China Consumer

Cola giant goes on diet

Pepsi eyes a $17 billion market


A meal replacement drink

Back in 2012, when Rob Rhinehart invented Soylent, a milky drink packing 35 nutrients needed for human survival, his mission was to save time and money without compromising health. After a month of relying just on the beige elixir, Rhinehart reported his food costs were 89% lower and his physique had noticeably improved. “My skin is clearer, my teeth whiter, my hair thicker and my dandruff gone,” noted the then 23 year-old engineer in his blog How I Stopped Eating Food.

Thanks to a crowdfunding campaign and venture capital backing, the drink soon became a hit with Silicon Valley techies, and is now widely sold across 7-Eleven and Walmart stores in the US.

Today, similar products are taking root in China, as suggested by a slew of new releases.

PepsiCo, for instance, launched a ready-to-drink milkshake known as Smart Calories, or Dikakong, early this month under its cereal brand Quaker. Containing grains, freeze-dried fruits and whey protein, the drink comes with four flavours such as apple-cum-pomegranate, and oat and quinoa. Each bottle caps its energy supply at 200 kilocalories, but promises to keep dieters full for up to four hours.

“The market potential for meal replacement [in China] is gigantic,” an executive from Pepsi told 36Kr, a news website, claiming that nutrient-dense synthetic food represents the future of Chinese eating. In spite of the country’s deep-rooted culinary heritage and the strong social value its people place on dining together, the US food and beverage giant says it is seeing new demand for such ‘meal replacement’ drinks from busy urban consumers.

Its Smart Calories brand targets not only youthful, white-collar women looking to lose weight, but also people on the road, working overtime and practising intermittent fasting – scenarios for a growing number of city dwellers as they juggle a faster-paced lifestyle with greater social emphasis on body image.

China’s meal replacement market was worth roughly $8 billion in 2017, accounting for 12% of the global market, according to Euromonitor. By 2022 it could potentially double to $17 billion. This trajectory is fuelling the fortunes of Hangzhou Hengmei, a synthetic food contractor that reported a quadrupling of sales between 2016 and 2018 to over Rmb100 million.

Also significant is the number of new brands propelling the sector’s growth. Switzerland’s Nestlé has launched three meal replacement labels (i.e. NesQino, OPTIFAST, and Build U) since 2019, alongside a dozen local players including WonderLab, MissZero, ffit8, and Keep, a homegrown social fitness app.

The trend explains why Pepsi has chosen Smart Calories to draw attention to its social e-commerce platform in China, which it has established with a view to capturing another big market: healthy snacks. We reported in March that the company acquired Be & Cheery, a Hangzhou-based online snack retailer, after becoming the second largest shareholder of Natural Food International, China’s second-largest health food producer (see WiC485). The new investments aim to help the company cushion falls in junk food sales as the likes of carbonated drinks and potato chips are shunned by more health conscious consumers.

But the bigger issue that Pepsi has to deal with at present is the coronavirus outbreak at its factory on the outskirts of Beijing. As of June 20, eight workers were found to be infected, of which two had visited the capital’s Xinfadi wholesale food market, where the second wave of infections began (see WiC500).

Pepsi said that 480 employees had been sent to quarantine and all had tested negative for the virus. Production at the plant, which focuses on Lay’s chips, has also been suspended to allow for a disinfection process amid wider consumer concerns over potential contamination of Pepsi products.

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