Sales of beverages offering a functional benefit grew 6.9% in 2015
New product launches account for almost 90% of 2015 growth within juice beverages
A recent forecasting project by Nielsen estimates beverage category sales in China will grow slightly faster in 2016 than 2015, and consumers will continue to reach for drinks that offer a health concept or functional benefit. The study takes into account major trends in the 2015 beverage market as well as data modeling to forecast 2016 sales for the beverage category.
CHINESE CONSUMERS SEEK MORE FROM BEVERAGES
The beverage market in China has seen steady yet modest growth this year, with just under 1 percent increase year to date 2015 compared to 2014. However, increasingly sophisticated Chinese consumers are looking for more from their beverages, creating significant opportunity for innovative manufacturers.
Nielsen’s sales data shows that functional drinks and juice are two of the fastest growing subcategories within the beverage market. Year to date 2015 data shows that functional drinks are growing at 6.9 percent and juice is growing at 4.4 percent compared to this time last year. The strong potential of these sub-categories follows an overall trend in the China, as consumers are ever more concerned with health, safety and wellness benefits. In general, Nielsen has observed the trend across consumer packaged goods categories, including food and personal care, in China
Beverages that offer the consumer an additional benefit or assurance that the product is healthy and safe will continue to gain popularity. Functional drinks offer a specific benefit like increased energy for work or sports. Juice has a similar appeal to consumers looking for a healthy and natural alternative.
“One of the most prevalent trends in China today is the rise of health focused products and concepts. Chinese consumers are more conscious about health than ever before,” said Kiki Fan, managing director of Nielsen China. “A big driving force of this is the emerging middle class. These consumers are working white collar jobs, putting in long hours for rising incomes, but they’re also hoping to maintain a healthy and fit lifestyle. We expect that products appealing to these demands will grow, as we can see in the 2016 forecasted data.”
NEW PRODUCT INNOVATION DRIVING CATEGORY GROWTH
Within both functional and juice sub-categories, the products that are driving the growth are also following another recent trend; the growing importance of new product innovation and trading up among consumers. New product launches continue to drive much of the growth within the consumer packaged goods market, including beverages.
Out of the 6.9 percent increase in value growth for functional drinks, 3.3 percent of that came from products that were launched in 2015. That means that new launches accounted for just under half (48%) of the total sales growth. For juice, the ratio was even greater. Out of the 4.4 percent growth in 2015, 3.9 percent of that came from new products. That translates into almost 90 percent of the growth in sales. At the same time, existing juice products that were launched in 2014 or before showed negative growth of -4.7 percent.
“As the level of sophistication and spending power of Chinese consumers rises, so does their demand for innovative and premium products,” said Fan. “Consumers are becoming increasingly segmented with individual tastes and preferences. Manufacturers that prioritize innovative new product development will be in a great position to succeed moving forward.”
SMALL FORMAT STORE GROWTH SHOWS CONSUMERS CRAVE CONVENIENCE
Another factor influencing the beverage market is China’s quickly evolving retail landscape. Nielsen data shows that consumers are now spending more in small, convenient store formats such as chain convenience stores and chain personal care stores. These store types accounted for approximately 7 percent and 5 percent of 2015 beverage category growth respectively and offer consumers a fast and convenient way to quench their thirst. According to Nielsen, small format stores are also the fastest growing retail channels in terms of both store numbers and value sales. Nielsen expects these channels will continue to grow in importance, with 2016 forecasted sales in line with this trend.
HOW WILL CONSUMERS QUENCH THEIR THIRST IN 2016?
According to Nielsen’s forecasted 2016 market size and sales data, the value of the overall beverage market will increase; however brands can expect overall volume to decline as consumers trade up to new and more premium products. In terms of sub-categories, the data shows that functional drinks will further drive the beverage market and actually grow even faster in 2016 than in 2015, with juice following as the second fastest growing sub-category. The forecasted data reinforces the spending power of Chinese consumers and their increasing demand for innovative functional concepts and products with health benefits.
In terms of retail store channels, Nielsen’s forecasted sales data shows that sales for beverages will continue to shift from larger format stores like hypermarkets and supermarkets towards smaller format stores. For manufactures looking to win in China’s shifting retail landscape, it will be important to obtain a clear picture of what the market will look like in 2016 in order to effectively appeal to the evolving demand of Chinese consumers.
ABOUT NIELSEN’S 2016 SALES FORECASTING
Using sophisticated modelling and analytics techniques, Nielsen’s 2016 Sales Forecasting reports use existing retail sales data and market trends to forecast future retail sales. Over the past 30 years, we have created a global database of norms that can calibrate previous sales and trend data into actual sales forecasts. Nielsen is unmatched in our ability to produce reliable sales estimates and insight on the drivers of sales.
Nielsen Holdings plc (NYSE: NLSN) is a global performance management company that provides a comprehensive understanding of what consumers Watch and Buy. Nielsen’s Watch segment provides media and advertising clients with Total Audience measurement services across all devices where content — video, audio and text — is consumed. The Buy segment offers consumer packaged goods manufacturers and retailers the industry’s only global view of retail performance measurement. By integrating information from its Watch and Buy segments and other data sources, Nielsen provides its clients with both world-class measurement as well as analytics that help improve performance. Nielsen, an S&P 500 company, has operations in over 100 countries that cover more than 90% of the world’s population. For more information, visit www.nielsen.com.