Summary of Key Points
Despite the overall decline in sales of sugary carbonated beverages and the cooling of the domestic beverage industry, Coca-Cola has managed to grow against the trend: its revenue increased by 7% year-on-year in the second quarter of this year, and its net profit increased by 17%, making it the “best-selling product” in supermarkets and convenience stores. This success is attributed to its early investment in the sugar-free market 20 years ago, its strong brand recognition, and its precise understanding of consumers’ preferences for both taste and health. However, it also faces fierce competition from local brands such as Yuanqi Forest and Nongfu Mountain Spring, and will need to continue to adapt to market changes in the future.
I. Contrast: The Industry is Cooling, but Coca-Cola is Flourishing
Many people think sugary cola is hard to sell, but Coca-Cola’s performance proves otherwise.
- Industry Situation: Owners of small supermarkets in Hangzhou report that cola sales have decreased by one-third compared to last year. Data from Euromonitor shows that the growth in the domestic carbonated beverage market is entirely driven by sugar-free products, while sales of sugary beverages continue to decline. Statistics from the National Bureau of Statistics indicate that beverage production in the first half of this year fell year-on-year for the first time in five years.
- Coca-Cola’s Performance: Dozens of supermarkets and convenience stores in Shanghai and Jiangsu have listed it as the “best-selling beverage of summer.” Globally, carbonated beverage sales increased by 5% in the second quarter, while PepsiCo’s global beverage sales only increased by 2%, and its carbonated beverage sales in North America even declined.
- Brand Power: Studies have shown that even when consumers are unable to distinguish the flavors of PepsiCo and Coca-Cola, seeing the Coca-Cola label activates the brain’s pleasure centers—this is the “filter” that a century-old brand has ingrained in consumers’ minds.
II. A Critical Step: Investing in Sugar-Free Products 20 Years in Advance
Coca-Cola’s growth is largely due to its early adoption of the sugar-free trend.
- Early Advantage: It introduced zero-calorie cola in 2005 (six years before PepsiCo), and its zero-calorie packaging is almost identical to that of regular cola, leveraging the existing brand recognition. In contrast, PepsiCo’s attempt with Pepsi Max failed to convey the sugar-free message effectively.
- Realizing the Trend: After Yuanqi Forest’s success in the sugar-free market, consumers increasingly favored sugar-free beverages, leading to a 16% increase in sales of Coca-Cola’s sugar-free products in the second quarter. iMedia Research predicts that the Chinese sugar-free beverage market will reach 81.56 billion yuan by 2028, providing further growth opportunities for Coca-Cola.
III. Consumers’ Preferences: Taste is King, Health is a Bonus
Don’t assume that consumers only care about being sugar-free; taste is still the most important factor.
- Data Proof: iMedia Research shows that in 2026, 40.85% of consumers prioritize taste when buying beverages, with health being only third (34.41%). Brands are focusing on combining “good taste” with “health”:
- PepsiCo has launched prebiotic low-sugar cola, emphasizing “natural sweetness and lightness.”
- Yuanqi Forest’s new vitamin water contains cucumber and lemon extracts for a mild taste.
- Nongfu Mountain Spring’s electrolyte water uses a low-sugar formula with fruit flavors to reduce the sweetness of traditional electrolyte drinks.
- Coca-Cola’s Adaptation: Coca-Cola has released multiple versions of sugar-free cola to improve the taste, with management stating, “The reason consumers like the current version is simply because it tastes good.”
IV. Challenges from Giants: Fierce Competition from Local Brands
Despite being a strong brand, Coca-Cola cannot relax its guard.
- Pressure from Local Brands: Competitors like Yuanqi Forest and Nongfu Mountain Spring are gaining market share. Coca-Cola’s operating profit in the Asia-Pacific region plummeted by 36% last quarter due to price increases and fierce competition.
- Marketing and Channel Changes: Brands are shifting their focus from promoting “sweetness” to nostalgia and companionship (e.g., Coca-Cola’s “classic memories” campaign) to reduce consumers’ guilt about drinking sugary drinks. They are also expanding into delivery, instant retail, and home stocking scenarios to attract more customers.
- Future Challenges: New products such as prebiotic sodas, tea-flavored carbonated drinks, and electrolyte sodas are emerging, requiring Coca-Cola to continuously adjust its products and strategies to maintain its position as the “number one happy drink.”
Conclusion
Coca-Cola’s strength lies in its ability to anticipate and adapt to changes, but the market competition is always fierce. Many brands want to challenge this century-old giant, and its “tough times” may not be over yet.