Coke and Pepsi Fight for Non-soda Market

After entering China, Coke and Pepsi consider it to be one of their most important markets. The competition between them is also very furious. And this year is a pivotal period for both of them.

May 19, 2009 was an ordinary day. However, two beverage giants – Coca Cola and Pepsi chose to hold their sales-promotion movements on that day, making that day somewhat different.

On the afternoon of that day, Coca Cola held the Party of Minute Maid Fruit Grain of Orange in the College City of Guangzhou. More than one thousand people attended the party. The famous Hong Kong pop singer Eason Chan turned up in the party as the spokesman for Minute Maid. From then on the new round of market offensive in 2009 was launched.

At the same time, Pepsi held the press release named “2009 World-best Voices and Cool Summer” in Beijing. Twelve pop singers Louis Koo, Jolin Tsai, Lee Joon-Ki and so on were present in the press release.

It was known that this was the largest party held by Pepsi. And according to the insider from Coca Cola, the party mentioned above is the largest on-site marketing movement in the history.

Even the journalists are confused. “I don’t know which party I should go to,” said one of them.

Stand to the Reason, Out of Expectation

Right now it is the hot season of beverage, as well as the time for each beverage enterprise to use every means to attract more customers. It is obvious that the two beverage giants make the war between them more furious than ever before. In addition, the focus of competition in China’s market has been changed. This year, the trend is more obvious.

Maybe not so many people will pay attention to the marketing activities of those two beverage companies which used to be specialized in sodas if there is no bid of Coca Cola for Huiyuan Juice in September 2008.

When Coca Cola declared to bid for Huiyuan shares for 19.65 billion HK dollars, most people thought it “really high”. And what it wants is just a juice maker having a dominant place in China.

In Coca Cola’s opinion, this price was “very reasonable”. According to the report from Nielsen, Huiyuan took 42.6% of pure fruit juice market and 39.6% of the medium consistency fruit and vegetable juice while Cola Coca was an amateur in those two fields.

And according to the forecast of Huiyuan, the development of fruit and vegetable juice will be faster than sodas in 2012.

At that time, people suddenly discovered that both Coca Cola and Pepsi has already got certain strength in the non-soda beverage.

In 2004, Minute Maid under Coca Cola was for the first time introduced in China. Its innovating characteristics of “containing real fruit meat” made it popular quite soon. Its sales amount can see a two-digit growth rate every year. After the initial success, Minute Maid introduced some new favors, also getting good achievements.

In February 2008, a tea drink named “Original Tea Leaf” began to be sold in the different markets of China. The first movement is to send one million bottles for free. In addition to the advertisement featured by film star Jackie Chan and his son Jaycee Chan, “Original Tea Leaf” was quickly known to the Chinese people. It is also a marketing project launched by Coca Cola. It saw a success – the “Original Tea Leaf” can be seen in the obvious places of the supermarkets in different places.

According to the data from Coca Cola, Minute Maid drinks stood on the first place of the low consistency juice market of China. And hundreds of million bottles of “Original Tea Leaf” have been sold old since its appearance last year. Its whole non-soda business can see a double-digit growth rate every year.

Admiring Coca Cola’s sweet success in China’s low consistency juice market, Pepsi also launched its own activities. In the summer of 2007, Pepsi initially began to sell low consistency combination juice Tropicana in Fuzhou and Guangzhou. After gaining unexpected success in these two cities, Pepsi began to sell Tropicana juice in the rest places of China, with an obvious purpose of competing with Minute Maid.

Unknown to many people, Dole 100% Pure Juice, which has been in China’s market for several years, is also a product from Pepsi.

A Pivotal Year

Though Tropicana’s sale is good in China, Pepsi is still in the adversary position in the competition with Coca Cola. “To get up earlier but to arrive later”, it is the best sentence to describe Pepsi’s development in the non-soda market of China.

In the USA, Pepsi was the earlier one to develop the non-soda beverage. In China, Pepsi invested 30 million US dollars in building up the first non-soda beverage production base in the Asia in Guangzhou as early as 2003.

However, Dole didn’t get expected fruits. And it is hard for Tropicana to fight against Minute Maid.

According to the data from the industry research center of China Investment Corporation, in the first quarter of 2009, Coca Cola’s Minute Maid took 25.1% of China’s low and medium consistency juice market, followed by Master Kong and Tongyi. However, Tropicana only took 7.2%, less than one third of Minute Maid.

To acquire Huiyuan was an opportunity. It was said that Pepsi also joined in the bid for Huiyuan but was defeated by Coca Cola who provided a higher price. Fortunately, the Chinese Ministry of Commerce said “no” to the Coke-Huiyuan bid, giving Pepsi new hope of catching up with Coca Cola.

2009 is undoubtedly a pivotal year to decide who will win the competition.

From the end of 2008, here came various rumors that Pepsi wanted to buy shares of Wanglaoji under Guangzhou Pharmaceutical Holdings Limited (Guangzhou Pharma). Though Guangzhou Pharma denied these sayings, Chen Chen, food and beverage industry researcher of China Investment Corporation, thought that a great change has been occurring to China’s beverage market. The non-soda beverages, represented by tea drink, juice and herbal tea, are rising very quickly. The sodas, however, are generally forgotten by the customers. Coca Cola has had good achievements in both fields and Pepsi, if it doesn’t want to be the loser again, must increase its strength in non-soda market in the future.

The data shows that Wanglaoji in green case package also had more than one-billion-yuan sales amount in 2008.

In Chen Chen’s opinion, if Pepsi succeeded in acquiring Wanglaoji, it will not only gain great increase of its strength in non-soda market, but also reduce the gap between the market shares of it and Coca Cola.

Pepsi’s latest movement also proved its determination to develop in China’s non-soda industry. In late May, a new kind of Pepsi’s herbal drink named “Caobenle” (Herbal Joy) came out in the supermarkets of some Chinese major cities without any grand marketing activities.

The insider from Pepsi attributed their “low profile” to the fact that this product is in the trial sale period in some pilot markets.

Actually, the careful customers will find out that the new product of Pepsi is quite like the Coca Cola’s “Tea Grinding Workshop” in the product features and package orientation. The “Tea Grinding Workshop” has already been retreated from the Mainland market and now is only available in Hong Kong.

Coca Cola has already sensed the threat from Pepsi. “The trial sales of ‘Tea Grinding Workshop’ were finished in the cities of Mainland China. But this is just a process of our strategic adjustment in tea drinks. We can not exclude the possibility that the ‘Tea Grinding Workshop’ will come out in the whole market of China in the future,” said an insider from Coca Cola.

The insider also said that the company’s investment strategies and strategic focus was changed in 2008. The “Original Tea Leaf” drinks and the Nestle “Cool Tea” saw fast and stable development. The company turned its attention to the fields of ice tea, green tea and cool tea.

The failure to get Huiyuan confronted Coca Cola with the test of how to maintain its dominant place in the juice market.

Jia Jingrong, senior market director of Coca Cola said that the company will focus on making use of its resources and abilities to develop its new juice products in the future. In March, Coca Cola declared that it will put 2 billion US dollars in China to consolidate its new marketing system and new distribution net. The juice marketing is an important part of this program.

The newly-built Coca Cola Global Research and Development Center in Shanghai makes the research and development of new products faster. The research and development period which used to last one and a half year will be reduced to half a year. It is also Coca Cola’s new center of non-soda drink.

In May, Coca Cola’s new “Green Power Grape” drink with grape juice and aloe grains began to be sold in the major cities of China. This product is just from the research and development center mentioned above.