Made China
Beverage Makers in China Turn to Canned Drinks to Generate New Business
Chinese males are increasingly faced with a perennial dilemma that has perplexed Western males for over half a century: Whether to buy a box of beer in glass bottles or cans. China’s beverage packaging market, once extremely glass-based, is rapidly evolving into newer forms on the back of technological advancements and changing consumer habits. Cans, PET bottles, and one-way glass bottles have emerged as more viable vehicles for the sales of beverage products.
HORECA sales of beverages (i.e. the food services sector) in China remain an important source of revenue – this is especially true for beer; around 95 per cent of glass bottle sales of beer are for on-premise consumption. However, in the face of decreasing average earnings per hectolitre of beer in China over the past few years, breweries are looking to the home consumption market to improve revenue growth. This is the same for other beverage makers.
The growing home consumption market has been identified as a key target to improve sales volumes, but it remains a challenge. Changes in demographics, consumption behaviour, purchase patterns, and the rise of organised retailers (supermarkets, convenience stores etc.) over the years have necessitated the increasing use of new primary packs and price point strategies to drive the home consumption volumes. These new primary packs have to incorporate solutions to address: Product shelf life (vital for carbonated beverages); ease of handling; distribution; and environmental concerns.
As competition increases, marketing and brand managers have to continually identify new ways of staying ahead of the competition and defend their products’ market share. This in turn has further increased the impetus on using the primary packs as an effective tool for brand differentiation on the shelf.
When considering the most effective home consumption primary pack for the Chinese market, physical factors such as the size, spread, and homogeneity of the consumer population, quality of roads and other distribution infrastructure, nature of retail trade need to be looked at. Looking at the development of markets in Europe, countries that have large populations and hence require high-capacity filling lines as well as transportation of goods over long distances due to a greater spread of target population have all developed into strong cans markets. The advent of modern retailing and consumer choice has helped to turn many Eastern European countries into can markets too.
Following the European experience cans have a clear case for developing as the preferred primary pack for Chinese beverage makers. The same experience was made by the cola majors, Coca Cola and Pepsi, who began shipping their beverages across long distances from the US to the Middle East market in the 70s and 80s.
However, a successful cans strategy needs to focus beyond addressing and conquering these physical business attributes. Even if there are clearly identified advantages of cans being the preferred packaging for home consumption, to achieve growth in sales any strategy needs to build in a clear market approach targeted towards influencing consumer behaviour in favour of cans.
About the Author
To read the rest of this article by Devan K. Yadav, please visit BusinessForum China at www.bfchina.de. BusinessForum China is a magazine and website dedicated to China business news and analysis, regarding the China economy and the China market.
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