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Monster Beverage Co has certainly tasted the sweetness of distribution support from The Coca-Cola Company (TCCC). Its global market share has climbed significantly since the distribution deal started a few years ago and it is now the biggest threat to Red Bull GmbH. Upon the completion of the deal, Monster and TCCC will be able interplay with their energy drink brands and subbrands in different regions or core markets, including China, and make strategic decisions as to how to grow their combined brand portfolio.
Before the new Monster fully grows and forms, Monster’s management started to show its long-awaited ambition to enter China. Euromonitor International data shows that China is an apparently underdeveloped market for the two ambitious partners. Without a solid physical presence in this strong growth region, TCCC/Monster could lose out on playing a part in China’s energy drinks boom. Monster said that, “China is a very long-term strategic goal for us – we want to be there, we want to get there as quickly as we can. There’s a complex regulatory procedure to get through to register.” These words show its eagerness to make an entry and its desperate need for help from TCCC. So let’s have a look at the opportunities and challenges China may present to the new Monster.
This article has two parts: the first assesses the state of the market, its potential and competitive landscape; the second discusses possible tactics in marketing and media as well as handling the government.
Energy drinks in China experienced a surge in popularity in the past few years and the huge potential is attracting a growing number of market entrants. Euromonitor International forecasts that China’s retail value sales of energy drinks will amount to around US$6 billion by 2018, equivalent to over half of that in the US. To secure a good presence in China, Monster will need to have excellent marketing campaigns, wide distribution, flexible packaging and affordable pricing. With TCCC’s help, Monster can be slotted into the Coca-Cola system without too much difficulty.
In terms of the competitive landscape, TC Pharmaceutical Industry Co Ltd continued to hold its strong number one position in 2013, with a 78% off-trade volume share. The rest of the energy drinks share is held by domestic players, Japanese companies and, sporadically, some international brands. Without TCCC’s nationwide distribution and production support, there is little chance that Monster would be able to establish a foothold in such a vast country quickly, given TC Pharmaceutical’s dominance. TC Pharmaceutical’s sister company, Red Bull GmbH, is also not yet widely present in China. It is unclear if Red Bull GmbH will feel the need to collaborate with its Asian sister company and jointly tackle the thirsty dragon before the new Monster looms large. As a private company, Red Bull GmbH discloses little information with regard to its corporate strategies and financials. The silent and specific agreements between Thai Red Bull and Austrian Red Bull remain unknown to the outside world.
The market development is speeding up and gained an additional boost and interest from Qili’s successful launch by Hangzhou Wahaha Group in 2012, with Qili achieving an 9% off-trade volume share within only two years of its introduction. Fujian Dali Food Co Ltd also introduced Hi-Tiger in April 2013 to heat up the market. In terms of packaging, the metal beverage can was the dominant pack type historically, which was perceived as premium competitively. However, the new product Hi-Tiger was available with two types of packaging – a 250ml metal can and a 380ml PET bottle. The latter has filled a gap in existing product packaging and caters specially to students. Meanwhile, the PET bottle for Eastroc Super Drink comes with a cup attached at the top of the bottle, making it convenient for takeaway and instant consumption.
Like the situation in many developed markets, convenience in consumption of foods and beverages is also a trend in China today. Currently, Monster’s products are packaged in metal cans – although the company may want to consider the situation in China and be prepared to be adaptable and creative to reach its new audience.