

Li Ka-shing is also among the players. In fact, while the Red Bull trademark dispute continues, Li Ka-shing already was in the process of laying out the mainland China market with the functional drink Celsius before XS was ready to enter China.

Public information shows that on July 31 this year, the United States Nasdaq listed Celsius Holdings announced that it will enter the Chinese market, and plans to distribute throughout the country, entering the Chinese market as a lifestyle brand through the e-commerce dealer, Qi Feng Food Technology (Beijing) Company, Ltd.

It is reported that Celsius entered the Hong Kong Market through a distribution agreement with Watson Group, and sells in retailers such as 7-11, AEON, International, Fusion, TASTE, and PARKnSHOP Supermarket. At the same time, Celsius has set up a new holding company in Hong Kong, hiring a number of high-level executives with working experience in Red Bull Asia in order to dominate the expansion of the entire Asian market.

A. C. Nielsen data shows that in 2009-2014, the compound annual growth rate of China's functional beverages reached 31.6%, and it is expected that by 2019 the scale will reach 101.3 billion yuan. Analysis at that time recognized that, as a subdivision of functional drinks, Celsius discovered a good selling point for the Chinese market, promoting metabolism and fat reduction.