China Food

Coca Cola invades the hinterland of Wanglaoji




Author: zhangjikang; Editor: Chenfang

Source: AI finance and Economics (id:aicjnews)

Invade the hinterland of Wanglaoji
Coca Cola began to sell herbal tea.  
Recently, Coca Cola tmall flagship store launched a herbal tea product called “Prunella vulgaris”. Coca Cola introduced this product as follows: herbal formula, traditional herbal tea; No additional artificial flavors and pigments are added.
According to the official customer service of Coca Cola, this herbal tea product was launched in June this year. It is the first herbal tea beverage launched by Coca Cola since it entered the mainland of China.
However, this herbal tea doesn’t seem to attract much interest from consumers. According to the data of Coca Cola flagship store, the sales volume of this product is only 54 at present.
Gu is a loyal fan of herbal tea from Guangdong. After seeing the news that Coca Cola launched herbal tea, she was eager to try this new product, but was shocked by the discount price of 297 yuan for 24 bottles, and finally gave up buying it.
She calculated a simple account: “a bottle of this herbal tea costs more than 12 yuan, while a bottle of Wanglaoji of the same volume costs only 4 yuan, a price difference of twoorthree times.” Compared with the price of nearly 300 yuan, GUKE still prefers to buy Wanglaoji, who will not make mistakes in taste.
Panlulu, a fan of Coca Cola brand, expressed “dislike” of this herbal tea from the perspective of packaging. In her opinion, the large purple packaging of Prunella vulgaris and the too rigid bottle design make her feel too “aging” and difficult to catch the attention of young people. On the contrary, it will give consumers an illusion of “dark drink”.
(picture source: Coca Cola tmall flagship store)
Coca Cola, on the other hand, said that the introduction of Prunella vulgaris herbal tea plant beverage produced by its health workshop into the mainland and its initial sale on tmall flagship store was based on the guidance of the company’s full category beverage strategy and intended to explore the subdivision of tea beverage categories.
In 2020, Coca Cola announced the restructuring of its organizational structure and reclassified its herbal tea business into five categories: bottled water, sports, coffee and tea.
As we all know, the herbal tea market is Wanglaoji’s world. Coca Cola’s launch of new herbal tea products means that it has invaded Wanglaoji’s hinterland. However, in the consultation with Wang Laoji, Caijing Tianxia weekly responded that it was not worried about the impact on Wang Laoji, and Coca Cola could expand the herbal tea market together.
The rough road of herbal tea
It is worth noting that Coca Cola wanted to enter the herbal tea market long ago.
As early as november2005, Coca Cola purchased the production line of Hong Kong herbal tea brand “Health workshop” and formed a strategic partnership with it. In the same year, Coca Cola also announced the establishment of a cooperative relationship with the Chinese Academy of traditional Chinese medicine, hoping to develop a beverage containing Chinese herbal ingredients and formulas.
One of the core reasons why Coca Cola wanted to make herbal tea was that at that time, the herbal tea brand represented by Wanglaoji surged in the Chinese beverage market. In 2006, the growth rate of 21 herbal tea enterprises represented by Wanglaoji and Xingqun pharmaceutical reached 300%, with a total production and sales volume of more than 4million tons, surpassing the production and sales volume of Coca Cola in China for the first time. It was once regarded as “earth cannon” defeating “foreign gun”.
In the face of the current situation, Coca Cola certainly can’t wait to die. In addition to the acquisition, Coca Cola also wants to intervene in the herbal tea industry from the perspective of rules. Zhang Junxiu, known as the “father of herbal tea”, said in 2006 that Coca Cola wanted to participate in the formulation of herbal tea industry standards, but the association did not agree. The reason given by Zhang Junxiu is: “herbal tea is a century old characteristic culture of Guangdong, which can be shared, but not shared.”
After the failure of participating in the formulation of industry standards, Coca Cola did not give up. In 2007, Coca Cola and the Chinese Academy of traditional Chinese medicine established the research center of traditional Chinese medicine and invested 600million yuan in the research and development of Chinese herbal drinks represented by herbal tea. In 2008, it was reported that Coca Cola would launch Chinese herbal medicine drinks during the Beijing Olympic Games. Rona apbang, then vice president of Coca Cola, also said that she hoped to promote China’s ancient wisdom and culture by launching health drinks.
However, it is strange that until the end of 2008, Coca Cola did not launch any herbal tea drinks, and Coca Cola’s herbal tea plan was “cool”.
In the following years, Coca Cola has rarely mentioned the herbal tea business. However, since the “full category beverage” strategy was put forward in 2016, Coca Cola has introduced a lot of new products in non carbonated beverages. Only in the Chinese market, Coca Cola has introduced the alcoholic beverage “Topaz”, sparkling wine “lemon path”, plant-based beverage “Zhibai” and low-temperature milk brand xianfeile.
It was not until 2022, 14 years later, that Coca Cola made substantial progress in its herbal tea business and launched its first new product.
The market has already changed
But today, the herbal tea market has already changed. It is no longer the booming beverage segment, but has entered the era of stock competition.
According to the data of the prospective industry research institute, from 2011 to 2015, the market scale of China’s herbal tea industry continued to maintain a double-digit growth rate, with an average annual compound growth rate of 12.34%; After 2016, the growth rate of market scale dropped to single digits. According to the China tea beverage report released by immente in 2021, the market share of Asian ready to drink herbal tea decreased by 27.1% in 2020 due to the impact of the epidemic on the Spring Festival peak season.
(source: Vision China)
Among them, the most serious decline in market share was that of JDB, which was severely weakened by the trademark dispute. After its revenue reached the peak of RMB 25billion in 2015, it began to decline. From 2015 to 2017, the main business income of JDB group was RMB 10.042 billion, RMB 10.634 billion and RMB 7.002 billion respectively; The net profit was RMB -189million, RMB 1.489 billion and RMB -583million respectively.
That was because of the performance disclosed by Zhonghong shares. Since then, JDB has not announced its performance to the public. However, under the background of factory closing and layoffs, JDB has entered the second entrepreneurial stage of “healing the wound”.
At the same time, in the second echelon and its positive, revenue is also declining. According to the 2021 financial report of its parent company, Dali group, the revenue of Hezheng herbal tea decreased by 2.3% year-on-year to RMB 1.668 billion.
Wang Laoji, the eldest brother, has a hard time. According to the financial report of Baiyun Mountain, the revenue of Wanglaoji great health company in 2019 and 2020 was 10.297 billion yuan and 6.862 billion yuan respectively, and the net profit was 1.380 billion yuan and 1.195 billion yuan respectively. In 2020, the revenue almost halved, and the net profit also declined. In 2021, although Wang Laoji’s revenue increased to some extent, it still did not return to the level before the epidemic, with a revenue of 9.728 billion yuan and a net profit of 1.288 billion yuan.
At present, herbal tea enterprises facing growth pressure begin to learn from Coca Cola in product innovation. In 2018, Wanglaoji launched “Wanglaoji Cola” and later launched black herbal tea, sugar free herbal tea and other products; JDB introduced 0 calorie herbal tea; Heqizheng has also developed new categories such as bubble herbal tea.
Zhu danpeng, an analyst of China’s food industry, believes that although the overall market share of herbal tea is not small at present, taking a comprehensive view of the market pattern of Chinese herbal tea, at present, only Wanglaoji is the leading brand, and the sum of the second, third and fourth ranked enterprises is less than 60% of Wanglaoji.
In his opinion, relying on the entire Coca Cola supply chain, its brand tone, diversified layout, and its position in the minds of the new generation of consumers, the overall assessment shows that if Coca Cola wants to occupy the second place in the herbal tea market, or snatch a share of the second, third or fourth place, it is very likely.
(in the text, the consumer is a pseudonym)
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