Fast growth for Chinese functional drinks, but still a long way to go

In 2015, the functional drinks market was worth over RMB60.6bn (US$9.1bn), having risen at an annual rate of almost 24% since 2011, when the market size was just RMB25.7bn (US$3.9bn). Meanwhile, China’s traditional beverage market grew at just 4.4%. 

Much of the growth in functional beverages is attributed to new product launches. Analysts believe that competition in the Chinese functional drink industry is less intense than other soft drink varieties, and that the market offers opportunities for manufacturers across a range of segments and regional markets. 

Moreover, average annual consumption of less than 3 litres per capita—far below the global average of 7 litres—suggests there is scope to tap into a growing industry that is still some way to go to meet its potential.

According to Research & Markets, the aggregate market share of the leading five functional drink manufacturers in China represented 63.5% of the total market in 2015. It also has a high concentration rate, with the market share of Red Bull and Danone Mizone alone accounting for over half of the segment.

In terms of age, children, students and office workers are the main consumers of functional drinks, which they take as an energy supplement. Most brands are locally manufactured, and formulated with vitamins and taurine.

Gender-wise, Chinese men consume more functional drinks due to their preference for sports and staying up late. In contrast, female consumers prefer fruit juices, vegetable protein beverages or bottled water, and have little time for sport.

In recent years, consumption has been growing outside the metros and especially in the third and fourth tier cities, as well as rural areas. Research & Markets believes that demand will continue to increase in tandem with increasing health awareness.