New skin in the game

From Coke Zero... to Coke Collagen

Soft drinks giant Coca-Cola is on a mission to become a ‘total beverage company’. Cynics read that as a necessary push to reduce its reliance on its sugary bestsellers. But the journey continues: this week there was the announcement of another new joint venture in China with dairy firm Mengniu to sell chilled milk. And the beverage behemoth was in diversification mode last month as well, launching a new product called Zunxuan 28 Sleep-Recharged Face, a drinkable supplement said to boost skincare and sleeping patterns.

The drink contains gamma-aminobutyric acid and collagen peptides. The beverage also claims to draw on the salubrious effects and flavours of Brazilian coniferous cherry powder and Italian blood orange powder. The offering, meant to promote Coca-Cola’s social e-commerce platform in China, targets a burgeoning class of sleep-deprived urbanites and draws on the concept of “oral beauty” or “eating pretty” in China. The idea is also influenced by the TCM (traditional Chinese medicine) tenet of food-medicine homology, which believes that everyday food contains healing properties.

According to Tmall International, oral beauty was one of the three most popular product categories for consumers during last year’s 618 shopping festival (JD.com’s answer to Alibaba’s Singles’ Day). Total turnover on the platform in the period surged over 22 times compared to the year before. Japanese skincare brand POLA, a leading player, even saw its sales jump more than 30 times on the previous period.

The market dates back to 1993 when a TCM-inspired product called Taita Beauty Essence started selling well to female shoppers. Revenues were Rmb160 million ($22.54 million) within a year of launch, allowing its manufacturer – now known as Joincare Pharmaceutical – to later go public in Shenzhen in 2001.

Thanks to rising affluence and a subsequent boom in beauty culture, China’s oral cosmetics market could reach Rmb23.8 billion in 2022, Beijing-based Intelligence Research Group forecasts.

The bigger pie has led to greater diversifity of both product ranges and suppliers. But the deluge of new product offerings can be broadly divided into four categories: namely skin whitening, anti-aging, moisturisers and hair-loss prevention. Collagen aside, grape seed extract and enzymes are two of the most popular ingredients for oral cosmetics. Customer preferences vary by age. People born after the 1990s in better-off cities (about half of the market demand) prefer to take the supplements in the form of pills and gummies. The post-80s generation prefer powders and jelly, CBNData found in a survey.

Despite the previous dominance of overseas cosmetics and health supplement producers, local players are making a more convincing push into the market. Guangzhou-based cosmetic brand Marubi, backed by the investment vehicle of LVMH, was one of the first to launch a collagen peptide drink. State-owned dairy giants Mengniu and Yili rolled out their own versions in 2018, followed by Wahaha and Zhuhai-based By-health last year.

For Coca-Cola, the move to capitalise on China’s oral beauty craze is in line with its broader plan to diversify its product range.

In an interview with China Daily, Curt Ferguson, the company’s Greater China president, said that functional offerings linked to wellness would be a new focus as health-conscious customers shun sugary beverages.

In 2018 Coke launched sugar-free Sprite-with-fibre and two ready-to-drink tea products. The strategy has helped the world’s largest beverage maker retain a strong position in China, despite the overall downtrend in carbonated beverage sales since 2015. Last year one of its bottlers Swire Coca-Cola recorded HK$22.9 billion ($2.95 billion) in revenues for its sales territory in mainland China. COFCO Coca-Cola also logged a 10% growth in soda sales to Rmb12.6 billion the same year.

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