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Sugar-free beverages have become the favorite of more and more consumers. At present, sugar-free beverages on the market include beverages that do not contain refined sugars such as sucrose, glucose, maltose, and fructose, as well as beverages that use sweeteners such as sugar alcohols and oligosaccharides that do not increase blood sugar concentration as sugar substitutes.

Sugar-free beverages are mainly divided into sugar-free carbonated beverages (sugar-free soda), sugar-free tea beverages, sugar-free coffee beverages and sugar-free plant beverages. Sugar-free carbonated beverages and sugar-free tea beverages are the most mainstream sugar-free beverages on the market. Among them, sugar-free sparkling water has promoted the "health war" in the sugar-free soda market, and the addition of sugar-free tea has made the competition in the sugar-free beverage market more intense.

Focusing on the industry development and trends of sugar-free beverages, the Beijing News launched the "2024 Sugar-Free Beverage Development Report", which presents industry opportunities and challenges from the dimensions of market size, category evolution, industry bottlenecks, and development trends. According to monitoring data from the Beijing News and offline retail monitoring agency Mashangying, the main sugar-free soda price range of beverage companies is currently concentrated in the 3-5 yuan range, which is also the most acceptable range for consumers. In addition, in terms of market share, Coca-Cola, Pepsi, and Yuanqi Forest have always been in the top three positions in the industry, which is relatively stable.

【Industry Development】

1. Sugar-free beverages maintain growth

With the emergence of Yuanqi Forest in 2018, the market size of China's sparkling water industry has continued to expand, ushering in a wave of healthy flavored sparkling water with zero sugar and zero calories. In addition, the entry of major manufacturers such as Coca-Cola, PepsiCo, and Nongfu Spring has pushed the industry into a stage of rapid expansion.

According to iMedia Research, the market size of China's sugar-free beverage industry has grown year by year from 2016 to 2022, from 3.12 billion yuan to 19.96 billion yuan, and is expected to reach 61.56 billion yuan in 2025. In the future, the market size of China's sugar-free beverages will maintain a sustained growth trend.

Under the trend of "reducing and controlling sugar", the sugar-free beverage market has ushered in a bonus period, and related companies are constantly increasing their layout. The emergence of new beverages such as sparkling water has increased the popularity of "healthy beverage products" to a certain extent, attracting more companies to seize market share.

2. Women prefer sugar-free drinks

Obesity is a health problem that many young consumers want to solve and avoid, so sugar-free beverages are also the first choice for health-conscious women. According to iiMedia Research, female consumers of sugar-free beverages in China account for a high proportion, reaching 60%; the age group is concentrated in the 22-40 age group, accounting for 82.1%, with a clear trend of younger consumers.

Among the consumers of sugar-free beverages, middle- and high-income groups account for a high proportion, with monthly income mostly concentrated between 5,001 and 10,000 yuan, accounting for 37.2%; followed by 5,000 yuan and below and 10,001 to 15,000 yuan, accounting for 20.0% and 26.5% respectively.

3. Sugar-free soda has a bright future

The emergence of sugar substitutes has opened up a new direction for carbonated beverage companies to develop sugar-free soda. Take Coca-Cola as an example. From 1982 to 2017, Coca-Cola tried to develop a sugar-free product that was closer to the taste of classic Coca-Cola. It launched Diet Coke, Coke Zero and Coke No Sugar, but the taste is still significantly different from the classic product. However, this still cannot stop consumers who want to drink Coke but want to control sugar intake, and Coke Zero has also gained a large number of fans.

With the popularity of Yuanqi Forest, a "sparkling water" track has been separated from the soda track, pushing the soda beverage market to achieve a leap forward. According to the "2024-2030 China Sparkling Water Industry Market Supply and Demand Situation and Development Trend Research Report" released by Zhiyan Consulting, in 2023, my country's demand for sparkling water will increase from 185.92 million bottles in 2017 to 234.4 million bottles, the market size will increase from 976 million yuan in 2017 to 1.465 billion yuan, and the output will increase from 187.14 million bottles in 2017 to 235.87 million bottles. With the continuous efforts of enterprises in product innovation, marketing strategies and channel expansion, the popularization of healthy eating trends and the continuous growth of market demand, my country's sparkling water industry will continue to grow and develop, and the future prospects are broad.

【Market structure】

1. “Two Joys + Yuanqi” firmly occupies the top three

The soda industry includes traditional carbonated drinks, sparkling water, and soda water. As more and more beverage brands enter the sparkling water segment, sparkling water has become the industry trend. In addition to traditional beverage companies promoting sparkling water, some cross-border companies are also trying to get a piece of the pie.

According to data from the Beijing News and offline retail monitoring agency Mashangying, the top three sugar-free soda (including carbonated beverages, sparkling water, and soda water) market shares have been relatively stable since June 2023, namely Coca-Cola, Yuanqi Forest, and PepsiCo. Among them, Coca-Cola has performed strongly, with a market share of nearly 40% at one time; Yuanqi Forest's market share occasionally fluctuates. In the past year, its market share was as low as 16.53%, and once reached 25.45% during the peak summer sales season. In addition, due to the addition of soda water products, brands such as Nongfu Spring, Wahaha, and Mingren have also ranked among the top ten in terms of market share.

Industry insiders pointed out that sparkling water has high product power. It can combine the advantages of bottled water, carbonated drinks, juice and even functional drinks, and present consumers' core needs for health, stimulation, flavor, functionality and so on in one bottle of water, making it more popular.

2. Consumers prefer products priced between 3 yuan and 5 yuan

Compared with the price range of around 3 yuan for traditional beverages, the price range of sugar-free soda is concentrated between 3 yuan and 5 yuan, and the market share of products in this price range is basically maintained between 40% and 55%. The second is the price range below 3 yuan, and the average market share of this price range reaches 30%.

According to Mashangying's data, the number of SKUs does not significantly help expand the market share of products. In terms of the number of product SKUs, the largest number is concentrated in the price range of more than 7 yuan. In this price range, the product SKUs are as high as 506, including combination packs and large bottles. However, the highest market share in this price range is only 14.43%. The price range with the least number of SKUs is between 5 yuan and 7 yuan, and the number of SKUs in this price range has not yet reached 100.

3. Market share squeezed

While sugar-free soda is developing rapidly, the emergence of sugar-free tea has brought a certain impact on the market. According to Mashangying data, under the beverage category, the market share of sugar-free soda in the convenience store channel has dropped from 6.25% in the third quarter of 2022 to 4.13% in the second quarter of 2024. In the hypermarket channel, sugar-free soda also faces this problem, falling from 3.91% in the third quarter of 2022 to 3.07% in the second quarter of 2024.

During this period, sugar-free tea beverages began to gain momentum. According to the Nielsen IQ report, in 2023, the volume of sugar-free tea will double, with a growth rate of 110%, which is not only higher than the 6% growth rate of the beverage industry as a whole, but also higher than the 19% growth rate of the ready-to-drink tea category in which it is located; the national distribution points of sugar-free tea increased by 86% year-on-year, higher than the 12% growth rate of the ready-to-drink tea category and the 6% growth rate of beverages as a whole.

From the perspective of added sugar substitutes, from April to May 2024, the number of SKUs and market share of sugar-free ready-to-drink tea with added sugar substitutes were 12 and 3.48% respectively, while the number of products without added sugar substitutes were 107 and 90.56% respectively. With the implementation of beverage classification, the battle of sugar substitutes seems to have been settled in the sugar-free tea category. The number and market share of SKUs without sugar substitutes are obviously much larger than those with sugar substitutes.

【development trend】

As consumers become more concerned about the "sugar" in products, sugar-free beverages still have room for growth.

According to the first quarter report of 2024 released by Coca-Cola, carbonated beverages and juice categories performed well in the first quarter. Specifically, carbonated beverage sales increased by 2% globally. Sales of the flagship brand "Coca-Cola" increased by 2% globally; sales of sugar-free "Coca-Cola" increased by 6% globally; sales of juice drinks, dairy products and plant-based beverages increased by 2% globally. Sugar-free products became the products with the highest growth rate.

According to a report by Zhiyan Consulting, China's sparkling water market will continue to grow in the future. As consumers pay more attention to healthy eating, sugar-free sparkling drinks will continue to be popular.

Conclusion

From the launch of sugar-free sparkling water by Yuanqi Forest in 2018 and its rapid popularity to the entry of many beverage companies, the category of soda that uses sugar substitutes instead of white sugar has ushered in development opportunities. Later, sugar-free tea emerged, and the development of sugar-free soda was subject to certain restrictions, but it is still growing overall.

Looking ahead, technological innovation will also drive the continued development of the sugar-free soda market. With the introduction of new technologies such as intelligent, energy-saving and environmentally friendly beverage companies, the production efficiency of sugar-free soda will be improved, energy consumption will be reduced, and user experience will be improved. Personalized demand will also become one of the important trends in the sugar-free soda market.

(The above charts and data are from: Mashangying, iMedia Research, and Zhiyan Consulting)

Produced by Beijing News Food News Department

Produced by Tu Chonghang

Editor Liao Ailing

Interview with Wang Ziyang

Coordinating Editor: Qin Shengnan

Designed by Sun Jianfei and Lu Zixiong

Proofread by Liu Baoqing