Frost & Sullivan releases 'White Paper on the Chinese Sugarless Tea Industry'

With the popularization of health awareness, high-sugar and high-calorie beverages have gradually lost their market appeal. To adapt to this trend of healthy consumption, many beverage brands have begun to adjust their product strategies and vigorously launch low-sugar and sugar-free products to meet the growing market demand for healthy beverages. For example, sugar-free tea products have shown significant growth potential in the Chinese market. These products not only meet consumers' health needs but also attract a large number of young consumers through innovative flavors and packaging.

Sugar-free tea can be further divided into categories such as pure tea, fruit tea, and compound tea beverages. Among them, sugar-free fruit tea refers to a tea beverage that uses tea leaves or deeply processed tea concentrate, tea powder as the main raw materials, adds fruit concentrate juice, and is supplemented with food additives to improve the color, aroma, and taste of the product, meeting the sugar-free claim in GB 28050 (Carbohydrates (sugar) ≤ 0.5g/100mL).

With the promotion of healthy lifestyles, consumers are paying more attention to ingredient lists when choosing beverages, especially as their sensitivity to sugar and calories has significantly increased. High-sugar carbonated drinks, once popular, now face shrinking market shares. This change is mainly due to consumers' deeper understanding of the potential health risks associated with excessive sugar intake. Multiple studies have shown that excessive sugar intake is closely linked to the occurrence of chronic diseases such as obesity and diabetes, making more and more consumers more cautious about beverage choices. Sugar content has become one of the key criteria for consumers to measure whether a beverage is healthy.

Sugar-free tea has quickly gained the favor of consumers who value health and quality of life due to its fresh taste and natural health benefits. In 2023, the market size of sugar-free tea in China reached approximately 102 billion RMB, and the overall market is still experiencing rapid growth.

Looking ahead, with the overall acceptance of sugar-free tea increasing and the further growth of new products such as sugar-free fruit teas, the overall market for sugar-free tea is expected to maintain rapid growth. It is estimated that the market size will exceed 30 billion yuan by 2028.

Although the overall proportion of candy-free tea in the sugar-free tea beverage market is still small, its growth rate is significantly higher than that of traditional sugar-free tea drinks, demonstrating strong growth potential and broad market prospects. With the transformation of consumers' dietary structure and consumption concepts, candy-free tea has rapidly attracted consumer groups that focus on health management and pursue a quality lifestyle, especially favored by young people and urban white-collar workers, due to its 'zero sugar, zero calories' health attributes, better taste, and diverse flavor options.

The rapid rise of the sugar-free tea market not only relies on the driving force of the general trend towards healthy beverages but also benefits from brands' continuous efforts in taste innovation and product form upgrades. Compared to traditional sugar-free tea products, sugar-free teas not only maintain the 'sugar-free' characteristic but also further integrate fruit flavors and refreshing floral scents into their tea aroma. This not only meets the modern consumer's demand for low-calorie, healthy beverages but also satisfies the public's expectations for diverse flavors and sour and refreshing tastes through the use of artificial sweeteners.

In addition, sugar-free tea has a more youthful and fashionable packaging design and brand image, further enhancing market attractiveness and consumer loyalty. In the future, as consumers' demand for functional and personalized beverages continues to rise, sugar-free tea will continue to expand its market boundaries with product innovation and brand differentiation advantages. From raw material innovation, flavor upgrade to diversified exploration of functional additions, the sugar-free tea market will become a new battlefield for brand competition while promoting the upgrade of healthy tea categories, and gradually occupy a larger market share in the sugar-free tea industry.

● Healthy eating trends & '0' sugar lifestyle

In April 2022, the '14th Five-Year Plan' for National Health mentioned the need to fully implement the national health lifestyle campaign and promote special actions such as 'three reductions and three enhancements'. With the popularization of the concept of healthy living, more and more consumers are beginning to pay attention to sugar intake in their diet. Especially among young people and middle- to high-income groups, sugar-free and low-calorie foods and beverages have become a symbol of healthy lifestyles. Sugar-free tea, with its light tea flavor and refreshing fruit taste, contains no artificial sugars or calorie burdens, making it an alternative to daily drinking water and gradually gaining consumer favor. Compared to traditional sugary drinks and teas, sugar-free tea is considered a choice that satisfies both taste and is beneficial to health, catering to the consumer demand for healthy sugar control and becoming an important driving force behind market development.

● Novel taste and rich combinations

Modern consumers, especially the younger generation, pursue diverse flavors and innovative experiences in their beverages. There is significant room for innovation in the blending and layering of fruit flavors in sugar-free tea, as well as the choice of tea base. By combining various fresh fruits with tea, diverse flavor options are created, such as lemon, peach, berry, and other flavors, to meet consumers' demand for fresh experiences and fit into various consumption scenarios. At the same time, the aroma and natural sweetness of fruits also make sugar-free tea more popular, becoming a trendy alternative to traditional sweet beverages.

●The functionality of tea

Multiple studies have shown that tea contains substances such as tea polyphenols, caffeine, and tea polysaccharides. Long-term consumption of tea can help prevent and alleviate cardiovascular and cerebrovascular diseases. Sugar-free tea also returns to the essence of healthy tea drinking compared to sugared tea.

● Distribution channel barriers

Existing candy-free tea brands may have established long-term exclusive partnerships with some important retailers, wholesalers, or distributors, making it difficult for new entrants to directly access these key sales channels. At the same time, existing brands in the market may already occupy a certain share of the market and have gained cost advantages through economies of scale. They can attract distributors with more competitive prices and terms. All these make it difficult for new entrants to quickly acquire the same distribution channel resources.

● Brand awareness and market trust

In the beverage market, consumers often have a strong trust in brands, especially in the field of healthy drinks. Mature brands in the market have established a solid position in consumers' minds due to their high recognition and long-term word-of-mouth accumulation. Currently, there is a small market for sugar-free tea, with both traditional beverage giants and emerging brands operating within it. Although the scale is still growing, there is a relatively sufficient variety of categories. New entrants need to innovate their product matrix or launch hit products to attract consumers. New sugar-free tea brands entering the market need to invest heavily in market promotion to increase recognition and build consumer trust, so as to stand out in the fierce market competition.

● Supply chain management and raw material costs

Candy-free tea emphasizes natural fruit flavors and health attributes, making the supply chain management and cost control of raw materials crucial. For example, the Tea Gaoshan series uses 100% original leaf tea extracts, sourced from high mountain tea gardens above an altitude of 800 meters. At the same time, supply chain management is quite challenging. Therefore, enterprises lacking strong supply chain and raw material control capabilities may face challenges such as high costs and unstable supply.

●Vital Nutrition International Group Co., Ltd. (Vital Nutrition)

Vital Nutrition International Group Co., Ltd. was established in 1940 and is a beverage manufacturing company. Its products mainly include the soy milk beverage brand "Vital Nutrition," as well as tea beverages, juices, and milk under the "Vital" brand. Vital Lemon Tea was launched in the market in 1979 and is the most well-known beverage in the Vital series, with different packaging introduced to attract customers. Its sugar-free tea product is the sugar-free lemon tea.

●Coca-Cola Amaya Co., Ltd.

Tai Gu Coca-Cola Co., Ltd. is Coca-Cola's fifth-largest bottler partner in terms of global sales. It has exclusive rights to produce, promote, and distribute Coca-Cola products in the Greater China region, Cambodia, Vietnam, and the Midwest United States, maintaining close cooperation with Coca-Cola. 'Sunshine' is a tea beverage brand under Coca-Cola. Since its launch on the Chinese mainland in 2019, it has successively introduced various tea beverages such as 'Sunshine' Classic Lemon Black Tea, Sugar-Free Lemon Black Tea, and Sugar-Free Peach Oolong Tea, as well as 'Sunshine' Chrysanthemum Tea Plant Beverage. The 'Sunshine' tea beverage series features real tea extracts with a rich aroma, bringing consumers a refreshing and delicious experience. Its sugar-free tea products include sugar-free lemon tea flavor beverages and peach oolong tea with white peach flavor.

●Master Kong Holdings Limited (Master Kong)

Master Kong Holdings Limited is mainly engaged in the production and sale of instant noodles, beverages, pastries, and related supporting industries in China. The company's headquarters is located in the Taiwan-funded food enterprise group at the Tianjin Economic and Technological Development Zone in Binhai New Area, Tianjin.

● Let's Tea (Beijing) Beverage Co., Ltd. (Let's Tea)

Let Tea Company was founded in 2020. It is a modern professional fast-moving consumer goods company focusing on "convenient and healthy tea." It owns the sugar-free tea brand "Let Tea" and the health water brand "Plant and Nourish." The company operates with the business philosophy of "convenience" and "tasty," presenting traditional tea and plant ingredients in a modern, convenient form of bottled drinks, providing young people with natural, healthy, convenient, and tasty tea beverages. Its sugar-free tea products include grape oolong tea, lime C jasmine tea, pomelo C jasmine tea, orange C oolong tea, and green plum Longjing tea.

Overall, the Chinese sugar-free tea market is relatively concentrated. Based on the total sales volume of sugar-free tea in 2023 and the first half of 2024, the top three companies account for nearly 50% of the market share.

Based on the sales volume of non-sugar tea in 2023 and the first half of 2024, leading companies include Coca-Cola Sunny, Vita, and Let's Tea, among which Let's Tea ranks third.

The online market for Chinese sugar-free tea is relatively concentrated, with most players in the industry being small and medium-sized enterprises. As consumers increasingly focus on health issues, more and more players are paying attention to the sugar-free tea market segment.

Overall, in the first half of 2024, the leading brands in China's online non-sugar tea market include Lantai, Weihai, and Coca-Cola Sunshine. Among them, in the second quarter of 2024, Lantai ranked first in terms of online sales volume of non-sugar tea among Chinese enterprises.

● The no-sugar tea market will continue to develop in the direction of healthiness and natural ingredients

In the future, the candy tea market will continue to develop in the direction of healthiness and natural ingredients. Enterprises will increase their R&D efforts to produce tea products that conform to health concepts. For example, using natural sweeteners or enhancing the natural sweetness of fruits can make the products closer to the real taste of fruits, meeting consumers' health needs.

To implement the decision-making arrangements of the Central Committee on implementing the Healthy China strategy, to fulfill the requirements of the 'Opinions of the State Council on Implementing the Healthy China Action' and the 'Healthy China Action (2019-2030)', to solidly advance diabetes prevention and control work, and to enhance the effectiveness of diabetes prevention and control, a specific implementation plan for diabetes prevention and control actions (2024-2030) has been formulated. This includes popularizing healthy lifestyles, establishing an active health concept, and guiding the public to scientifically manage their own health. It promotes the action of promoting a healthy lifestyle for all people, and deeply carries out special campaigns such as 'Three Reductions and Three Healths' (reducing salt, oil, and sugar; healthy oral cavity, healthy weight, healthy bones).

● No candy tea brands will launch more portable and single-use large-capacity packaging products

With the integrated development of outbound consumption and home leisure, consumers' demand for portable and large-capacity packaging has risen. In the future, candy-free tea brands will introduce more portable and disposable large-capacity packaging products to meet consumers' need for instant enjoyment. At the same time, large-capacity packaging also aligns with the 'stockpiling' home and family consumption trend, further driving market growth.

In 'Trends and Outlooks in China's Beverage Industry 2024', large ready-to-drink beverages (600ml - 1249ml) have become a new growth point in the beverage industry in recent years. The sales share of this specification segment among all sizes increased from 6.4% in 2019 to 11.3% in 2023. Large ready-to-drink beverages also include multiple categories, with ready-to-drink tea accounting for 105%.

The most critical selling point of large packaging is cost-effectiveness, and its direct competitive advantage lies in the reduction in the average unit price per milliliter. From the market perspective, large packaging products have also achieved better sales. A similar growth trend in large packaging has also emerged in small supermarkets + grocery stores, as well as convenience store formats.

● No candy tea brands will combine traditional culture with regional characteristics

Candy-free tea brands can combine the connotations of Chinese tea culture by launching products with local characteristics to enhance cultural identity. By integrating Chinese characteristic Longjing tea, jasmine tea with regional Fujian green plums and Sichuan lemons, they have created candy-free tea beverages with Chinese cultural heritage and regional characteristics, which are very popular among Chinese consumers. Limited-edition candy-free teas can be launched based on different regional features.

In recent years, more and more consumers have begun to attach importance to the profound history and cultural connotations behind tea culture. This is reflected not only in the quality and taste of tea but also in brand stories, product packaging, marketing strategies, and other aspects. In the sugar-free tea market, the integration of tradition and modernity has become an important trend. Many brands have started to experiment with combining traditional tea culture elements with modern technology, design, and consumer experience to meet the diverse needs of consumers. For example, in 2022, Pingze Sugar-Free Tea Drink became a strategic partnership with the trendy IP 'Newly Upcoming Forbidden City' with a young tea brand. The product's exterior design was updated with new traditional cultural elements such as the Forbidden City auspicious divine beast, square and round bottle bodies, seal trademarks, and vertical ribbed purple sand rhombus stone ladle-shaped bottles. At the same time, a co-branded set of tea utensils was launched to complete the cultural integration of new national products.

● Cross-border collaboration to launch joint products

Candy-free tea brands can collaborate with brands from other industries through cross-border partnerships to create unique products or marketing activities, thereby expanding their market, attracting new customer groups, and enhancing brand awareness. For example:

Fashion industry collaboration: Collaborating with fashion brands to launch limited edition packaging designs, or with fashion designers to launch special series products to attract young fashion consumers.

Art collaboration: Collaborating with artists to design packaging or launch limited-edition art products, combining artistic creativity with non-sugar tea to enhance the product's artistic appeal and collectible value.

Healthy Lifestyle Collaboration: Collaborating with fitness clubs, yoga studios, and other healthy lifestyle brands to launch joint products, emphasizing the connection between sugar-free tea and healthy living. Cosmetics Industry Collaboration: Collaborating with beauty brands to launch sugar-free tea products with skincare functions, creating an integrated concept of beauty and wellness.

Cooperation in the technology field: Collaborating with tech companies to launch smart packaging or adding interactive experiences to products through AR/VR technology, enhancing the technological feel of products.

These cross-border collaborations can bring new market opportunities and innovative ideas to candy-free tea brands, while also helping to enhance brand image and increase consumer interaction.

● The candy-free tea market will converge with the trend of functional beverages

As consumers' expectations for healthy beverages increase, sugar-free tea will merge with the trend of functional beverages in the future.

The candy-free tea industry can add more functional natural ingredients such as vitamin C and collagen to its products in the future, further meeting consumers' demand for 'health + functionality'. This combination not only expands the usage scenarios of candy-free tea but also provides more added value. For example, by leading the trend with tea, a series of popular products have been launched such as 'Lemon C Jasmine Tea', 'Grape C Jasmine Tea', 'Orange C Oolong Tea', etc.

In addition, sugar-free tea beverages with additional functions such as boosting immunity and fat reduction will receive attention. Some brands have begun adding herbal ingredients to their sugar-free teas, such as cassia seeds, goji berries, hawthorns, etc., to provide additional benefits such as aiding digestion and promoting sleep.

● Non-candy tea brands will further strengthen digital marketing, combining online and offline channels to enhance brand awareness

The main purchasing channels for young consumers are gradually shifting online, especially e-commerce and social media. Candy tea brands need to further strengthen digital marketing in the future, combining online and offline efforts to enhance brand awareness. By integrating with social platforms such as Douyin and Rednote, and through the promotion of KOLs and KOCs, they can highlight the health and taste advantages of their products, attracting young people to try and expanding their consumer base. At the same time, offline channels should be combined with convenience stores, gyms, and other scenarios to launch limited-time discounts or tasting events to increase brand exposure.

In terms of online channels, brands are keeping up with the pace of the times, making full use of the power of e-commerce platforms to achieve in-depth cooperation with major mainstream e-commerce platforms. Whether it's Tmall, JD.com, Pinduoduo, or other emerging e-commerce platforms, the presence of Wuzhong Candy Tea can be seen everywhere. At the same time, brands are also actively cooperating with live streaming rooms, such as collaborating with the live streaming rooms of several top influencers like Oriental selection, Jiao Ge You, and Hui Xing Tong, which often sell out!

In terms of offline channels, all Wafu Cha brands are also making every effort. Whether it's large supermarkets, convenience stores, or new retail outlets, one can always see Wafu Cha products in sight. This has provided new possibilities for channel cooperation.