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Beverage battle: Genki Forest under siege

Written by KrASIA Connection Published on     2 mins read

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Genki Forest has shaken up the Chinese beverage market, rattling major brands.

Genki Forest has caught the attention of beverage conglomerates this summer. “In every important meeting of the two largest cola makers—Coca-Cola and Pepsi—this year, Genki Forest would definitely be mentioned,” a former Pepsi executive told 36Kr. The topic of conversation will often involve speculation about how Genki Forest managed to find success, he added.

With its signature sugar-free and calorie-free fizzy drinks, Genki Forest became the dark horse of the Chinese beverage industry. The company reached a valuation of USD 6 billion within just five years of its launch.

For 40 years, Coca-Cola and Pepsi had a firm hold of China’s soft drink beverage market, with the two companies controlling more than 90% of the market. Before Genki Forest, no company had ever been able to break through their tight upstream supply chain.

When Genki Forest started making sparkling drinks, it couldn’t locate production capacity for its products anywhere in China. Most factories had existing partnerships with Coca-Cola and Pepsi, and both companies demanded exclusivity agreements from their suppliers.

Read more: China’s fast-growing sparkling water maker Genki Forest wants to grow faster, will it succeed?

In 2019, Genki Forest finally found a production line and signed a deal, but soon after, the provider withdrew from the agreement. Besides beverage production lines, other upstream suppliers like bottle manufacturers and erythritol producers had turned down Genki Forest due to pressure from Coca-Cola and Pepsi.

Genki Forest then decided to build its own production facility in Chuzhou, Anhui Province, and begin operations in June 2020. From there, the Beijing-headquartered beverage upstart secured a relatively consistent supply for its first line of beverages.

However, as Genki Forest entered the mineral water market in China in July 2021, another beverage giant—Nongfu Spring, the country’s largest bottled water supplier—is now attempting to curb Genki’s reach in product distribution.

Reportedly, Nongfu Spring has approached several regional distributors and issued requests to ban Genki Forest’s products, especially sparkling water, from their product line-ups. What’s more, Nongfu Spring also launched an aggressive promotional campaign for its fizzy drinks—every pack of Nongfu soft drinks sold by distributors came with a box of Nongfu water, free of charge.

According to Nongfu Spring’s latest earnings report, to maintain this campaign, the company’s marketing expenses shot up to RMB 3.55 billion (USD 551.7 million) in June, RMB 850 million (USD 132 million) more than in the same period last year.

As Genki Forest expands its reach across other segments, with reports indicating that the firm is also targeting the low-sugar, low-calorie snack market, it is likely that other established food and beverage companies will also shore up their offerings to compete with Genki.

KrASIA Connection features translated and adapted content published by 36Kr. This article was originally written by Peng Qian for 36Kr. It was translated and adapted by Jiaxing Li.

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