March 17, 2005
Walk into any convenience store in Taiwan and you'll see virtually an entire wall dedicated to refrigerated drinks. Not only is this market big, it's been getting bigger for the last three years. However, the strong growth in this sector has put pressure on sales of non-refrigerated drinks.
In light of this market development, Coca-Cola, whose popular carbonated sodas and teas are classified as non-refrigerated beverages, plans to move into Taiwan's booming refrigerated drinks market by cooperating with a local beverage maker. There are rumors that Coke's first refrigerated drink will be released under the brand of its partner Nestle and that milk tea and flavored teas will make up its first refrigerated beverage products.
Refrigerated drinks, such as juices, milk teas and coffee, require constant refrigeration to maintain freshness, while non-refrigerated drinks, like sodas and sports drinks, are processed and packaged for longer shelf lives. Refrigerated beverages have high stock rotation rates and require tight distribution systems, but they also command higher prices than non-refrigerated drinks. Perhaps more importantly, in a market where it seems every flavor and form of packaging has been tried before, refrigerated beverages also present a viable opportunity for drink makers to pursue in diversifying their product lines.
Swire Coca-Cola Taiwan Ltd., stressing its role as a complete drinks company, confirms that it is indeed expanding into the refrigerated beverage market. The local Coke representative plans to contract production of its refrigerated drinks to a local drinks company and is currently holding talks with Chou Chin Industrial Co., Bomy, AGV Products Corp. and Tai Hwa Oil Industrial Co.
Taiwanese consumers consider refrigerated drinks more fresh and healthy because they are assumed to undergo less processing and have fewer preservatives that non-refrigerated drinks. ACNielsen Taiwan reports that the market value of refrigerated coffees, teas and juices reached
NTD 9.104 billion in 2004, accounting for over 25% of the total drinks market. This value was up nearly 10% compared to the
NTD 8.389 billion reported for 2003.
Convenience stores are the main distribution channel for drinks in Taiwan, accounting for over 30% of total drink sales. Sales of refrigerated drinks make up around 60% of all beverage sales at convenience stores. These beverages have cut into the sales of non-refrigerated drinks, leading Vedan, Wei Li Foods and King Car, all local foods and drinks companies, and Swire Coca-Cola to make their moves on the refrigerated beverage market.
Swire Coca-Cola says that it will release its new products in May at the earliest, but has remained silent regarding the identity of its partner and the type of product to be introduced. Industry insiders have posited that Chou Chin Industrial Co. and Bomy have the best chances and that Coke will first release milks teas and flavored teas under the Nestle brand.
Distribution industry analysts say that if Coca-Cola does not jump into the refrigerated drinks market now, it could find itself trapped in the non-refrigerated beverage market with its sodas and Nestea. Black teas and green teas are the hottest selling items among refrigerated drinks and local products already have a firm grip on market share. Those that enter the market too late may find it difficult to make an impact.
Coffee drinks reached a growth peak in 2003, while milk teas performed exceptionally well at convenience stores in 2004. Nestle is already the undisputed leader for flavored teas in the non-refrigerated drinks sector. With no serious flavored tea rival, Nestle has a good chance of taking this sector by storm with such flavored teas as milk tea.
Local drink maker King Car says that, despite the short life spans and high distribution costs associated with refrigerated drinks, the persistent growth in this market has forced it to seriously evaluate whether to enter this market. The maker of the popular Mr. Brown canned coffee says that even if it does decide to expand to this sector, it would invest in its own production line in order to ensure quality and flavor consistent with its brand image.
(United Daily News)
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