Home Country The best beverage sector to be in is ….

The best beverage sector to be in is ….

Fruit juice 

Fruit juice does not make the cut because the entry barrier is low and consumer loyalty is weak. Consumers can switch from brand A orange juice to brand B orange juice whenever one is cheaper as there is no big difference in taste. No ready-to-drink juice can ever beat the taste of a freshly squeezed juice.
The key to winning in the fruit juice market is package design, distribution and innovative flavours. There are too many products in the market with really poor package design. Besides poor package design, distribution and marketing are keys to success. A company with less than stellar innovation capability can still reap the reward if it has the flexibility to respond to new flavour innovation.

One example is crystal pear juice. In China, Uni-President launched the highly successful pear juice in March 2011. After six months, rival Master Kong (Tingyi) followed suit and managed to eventually win the battle, thanks to strong distribution and marketing. However, the resources devoted to such aggressive marketing can really sap the energy out of the company trying to protect its own turf.

Different types of pear juice in China. Image from China Galaxy International
Loose tea/RTD tea
There is no strong loose tea brand in the world. You drink pu’er tea but any pu’er tea will do unless you are a connoisseur of fine tea. Even if you are seriously into pu’er tea, there are so many producers all claiming to offer the best pu’er tea. When you go into a restaurant, you tell the waiter that you want to drink pu’er tea. You have to accept whatever pu’er is given to you. You can’t be telling the waiter you want to drink brand X pu’er tea because they might not have it in the restaurant. As a pu’er tea producer, you can’t really dominate the market in a category where consumers strongly identify with the type of the tea and not with the brand.

RTD tea is a tough market. As a new entrant or an existing player in the market, you really have to be very strong in marketing. Nobody does marketing better than Mr Tan Passakornnatee, chairman and CEO of Thailand’s Ichitan Group. The company has run an aggressive campaign with cash rewards. In one of its campaigns, Tan is portrayed as a superhero trying to solve the debt problems. One lucky winner would be given a gold bar worth THB 1 million everyday for 60 days during the campaign period. The strong marketing coupled with Tan’s bigger-than-life personally has propelled Ichitan’s green tea drink market share to 50% in June 2013, up from just 17% in July 2012. What will happen to Ichitan if Mr Tan is no longer at the helm?

Ichitan market share: From RHB report
In China, unless you have the resources to cope with price wars, you are bound to enter into one. The RTD tea is famous for the “One more bottle” lucky draw campaign where one get a chance to get another bottle for free. Such price discounting is bad for the margin but can boost sales artificially.

Carbonated soft drinks

This is a market where the big brands usually win. It is either Pepsi or Coca-Cola. So, there is nothing you can  do  to challenge the domination of these two brands. You can happen to stumble upon a great idea just like what China’s Wahaha did with the kvass Russian fermented drink. In China, kvass is a regional carbonated drink confined to the Northeast particularly in Heilongjiang province where the Russian influence is the strongest. Now, Wahaha leveraging on its strong distribution network has made kvass drink into the next big thing for the carbonated soft drink category. Wahaha kvass is available whenever you go in China. However, kvass still does not have the ability to knock out Pepsi or Coca-Cola in the country.

Wahaha Kvass
Coffee (powder/3-in-1)
This is a market where innovation is quite limited. Once the consumer likes the taste, they will usually stick to the brand. This is a market where consumers can really order a cup of Nescafe in a coffee shop in Malaysia, a market Nescafe has been for the last 76 years. Among the top 50 brands on Interbrand 2013 list, Nescafe is the only coffee brand at 37th with Coca-Cola 3rd and Pepsi 22nd. This shows the potential for a coffee brand to excel. Moreover, instant coffee maker can easily export their products overseas as coffee is a universally-accepted drink.
So, the verdict is out. Coffee is the best sector to be in for the long run.

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