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On-trade Soft Drinks - China - May 2016

“Beverages usually are not the centre of a meal, but pairing the beverages with food can effectively increase consumers’ likeliness of ordering a drink. Aside from herbal tea brands which have successfully paired themselves with hot pot cuisine, there is still great potential for other non-alcoholic drinks to pair with the vast choice of Chinese local cuisines”

Ching Yang, Research Analyst

This report looks at the following areas:

  • Educate consumers on the concept of food pairing
  • Link with emotions
  • Tapping into flavoured water and fermented drinks

The on-trade soft drink market achieved double-digit growth between 2010 and 2013, driven by the solid performance of the herbal tea category. However, few breakthrough innovations have emerged and herbal tea and freshly-made drinks are threatening the packaged drink market, the growth rate has slowed down since 2014.

The on-trade soft drink market is much less diverse than the retail market, implying room for more brands and products entering the channels. Consumer data show fast food and hot pot restaurants are the channels where consumers are most likely to order soft drinks, with quenching thirst and reducing the greasiness and spiciness in food being the primary usage purposes.

Looking ahead, flavoured water and fermented drinks are two categories with good potential in the on-trade channels. Brands can leverage the food pairing concept and the use of soft drinks as an alcoholic drink substitute to increase consumers’ usage frequency.

This Report examines the on-trade soft drink market in China which refers to packaged soft drinks sold through on-trade outlets, including ready-to-drink (RTD) tea, juice, carbonated soft drinks (CSD), plant protein drinks (PPD), bottled water, and all the other non-alcoholic ready-to-drink products.

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
        • Excluded
        • Executive Summary

            • The market
              • Growth rate has slowed since 2014 and may remain stable
                • Figure 1: Volume sales forecast of on-trade soft drinks in China, 2010-20
              • RTD tea and bottled water are the dominant categories
                • Figure 2: Segment share of on-trade soft drinks in China, by volume, 2010-20
              • Companies and brands
                • Premium bottled water bubbles up in high-end restaurants
                  • Use slogans and limited festive edition to increase brand awareness
                    • Customise my drink – Coca-Cola Freestyle
                      • Figure 3: Coke Freestyle, USA 2016
                    • The consumer
                      • Milk is rarely consumed but sees opportunities
                        • Fast food restaurants enjoy the highest soft-drink consumption
                          • Figure 4: Usage frequency in different on-trade channels, January 2016
                        • Hot pot restaurants the channel to watch
                          • Figure 5: Order frequency of different soft drinks in hot pot and fast food restaurants, January 2016
                        • Light and thirst-quenching drinks are more ideal
                          • Figure 6: Purpose of ordering soft drinks in on-trade channels, January 2016
                        • Rely on brand
                          • Figure 7: Purchase factor of on-trade soft drinks, January 2016
                        • Summer is the peak season
                          • Figure 8: General attitudes towards on-trade soft drinks, January 2016
                          • Figure 9: General attitudes towards on-trade soft drinks, January 2016
                        • Consumers in the north drink more than those in the south
                          • Figure 10: Percentage of consumers who always order soft drinks in the on-trade channels, by channel and region, January 2016
                        • Mintropolitans are sophisticated in food pairing and nutrient balancing
                          • Figure 11: Highlighted purpose of ordering on-trade soft drinks, by consumer classification, January 2016
                        • What we think
                        • Issues and Insights

                          • Educate consumers on the concept of food pairing
                            • The facts
                              • The implications
                                • Link with emotions
                                  • The facts
                                    • The implications
                                      • Tapping into flavoured water and fermented drinks
                                        • The facts
                                          • The implications
                                            • Figure 12: Percentage of flavoured water among total new-launched bottled water products in China, by year, 2012-15
                                            • Figure 13: Product example of flavoured water targeting female consumers, Japan and France 2014-15
                                            • Figure 14: Product example of fermented soft drinks. China, New Zealand, and Italy 2014-16
                                        • The Market – What You Need to Know

                                          • Growth rate slowed down since 2014 and may remain stable
                                            • Packaged products losing out to freshly-made drinks
                                              • RTD tea and bottled water are the dominant categories
                                              • Market Size and Forecast

                                                • Growth rate slowed down since 2014…
                                                  • Figure 15: volume sale and annual growth rate of on-trade soft drinks in China, 2010-20
                                                • …and may remain stable in the next 3-5 years
                                                  • Figure 16: Volume sale forecast of on-trade soft drinks in China, 2010-20
                                              • Market Drivers

                                                • Consumers’ frequent restaurant visiting and soft drink consumption
                                                  • Consumers are spending less on alcoholic drinks
                                                    • Figure 17: Chinese consumers’ changes in the amount spent in alcoholic and non-alcoholic drinks, Jan 2016
                                                • Market Barriers

                                                  • Packaged losing out to freshly made
                                                    • Lack of breakthrough innovation after herbal tea
                                                    • Market Segmentation

                                                      • RTD tea and bottled water are the dominant categories
                                                        • Figure 18: Segment share of on-trade soft drinks in China, by volume, 2010-20
                                                      • Herbal tea drives the RTD tea segment growth
                                                        • Figure 19: Sales of on-trade RTD tea, by volume 2010-15
                                                      • Bottled water surpassing RTD tea segment
                                                        • Figure 20: Sales of on-trade bottled water, by volume, 2010-15
                                                      • Packed juice market threatened by freshly-made juice
                                                        • Figure 21: Sales of on-trade packaged juice, by volume, 2010-15
                                                        • Figure 22: Product example of dessert-like packaged juice, China 2012
                                                      • CSD market more stable in on-trade than in retail
                                                        • Figure 23: Sales of on-trade CSDs, by volume, 2010-15
                                                      • PPD and fermented drinks are potential stars
                                                        • Figure 24: Sales of on-trade PPD, by volume, 2010-15
                                                        • Figure 25: Product example of lactobacillus drink with reduced sugar level, China 2016
                                                    • Key Players – What You Need to Know

                                                      • Premium bottled water bubbles up in high-end restaurants
                                                        • Customise my drink
                                                          • Premium juice
                                                          • Competitive Strategies

                                                            • Premium bottled water bubbles up in high-end restaurants
                                                              • Figure 26: Voss premium bottled water, Norway 2010
                                                            • Brief and catching slogans
                                                              • Figure 27: Example product with restaurant-targeting slogan, China 2014-16
                                                            • Limited festive editions
                                                              • Figure 28: Product example of festive limited editions. China and Singapore 2016
                                                          • Who’s Innovating?

                                                            • Customise my drink
                                                              • Figure 29: Coke Freestyle, USA 2016
                                                            • Resealable can
                                                              • Figure 30: Product example of resealable can. UK 2015.
                                                            • ‘Mocktail’
                                                              • Figure 31: Product example of ‘mocktail’, USA and Italy 2016
                                                            • Premium juice
                                                              • Figure 32: Example of coconut water for kids
                                                              • Figure 33: Product example of packaged juice blended with super fruits or exotic fruits, Brazil and UK 2013 and 2016
                                                          • The Consumer – What You Need to Know

                                                            • Rely on brand
                                                              • Fast food restaurants enjoy the highest soft-drink consumption
                                                                • Higher threshold price
                                                                  • Regional dining habits affect consumers’ drinking purposes
                                                                  • The Consumer - Comparison of Retail and On-trade Channels

                                                                    • CSD is well-liked in on-trade channels
                                                                      • Figure 34: Soft drink consumption from retail channels, by category, January 2016
                                                                      • Figure 35: Top three most commonly ordered soft drinks, by channel, January 2016
                                                                    • Milk is rarely consumed but has opportunity
                                                                    • The Consumer - Usage Frequency

                                                                      • Fast food restaurants enjoy the highest soft-drink consumption
                                                                          • Figure 36: Usage frequency in different on-trade channels, January 2016
                                                                        • Female consumers order more often than the males
                                                                            • Figure 37: Percentage of consumers who always order soft drinks in the on-trade channels, by channel and gender, January 2016
                                                                          • Consumers aged 40 and above order less than the young
                                                                              • Figure 38: Percentage of consumers who have not ordered any on-trade drinks, by channel and age group, January 2016
                                                                          • The Consumer - Usage by location

                                                                            • Diverse beverage preference in hot pot restaurants
                                                                              • Figure 39: Order frequency of different soft drinks in hot pot and fast food restaurants, January 2016
                                                                            • CSDs are rarely ordered in full-service restaurants
                                                                              • Figure 40: Order frequency of CSDs, by channel, January 2016
                                                                              • Figure 41: Product example of premium CSD
                                                                            • Packaged and freshly made juice each own their stage
                                                                                • Figure 42: Order frequency of packaged juice and freshly made juice/smoothie, by channel, January 2016
                                                                              • Speciality drinks and hot beverages are popular in full-service restaurants
                                                                                  • Figure 43: Usage of freshly made juice/smoothie, special blend from the store, and hot beverages by channel, January 2016
                                                                              • The Consumer - Usage Purpose

                                                                                • Light and thirst-quenching drinks are more ideal
                                                                                  • Figure 44: Purpose of ordering soft drinks in on-trade channels
                                                                                • Young consumers drink for physiological purposes; old consumers value the health benefits
                                                                                    • Figure 45: Purposes of ordering on-trade soft drinks, by age group, January 2016
                                                                                  • Need further education on health benefits
                                                                                      • Figure 46: Purpose of ordering on-trade soft drinks, by education level and income, January 2016
                                                                                  • The Consumer – Purchase Factors

                                                                                    • Rely on brand
                                                                                      • Figure 47: Purchase factors for on-trade soft drinks, January 2016
                                                                                    • Building new habits
                                                                                      • Men are loyal to brand; women are adventurous tasters
                                                                                          • Figure 48: Purchase factor by gender, January 2016
                                                                                      • The Consumer - General Attitudes towards On-trade Soft Drinks

                                                                                        • Summer is the peak season
                                                                                            • Figure 49: General attitudes towards on-trade soft drinks, January 2016
                                                                                          • No strong preference between restaurant-made and packaged drinks
                                                                                            • Higher threshold price
                                                                                                • Figure 50: General attitudes towards on-trade soft drinks
                                                                                              • Consumers in their 30s are more interested in children’s drinks
                                                                                                • Figure 51: Percentage of consumers who would like to see more children’s drinks in on-trade channels, by age group, January 2016
                                                                                            • The Consumer – Region and City Tier Comparison

                                                                                              • Consumers in the north drink more than the south
                                                                                                  • Figure 52: Percentage of consumers who always order soft drinks in the on-trade channels, by channel and region, January 2016
                                                                                                • Regional dining habits affect consumers’ drinking purposes
                                                                                                    • Figure 53: Purpose of ordering on-trade soft drinks, by region, January 2016
                                                                                                  • Packaged juice and PPD more popular in tier two and three cities
                                                                                                    • Figure 54: Usage of packaged juice and PPD in different surveyed channels, by city tier, January 2016
                                                                                                • The Consumer - Meet the Mintropolitans

                                                                                                  • More likely to order soft drinks
                                                                                                    • Figure 55: Percentage of consumers who always order on-trade soft drinks in selected channels, by consumer classification, January 2016
                                                                                                  • Sophisticated in food pairing
                                                                                                      • Figure 56: Highlighted purpose of ordering on-trade soft drinks, by consumer classification, January 2016
                                                                                                    • Aware of products’ nutritional value
                                                                                                      • Figure 57: Highlighted purchase factor of on-trade soft drinks, by consumer classification, January 2016
                                                                                                  • Appendix – Market Segmentation

                                                                                                      • Figure 58: Volume sales of on-trade RTD tea in China, 2010-20
                                                                                                      • Figure 59: Volume sales of on-trade packaged juice in China, 2010-20
                                                                                                      • Figure 60: Volume sales of on-trade CSDs in China, 2010-20
                                                                                                      • Figure 61: Volume sales on-trade bottled water in China, 2010-20
                                                                                                      • Figure 62: Volume sales of on-trade the others* drinks in China, 2010-20
                                                                                                      • Figure 63: Volume forecast of on-trade soft drinks in China, by segment, 2010-20
                                                                                                  • Appendix – Methodology and Abbreviations

                                                                                                    • Methodology
                                                                                                      • Fan chart forecast
                                                                                                        • Mintropolitans
                                                                                                          • Why Mintropolitans?
                                                                                                            • Who are they?
                                                                                                              • Figure 64: Demographic profile of Mintropolitans vs Non-Mintropolitans, by gender, age and personal income
                                                                                                              • Figure 65: Demographic profile of Mintropolitans vs Non-Mintropolitans, by marital status, city tier and education level
                                                                                                            • Abbreviations

                                                                                                            Companies Covered

                                                                                                            To learn more about the companies covered in this report please contact us.

                                                                                                            On-trade Soft Drinks - China - May 2016

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