Rabobank Report: Further Consolidation Expected In China's Soft Beverages Market

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Nov 16, 2012, 10:08 ET

NEW YORK, Nov. 16, 2012 /PRNewswire/ -- Rabobank has published a new research report on the Chinese beverage market, forecasting increased consolidations after the alliance of Tingyi and PepsiCo.

In a new report titled "Survival Handbook: Strategies for Success in China's Soft Drink Revolution," Rabobank's Food & Agribusiness Research and Advisory group says there is likely to be a wave of consolidations in China's beverages market as it responds to the USD 5 billion alliance of Tingyi and PepsiCo, according a report from Rabobank. Rabobank says that smaller, 'second tier' beverages players will be affected most by the new alliance, as they struggle to compete with Tingyi-PepsiCo's - as well as that of fellow beverages giants Coca Cola and Wahaha - established advantages in brand equity, distribution networks, supply chains and investment capital.

Despite the dominance of Tingyi-PepsiCo, there are still solutions for smaller beverages businesses to earn profits. Rabobank expects smaller players to partner with each other to pool resources, as well as focus on specific subcategories or specific roles in the value chain.

Opportunities exist for international second-tier players to partner with Chinese beverages companies with local know-how, particularly those based in smaller, fast growing cities. An example comes from Nestle who recently bought 60 percent of Xiamen Yinlu Food, the leading producer of canned food and vegetable protein drinks, and are leveraging the distribution network of Yinlu to reach lower tier cities and penetrate other beverage subcategories such as bottled water and ready-to-drink (RTD) teas.

Several big or fast growing beverage subcategories such as herbal drinks, RTD coffees and teas are excluded from the tie up between Tingyi-PepsiCo and as such, smaller players are accelerating their growth efforts in these areas. Over the past five years, herbal drinks have been the fastest growing beverage category in China, with a compound annual growth rate of over 35 percent. If this growth trend continues, it presents a significant opportunity to beverages companies specializing in this drinks sector.

Moreover, with a large proportion of China's beverages giants' revenue coming from carbonated soft drinks (CSDs), competitors are developing advertising and marketing programs designed to highlight the benefits of health drinks, as well as to disseminate negative messages about the health effect of CSDs.

The Rabobank report on the Chinese soft drink market is available to media upon request.

Rabobank Group is a global financial services leader providing wholesale and retail banking, asset management, leasing, real estate services, and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries, and is among the highest rated private banks by S&P and Moody's. In North America, Rabobank is a premier bank to the food, beverage and agribusiness industry. Rabobank's Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel to Rabobank clients about trends, issues and developments in all sectors of agriculture. www.Rabobank.com

SOURCE Rabobank